-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D7gDZPx33RxHSiWa7XUhriTThseG6kmJ1RbWPtXVYdvcgtMHUl01HYX25t7sHh0N 7cteub6C6JQCvSqyeIm4yg== 0000950130-99-001927.txt : 19990403 0000950130-99-001927.hdr.sgml : 19990403 ACCESSION NUMBER: 0000950130-99-001927 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 19990401 EFFECTIVENESS DATE: 19990401 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METROPOLITAN SERIES FUND INC CENTRAL INDEX KEY: 0000710826 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 833164113 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 002-80751 FILM NUMBER: 99586033 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-03618 FILM NUMBER: 99586034 BUSINESS ADDRESS: STREET 1: ONE MADISON AVE STREET 2: C/O METROPOLITAN LIFE INSURANCE CO CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2125787360 MAIL ADDRESS: STREET 1: METROPOLITAN LIFE INSURANCE CO STREET 2: 1 MADISON AVE LAW DEPT AREA 7-G CITY: NEW YORK STATE: NY ZIP: 10010 485BPOS 1 METROPOLITAN SERIES FUND As filed with the Securities and Exchange Commission on April 1, 1999 Registration Nos. 2-80751 811-3618 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- Form N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_] Post-Effective Amendment No. 24 [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_] Amendment No. 26 [X] (Check appropriate box or boxes) ---------------- Metropolitan Series Fund, Inc. (Exact Name of Registrant as Specified in Charter) One Madison Avenue 10010 New York, New York (Zip Code) (Address of Principal Executive Office) Registrant's Telephone Number, Including Area Code: 212-578-2674 ---------------- GARY A. BELLER, ESQ. One Madison Avenue New York, New York 10010 (Name and Address of Agent for Service) Copy to: GARY O. COHEN, ESQ. Freedman, Levy, Kroll & Simonds 1050 Connecticut Avenue, N.W. Washington, D.C. 20036 It is proposed that the filing will become effective (check appropriate box) [_]immediately upon filing pursuant to paragraph (b) of Rule 485. [X]on April 30, 1999 pursuant to paragraph (b) of Rule 485. [_]80 days after filing pursuant to paragraph (a)(1) of Rule 485. [_]on (date) pursuant to paragraph (a)(1) of Rule 485. [_]75 days after filing pursuant to paragraph (a)(2) of Rule 485. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- METLIFE LOGO STATE STREET RESEARCH LOGO SANTANDER LOGO HARRIS ASSOCIATES L.P. LOOMIS SAYLES & COMPANY, L.P. LOGO JANUS LOGO NEUBERGER BERMAN LOGO SCUDDER LOGO T. ROWE PRICE LOGO PROSPECTUS FOR METROPOLITAN SERIES FUND, INC. April 30, 1999 The investment options currently offered by the Metropolitan Series Fund (the "Fund") are: State Street Research Loomis Sayles High Yield Bond Aggressive Growth Portfolio Portfolio State Street Research Diversified Portfolio Neuberger Berman Partners Mid Cap Value Portfolio State Street Research Growth Scudder Global Equity Portfolio Portfolio State Street Research Income T. Rowe Price Large Cap Portfolio Growth Portfolio State Street Research Money T. Rowe Price Small Cap Market Portfolio Growth Portfolio Santander International Stock Portfolio (formerly State Street Research International Stock Portfolio) Lehman Brothers(R) Aggregate Bond Index Portfolio MetLife Stock Index Portfolio Harris Oakmark Large Cap Morgan Stanley EAFE(R) Index Value Portfolio Portfolio Janus Mid Cap Portfolio Russell 2000(R) Index Portfolio As with all mutual fund shares, neither the Securities and Exchange Commission nor any state securities authority have approved or disapproved these securities, nor have they determined if this Prospectus is accurate or complete. Any representation otherwise is a criminal offense. TABLE OF CONTENTS FOR THIS PROSPECTUS
Page in this Subject Prospectus ------- ---------- Risk/Return Summary............................................... 2 Performance and Volatility........................................ 11 About the Investment Managers..................................... 18 Portfolio Turnover Rates.......................................... 24 Dividends, Distributions and Taxes................................ 24 General Information About the Fund and its Purpose................ 24 Sale and Redemption of Shares..................................... 25 Financial Highlights.............................................. 26 Appendix A--Portfolio Manager Prior Performance................... 32 Appendix B--Certain Investment Practices.......................... 35 Appendix C--Description of Some Investments, Techniques, and Risks............................................ 39
[SIDEBAR: Carefully review the objectives and investment practices of the Portfolios and consider your ability to assume the risks involved before allocating payments to particular Portfolios.] Risk/Return Summary About all the Portfolios Each Portfolio of the Fund has its own investment objective. Since investment in any Portfolio involves both opportunities for gain and risks of loss, we cannot give you assurance that the Portfolios will achieve their objectives. You should carefully review the objectives and investment practices of the Portfolios and consider your ability to assume the risks involved before allocating payments to particular Portfolios. While certain of the investment techniques, instruments and risks associated with each Portfolio are referred to in the discussion that follows, additional information on these subjects appears in Appendix B and C to this Prospectus. However, those discussions do not list every type of investment, technique, or risk to which a Portfolio may be exposed. Further, the Portfolios may change their investment practices at any time without notice, except for those policies that this Prospectus or the Statement of Additional Information ("SAI") specifically identify as requiring a shareholder vote to change. Unless otherwise indicated, all percentage limitations, as well as characterization of a company's capitalization, are evaluated as of the date of purchase of the security. [SIDEBAR: State Street Research Aggressive Growth Portfolio] About the State Street Research Aggressive Growth Portfolio: Investment objective: maximum capital appreciation. Principal investment strategies: The Portfolio generally invests most of its assets in the common stocks of, and other securities convertible into or carrying the right to acquire common stocks of, less mature companies with the potential for rapid growth and companies whose unusual circumstances have not been fully recognized. The Portfolio's investments can range across the full spectrum from small to large capitalization issuers. At different times, the Portfolio may emphasize a particular size or type of company. 2 Principal risks: The risks described after the following captions under "Principal Risks of Investing in the Fund:" "Equity investing;" "Investing in less mature companies, smaller companies and companies with "special situations;' " and "Growth investing." Volatility may be indicative of risk. Please refer to the discussion under "Performance and Volatility." [SIDEBAR: State Street Research Growth Portfolio] About the State Street Research Growth Portfolio: Investment objective: long-term growth of capital and income and moderate current income. Principal investment strategies: The Portfolio generally invests the greatest portion of its assets in equity securities of larger, established companies and equity securities that are selling below what the portfolio manager believes to be their intrinsic values. Other principal strategies include investing in cyclical securities and smaller emerging growth companies with potential for above average earnings growth. Principal risks: The risks described after the following the captions under "Principal Risks of Investing in the Fund:" "Equity investing;" "Investing in larger companies;" "Investing in less mature companies, smaller companies and companies with "special situations;' "Growth Investing;" and "Value investing." Volatility may be indicative of risk. Please refer to the discussion under "Performance and Volatility." [SIDEBAR: State Street Research Money Market Portfolio] About the State Street Research Money Market Portfolio: Investment objective: the highest possible current income consistent with preservation of capital and maintenance of liquidity. Principal investment strategies: The Portfolio primarily invests in short term money market instruments with minimal credit risks including: corporate debt securities, United States government securities, government agency securities, bank certificates of deposit, bankers' acceptances, variable amount master demand notes and repurchase and reverse repurchase agreements. The Portfolio invests only in securities that have a remaining maturity of less than 13 months, and the dollar weighted average maturity of the Portfolio's securities will not be more than 90 days. Principal risks: Although the portfolio manager will manage the Portfolio so that significant variations in net asset value are rather unlikely, it is possible to lose money by investing in the Portfolio. The major risk involved with investing in the Portfolio is that the overall yield of the Portfolio could decrease and lower the return on your investment. Situations that can lower the yield include those that cause short-term interest rates to decline. An investment in the Portfolio is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Volatility may be indicative of risk. Please refer to the discussion under "Performance and Volatility." [SIDEBAR: State Street Research Income Portfolio] About the State Street Research Income Portfolio: Investment objective: a combination of: (a) the highest possible total return, by combining current income with capital gains, consistent with prudent investment risk, and (b) secondarily, the preservation of capital. Principal investment strategies: The Portfolio invests at least 75% of its total assets in non-convertible debt securities in the three highest rating 3 categories as determined by a nationally recognized statistical rating organization ("NRSRO"), or of comparable quality ("top three ratings"). The maturities of the debt securities the Portfolio invests in vary depending on market values and trends and can be long-term (10 or more years), intermediate term (1-10 years) or short-term (less than 1 year). The Portfolio may also invest in debt securities that are not within the top three rating categories, convertible securities and preferred stocks of companies that have senior securities rated within the top three credit rating categories, as well as up to 10% of total assets in common stocks acquired by conversion of convertible securities or exercise of warrants attached to debt securities. Principal risks: The risks described after the following captions under "Principal Risks of Investing in the Fund:" "Investing in fixed income securities;" "Prepayment risk;" and "Zero coupon risks." Volatility may be indicative of risk. Please refer to the discussion under "Performance and Volatility." [SIDEBAR: State Street Research Diversified Portfolio] About the State Street Research Diversified Portfolio: Investment objective: high total return while attempting to limit investment risk and preserve capital. Principal investment strategies: The Portfolio invests portions of its assets in equity securities of the type that can be purchased by the State Street Research Growth Portfolio, debt securities of the type that can be purchased by the State Street Research Income Portfolio and short-term money market instruments of the type that can be purchased by the State Street Research Money Market Portfolio. The portion of the Portfolio's assets invested in each category will usually be similar in composition to that of the Portfolio to which that portion correlates. However, no absolute limits apply to the portion of assets invested in each category of the composition of each category. The amount of assets invested in each type of security will depend upon economic conditions, the general level of common stock prices, interest rates and other relevant considerations, including the risks of each type of security. Principal risks: The major risk for the Portfolio is that the portfolio managers will not correctly anticipate the relative performance of different asset categories for specific periods resulting in the Portfolio underperforming other types of asset allocation investments or other types of investments in general. In addition, the Portfolio is subject to the same risks as the State Street Research Growth, State Street Research Income and State Street Research Money Market Portfolios to the extent its assets are invested similarly to each of those portfolios. These risks may be moderated, however, by the greater variety of asset types in which the Diversified Portfolio is generally expected to be invested, as compared with those other Portfolios. Volatility may be indicative of risk. Please refer to the discussion under "Performance and Volatility." [SIDEBAR: Santander International Stock Portfolio] About the Santander International Stock Portfolio (formerly, the State Street Research International Stock Portfolio). Investment objective: long-term growth of capital. Principal investment strategies: The Portfolio normally invests at least 65% of its net assets in equity securities of established large capitalization foreign (non-U.S. domiciled) companies with attractive long-term prospects for growth of capital. The Portfolio invests primarily on non-U.S. stock 4 exchanges or in well established over-the-counter markets. The Portfolio will usually be invested in issuers located in at least three countries, not including the U.S. Principal risks: The risks described after the following captions under "Principal Risks of Investing in the Fund:" Equity investing;" "Investing in larger companies;" "Investing in securities of foreign issuers;" and "Growth investing." Volatility may be indicative of risk. Please refer to the discussion under "Performance and Volatility." [SIDEBAR: Harris Oakmark Large Cap Value Portfolio] About the Harris Oakmark Large Cap Value Portfolio Investment objective: long-term capital appreciation. Principal investment strategies: The Portfolio normally invests at least 65% of its total assets in equity securities of large capitalization U.S. companies. The portfolio managers define large-cap ("large-cap") companies as those whose market capitalization falls within the range of companies included in the S&P 500 Index at the time of the purchase. As of December 31, 1998, this included companies with capitalizations of approximately $487 million and above. The portfolio managers' chief consideration in selecting equity securities for the Portfolio is their judgment as to the size of the discount at which the security trades, relative to its economic value. The portfolio managers' investment philosophy is predicated on the belief that, over time, market price and value converge and that the investment in securities priced significantly below long-term value present the best opportunity to achieve long-term capital appreciation. The portfolio managers use several methods to analyze value, but considers the primary determinant to be the enterprise's long-run ability to generate cash for its owners. The portfolio managers also believe the risks of equity investing are often reduced if management's interests are strongly aligned with the interests of its stockholders. Principal risks: The risks described after the following captions under "Principal Risks of Investing in the Fund:" "Equity investing;" "Investing in larger companies;" "Investing in less mature companies, smaller companies and companies with "special situations;' " and "Value investing." Volatility may be indicative of risk. [SIDEBAR: Janus Mid Cap Portfolio] About the Janus Mid Cap Portfolio Investment objective: long-term growth of capital. Principal investment strategies: The Portfolio normally invests at least 65% of its total assets in common stocks of medium capitalization companies selected for their growth potential. The portfolio manager defines medium capitalization ("mid-cap") companies as those whose market capitalization falls within the range of companies included in the S&P MidCap 400 Index at the time of the purchase. As of December 31, 1998, this included companies with capitalizations between approximately $142 million and $73,303 billion. The Portfolio is non- diversified, so that it can own larger positions in a smaller number of issuers. This means the appreciation or depreciation of a single investment can have a greater impact on the Portfolio's share price. The portfolio manager generally takes a "bottom up" approach to building the Portfolio by identifying companies with earnings growth potential that may not be recognized by the market at large, without regard to any industry sector or other similar selection procedure. 5 Principal risks: The Portfolio is nondiversified which means it may hold larger positions in a smaller number of securities than would a diversified portfolio. Thus, a single security's increase or decrease in value may have a greater impact on the value of the Portfolio and its total return. The Portfolio's other principal risks are described after the following captions, under "Principal Risks of Investing in the Fund:" "Equity investing;" "Investing in securities of foreign issuers;" "Investing in medium sized companies" and "Growth investing." Volatility may be indicative of risk. Please refer to the discussion under "Performance and Volatility." [SIDEBAR: Loomis Sayles High Yield Bond Portfolio] About the Loomis Sayles High Yield Bond Portfolio Investment objective: high total investment return through a combination of current income and capital appreciation. Principal investment strategies: The Portfolio normally invests at least 65% of its assets in below investment grade fixed income securities (commonly referred to as "junk bonds"). Principal risks: The risks are described after the following captions under "Principal Risks of Investing in the Fund:" "Investing in fixed income securities," "Prepayment risk," and "Zero coupon risks." Also, the Portfolio has higher risk than many other debt-type investments, because it normally invests 65% or more of its assets in lower rated bonds (commonly known as "junk bonds"), and the bonds in this Portfolio have higher default rates than do high quality bonds. Volatility may be indicative of risk. Please refer to the discussion under "Performance and Volatility." [SIDEBAR: Neuberger Berman Partners Mid Cap Value Portfolio] About the Neuberger Berman Partners Mid Cap Value Portfolio Investment objective: capital growth. Principal investment strategies: The Portfolio normally invests at least 65% of its total assets in common stocks of mid capitalization companies. The portfolio managers define mid-cap companies as those whose market capitalization falls within the range of companies included in the S&P MidCap 400 Index at the time of purchase. As of December 31, 1998, this included companies with capitalizations between approximately $142 million and $73,303 billion. The Portfolio uses a value-oriented investment approach designed to increase capital with reasonable risk by purchasing securities believed to be undervalued based on strong fundamentals, including: a low price-to-earnings ratio; consistent cash flows; the company's track record through all economic cycles; ownership interests by a company's management; and the dominance of a company in particular field. Principal risks: The risks described after the following captions under "Principal Risks of Investing in the Fund:" "Equity investing;" "Investing in medium sized companies" and "Value investing." Volatility may be indicative of risk. [SIDEBAR: Scudder Global Equity Portfolio] About the Scudder Global Equity Portfolio Investment objective: long-term growth of capital. Principal investment strategies: The Portfolio generally invests most of its assets in equity securities (primarily common stock) of established companies listed on U.S. or foreign securities exchanges or traded over-the-counter. Normally investments will be spread broadly around the world and will 6 include companies of varying sizes. The Portfolio invests in companies that are expected to benefit from global economic trends, promising technologies or products and specific country opportunities resulting from changing geopolitical, currency or economic relationships. The Portfolio will usually be invested in securities of issuers located in at least three countries, one of which may be the U.S., although all of its assets may be invested in non-U.S. issues. Principal Risks: The risks described after the following captions under "Principal Risks of Investing in the Fund:" "Equity investing;" "Value investing; "Growth investing;" "Investing in larger companies," and "Investing in securities of foreign issuers." Volatility may be indicative of risk. Please refer to the discussion under "Performance and Volatility." [SIDEBAR: T. Rowe Price Large Cap Growth Portfolio] About the T. Rowe Price Large Cap Growth Portfolio: Investment objective: long-term growth of capital and, secondarily, dividend income. Principal investment strategies: The Portfolio normally invests at least 65% of its total assets in a diversified group of large capitalization growth companies. The portfolio managers define large capitalization ("large-cap") companies as those whose market capitalization falls within the range of the largest 300 companies included in the Russell 3000 Index at the time of the purchase. As of December 31, 1998, this included companies with capitalizations of approximately $6.3 billion and above. The Portfolio generally looks for companies with above-average growth in earnings and cash flow; the ability to sustain earnings momentum even during economic slowdowns by operating in industries or service sectors where earnings and dividends can outpace inflation and the overall economy; or that have a lucrative niche in the economy where profit margins widen due to economic factors (rather than one- time events such as lower taxes). The Portfolio expects to invest in common stocks of companies that normally (but not always) pay dividends that are generally expected to rise in future years as earnings rise. Principal risks: The risks described after the following captions under "Principal Risks of Investing in the Fund:" "Equity investing;" "Investing in larger companies;" "Investing in securities of foreign issuers;" and "Growth investing." The risks of equity investing may be moderated by the fact that the Portfolio emphasizes dividend paying securities. On the other hand, that may expose the Portfolio more directly to interest rate risk. Volatility may be indicative of risk. [SIDEBAR: T. Rowe Price Small Cap Growth Portfolio] About the T. Rowe Price Small Cap Growth Portfolio: Investment objective: long-term capital growth. Principal investment strategies: The Portfolio normally invests at least 65% of its total assets in a diversified group of small capitalization companies. The portfolio manager defines small capitalization ("small cap") companies as those whose market capitalization falls within the range of companies included in the bottom 10% of the S&P 500 Index at the time of the purchase. As of December 31, 1998, this included companies with capitalizations between approximately $445 million and $7.95 billion. The Portfolio expects to invest primarily in common stocks and convertible securities of companies in the development stage of their corporate life cycle with potential to achieve long-term earnings growth faster than the overall market. 7 Principal risks: The risks described after the following captions "Principal Risks of Investing in the Fund:" "Equity investing;" "Investing in less mature companies, smaller companies and companies with "special situations;"' and "Growth investing." Volatility may be indicative of risk. Please refer to the discussion under "Performance and Volatility". [SIDEBAR: The Index Portfolios] About all the Index Portfolios Principal investment strategies applicable to all the Index Portfolios: Each Index Portfolio has as an investment objective to equal the performance of a particular index. Certain strategies common to all of the Index Portfolios are discussed in the next paragraph below. Thereafter, the unique aspects of the objective and principal strategies of each Index Portfolio are discussed. Each of these Portfolios expects to diversify differently by industry, country, currency and/or asset sector, as applicable, than the actual index. In addition to securities of the type contained in its index, each Portfolio also expects to invest, as a principal investment strategy, in securities index futures contracts and related options, warrants and convertible securities to simulate full investment in the index while retaining liquidity, to facilitate trading, to reduce transaction costs or to seek higher return when these derivatives are priced more attractively than the underlying security. Also, since the Portfolios attempt to keep transaction costs low, the portfolio manager generally will rebalance a Portfolio only if it deviates from the applicable index by a certain percent, depending on the company, industry, and country, as applicable. MetLife monitors the tracking performance of the Portfolio through examination of the "correlation coefficient." A perfect correlation would produce a coefficient of 1.00. The Portfolio will attempt to maintain a target correlation coefficient of at least .95. [SIDEBAR: Lehman Brothers Aggregate Bond Index Portfolio] Lehman Brothers Aggregate Bond Index Portfolio: Investment objective: to equal the performance of the Lehman Brothers Aggregate Bond Index. Principal investment strategies: In addition to the strategies outlined above under "Principal investment strategies applicable to all the Index Portfolios," the Portfolio will normally invest most of its assets in fixed income securities included in the Lehman Brothers Aggregate Bond Index. This index is comprised of the Lehman Brothers Government/Corporate Index, the Lehman Brothers Mortgage-Backed Securities Index, the Lehman Brothers Asset-Backed Securities Index and, effective July 1, 1999, the Lehman Brothers Commercial Mortgage-Backed Securities Index. The Portfolio may continue to hold debt securities that no longer are included in the Index, if, together with any money market instruments or cash, such holdings are no more than 20% of the Portfolio's net assets. The types of fixed income securities included in the Index are debt obligations issued or guaranteed by the United States Government or its agencies or instrumentalities, debt obligations issued or guaranteed by U.S. corporations, debt obligations issued or guaranteed by foreign companies, sovereign governments, municipalities, governmental agencies or international agencies, and mortgage-backed securities. The Portfolio will invest in a sampling of the bonds included in the Lehman Brothers Aggregate Bond Index. The bonds purchased for the Portfolio are chosen to, as a group, reflect the composite performance of the Index. As the Portfolio's total assets grow, a larger percentage of bonds included in the Index will be included in the Portfolio. 8 Principal risks: The risks described after the following captions under "Principal Risks of Investing in the Fund:" "Investing in fixed income securities;" "Prepayment risk;" "Zero coupon risks" and "Index investing." Volatility may be indicative of risk. [SIDEBAR: MetLife Stock Index Portfolio] MetLife Stock Index Portfolio: Investment objective: to equal the performance of the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"). Principal investment strategies: In addition to the strategies outlined above under "Principal investment strategies applicable to all the Index Portfolios," the Portfolio will normally invest most of its assets in common stocks included in the S&P 500 Index. The S&P 500 Index consists of 500 common stocks, most of which are listed on the New York Stock Exchange. The stocks included in the S&P 500 Index are issued by companies among those whose outstanding stock have the largest aggregate market value, although stocks that are not among the 500 largest are included in the S&P 500 Index for diversification purposes. Principal risks: The risks described after the following captions under "Principal Risks of Investing in the Fund:" "Equity investing;" "Investing in larger companies;" and "Index investing." Volatility may be indicative of risk. Please refer to the discussion under "Performance and Volatility." [SIDEBAR: Morgan Stanley EAFE Index Portfolio] Morgan Stanley EAFE Index Portfolio: Investment objective: to equal the performance of the MSCI EAFE Index. Principal investment strategies: In addition to the strategies outlined above under "Principal investment strategies applicable to all the Index Portfolios," the Portfolio will normally invest most of its assets in equity securities included in the MSCI EAFE Index. The MSCI EAFE Index (also known as the Morgan Stanley Capital International Europe Australasia Far East Index) is an index containing approximately 1,100 equity securities of companies of varying capitalizations in countries outside the United States. As of December 31, 1998 countries included in the MSCI EAFE Index were Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, The Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The Portfolio will invest in a statistically selected sample of the 1,100 stocks included in the MSCI EAFE Index. The stocks purchased for the Portfolio are chosen to, as a group, reflect the composite performance of the MSCI EAFE Index. As the Portfolio's total assets grow, a larger percentage of stocks included in the MSCI EAFE Index will be included in the Portfolio. Principal risks: The risks described after the following captions under "Principal Risks of Investing in the Fund:" "Equity investing;" "Investing in securities of foreign issuers;" and "Index investing." Volatility may be indicative of risk. [SIDEBAR: Russell 2000 Index Portfolio] Russell 2000 Index Portfolio: Investment objective: to equal the return of the Russell 2000 Index. Principal investment strategies: In addition to the strategies outlined above under "Principal Investment Strategies for the Index Portfolios," the Portfolio will normally invest most of its assets in common stocks included in 9 the Russell 2000 Index. The Russell 2000 Index is composed of approximately 2,000 small capitalization companies. As of December 31, 1998, the average stock market capitalization of companies in the Russell 2000 Index was $56 million, and the weighted average stock market capitalization was $88 million. The Portfolio will invest in a statistically selected sample of the 2000 stocks included in the Russell 2000 Index. The stocks purchased for the Portfolio are chosen to, as a group, reflect the composite performance of the Russell 2000 Index. As the Portfolio's total assets grow, a larger percentage of stocks included in the Russell 2000 Index will be included in the Portfolio. Principal risks: The risks described after the following the captions under "Principal Risks of Investing in the Fund:" "Equity investing;" "Investing in less mature companies, smaller companies and companies with "special situations;" and "Index investing." Volatility may be indicative of risk. 10 Performance and Volatility The following tables and charts are provided to illustrate the variability of the investment returns that each Portfolio shown below has earned in the past. . Average annual total return measures a Portfolio's performance over time, and compares those returns to a representative index. Periods of 1, 5, and 10 years (or since inception as applicable) are presented. . The graphs of year-by-year returns examine volatility by illustrating a Portfolio's historic highs and lows, as well as the consistency of returns. . In general, as reflected in this section, Portfolios with higher average annual total returns tend to be more volatile. . Return calculations do not reflect insurance product fees or other charges, and if included these charges would reduce each Portfolio's past performance. Also, past performance does not necessarily indicate how a particular Portfolio will perform in the future. [STATE STREET RESEARCH AGGRESSIVE GROWTH CHART APPEARS HERE] State Street Research Aggressive Growth Investment Results Average Annual Total Returns As of December 31, 1998 ------------------------------------ 1 Year 5 Years 10 Years ------ ------- -------- State Street Research Aggressive Growth 13.69% 10.67% 15.94% - --------------------------------------------------------------------- S&P 500 28.60% 24.05% 19.19% [BAR GRAPH APPEARS HERE] 89 30.94% 90 -10.34 91 66.41 92 10.39 93 22.63 94 -1.88 95 29.50 96 7.72 97 6.67 98 13.69 During the 10-year period shown in the bar chart, the highest return for a quarter was 30.6% (quarter ended March 31, 1991) and the lowest return for a quarter was -22.3% (quarter ended Sept. 30, 1990). [STATE STREET RESEARCH GROWTH CHART APPEARS HERE] State Street Research Growth Investment Results Average Annual Total Returns As of December 31, 1998 ----------------------------------- 1 Year 5 Years 10 Years ------ ------- -------- State Street Research Growth 28.18% 20.96% 18.59% - -------------------------------------------------------------------------- S&P 500 Index 28.60% 24.05% 19.19% [BAR CHART APPEARS HERE] 89 36.64 90 -8.50 91 33.09 92 11.56 93 14.40 94 -3.25 95 33.14 96 22.18 97 28.36 98 28.18 During the 10-year period shown in the bar chart, the highest return for a quarter was 38.6% (quarter ended Dec. 31, 1998) and the lowest return for a quarter was -22.6% (quarter ended Sept. 30, 1998). 11 [STATE STREET RESEARCH MONEY MARKET CHART APPEARS HERE] State Street Research Money Market Investment Results Average Annual Total Returns As of December 31, 1998 -------------------------------- 1 Year 5 Years 10 Years ------ ------- -------- State Street Research Money Market 5.19% 4.97% 5.49% - ------------------------------------------------------------------------ IBC's All Taxable 30 Day 5.03% 4.82% 5.24% The seven day yield for this portfolio is 7.01% (simple yield ) and 7.26% (effective yield) for the seven days ended December 31, 1998. [BAR GRAPH APPEARS HERE] 89 9.28 90 8.23 91 6.10 92 3.73 93 2.90 94 3.85 95 5.59 96 5.01 97 5.21 98 5.19 During the 10-year period shown in the bar chart, the highest return for a quarter was 2.4% (quarter ended June 30, 1989) and the lowest return for a quarter was .7% (quarter ended Sept. 30, 1993). [STATE STREET RESEARCH INCOME CHART APPEARS HERE] State Street Research Income Investment Results Average Annual Total Returns As of December 31, 1998 ------------------------------------- 1 Year 5 Years 10 Years ------ ------- -------- State Street Research Income 9.40% 7.58% 9.64% - -------------------------------------------------------------------------- Lehman Brothers Aggregate 8.69% 7.27% 9.26% [BAR GRAPH APPEARS HERE] 89 13.35 90 10.03 91 17.31 92 6.91 93 11.36 94 -3.15 95 19.55 96 3.60 97 9.83 98 9.40 During the 10-year period shown in the bar chart, the highest return for a quarter was 6.9% (quarter ended Sept. 31, 1991) and the lowest return for a quarter was -2.5% (quarter ended March 31, 1994). [STATE STREET DIVERSIFIED CHART APPEARS HERE] State Street Research Diversified Investment Results Average Annual Total Returns As of December 31, 1998 -------------------------------------- 1 Year 5 Years 10 Years ------ ------- -------- State Street Research Diversified 19.64% 15.26% 14.33% - --------------------------------------------------------------------------- S&P 500 28.60% 24.05% 19.19% - --------------------------------------------------------------------------- Lehman Brothers Aggregate 8.69% 7.27% 9.26% [BAR CHART APPEARS HERE] 89 21.76 90 0.00 91 24.84 92 9.48 93 12.75 94 -3.06 95 27.03 96 14.52 97 20.58 98 19.64 During the 10-year period shown in the bar chart, the highest return for a quarter was 11.7% (quarter ended June 30, 1998) and the lowest return for a quarter was -8.8% (quarter ended Sept. 30, 1990). 12 [SANTANDER INTERNATIONAL CHART APPEARS HERE] Santander International Stock Investment Results Average Annual Total Returns As of December 31, 1998 ------------------------------------ 1 Year 5 Years Inception ------ ------- --------- Santander International Research 22.56% 4.49% 6.55% - -------------------------------------------------------------------- MSCI EAFE 20.00% 9.19% 8.49% [BAR CHART APPEARS HERE] 92 -10.21 93 47.76 94 5.08 95 0.84 96 -1.77 97 -2.34 98 22.56 During the 10-year period shown in the bar chart, the highest return for a quarter was 19.4% (quarter ended March 31, 1993) and the lowest return for a quarter was -12.8% (quarter ended Sept. 30, 1998). Harris Oakmark Large Cap Value Since the Portfolio commenced operations effective November 9, 1998, no volatility or performance information is available. [JANUS MID CAP CHART APPEARS HERE] Investment Results Average Annual Total Returns As of December 31, 1998 ----------------------- 1 Year Inception ------ --------- Janus Mid Cap 37.19% 36.09% - -------------------------------------------------------------------- S&P 400 MidCap 19.11% 26.19% [BAR CHART APPEARS HERE] 97* 28.22 98 37.19 During the period shown in the bar chart, the highest return for a quarter was 25.7% (quarter ended Dec. 31, 1998) and the lowest return for a quarter was - -14.5% (quarter ended Sept. 30, 1998). * For the period March 3, 1997 to December 31, 1997. Loomis Sayles High Yield Bond Investment Results Average Annual Total Returns As of December 31, 1998 ----------------------- 1 Year Inception ------ --------- Loomis Sayles High Yield Bond -7.51% -0.98% - -------------------------------------------------------------------- Merrill Lynch High Yield 3.66% 7.55% [BAR CHART APPEARS HERE] 97* 6.18 98 -7.51 During the period shown in the bar chart, the highest return for a quarter was 7.5% (quarter ended Sept. 30, 1997) and the lowest return for a quarter was - -15.8% (quarter ended Sept. 30, 1998). * For the period March 3, 1997 to December 31, 1997. 13 Neuberger Berman Partners Mid Cap Value Since the Portfolio commenced operations effective November 9, 1998, no volatility or performance information is available. Scudder Global Equity Investment Results Average Annual Total Returns As of December 31, 1998 ----------------------- 1 Year Inception ------ --------- Scudder Global Equity 15.96% 13.99% - ------------------------------------------------------- MSCI World 24.80% 20.96% [BAR CHART APPEARS HERE] 97 9.62 98 15.96 During the period shown in the bar chart, the highest return for a quarter was 12.5% (quarter ended Dec. 31, 1998) and the lowest return for a quarter was - 11.2% (quarter ended Sept. 30, 1998). * For the period March 3, 1997 to December 31, 1997. T. Rowe Price Large Cap Growth Since the Portfolio commenced operations effective November 9, 1998, no volatility or performance information is available. T. Rowe Price Small Cap Growth Investment Results Average Annual Total Returns As of December 31, 1998 ----------------------- 1 Year Inception ------ --------- T. Rowe Price Small Cap Growth 3.45% 11.91% - -------------------------------------------------------------------- Russell 2000 Growth 1.23% 9.83% [BAR CHART APPEARS HERE] 97 18.81 98 3.45 During the period shown in the bar chart, the highest return for a quarter was 25.8% (quarter ended Dec. 30, 1998) and the lowest return for a quarter was - 21.8% (quarter ended Sept. 30, 1998). * For the period March 3, 1997 to December 31, 1997. Lehman Brothers(R) Aggregate Bond Index Since the Portfolio commenced operations effective November 9, 1998, no volatility or performance information is available. 14 [T. ROWE PRICE SMALL CAP GROWTH CHART APPEARS HERE] Lehman Brothers(R) Aggregate Bond Index Since the Portfolio commenced operations effective November 9, 1998, no volatility or performance information is available. [METLIFE STOCK INDEX CHART APPEARS HERE] MetLife Stock Index Investment Results Average Annual Total Returns As of December 31, 1998 ------------------------------------------- 1 Year 5 Years Inception ------ ------- --------- MetLife Stock Index 28.23% 23.55% 18.88% - --------------------------------------------------------------------------- S&P 500 28.60% 24.05% 19.39% [BAR GRAPH APPEARS HERE] 91 29.76 92 7.44 93 9.54 94 1.18 95 36.87 96 22.66 97 32.19 98 28.23 During the 10-year period shown in the bar chart, the highest return for a quarter was 21.3% (quarter ended Dec. 31, 1998) and the lowest return for a quarter was -13.6% (quarter ended Sept. 30, 1990). Morgan Stanley EAFE(R) Index Since the Portfolio commenced operations effective November 9, 1998, no volatility or performance information is available. Russell 2000(R) Index Since the Portfolio commenced operations effective November 9, 1998, no volatility or performance information is available. 15 [SIDEBAR: Carefully review the principal risks associated with investing in the Portfolios] Principal Risks of Investing in the Fund The following briefly describes the principal risks that are associated with one or more of the Fund's Portfolios. In the discussion of each Portfolio that appears immediately above, the paragraph entitled "Principal risks" states which of the following are the principal risks for that Portfolio. Equity investing: Portfolios that invest in equities could lose money due to sudden unpredictable drops in value and the potential for periods of lackluster performance. Such adverse developments could result from general market or economic conditions and/or developments at a particular company that the portfolio managers do not foresee or circumstances that they do not evaluate correctly. Historically, investments in equities have been more volatile than many other investments. This is a principal risk for the following Portfolios: State Street Research Aggressive Growth, T. Rowe Price Small Cap Growth, Harris Oakmark Large Cap Value, State Street Research Growth, State Street Research Diversified, Santander International Stock, Janus Mid Cap, Neuberger Berman Partners Mid Cap Value, Scudder Global Equity, T. Rowe Price Large Cap Growth, MetLife Stock Index, Morgan Stanley EAFE Index and Russell 2000 Index. Investing in less mature companies, smaller companies and companies with "special situations": These investments can be particularly sensitive to market movements, because they may be thinly traded and their market prices tend to reflect future expectations. Also, these companies often have limited product lines, markets or financial resources and their management personnel may lack depth and experience. (For an explanation of "special situations" see "investment styles," in Appendix C.) This is a principal risk for the following Portfolios: State Street Research Aggressive Growth, T. Rowe Price Small Cap Growth, Harris Oakmark Large Cap Value, State Street Research Growth, State Street Research Diversified and Russell 2000 Index. Investing in larger companies: Larger more established companies may be unable to respond quickly to new competitive challenges such as changes in technology and consumer tastes. Many larger companies also may not be able to attain the high growth rates of successful smaller companies, especially during extended period of economic expansion. This is a principal risk for the following Portfolios: State Street Research Diversified, Harris Oakmark Large Cap Value, State Street Research Growth, Santander International Stock, Scudder Global Equity, T. Rowe Price Large Cap Growth and MetLife Stock Index. Investing in fixed income securities: These types of investments are subject to loss in value if the market interest rates subsequently rise after purchase of the obligation. This risk is greater for investments with longer remaining durations. Another risk is that the issuer's perceived creditworthiness can drop and cause the fixed income investment to lose value or the issuer could default on interest or principal payments causing a loss in value. Lower rated instruments, especially so called "junk bonds," involve greater risks due to the financial health of the issuer and the economy generally and their market prices can be more volatile. 16 This is a principal risk for the following Portfolios: State Street Research Income, State Street Research Diversified, Lehman Brothers Aggregate Bond Index and Loomis Sayles High Yield Bond. Prepayment risk: Prepayment risk is the risk that an issuer of a debt security owned by a Portfolio repays the debt before it is due. This is most likely to occur when interest rates have declined and the issuer can therefore refinance the debt at a lower interest rate. A Portfolio that owns debt obligations that are prepaid would generally have to reinvest the amount prepaid in lower yielding instruments. Also, debt obligations that can be prepaid tend to increase less in value when interest rates decline, and decrease more when interest rates rise, than otherwise similar obligations that are not prepayable. This is a principal risk for the following Portfolios: State Street Research Income, State Street Research Diversified, Lehman Brothers Aggregate Bond Index and Loomis Sayles High Yield Bond. Zero coupon risks: "Zero coupon" securities are debt obligations that provide for payment of interest at the maturity date, rather than over the life of the instrument. The values of zero coupon securities tend to respond more to changes in interest rates than do otherwise comparable debt obligations that provide for periodic payment of interest. This is a principal risk for the following Portfolios: State Street Research Income, State Street Research Diversified, Lehman Brothers Aggregate Bond Index and Loomis Sayles High Yield Bond. Investing in securities of foreign issuers: Investment in securities that are traded outside the U.S. have additional risks beyond those of investing in U.S. securities. Foreign securities are frequently more volatile and less liquid than their U.S. counterparts for reasons that may include unstable political and economic climates, lack of standardized accounting practices, limited information available to investors and smaller markets that are more sensitive to trading activity. Also, changes in currency exchange rates have the potential of reducing gains or creating losses. There also can be risks of expropriation, currency controls, foreign taxation or withholding, and less secure procedures for transacting business in securities. The risks of investing in foreign securities are usually higher in emerging markets such as most countries in Southeast Asia, Eastern Europe, Latin America and Africa. This is a principal risk for the following Portfolios: Santander International Stock, Scudder Global Equity, Morgan Stanley EAFE Index, Janus Mid Cap Value and T. Rowe Price Large Cap Growth. Value investing: This investment approach has additional risk associated with it because the portfolio manager's judgement that a particular security is undervalued in relation to the company's fundamental economic values may prove incorrect. This is a principal risk for the following Portfolios: Harris Oakmark Large Cap Value, State Street Research Growth, State Street Research Diversified, Neuberger Berman Partners Mid Cap Value and Scudder Global Equity. 17 Growth investing: This investment approach has additional risk associated with it due to the volatility of growth stocks. Growth companies usually invest a high portion of earnings in their businesses, and may lack the dividends of value stocks that can cushion prices in a falling market. Also, earnings disappointments often lead to sharply falling prices because investors buy growth stocks in anticipation of superior earnings growth. This is a principal risk for the following Portfolios: State Street Research Growth, State Street Research Aggressive Growth, State Street Research Diversified, T. Rowe Price Small Cap Growth, Santander International Stock, Janus Mid Cap, Scudder Global Equity and T. Rowe Price Large Cap Growth. Index investing: Unlike actively managed portfolios, portfolios that attempt to match the return of an index generally will not use any defensive strategies. You, therefore, will bear the risk of adverse market conditions with respect to the market segment that the index seeks to match. In addition, transaction costs, other Portfolio or Fund expenses, brief delays that occur until a Portfolio can invest cash it receives and other tracking errors may result in a Portfolio's return being lower than the return of the applicable index. This is a principal risk for the following Portfolios: MetLife Stock Index, Morgan Stanley EAFE Index, Russell 2000 Index and Lehman Brothers Aggregate Bond Index. Investing in Medium Sized Companies: These companies present additional risks because their earnings are less predictable, their share prices more volatile, and their securities less liquid than larger, more established companies. This is a principal risk for the following Portfolios: Janus Mid Cap and the Neuberger Berman Partners Mid Cap. Defensive Strategies Except with respect to the index Portfolios, portfolio managers generally may use defensive strategies. These include holding greater cash positions, short- term money market instruments or similar investments that are not within the Portfolio's usual investment strategy, but do not violate any prohibition to which the Portfolio is subject. Portfolio managers may use defensive strategies when they believe that market conditions are not favorable for profitable investing or when the portfolio manager is otherwise unable to locate favorable investment opportunities. Adopting a defensive position, however, can mean that a Portfolio would be unable to meet its investment objective. [SIDEBAR: About MetLife] About The Investment Managers Metropolitan Life Insurance Company ("MetLife") has overall responsibility for investment management for each Portfolio and day-to-day investment management responsibility for the index Portfolios. (MetLife also performs general administrative and management services for the Fund.) In addition, MetLife is the Fund's principal underwriter and distributor. MetLife also manages its own investment assets and those of certain affiliated companies and other entities. MetLife is a mutual life insurance company which sells insurance policies and annuity contracts. On December 31, 1998, it had total 18 life insurance in force of approximately $1.7 trillion and total assets under management of approximately $359 billion. MetLife is the parent of Metropolitan Tower Life Insurance Company ("Metropolitan Tower"). [SIDEBAR: Portfolio management of the State Street Research Portfolios] State Street Research & Management Company ("State Street Research") is the sub-investment manager for the State Street Research Portfolios. It is a Delaware corporation and traces its history back to 1924. It is a wholly-owned indirect subsidiary of MetLife. In addition to the Fund, it provides investment management services to several mutual funds and institutional clients. As of December 31, 1998, State Street Research had investment arrangements in effect for about $17 billion in assets. The following gives you information on the portfolio managers for certain of the State Street Research Portfolios: State Street Research Aggressive Growth Portfolio: Richard J. Jodka, a Senior Vice President since joining State Street Research in February 1998, is the portfolio manager for the Portfolio and has been primarily responsible for its day-to day management since that time. During the past five years, he also served as a portfolio manager with Frontier Capital Management and Putnam Investments, Inc. State Street Research Diversified Portfolio: The portfolio manager for each portion is the same as the portfolio manager of the Portfolio to which such portion correlates (see portfolio manager information). Assets are allocated among the portions of the Portfolio based on the input of State Street Research's Asset Allocation Committee. State Street Research Growth Portfolio: John T. Wilson, a Senior Vice President at State Street Research since April, 1998, has been with the firm since 1996. Mr. Wilson is the portfolio manager for the Portfolio and has been primarily responsible for its day-to-day management for the past 2 years. During the past five years, he was also a portfolio manager with Phoenix Investment Counsel, Inc. State Street Research Income Portfolio: Kim Peters, a Senior Vice President at State Street Research since 1994, has been with the firm since 1986. Mr. Peters is the portfolio manager for the Portfolio and has been primarily responsible for its day-to-day management for 5 years. During the past five years, Mr. Peters has also served as a Vice President at State Street Research. [SIDEBAR: Portfolio management of the Santander International Stock Portfolio] Santander Global Advisors, Inc. ("Santander") is the sub-investment manager of the Santander International Stock Portfolio since November 9, 1998. Santander was founded in 1997. Santander Investments, SA, a wholly-owned subsidiary of Banco Santander, owns 75% of the outstanding common stock of Santander. MetLife owns 25% of the outstanding common stock of Santander. In addition to the Fund, Santander provides investment management services to several institutional clients. Santander has not previously provided investment management services to a mutual fund registered with the SEC, which you should consider as an additional risk factor associated with investing in the Portfolio. Nevertheless, as of December 31, 1998, it did have investment arrangements in effect for in excess of $1.5 billion in assets. 19 Christopher J. Goudie, an Executive Vice President at Santander since May 1998, has been primarily responsible for the Portfolio's day-to-day management since Santander became sub-investment manager for the Portfolio. He also manages Santander's EAFE Active/Passive portfolio. During the past 5 years, Mr. Goudie was head of client service for North America and a portfolio manager for global and U.S. equity portfolios at Baring Asset Management. [SIDEBAR: Portfolio management of the Harris Oakmark Large Cap Value Portfolio] Harris Associates L.P. ("Harris") is the sub-investment manager of the Harris Oakmark Large Cap Value Portfolio. Together with its predecessors it has provided investment management services to mutual funds since 1970. It is a wholly-owned subsidiary of Nvest Companies, L.P. whose general partner, Nvest Corporation, is an indirect wholly-owed subsidiary of MetLife. In addition to the Fund, it provides investment management services to several mutual funds as well as individuals, trusts, endowments, institutional clients and private partnerships. As of December 31, 1998, Harris had investment arrangements in effect for about $17 billion in assets. Robert J. Sanborn and Edward Loeb are co-portfolio managers for the Portfolio and have been primarily responsible for its day-to-day management since its inception in November, 1998. Mr. Sanborn is the portfolio manager for other mutual funds managed by Harris. During the past five years, Mr. Sanborn has been a Portfolio Manager of Harris, a Director of Harris Associates Inc., its general partner, and the Executive Vice President of Harris Associates Investment Trust, a registered mutual fund with six series, including The Oakmark Fund, for which he is the fund manager. Mr. Loeb is the portfolio manager for numerous individual and institutional clients. During the past five years, Mr. Loeb has been a Portfolio Manager at Harris and, since June 1997, Vice President of the Investment Advisory Department of Harris. Mr. Sanborn and Mr. Loeb have been with Harris since 1988 and 1989, respectively. [SIDEBAR: Portfolio management of the Janus Mid Cap Portfolio] Janus Capital Corporation ("Janus") is the sub-investment manager for the Janus Mid Cap Portfolio. It is a Colorado corporation that began providing investment management services at its inception in 1970. In addition to the Fund, it provides investment management services to several mutual funds and several individual and institutional clients. As of December 31, 1998, Janus managed approximately $108 billion in assets. James P. Goff, Vice President since December 1993 and Portfolio Manager, joined Janus in 1988. He is the portfolio manager for the Portfolio and has been primarily responsible for its day-to-day management since its inception in March, 1997. He is also a portfolio manager for other investment portfolios. Over the past five years, he has also been Portfolio Manager at Janus. [SIDEBAR: Portfolio management of the Loomis Sayles High Yield Bond Portfolio] Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the sub-investment manager for the Loomis Sayles High Yield Bond Portfolio. It is a Delaware limited partnership with a history that dates back to 1926. Its general partner is an indirect wholly-owned subsidiary of Nvest Companies, L.P. whose general partner, Nvest Corporation, is an indirect wholly-owned subsidiary of MetLife. In addition to the Portfolio, it provides investment management services to numerous mutual funds and institutional clients. As of December 31, 1998, Loomis Sayles had investment arrangements in effect for about $71 billion in assets. Daniel J. Fuss, Executive Vice President, Director and Managing Partner, and Kathleen C. Gaffney, Vice-President, have held their current positions 20 over the past five years and have been with Loomis Sayles since 1976 and 1984 respectively. Mr. Fuss and Ms. Gaffney, co-portfolio managers for the Portfolio, have been primarily responsible for its day-to-day management since its inception in March, 1997. [SIDEBAR: Portfolio management of the Neuberger Berman Partners Mid Cap Value Portfolio] Neuberger Berman Management Inc. ("Neuberger Berman"), is the sub-investment manager for the Neuberger Berman Partners Mid Cap Value Portfolio. Neuberger Berman and its predecessor firms and affiliates have been managing money since 1939 and have specialized in the management of mutual funds since 1950. Neuberger Berman is owned by the principals of Neuberger Berman, LLC. In addition to the fund, Neuberger Berman, LLC and its affiliates, including Neuberger Berman, provide investment management services to mutual funds and securities accounts with assets as of December 31, 1998 of about $55.4 billion. Michael M. Kassen, Robert I. Gendelman and S. Basu Mullick have been co- managers of the Portfolio since its inception. Mr. Kassen and Mr. Gendelman have been Vice Presidents of Neuberger Berman and principals of Neuberger Berman, LLC since June 1990 and October 1994, respectively. Mr. Mullick has been a Vice President of Neuberger Berman since October 1998. Over the past five years, Mr. Gendelman was also portfolio manager at Harpel Partners. Over the past five years, Mr. Mullick was also a portfolio manager at Ark Asset Management. Mr. Kassen, Mr. Gendelman and Mr. Mullick are also co-managers of the Neuberger Berman Partners Fund and Neuberger Berman AMT Partners Portfolio. [SIDEBAR: Portfolio management of the Scudder Global Equity Portfolio] Scudder Kemper Investments, Inc. ("Scudder") is the sub-investment manager for the Scudder Global Equity Portfolio. Zurich Insurance Company owns a 70% interest in Scudder. Zurich Insurance Company is indirectly owned by Zurich Allied AG, a publicly held Swiss financial service holding company, and Allied Zurich p.l.c., a publicly held U.K. financial service holding company. In addition to the Portfolio, it provides investment management services to several mutual funds and several individual and institutional clients. As of December 31, 1998, Scudder had investment management arrangements in excess of $280 billion in asset globally. William E. Holtzer, Managing Director, Diego Espinosa, Senior Vice President and Nicholas Bratt, Director of the Global Equity Group have been with Scudder since 1980, 1996 and 1976, respectively. Messrs. Holzer, Espinosa and Bratt are co-portfolio managers for the Portfolio. Messrs. Holzer and Espinosa have been primarily responsible for its day-to-day management. Mr. Holzer is a portfolio manager for other investment portfolios, is a member of Scudder's Currency Committee and has responsibilities for global equity investment strategies. Over the past five years, Mr. Espinosa was responsible for Latin American research and was portfolio manager of The Argentina Fund, Inc. at Scudder and held positions at Morgan Stanley & Co., Boston Consulting Group and CitiBank. Mr. Bratt is responsible for Scudder's Equity Activities and is president of Scudder's open and closed end equity funds that invest overseas. [SIDEBAR: Portfolio management of the T. Rowe Price Portfolios] T. Rowe Price Associates, Inc. ("T. Rowe Price") is the sub-investment manager of the T. Rowe Price Portfolios. A Maryland corporation, it dates back to 1937. In addition to the Fund, it provides investment management services to many retail and institutional accounts. As of December 31, 1998, T. Rowe Price and its affiliates had investment management arrangements in effect for about $148 billion in assets. The following gives you information on the portfolio managers for the T. Rowe Price Portfolios: 21 T. Rowe Price Large Cap Growth Portfolio: The Portfolio is managed by an Investment Advisory Committee. Robert W. Smith, Committee Chairman, has been responsible for the day-to-day management of the Portfolio since its inception in November, 1998 and works with the Committee in developing and executing the Portfolio's investment program. Mr. Smith joined T. Rowe Price and began managing assets there in 1992. Mr. Smith and the Investment Advisory Committee manage other mutual funds, including the T. Rowe Price Growth Stock Fund. T. Rowe Price Small Cap Growth Portfolio: The Portfolio is managed by an Investment Advisory Committee. Richard T. Whitney, Committee Chairman, has been responsible for day-to-day management of the Portfolio since its inception in March, 1997 and works with the Committee in developing and executing the Portfolio's investment program. Mr. Whitney joined T. Rowe Price in 1985 and has been managing investments there since 1986. Mr. Whitney and the Investment Advisory Committee manage other mutual funds including T. Rowe Price Diversified Small Cap Growth Fund. [SIDEBAR: Investment Management Fees] The Fund pays MetLife monthly for its investment management services. MetLife pays each sub-investment manager for their investment management services. There is no separate charge to the Fund for the sub-investment management services. For the Portfolios indicated below, the following table shows the investment management and sub-investment management fees for the year ending December 31, 1998 as an annual percentage of the average daily net assets of each Portfolio.
% of Average Daily Net Assets % of Average Paid by Daily Net Assets Investment Paid to Manager to Investment Sub-Investment Portfolio Manager Manager - -------------------------------------------------------------------------------- State Street Research Money Market .25% .25% - -------------------------------------------------------------------------------- MetLife Stock Index .25% N/A - -------------------------------------------------------------------------------- State Street Research Growth .49% .34% - -------------------------------------------------------------------------------- State Street Research Income .33% .25% - -------------------------------------------------------------------------------- State Street Research Diversified .44% .28% - -------------------------------------------------------------------------------- State Street Research Aggressive Growth .70% .50% - -------------------------------------------------------------------------------- Loomis Sayles High Yield Bond .70% .50% - -------------------------------------------------------------------------------- Santander International Stock/1/ .75% .55% - -------------------------------------------------------------------------------- T. Rowe Price Small Cap Growth .53% .33% - -------------------------------------------------------------------------------- Janus Mid Cap .72% .51% - -------------------------------------------------------------------------------- Scudder Global Equity .74% .53%
22 The Portfolios indicated in the following table have been in operation for less than one year. The following shows the investment management and sub-investment management fee schedules as an annual percentage of the average daily net assets of each Portfolio.
% per % per annum annum Paid to Average paid to Sub- Daily Net Investment Investment Portfolio Assets Manager Manager - -------------------------------------------------------------------------------- Lehman Brothers Aggregate Bond Index All assets .25% N/A - -------------------------------------------------------------------------------- Russell 2000 Index All assets .25% N/A - -------------------------------------------------------------------------------- Morgan Stanley EAFE Index All assets .30% N/A - -------------------------------------------------------------------------------- 1st $50 million .70% .50% T. Rowe Price Large Cap Growth over $50 million .60% .40% - -------------------------------------------------------------------------------- 1st $250 million .75% .65% Harris Oakmark Large Cap Value Over $250 million .70% .60% - -------------------------------------------------------------------------------- Neuberger Berman Partners Mid Cap Value 1st $100 million .70% .50% next $250 million .675% .475% next $500 million .65% .45% next $750 million .625% .425% over $1.6 billion .60% .40%
- -------- /1/For the year ending December 31, 1998: (a) State Street Research was sub- investment manager until November 9, 1998 and received .47% of the average daily net assets through that date; (b) GFM International Investors, Inc. ("GFM") was sub-sub investment manager until November 9, 1998 and received .34% of the average daily net assets through that date; and (c) beginning November 9, 1998, Santander replaced State Street Research as sub-investment manager and received .55% of the average daily net assets from that date through December 31, 1998. MetLife paid all sub-investment management fees to State Street Research and Santander. State Street Research paid all sub-sub investment management fees to GFM. [SIDEBAR: Fund Expenses] The Fund is responsible for paying its own expenses. However, MetLife voluntarily pays expenses of certain Portfolios in excess of a certain percentage of net assets until the earlier of either total net assets of the Portfolio reaching $100 million or a certain date as follows:
SUBSIDIZED EXPENSES* IN PORTFOLIO EXCESS OF DATE Loomis Sayles High Yield Bond 0.20% 3/2/99 Harris Oakmark Large Cap Value 0.20% 11/2/00 T. Rowe Price Large Cap Growth 0.20% 11/2/00 Neuberger Berman Partners Mid Cap Value 0.20% 11/2/00 Lehman Brothers Aggregate Bond Index 0.20% 11/2/00 Russell 2000 Index 0.20% 11/2/00 Morgan Stanley EAFE Index 0.25% 11/2/00
- -------- *Expenses for this purpose exclude the investment management fees payable to MetLife, brokerage commissions on portfolio transactions (including any other direct costs related to portfolio investment transactions), taxes, interest and other loan costs owed by the Fund and any unusual one-time expenses (such as legal related expenses). MetLife also paid such excess expenses for the Janus Mid Cap Portfolio until December 30, 1997, for the T. Rowe Price Small Cap Growth Portfolio until January 22, 1998, and for the Scudder Global Equity Portfolio until July 1, 1998. These subsidies and other prior expense reimbursement arrangements can increase the performance of the Portfolios. MetLife also has the right to stop these payments at any time upon notice to the Board of Directors and to Fund shareholders. 23 Portfolio Turnover Rates The rate of portfolio turnover is the annual amount, expressed as a percentage, of a Portfolio's securities that it replaces in one year. The portfolio turnover rate will not be a limiting factor when it is deemed appropriate to purchase or sell securities for a Portfolio. Portfolio turnover may vary from year to year or within a year, depending upon economic, market or business conditions and client contributions and withdrawals. To the extent that brokerage commissions and transaction costs are incurred in buying and selling portfolio securities, the rate of portfolio turnover could affect each Portfolio's net asset value. The historical rates of portfolio turnover for all of the Portfolios are set forth in the Prospectus under the Financial Highlights. [SIDEBAR: Dividends are reinvested.] Dividends, Distributions and Taxes The Fund intends to qualify as a regulated investment company under the tax law and, as such distributes substantially all of each Portfolio's ordinary net income and capital gains each calendar year as a dividend to the separate accounts funding the Contracts to avoid an excise tax on certain undistributed amounts. The Fund expects to pay no income tax. Dividends are reinvested in additional full and partial shares of the Portfolio as of the dividend payment date. The Fund and its Portfolios intend to comply with special diversification and other tax law requirements that apply to investments under variable life insurance and annuity contracts. Under these rules, shares of the Fund will generally only be available through the purchase of a variable life insurance or annuity contract. Income tax consequences to Contract owners who allocate premiums to Fund shares are discussed in the prospectus for the Contracts that is attached at the front of this Prospectus. General Information about the Fund and its Purpose The Fund is an open-end management investment company (or "mutual fund"). The Fund is a "series" type of mutual fund, which issues separate classes (or series) of stock. Each class or series represents an interest in a separate portfolio of Fund investments ("Portfolio"). The Fund offers its shares to MetLife and its affiliated insurance companies ("Insurance Companies"), including Metropolitan Tower. The Insurance Companies hold the Fund's shares in separate accounts that they use to support variable life insurance policies and variable annuity contracts (together, the "Contracts"). Not all of the Portfolios of the Fund are available to each of these separate accounts. An Insurance Company holding Fund shares for a separate account has different rights from those of the owner of a Contract. The terms "shareholder" or "shareholders" in this Prospectus refer to the Insurance Companies, and not to any Contract owner. 24 [SIDEBAR: Contract owners may allocate the amounts under the Contracts for ultimate investment in the Portfolios] Within limitations described in the appropriate Contract, owners may allocate the amounts under the Contracts for ultimate investment in the various Portfolios of the Fund. See the prospectus which is attached at the front of this Prospectus for a description of (a) the Contract, (b) the Portfolios of the Fund that are available under that Contract and (c) the relationship between increases or decreases in the net asset value of Fund shares (and any dividends and distributions on such shares) and the benefits provided under that Contract. Some of the Portfolios have names and investment objectives that are very similar to certain publicly available mutual funds that are managed by the same money managers. These Portfolios are not those publicly available mutual funds and will not have the same performance. Different performance will result from such factors as different implementation of investment policies, different cash flows into and out of the Portfolios, different fees, and different sizes. It is conceivable that in the future it may be disadvantageous for different types of variable life insurance and variable annuity separate accounts to invest simultaneously in the Fund. However, the Fund, Metropolitan Tower and MetLife do not currently foresee any such disadvantages. The Fund's Board of Directors intends to monitor for the existence of any material irreconcilable conflict between or among such owners, and the Insurance Companies will take whatever remedial action may be necessary. Sale and Redemption of Shares [SIDEBAR: Fund shares are available only through variable life and variable annuity contracts.] Shares are sold and redeemed at a price equal to the net asset value without any sales charges. The Insurance Companies purchase or redeem shares of each Portfolio, based on, among other things: (1) the amount of net Contract premiums or purchase payments transferred to the separate accounts; (2) transfers to or from separate account investment divisions; (3) policy loans; (4) loan repayments; and (5) benefit payments to be effected on a given date under the Contracts. Generally, these purchases and redemptions are priced using the Portfolio net asset value computed for the same date and time as are used to price the corresponding Contract transaction. Each Portfolio's net asset value per share is calculated by taking its assets (including dividends and interest received or accrued), deducting its liabilities (including accrued expenses and dividends payable) and dividing the result by the total number of the Portfolio's outstanding shares. To determine the value of a Portfolio's assets, cash and receivables are valued at their face amounts. Interest is recorded as accrued and dividends are recorded on the ex-dividend date. Securities, options and futures contracts held by the Portfolios are valued at market value. Short-term debt instruments with a maturity of 60 days or less held by all Portfolios and all debt instruments held by the State Street Research Money Market Portfolio are valued on an amortized cost basis. When market quotations are not readily available for securities and assets, or when the Board of Directors determines that customary pricing procedures would result in an unreliable valuation, they are valued at fair value as determined by the Board of Directors. Such a fair value procedure could be followed, for example, if (1) an event occurs after the time of the most recent available market quotations that is likely to have affected the value of those securities or (2) such market quotations for other reasons do 25 not reflect information material to the value of those securities. The possibility of fair value pricing means that changes in a Portfolio's net asset value may not always correspond to changes in quoted prices of a Portfolio's investments. [SIDEBAR: A Portfolio's net asset value per share is determined once daily] A Portfolio's net asset value per share is determined once daily immediately after any dividends are declared and is currently determined at the close of regular trading on the New York Stock Exchange. When it is open, regular trading on the New York Stock Exchange usually ends at 4:00 p.m., Eastern time. The net asset value may also be determined on days when the New York Stock Exchange is closed when there has been trading in a Portfolio's securities which would result in a material change in the net asset value. Computer Software Systems The services provided to the Fund by MetLife as investment manager and distributor, the other managers and the transfer agent, depend on the smooth functioning of their computer systems. Many computer software systems in use today cannot distinguish the year 2000 from the year 1900 because of the way dates are encoded and calculated. That failure could negatively impact handling of securities trades, pricing and account services and otherwise adversely impact the companies, organizations, and markets in which the Portfolios may invest and may reduce a Portfolio's returns. MetLife, the other managers, and transfer agents are actively working on necessary changes to their computer systems to deal with this issue and expect that their systems will be adapted in time for that event, although there cannot be assurance of success. Financial Highlights The financial highlights table is intended to help you understand each Portfolio's financial performance for the past 5 years, or since inception of the Portfolio if shorter. Certain information reflects financial results for a single share of the Portfolio. The total returns in the table represent the rate that a shareholder would have earned or lost on an investment in a Portfolio (assuming reinvestment of all dividends and distributions). This information has been audited by Deloitte & Touche LLP, whose report, along with the Fund's financial statements, are included in the annual report, which is available upon request. 26 FINANCIAL HIGHLIGHTS The table below* has been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing with the full financial statements and notes thereto in the Statement of Additional Information or as previously stated in earlier reports. For further information about the performance of the Portfolios, see the Fund's December 31, 1998 Management Discussion and Analysis which appears under the caption "Financial Statements" in the Statement of Additional Information.
Selected Data For a Share of Capital State Street Research Growth Portfolio Stock Outstanding Throughout Period: ------------------------------------------------------------------------------- Year Ended December 31, ------------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------ ------------ ------------ ------------ ------------ -------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: Beginning of period....... $31.92 $30.51 $27.56 $21.81 $23.27 -------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income.................... 0.36 0.44 0.36 0.35 0.30 Net realized and unrealized gain/(loss).. 8.52 7.72 5.78 6.83 (1.06) ------------ ------------ ------------ ------------ ------------ Total From Investment Operations....... 8.88 8.16 6.14 7.18 (0.76) ------------ ------------ ------------ ------------ ------------ Less Distributions: Dividends from net investment income..... (0.36) (0.44) (0.36) (0.35) (0.30) Distributions from net realized capital gains.................................. (3.34) (6.31) (2.83) (1.08) (0.40) ------------ ------------ ------------ ------------ ------------ Total Distributions.................... (3.70) (6.75) (3.19) (1.43) (0.70) ------------ ------------ ------------ ------------ ------------ -------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: End of period............. $37.10 $31.92 $30.51 $27.56 $21.81 -------------------------------------------------------------------------------------------------------------------------- Total return............................. 28.18% 28.36% 22.18% 33.14% (3.25)% Net assets at end of period (000's)...... $3,112,081 $2,349,062 $1,597,728 $1,094,751 $746,433 Supplemental Data/Significant Ratios: Operating expenses to average net assets................................. 0.53% 0.43% 0.29% 0.31% 0.32% Net investment income to average net assets................................. 1.04% 1.37% 1.29% 1.46% 1.40% Portfolio turnover (1)................... 74.29% 82.81% 93.05% 45.52% 57.27% Selected Data For a Share of Capital State Street Research Growth Portfolio Stock Outstanding Throughout Period: ------------------------------------------------------------------------------- Year Ended December 31, ------------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------ ------------ ------------ ------------ ------------ -------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: Beginning of period....... $12.66 $12.36 $12.73 $11.32 $12.59 -------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income.................... 0.75 0.83 0.82 0.83 0.91 Net realized and unrealized gain/(loss).. 0.42 0.38 (0.36) 1.38 (1.31) ------------ ------------ ------------ ------------ ------------ Total From Investment Operations....... 1.17 1.21 0.46 2.21 (0.40) ------------ ------------ ------------ ------------ ------------ Less Distributions: Dividends from net investment income..... (0.80) (0.87) (0.81) (0.80) (0.87) Distributions from net realized capital gains.................................. (0.25) (0.04) (0.02) -- -- ------------ ------------ ------------ ------------ ------------ Total Distributions.................... (1.05) (0.91) (0.83) (0.80) (0.87) ------------ ------------ ------------ ------------ ------------ -------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: End of period............. $12.78 $12.66 $12.36 $12.73 $11.32 -------------------------------------------------------------------------------------------------------------------------- Total return............................. 9.40% 9.83% 3.60% 19.55% (3.15) Net assets at end of period (000's)...... $526,854 $412,191 $383,395 $349,913 $275,659 Supplemental Data/Significant Ratios: Operating expenses to average net assets................................. 0.39% 0.38% 0.32% 0.34% 0.35 Net investment income to average net assets................................. 6.13% 6.57% 6.64% 7.01% 7.02 Portfolio turnover (1)................... 123.60% 121.92% 92.90% 102.88% 141.15
- --------------------- Footnotes Appear on Page 31. 27 FINANCIAL HIGHLIGHTS
Selected Data For a Share of Capital State Street Research Money Market Portfolio Stock Outstanding Throughout Period: ----------------------------------------------------------------- Year Ended December 31, ----------------------------------------------------------------- 1998 1997 1996 1995 1994 --------- --------- --------- --------- --------- ------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: Beginning of period............ $10.38 $10.44 $10.45 $10.48 $10.49 ------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income.......................... 0.54 0.54 0.53 0.59 0.40 --------- --------- --------- --------- --------- Total From Investment Operations............... 0.54 0.54 0.53 0.59 0.40 --------- --------- --------- --------- --------- Less Distributions: Dividends from net investment income........... (0.57) (0.60) (0.54) (0.62) (0.41) --------- --------- --------- --------- --------- Total Distributions............................ (0.57) (0.60) (0.54) (0.62) (0.41) --------- --------- --------- --------- --------- ------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: End of period.................. $10.35 $10.38 $10.44 $10.45 $10.48 ------------------------------------------------------------------------------------------------------------------------- Total return................................... 5.19% 5.21% 5.01% 5.59% 3.85% Net assets at end of period (000's)............ $41,185 $39,480 $41,637 $40,456 $39,961 Supplemental Data/Significant Ratios: Operating expenses to average net assets....... 0.48% 0.49% 0.43% 0.49% 0.44% Net investment income to average net assets.... 5.11% 5.08% 4.92% 5.39% 3.76% Selected Data For a Share of Capital State Street Research Money Market Portfolio Stock Outstanding Throughout Period: ----------------------------------------------------------------- Year Ended December 31, ----------------------------------------------------------------- 1998 1997 1996 1995 1994 --------- --------- --------- --------- --------- ------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: Beginning of period............ $16.98 $16.67 $15.95 $13.40 $14.41 ------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income......................... 0.60 0.60 0.55 0.59 0.51 Net realized and unrealized gain/(loss)....... 2.70 2.71 1.77 3.02 (0.95) --------- --------- --------- --------- --------- Total From Investment Operations............. 3.30 3.31 2.32 3.61 (0.44) --------- --------- --------- --------- --------- Less Distributions: Dividends from net investment income.......... (0.57) (0.60) (0.53) (0.58) (0.50) Distributions from net realized capital gains. (1.32) (2.40) (1.07) (0.48) (0.07) --------- --------- --------- --------- --------- Total Distributions.......................... (1.89) (3.00) (1.60) (1.06) (0.57) --------- --------- --------- --------- --------- ------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: End of period.................. $18.39 $16.98 $16.67 $15.95 $13.40 ------------------------------------------------------------------------------------------------------------------------- Total return.................................. 19.64% 20.58% 14.52% 27.03% (3.06)% Net assets at end of period (000's)...........$2,656,987 $1,982,232 $1,448,841 $1,114,834 $892,826 Supplemental Data/Significant Ratios: Operating expenses to average net assets...... 0.48% 0.40% 0.29% 0.31% 0.32% Net investment income to average net assets... 3.39% 3.50% 3.38% 3.92% 3.66% Portfolio turnover (1)........................ 105.89% 114.79% 91.07% 79.29% 96.49%
- ------------------------------------- Footnotes Appear on Page 31 28 FINANCIAL HIGHLIGHTS
Selected Data For a Share of Capital State Street Research Aggressive Growth Portfolio Stock Outstanding Throughout Period: ---------------------------------------------------------------------------- Year Ended December 31, ---------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------ ------------ ------------ ---------- ---------- -------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: Beginning of period.... $27.61 $27.11 $25.87 $22.05 $22.54 -------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss)........... (0.06) (0.03) (0.02) (0.01) 0.05 Net realized and unrealized gain/(loss).......................... 3.75 1.67 2.01 6.50 (0.48) ------------ ------------ ------------ ---------- ---------- Total From Investment Operations... 3.60 1.64 1.99 6.49 (0.43) ------------ ------------ ------------ ---------- ---------- Less Distributions: Dividends from net investment income... -- -- -- -- (0.05) Distributions from net realized capital gains........................ (1.77) (1.14) (0.75) (2.67) (0.01) ------------ ------------ ------------ ---------- ---------- Total Distributions................ (1.77) (1.14) (0.75) (2.67) (0.06) ------------ ------------ ------------ ---------- ---------- -------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: End of period.......... $29.53 $27.61 $27.11 $25.87 $22.05 -------------------------------------------------------------------------------------------------------------------------- Total return........................... 13.69% 6.67% 7.72% 29.50% (1.88)% Net assets at end of period (000's).... $1,431,337 $1,391,956 $1,321,849 $958,915 $590,047 Supplemental Data/Significant Ratios: Operating expenses to average net assets............................... 0.75% 0.81% 0.79% 0.81% 0.82% Net investment income to average net assets............................... (0.20)% (0.10)% (0.11)% (0.06)% 0.24% Portfolio turnover (1)................. 97.39% 219.08% 221.23% 255.83% 186.52% Selected Data For a Share of Capital Metlife Stock Index Portfolio Stock Outstanding Throughout Period: ---------------------------------------------------------------------------- Year Ended December 31, ---------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------ ------------ ------------ ---------- ---------- -------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: Beginning of period.... $28.78 $22.23 $18.56 $13.87 $14.25 -------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income.................. 0.37 0.34 0.33 0.32 0.33 Net realized and unrealized gain/(loss).......................... 7.75 6.79 3.88 4.79 (0.17) ------------ ------------ ------------ ---------- ---------- Total From Investment Operations... 8.12 7.13 4.21 5.11 0.16 ------------ ------------ ------------ ---------- ---------- Less Distributions: Dividends from net investment income... (0.36) (0.34) (0.33) (0.32) (0.32) Distributions from net realized capital gains........................ (1.16) (0.24) (0.21) (0.10) (0.22) ------------ ------------ ------------ ---------- ---------- Total Distributions................ (1.52) (0.58) (0.54) (0.42) (0.54) ------------ ------------ ------------ ---------- ---------- -------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: End of period.......... $35.38 $28.78 $22.23 $18.56 $13.87 -------------------------------------------------------------------------------------------------------------------------- Total return........................... 28.23% 32.19% 22.66% 36.87% 1.18% Net assets at end of period (000's).... $3,111,919 $2,020,480 $1,122,297 $635,823 $363,001 Supplemental Data/Significant Ratios: Operating expenses to average net assets............................... 0.30% 0.33% 0.30% 0.32% 0.33% Net investment income to average net assets............................... 1.21% 1.47% 1.91% 2.22% 2.51% Portfolio turnover (1)................. 15.07% 10.69% 11.48% 6.35% 6.66%
- --------------------- Footnotes Appear on Page 31. 29 PAGE> FINANCIAL HIGHLIGHTS
Selected Data For a Share of Capital Santander International Stock Portfolio ---------------------------------------------------------------------- Stock Outstanding Throughout Period: Year Ended December 31, ---------------------------------------------------------------------- 1998 1997 1996 1995 1994 ---------- ---------- ---------- ---------- ---------- ---------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: Beginning of period......... $11.67 $11.95 $12.29 $12.30 $12.33 ---------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income....................... 0.13 0.10 0.07 0.03 0.08 Net realized and unrealized gain/(loss)..... 2.50 (0.38) (0.28) 0.07 0.54 ---------- ---------- ---------- ---------- ---------- Total From Investment Operations.......... 2.63 (0.28) (0.21) 0.10. 0.62 ---------- ---------- ---------- ---------- ---------- Less Distributions: Dividends from net investment income........ (0.16) -- -- (0.04) -- Distributions from net realized capital gains..................................... -- -- (0.13) (0.07) (0.65) ---------- ---------- ---------- ---------- ---------- Total Distributions....................... (0.16) -- (0.13) (0.11) (0.65) ---------- ---------- ---------- ---------- ---------- ---------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: End of period............... $14.14 $11.67 $11.95 $12.29 $12.30 ---------------------------------------------------------------------------------------------------------------------- Total return................................ 22.56% (2.34)% (1.77)% 0.84% 5.08% Net assets at end of period (000's)......... $297,381 $267,089 $303,826 $297,461 $272,952 Supplemental Data/Significant Ratios: Operating expenses to average net assets.... 1.02% 1.03% 0.97% 1.01% 1.04% Net investment income to average net assets. 0.87% 0.77% 0.56% 0.21% 0.80% Portfolio turnover (1)...................... 156.32% 182.11% 116.67% 86.24% 65.84%
Loomis Sayles Janus T. Rowe Price Small Scudder Global High Yield Bond Mid Cap Cap Growth Portfolio Equity Portfolio Portfolio Portfolio Portfolio Selected Data For a -------------------------- ------------------------- ------------------------ ------------------ Share of Capital YEAR ENDED DECEMBER 31, Stock Outstanding ------------------------------------------------------------------------------------------------------------ Throughout Period: 1998 1997/A/ 1998 1997/A/ 1998 1997/A/ 1998 1997/A/ ---------- ---------- ---------- -------- ---------- --------- ---------- -------- - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE: Beginning of period...... $10.14 $10.00 $12.77 $10.00 $11.88 $10.00 $10.85 $10.00 - ------------------------------------------------------------------------------------------------------------------------------------ Investment Operations: Net investment income/(loss).......... 0.88 0.35 (0.02) 0.01 -- -- 0.16 0.10 Net realized and unrealized gain/(loss). (1.65) 0.26 4.77 2.81 0.41 1.88 1.57 0.86 ------ ------ ------ ------ ------ ------ ------ ------ Total From Investment Operations............. (0.77) 0.61 4.75 2.82 0.41 1.88 1.73 0.96 ------ ------ ------ ------ ------ ------ ------ ------ Less Distributions: Dividends from net investment income...... (0.89) (0.35) -- (0.01) -- -- /B/ (0.16) (0.10) Distributions from net realized capital gains.................. (0.09) (0.12) (0.08) (0.04) -- -- (0.04) (0.01) ------ ------ ------ ------ ------ ------ ------ ------ Total Distributions... (0.98) (0.47) (0.08) (0.05) -- -- (0.20) (0.11) ------ ------ ------ ------ ------ ------ ------ ------ - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE: End of period................ $8.39 $10.14 $17.44 $12.77 $12.29 $11.88 $12.38 $10.85 - ------------------------------------------------------------------------------------------------------------------------------------ Total return............ (7.51)% 6.18% 37.19% 28.22% 3.45% 18.81% 15.96% 9.62% Net assets at end of period (000's).........$42,403 $27,804 $371,504 $103,852 $189,132 $94,020 $113,715 $60,712 Supplemental Data/Significant Ratios: - ------------------------ Net expenses to average net assets..... 0.87% 0.83% 0.81% 0.85% 0.67% 0.67% 0.96% 0.78%* Operating expenses to average net assets before voluntary expense reimbursements. 1.05% 1.35% N/A 0.99% N/A 0.86% 1.01% 1.14%* Net investment income to average net assets.. 10.41% 7.04% (0.22)% 0.10% (0.02)% 0.01% 1.61% 1.66%* Net investment income to average net assets before voluntary expense reimbursements. 10.23% 6.52% N/A (0.04)% N/A (0.19)% 1.56% 1.30%* Portfolio turnover (1).. 46.02% 39.26% 106.66% 74.70% 37.93% 13.45% 50.98% 36.04%
/A/ For the period March 3, 1997 (commencement of operations) to December 31, 1997. /B/ Less than $.005. Footnotes Appear on Page 31. 30 FINANCIAL HIGHLIGHTS
Neuberger Lehman Harris Berman T. Rowe Price Brothers Morgan Oakmark Large Partners Mid Large Cap Aggregate Stanley EAFE Russell 2000 Selected Data For a Cap Value Cap Value Growth Bond Index Index Index Share of Capital Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio -------------- -------------- ------------- ------------ ------------- ------------- Stock Outstanding For the Period November 9, 1998 (commencement of operations) to December 31, Throughout Period: ----------------------------------------------------------------------------------------------------------- 1998 1998 1998 1998 1998 1998 ------------- ------------- ------------- ------------ ------------- ------------- - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: Beginning of period.. $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 - ----------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income.. 0.03 0.03 0.01 0.07 0.01 0.02 Net realized and un- realized gain/(loss).. (0.30) 0.71 1.02 0.07 0.80 0.53 ------------- ------------- ------------- ------------ ------------- ------------- Total From Investment Operations............ (0.27) 0.74 1.03 0.14 0.81 0.55 ------------- ------------- ------------- ------------ ------------- ------------- Less Distributions: Dividends from net investment income..... (0.03) (0.01) (0.01) (0.08) (0.01) (0.02) Distributions from net realized capital gains................. -- -- -- -- -- -- ------------- ------------- ------------- ------------ ------------- ------------- Total Distributions.. (0.03) (0.01) (0.01) (0.08) (0.01) (0.02) ------------- ------------- ------------- ------------ ------------- ------------- - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: End of period.............. $9.70 $10.73 $11.02 $10.06 $10.80 $10.53 - ----------------------------------------------------------------------------------------------------------------------------------- Total return........... (2.70)% 7.44% 10.28% 1.38% 8.11% 5.48% Net assets at end of period (000's)........ $8,658 $8,647 $6,740 $58,810 $25,453 $38,147 Supplemental Data/Significant Ratios: Operating expenses to average net assets.... 0.70% 0.68% 0.50% 0.42% 0.49% 0.40%* Operating expenses to average net assets before voluntary expense reimbursements........ 1.79% 1.86% 2.62% 0.59% 1.41% 1.04%* Net investment income to average net assets................ 2.47% 2.61% 0.93% 5.28% 0.71% 1.46%* Net investment income to average net assets before voluntary expense reimburse- ments................. 1.38% 1.42% (1.19)% 5.11% (0.21)% 0.82%* Portfolio turnover (1)................... 0.00% 20.81% 5.69% 11.08% 12.68% 2.80%
Notes: ------ * Ratios have been determined based on annualized operating results for the period. Twelve month results may be different. (1) The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of securities (excluding short-term securities) for the year ended December 31, 1998 are as follows:
Purchases Sales of Securities --------- ------------------- State Street Research Growth............... $2,101,526,633 $1,891,659,069 State Street Research Income............... 694,429,093 556,361,346 State Street Research Diversified.......... 2,719,642,384 2,256,406,848 State Street Research Aggressive Growth.... 1,258,439,383 1,329,838,649 MetLife Stock Index........................ 863,635,727 382,070,345 Santander International Stock.............. 429,587,310 445,761,741 Loomis Sayles High Yield Bond.............. 37,933,076 16,813,644 Janus Mid Cap.............................. 399,290,044 228,305,175 T. Rowe Price Small Cap Growth............. 142,705,785 51,907,779 Scudder Global Equity...................... 84,591,572 43,681,204 Harris Oakmark Large Cap Value............. 7,987,916 -- Neuberger Berman Partners Mid Cap Value.... 8,821,882 1,270,759 T. Rowe Price Large Cap Growth............. 5,944,837 207,322 Lehman Brothers Aggregate Bond Index....... 63,057,826 5,783,973 Morgan Stanley EAFE Index.................. 25,546,074 2,775,385 Russell 2000 Index......................... 36,465,170 917,738
See Notes to Financial Statements. 31 Appendix A To Prospectus Portfolio Manager Prior Performance Because they commenced operations only on November 9, 1998, limited performance history is available for the Neuberger Berman Partners Mid Cap Value, Harris Oakmark Large Cap Value, T. Rowe Price Large Cap Growth, and Lehman Brothers Aggregate Bond Index Portfolios. The following, however, sets forth total return information for the one-year, three-year, five-year and ten-year periods ended December 31, 1998 (or since inception if more recent) for certain similar accounts that are managed by the same sub-investment managers as are these four Portfolios. Year-to-date information is also given for the two months ended February 28, 1999. Results are shown on a "total return" basis and include reinvestment of all dividends and capital gain distributions. The tables also show the total return information for appropriate indices for the same periods. The index performance information set forth below does not reflect any fees and expenses that the applicable Fund Portfolio will bear. Finally each table also shows the related Fund Portfolio over the period of its existence. Each sub-investment manager has represented to the Fund that, except as otherwise noted, the similar accounts for which performance figures are shown include all of the sub-investment manager's investment company and other accounts that (a) have been managed with investment objectives, policies, and strategies substantially similar to those used in managing the corresponding Portfolio, (b) are of sufficient size that their performance would be considered relevant to the owner of a policy or contract investing in that Portfolio and (c) are otherwise deemed sufficiently comparable to warrant including their performance. (No such similar account performance information is available with respect to the Morgan Stanley EAFE Index or Russell 2000 Index Portfolios, which also commenced operations on November 9, 1998.) The similar accounts are shown for illustrative purposes only and do not necessarily predict future performance of the Portfolios. You should be aware that the Portfolios are likely to differ from other accounts managed by the same sub-investment manager in such matters as size, cash flow pattern, expense levels and certain tax matters. Accordingly, the portfolio holdings and performance of the Portfolio will vary from those of such other accounts. The performance figures set forth below do not reflect any of the charges and deductions under the terms of the variable annuity contracts and variable life insurance policies that may invest in the Portfolios. These charges may be substantial and will cause the investment return under such a contract or policy to be less than that of the Portfolio. Such charges are discussed in detail in the appropriate Contract prospectus. 32 THE FOLLOWING PERFORMANCE INFORMATION DOES NOT REPRESENT THE PERFORMANCE OF ANY FUND PORTFOLIO EXCEPT IN THE RIGHT HAND COLUMN OF EACH TABLE. Neuberger Berman
Neuberger Berman Partners Neuberger Neuberger Mid Berman Berman AMT S&P Cap Value Total Return for Partners Fund Partners Portfolio Mid Cap 400 Portfolio Period (unaudited) (1/20/75)/1/ (3/22/94)/1/ Index/2/ (11/9/98) ------------------ ------------- ------------------ ------------- --------- Year to Date (ended 2/28/99) -1.18% -1.27% -9.13% 0.84% Since inception of Neuberger Berman Partners Mid Cap Value Portfolio (11/9/98 to 12/98, annualized) -- -- not available 8.34% One Year (12/97 to 12/98) 6.28% 4.21% 19.07% -- Three Year (12/95 to 12/98, annualized) 20.21% 21.01% 23.33% -- Since inception of Neuberger Berman AMT Partners Portfolio (3/22/94 to 12/98, annualized) -- 19.71% not available -- Five Year (12/93 to 12/98, annualized) 18.17% -- 18.81% Ten Year (12/88 to 12/98, annualized) 16.22% -- 19.24% --
- ------------ /1/ As of December 31, 1998 the Neuberger Berman Partners Fund, a mutual fund, had assets of $3,249.6 million. The Neuberger Berman Advisers Management Trust Partners Portfolio, an underlying mutual fund portfolio available only to life insurance companies to fund variable insurance contracts, had net assets of $1,637.5. The actual fees and expenses of the accounts whose performance is shown have been used. Had the Portfolio's estimated fees and expenses been used (whether before or after estimated expense reimbursements), the performance figures would have been lower. Performance figures are based on historical performance and do not guarantee future results. Neuberger Berman, in the past, absorbed certain expenses of Neuberger Berman AMT Partners Portfolio. Without this arrangement, performance would have been reduced. In addition, although managed in the same style with substantially similar investment objectives, policies and strategies, the Neuberger Berman Partners Fund and the Neuberger Berman AMT Partners Portfolio seek to achieve their objectives by investing principally in common stocks of medium- to large- capitalization companies. As a result, they may in the future have, or may in the past have had, greater exposure to larger capitalization companies than the Portfolio will have. /2/ The S&P Mid Cap 400 Index is an unmanaged index of common stocks that are primarily issued by companies with mid capitalizations. Performance for the index has been obtained from public sources and has not been audited. Harris
Harris Oakmark Large Cap Value Total Return for Oakmark Fund Portfolio Period (unaudited) (8/5/91)/1/ S&P 500 Index/2/ (11/9/98) ------------------ ------------ ---------------- --------------- Year to Date (ended 2/28/99) 1.98% .94% -1.34% Since inception of Harris Oakmark Large Cap Value Portfolio (11/9/98 to 12/31/98, annualized) -- not available 4.01% One Year (12/97 to 12/98) 3.74% 28.58% -- Three Year (12/95 to 12/98, annualized) 16.89% 28.17% -- Five Year (12/93 to 12/98, annualized) 17.28% 24.05% -- 8/5/91 to 12/98, annualized (since inception of the Oakmark Fund) 26.22% 19.73% --
- -------- /1/ As of December 31, 1998 the Oakmark Fund, a mutual fund, had assets of $7.32 billion. The actual fees and expenses of the fund whose performance is shown has been used. Had the Portfolio's estimated fees and expenses been used (whether before or after estimated expense reimbursement), the performance figures would have been lower. Performance figures are based on historical performance and do not guarantee future results. /2/ The S&P 500 Index is an unmanaged index of common stocks that are primarily issued by companies with large aggregate market values. Performance for the index has been obtained from public sources and has not been audited. 33 T. Rowe Price
Lipper T. Rowe Price Variable Funds Morgan T. Rowe Price Total Return for Growth Stock Underlying Growth Stanley Large Cap Period (unaudited) Fund/1/ Funds Average/2/ S&P 500/2/ EAFE Index/2/ Growth Portfolio ------------------ ------------- ----------------- ---------- ------------- ---------------- Year to Date (ended 2/28/99) -1.18% 0.13% 0.94% -2.63% -1.00% Since inception of T. Rowe Large Cap Growth Portfolio (11/9/98 to 12/31/98, annualized) -- -- -- not available 9.18% One Year (12/31/97 to 12/31/98) 27.41% 24.94% 28.57% 20.33% -- Three Year (12/31/95 to 12/31/98, annualized) 25.20% 23.77% 28.23% 9.31% -- Five Year (12/31/93 to 12/31/98, annualized) 20.99% 20.25% 24.06% 9.50% -- Ten Year (12/31/88 to 12/31/98, annualized) 17.70% 17.83% 19.21% 5.85% --
- -------- /1/ As of December 31, 1998 the T. Rowe Price Growth Stock Fund, a mutual fund, had assets of $5.04 billion. The total returns were calculated using the actual fees and expenses of the fund whose performance is shown. Had the Portfolio's estimated fees and expenses been used (whether before or after estimated expense reimbursement), the performance figures would have been lower. Performance figures are based on historical performance and do not guarantee future results. /2/ The Lipper Variable Funds Underlying Growth Funds Average represents the average total return based on net asset values of all underlying growth funds. The S&P 500 Index is an unmanaged index of common stocks that are primarily issued by companies with large aggregate market values. Performance for the indices has been obtained from public sources and has not been audited. MetLife
Lehman Brothers Lehman Brothers Total Return for MetLife Fixed Aggregate Aggregate Bond Period (unaudited) Income Account/1/ Bond Index/2/ Index Portfolio ------------------ ----------------- --------------- --------------- Year to Date (ended 2/28/99) -1.50% -6.15% -1.19% Since inception of Lehman Brothers Aggregate Bond Index Portfolio (11/9/98 to 12/31/98, annualized) -- not available .17% One Year (12/31/97 to 12/31/98) 8.32% 8.06% -- Two Year (12/31/96 to 12/31/98), annualized 8.83% 9.40% -- 8/1/96 to 12/31/98, annualized/3/ 8.88% 9.96% --
- -------- /1/ As of December 31, 1998 the MetLife Fixed Income Account, a non-mutual fund separate account, had assets of $305.8 million. The MetLife Fixed Income Account is not an SEC registered investment company and does not comply with requirements of Subchapter M of the Internal Revenue Code. The management of the Account would not have been affected had the Account been a registered investment company that complied with all legal requirements applicable to such companies and Subchapter M of the Code. The total returns were calculated using the estimated fees and expenses of the Lehman Brothers Aggregate Bond Index Portfolio. Performance figures are based on historical performance and do not guarantee future results. /2/ Lehman Brothers Aggregate Bond Index is an unmanaged index comprised of the Lehman Brothers Government/Corporate Index, the Lehman Brothers Mortgaged- Backed Securities Index, and the Lehman Brothers Asset-Backed Securities Index and effective July 1, 1999, the Lehman Brothers Commercial Mortgage-Backed Securities Index. Performance for the index has been obtained from public sources and has not been audited. /3/ MetLife was not the investment manager of the separate account until August 1, 1996. Prior thereto an affiliate of MetLife was the investment manager for the separate account. 34 Appendix B To Prospectus Certain Investment Practices The Table that follows sets forth certain investment practices in which some or all of the Portfolios may engage. These practices will not be the primary activity of any Portfolio, however, except if noted under "Risk/Return Summary" in the Prospectus. The following Portfolio numbers are used in the table:
Portfolio Number Portfolio Name --------- -------------- State Street Research Aggressive 1. Growth 2. State Street Research Diversified 3. State Street Research Growth 4. State Street Research Income 5. State Street Research Money Market 6. Santander International Stock 7. Harris Oakmark Large Cap Value 8. Janus Mid Cap 9. Loomis Sayles High Yield Bond
Portfolio Number Portfolio Name --------- -------------- 10. Neuberger Berman Partners Mid Cap Value 11. Scudder Global Equity 12. T. Rowe Price Large Cap Growth 13. T. Rowe Price Small Cap Growth 14. Lehman Brothers Aggregate Bond Index 15. MetLife Stock Index 16. Morgan Stanley EAFE Index 17. Russell 2000 Index
Percentage limit per Portfolio Item Investment practice Portfolios on assets/1/ - ------------------------------------------------------------------------------------------------------ 1 Sell covered call options on securities and All None stock indices as a hedge against or to minimize anticipated loss in value. - ------------------------------------------------------------------------------------------------------ 2 Sell covered put options on securities and 6,8,9,11,12,13, None stock indices to earn additional income, as a 17 hedge against or to minimize anticipated loss in value. - ------------------------------------------------------------------------------------------------------ 3 Sell covered put and covered call options on 6,8,9,11,12,13 None currencies as a hedge against anticipated declines in currency exchange rates in which securities are held or to be purchased or to earn additional income. - ------------------------------------------------------------------------------------------------------ 4 Purchase put options on securities and All, except 10 None indices that correlate with a Portfolio's securities for defensive purposes in order to protect against anticipated declines in values. - ------------------------------------------------------------------------------------------------------ 5 Purchase call options that on securities and All, except 10 None indice that correlate with that Portfolio's securities. - ------------------------------------------------------------------------------------------------------ 6 Purchase put options on currencies for 6,8,9,11,12,13 None defensive purposes in order to protect against anticipated declines in values on currencies in which a Portfolio's securities are or may be denominated. - ------------------------------------------------------------------------------------------------------ 7 Purchase call options on currencies that 6,8,9,11,12,13 None correlate with the currencies in which the Portfolio's securities may be denominated. - ------------------------------------------------------------------------------------------------------ 8 Purchase and sell otherwise permitted stock, 7,10,11 None currency, and index put and call options "over-the-counter" (rather than only on established exchanges). - ------------------------------------------------------------------------------------------------------ 9 Purchase and sell futures contracts (on All, except Combined limit on the sum of recognized futures exchanges) on debt 10,15,16,17 the initial margin for securities and indices of debt securities as futures and options sold on a hedge against or to minimize adverse futures, plus premiums paid principal fluctuations resulting from for unexpired options on anticipated interest rate changes or to futures, is 5% of total adjust exposure to the bond market. assets (excluding "in the money" and, for Portfolios 7, 8 and 9, "bona fide hedging" as defined by the Commodity Futures Trading Commission) - ------------------------------------------------------------------------------------------------------ 10 Purchase and sell future contracts (on All, except Same as Item 9 recognized futures exchanges) on equity 4,5,7,10,14 securities or stock indices as a hedge or to enhance return. - ------------------------------------------------------------------------------------------------------ 11 Purchase and sell currency futures contracts 6,8,9,11,12,13 Same as Item 9 (on recognized futures exchanges) as a hedge or to adjust exposure to the currency market.
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Percentage limit per Portfolio Item Investment practice Portfolios on assets/1/ - ---------------------------------------------------------------------------------------------------------- 12 Sell covered call options on and purchase put All, except 10 Same as Item 9 and call options contracts on futures contracts (on recognized futures exchanges) of the type and for the same reasons the Portfolio is permitted to enter futures contracts. - ---------------------------------------------------------------------------------------------------------- 13 Sell covered put options on futures contracts 6,8,9,11,12,13 Same as Item 9 (on recognized futures exchanges) of the type and for the same reasons the Portfolio is permitted to enter into futures contracts. - ---------------------------------------------------------------------------------------------------------- 14 Enter into forward foreign currency exchange All, except 15,17 None contracts to hedge currency risk relating to securities denominated, exposed to, or traded in a foreign currency in which the Portfolio may invest. - ---------------------------------------------------------------------------------------------------------- 15 Enter into forward foreign currency exchange 6,8,9,11,12, 13 5% of total assets contracts for non hedging purposes. - ---------------------------------------------------------------------------------------------------------- 16 Enter into transactions to offset or close All None out any of the above. - ---------------------------------------------------------------------------------------------------------- 17 Mortgage-related securities (except for IOs All None and POs). - ---------------------------------------------------------------------------------------------------------- 18 Mortgage related interest only (IOs) and All, except 5,10,15 None principal only (POs) securities. - ---------------------------------------------------------------------------------------------------------- 19 Use swaps, caps, floors and collars on 8,9,11,12,13,14 None interest rates, currencies and indices as a risk management tool. - ---------------------------------------------------------------------------------------------------------- 20 Invest in foreign securities (including A. 1,2,3,4,5,15 A. Not more than 10% of its investments through European Depository total assets in securities Receipts ("EDRs") and International of foreign issuers, except Depository Receipts ("IDRs")). up to 25% of its total assets may be invested in securities: issued, assumed or guaranteed by foreign governments or their political subdivisions or instrumentalities; assumed or guaranteed by domestic issuers; or issued, assumed or guaranteed by foreign issuers with a class securities listed on the New York Stock Exchange.* B. 6,11,14,16 B. None C. 17 C. Foreign Securities limited to 50% of its total assets (except 100% in securities of Canadian issuers).* D. 12 D. Foreign Securities limited to 30% of total assets (excluding reserves)* E. 13 E. Foreign Securities limited to 20% of total assets (excluding reserves)* F. 7 F. Foreign Securities limited to 25% of total assets* G. 10 G. Foreign Securities limited to 10% of total assets* H. 8 H. Foreign securities denominated in a foreign currency and not publicly traded in U.S. limited to 30% of total assets* - ---------------------------------------------------------------------------------------------------------- 21 Lend Portfolio securities. A. 1,2,3,4,5,6,15 A. 20% of total assets* B. 7,9,10,11,12, B. 33 1/3% of total assets* 13,14,16,17 C. 8 C. 25% of total assets* - ---------------------------------------------------------------------------------------------------------- 22 Invest in securities that are illiquid. A. All, except 5,11 A. 15% of total assets B. 5,11 B. 10% of total assets
36
Percentage limit per Portfolio Item Investment practice Portfolios on assets/1/ - -------------------------------------------------------------------------------------------------------------- 23 Invest in other investment companies, which A. All, except 10 A. 10% of total assets may involve payment of duplicate fees. except as in B below (except that only 5% of total assets may be invested in a single investment company and no portfolio can purchase more than 3% of the total outstanding voting securities of any one investment company or, together with other investment companies having the same investment adviser, purchase more than 10% of the voting stock of any "closed-end" investment company). B. 8,12,13 B. Up to 25% of total assets may be invested in affiliated money market funds for defensive purposes or as a means of receiving a return on idle cash. - -------------------------------------------------------------------------------------------------------------- 24 Invest in money market instruments issued by 6,8,9,11,12,13 None a commercial bank or savings and loan associations (or its foreign branch or agency) notwithstanding that the bank or association has less than $1 billion in total assets, is not a member of the Federal Deposit Insurance Corporation, is not organized in the U.S., and/or is not operating in the U.S. - -------------------------------------------------------------------------------------------------------------- 25 Invest in securities issued by companies All 25% of total assets primarily engaged in any one industry. (provided that the following will be considered separate industries: each type of utility service; each type of oil or oil-related company. Also, savings and loans are a separate industry from finance companies; and for the money market securities of Portfolios 3 and 4 securities issued or guaranteed by the U.S. government, its agencies or instrumentalities and debt securities issued by domestic banks are not subject to the restriction).* (The Fund will disclose when more than 25% of a Portfolio's total assets are invested in four oil related industries. For Portfolios 5 and 14, companies engaged in the business of financing may be classified according to the industries of their parent or sponsor companies, or industries that otherwise most affect the financing companies). - -------------------------------------------------------------------------------------------------------------- 26 Borrow in the form of short-term credits All Together with items 27 and necessary to clear Portfolio transactions; 28, up to 1/3 of the amount enter into reverse repurchase arrangements. by which total assets exceed total liabilities (less those represented by such obligations).* - -------------------------------------------------------------------------------------------------------------- 27 Borrow money for extraordinary or emergency A. All, except 11 A. 5% of total assets* purposes (e.g. to honor redemption requests which might otherwise require the sale of securities at an inopportune time). B. 11 B. 1/3 of total assets, provided that if together with reverse repurchase agreements obligations exceed 5% of total assets, no additional securities will be purchased for the Portfolio.* - -------------------------------------------------------------------------------------------------------------- 28 Purchase securities on a "when-issued" basis. 6,7,8,9,10,11,12,13,14, None 16,17 - -------------------------------------------------------------------------------------------------------------- 29 Invest in real estate interests, including All 10% of total assets* real estate mortgage loans, but excluding investments in exchange-traded real estate investment trusts and shares of other real estate companies. - -------------------------------------------------------------------------------------------------------------- 30 Purchase American Depository Receipts A. 1,2,3,4,5 A. Together with the assets ("ADRs"). referred to in Item 20 A above, 35% of total assets B. 6, 8,10,11,16 B. None C. 12,13,15,17 C. Together with assets referred to in Item 20 D above, 30% of total assets D. 7 D. Together with assets referred to in Item 20 F above, 25% of total assets
37
Percentage limit per Portfolio Item Investment practice Portfolios on assets/1/ - ---------------------------------------------------------------------------------------------------------- 31 Invest in debt securities. A. All, except 6,7, A. None 10, 11,13,14 B. 6,7,10,11,13,14 C. None on investment grade securities but 25% of total assets for 7, 15% for 10, 5% for 11, 13 and 14, and 0% for 6 in below investment grade securities. - ---------------------------------------------------------------------------------------------------------- 32 Invest in preferred stocks. A. All, except 5,9 A. None B. 9 B. Up to 20% of total assets - ---------------------------------------------------------------------------------------------------------- 33 Invest in common stocks. A. All, except 5,9 A. None B. 9 B. 10% of total assets - ---------------------------------------------------------------------------------------------------------- 34 Invest in hybrid instruments. A. All, except 12 A. None B. 12 B. 10% of its total assets
- ----------- /1/ At time of investment, unless otherwise noted. * Policy may be changed only by shareholder vote. 38 Appendix C To Prospectus Description Of Some Investments, Techniques, And Risks Investment Styles [SIDEBAR: To varying extents, the portfolio managers may use the following techniques and investments in managing the Portfolios.] A value investing approach concentrates on securities that are undervalued in relation to a company's fundamental economic values. Securities may be undervalued for various reasons including special situations (i.e., where the portfolio manager believes that a company's securities will appreciate when the market recognizes a specific development at the company, such as a new product or process, a management change or a technological breakthrough). A growth investing approach emphasizes stocks of companies that are projected to grow at above-average rates based on the company's earnings growth potential. Index Portfolios attempt to equal the return of a particular index, which can provide broad exposure to various market segments. Unlike actively managed portfolios, they do not expect to use any defensive strategies and investors bear the risk of adverse market conditions. Morgan Stanley sponsors the MSCI EAFE Index, Lehman Brothers sponsors the Lehman Brothers Aggregate Bond Index, the McGraw Hill Companies, Inc. sponsor the Standard & Poor's 500 Composite Stock Price Index, and Frank Russell Company sponsors the Russell 2000 Index (together referred to as "index sponsors"). The index sponsors have no responsibility for and do not participate in the management of the Portfolio assets or sale of the Portfolio shares. Each index and its associated trademarks and service marks are the exclusive property of the respective index sponsors. The Metropolitan Series Fund, Inc. Statement of Additional Information contains a more detailed description of the limited relationship the index sponsors have with MetLife and the Fund. [SIDEBAR: Capitalization] Capitalization measures the size of a company, based on the aggregate market value of the company's outstanding stock. Different Portfolios may use different definitions with respect to whether a company is classified as a small-cap, mid-cap or large-cap company. Investments in companies that are less mature or are small or mid-cap may present greater opportunities for capital appreciation than investments in larger, more mature companies, but also present greater risks including: . greater price volatility because they are less broadly traded . less available public information . greater price volatility due to limited product lines, markets, financial resources, and management experience. 39 [SIDEBAR: Equity Securities] Equity securities include common stocks, preferred stocks, convertible securities and warrants. Equity securities may offer a higher rate of return than debt securities. However, the risks associated with investments in equity securities may also be higher, because the investment performance of equity securities depends upon factors which are difficult to predict. Equity security values may fluctuate in response to the activities of an individual company or in response to general market, interest rate, and/or economic conditions. Historically, equity securities have provided greater long-term returns and have entailed greater short-term risk than other securities choices. Depending on their terms, however, preferred stock and convertible securities may have investment and risk characteristics more closely resembling those of debt securities than those of other equity securities. Common stocks represent ownership in a company and participate in company profits through dividend payments or capital appreciation after other claims are satisfied. Common stock generally has the greatest potential for appreciation and depreciation of all corporate securities (other than warrants) since the share price reflects the company's earnings. Preferred stocks represent an ownership interest in a company of a specified rank (after bonds and before common stocks) with respect to dividend payments and company assets. Preferred stock generally receives a dividend, but may also omit or be in danger of omitting a dividend payment, in which case it would be purchased for its capital appreciation potential. Convertible securities generally are bonds or preferred stocks which can be exchanged, through warrants or otherwise, into a specified number of shares of the issuer's common stock. Convertible securities generally pay higher interest or dividends than common stock but lower interest or dividends than non- convertible securities. Warrants are rights issued by the issuer of a security (usually common stock) to purchase that security at a specified price for a specified period of time. They do not represent an ownership interest in the issuing company, and their prices do not necessarily parallel the prices of the underlying security. [SIDEBAR: Debt ("Fixed Income") Securities] Some of the many varieties of debt securities that the Portfolios may purchase are described below. Most debt securities (other than those that have "floating" interest rates) will increase in value if market interest rates subsequently decrease and decrease in value if market interest rates subsequently increase. In most market environments these variations tend to be more pronounced the longer the security's remaining duration. Changes in the issuer's perceived creditworthiness can also significantly affect the value of any debt securities that a Portfolio holds. Investment grade securities are rated by at least one nationally recognized statistical rating organization in one of its top four rating categories, or if unrated, the portfolio manager must determine that the securities are of comparable quality. All other securities are considered below investment grade. Below investment grade securities are also known as "junk bonds." Although they generally provide higher yields, below investment grade fixed income securities, and to a lesser extent, lower rated investment grade fixed income securities, expose a Portfolio to greater risks than higher rated investment grade securities including: . the inability of the issuer to meet principal and interest payments . loss in value due to economic recession or substantial interest rate increases 40 . adverse changes in the public's perception of these securities . legislation limiting the ability of financial institutions to invest in these securities . lack of liquidity in secondary markets . market price volatility Mortgage-related securities represent a direct or indirect interest in a pool of mortgages such as FNMAs, FHLMCs, Collateralized Mortgage Obligations ("CMOs"), and related securities including GNMAs and mortgage-backed securities. They may be issued or guaranteed by U.S. government instrumentalities or other entities whose obligation is securitized by the underlying portfolio of mortgages or mortgage-backed securities. These securities are valued based on expected prepayment rates. The risks associated with prepayment of the obligations makes these securities more volatile in response to changing interest rates than other fixed-income securities. Interest only securities ("IOs") are entitled to interest payments from a class of these securities and principal only securities ("POs") are entitled to principal payments from a class of these securities. POs are more volatile in response to changing interest rates than mortgage-related securities that provide for interest payments. IOs also are extremely volatile and generally experience a loss in value in the event prepayment rates are greater than anticipated, which occurs generally when interest rates fall, and an increase in value when interest rates rise. Asset-backed securities represent a direct or indirect interest in a pool of receivables such as automobile, credit cards, equipment leases, or student loans. The issuers of the asset-backed securities are special purpose entities that do not have significant assets other than the receivables securitizing the securities. The collateral supporting these securities generally is of shorter maturity than mortgage-related securities, but exposes a Portfolio to similar risks associated with prepayment of the receivables prior to maturity. Zero coupon securities credit interest at a specified rate but do not distribute cash payments for interest as it falls due. These securities fluctuate in value due to changes in interest rates more than comparable debt obligations that pay periodic interest. [SIDEBAR: Foreign Investments] Foreign securities include equity securities and debt securities of non-U.S. domiciled issuers. A few of the many varieties of foreign investments are described below. EDRs and IDRs are receipts issued in Europe, generally by a non-U.S. bank or trust company, that evidence ownership of non-U.S. securities. GDRs are securities convertible into equity securities of foreign issuers. Forward Foreign Currency Exchange Contracts obligate a Portfolio to purchase or sell a specific currency on a specified date for a specified amount. They can be used to hedge the currency risk relating to securities traded in or exposed to a foreign currency. When used as a hedge, substitute or proxy currency can also be used instead of the currency in which the investment is actually denominated. This is known as proxy hedging. These contracts can also be used to generate income or adjust a Portfolio's exposure to various currencies. Synthetic Non-U.S. Money Market positions are created through the simultaneous purchase of a U.S. dollar-denominated money market 41 instrument and a forward foreign currency exchange contract to deliver U.S. dollars for a foreign currency. These are purchased instead of foreign currency denominated money market securities because they can provide greater liquidity. Foreign Securities Risk Considerations. Although Portfolios that invest in foreign securities may reduce their overall risk by providing further diversification, the Portfolios will be exposed to the risks listed below. In addition, these risks may be heightened for investments in developing countries: . adverse effects from changing political, social or economic conditions, diplomatic relations, taxation or investment regulations . limitations on repatriation of assets . expropriation . costs associated with currency conversions . less publicly available information because foreign securities and issuers are generally not subject to the reporting requirements of the SEC . differences in financial evaluation because foreign issuers are not subject to the domestic accounting, auditing and financial reporting standards and practices . lack of development or efficiency with respect to non-domestic securities markets and brokerage practices (including higher, non-negotiable brokerage costs) . less liquidity (including due to delays in transaction settlement) . more price volatility . smaller options and futures markets, causing lack of liquidity for these securities . higher custodial and settlement costs . change in net asset value of the Portfolio's shares on days when shareholders will not be able to purchase or redeem Fund shares. [SIDEBAR: American Depository Receipts ("ADRs")] ADRs are U.S. dollar-denominated certificates issued by a U.S. bank or trust company which represent the right to receive securities of a foreign issuer deposited in a domestic bank or foreign branch of a U.S. bank. ADRs are traded on domestic exchanges or in the U.S. over-the-counter market and are registered domestically. These factors eliminate certain risks associated with investing in foreign securities. [SIDEBAR: U.S. Dollar-Denominated Money Market Securities of Foreign Issuers] These securities may be registered domestically and traded on domestic exchanges or in the U.S. over-the-counter market (e.g., Yankee securities). If the securities are registered domestically, certain risk factors of investing in foreign securities are eliminated. These securities may also be registered abroad and traded exclusively in foreign markets (e.g., Eurodollar securities). [SIDEBAR: Derivative Instruments] Futures contracts are agreements to buy or sell a security, or deliver a final cash settlement price in connection with an index, interest rate, currency, or other contracts not calling for physical delivery, for a set price in the future. A Portfolio must post an amount equal to a portion of the total market value of the futures contract as initial margin, which is returned when a Portfolio's obligations under the contract have been satisfied. From time to time thereafter, the Portfolio may have to post variation margin to maintain this amount as the market value of the contract fluctuates. Special skill is required in order to effectively use futures contracts. No Portfolio will use futures contracts or options thereon for leveraging purposes. Certain risks exist when a Portfolio uses futures contracts including the: 42 . inability to close out or offset futures contract transactions at favorable prices . reduction of the Portfolio's income . reduction in the value of the subject of the futures contract or of the contract itself . imperfect correlation between the value of the futures contract and the value of the subject of the contract . prices moving contrary to the portfolio manager's expectation Call options give the purchaser the right to buy and obligate the seller to sell an underlying security, currency, stock index (which is based on the weighted average of the securities in the index), or futures contract at a specified "exercise" price during the option period. There are certain risks to a Portfolio that sells call options, including the inability to effect closing transactions at favorable prices or to participate in the appreciation of the subject of the call option above the exercise price. Purchasing call options exposes a Portfolio to the risk of losing the entire premium it has paid for the option. Put options give the purchaser the right to sell and obligate the seller to purchase an underlying security, currency, stock index (which is based on the weighted average of the securities in the index) or futures contract at a specified "exercise" price during the option period. There are certain risks to a Portfolio that sells put options, including the inability to effect closing transactions at favorable prices and the obligation to purchase the subject of the put option at prices which may be greater than current market values or exchange rates. Purchasing put options exposes a Portfolio to the risk of losing the entire premium it has paid for the option if the option cannot be exercised profitably. Covered options involve a Portfolio's (a) segregating liquid assets with its custodian that at all times at least equal the Portfolio's obligations under such options, (b) holding an appropriate offsetting option or other derivative instrument, or, (c) in the case of a call option sold by the Fund, owning the securities or other investments subject to the option. Hybrid instruments combine elements of futures contracts or options with elements of debt, preferred equity, depository instruments, or other evidence of indebtedness. A portion of or all interest payments to the Portfolio and/or the principal or stated amount payable to the Portfolio at maturity, redemption, or retirement of the hybrid instrument are determined by reference to prices, changes in prices, or differences between prices of securities, currencies, intangibles, goods, articles, or commodities or by another benchmark such as an index or interest rate. Hybrid instruments can be an efficient means of exposing a Portfolio to a particular market in order to enhance total return. Hybrid instruments are potentially more volatile and carry greater market risks than traditional debt instruments. The risks of investing in these instruments reflect a combination of the risks of investing in securities, options, futures and currencies. Hybrid securities typically do not trade on exchanges. Hybrid instruments are frequently (or may become) less liquid than other types of investments. They also expose the Portfolio to losses if the other party to the transaction fails to meet its obligations. Portfolios use swaps, caps, floors and collars as risk management tools to protect against changes in interest rates or in security or currency values, or 43 to gain exposure to certain markets in an economical way. Swap transactions involve an agreement where one party exchanges payments equal to a floating interest rate, currency exchange rate or variation in interest rates or currency indexes on a specified amount (the "notional amount"), and the other party agrees to make payments equal to a fixed rate on the same amount for a specified period. Caps give the purchaser the right to receive payments from the seller to the extent a specified interest rate, currency exchange rate or index exceeds a specified level during a specified period of time. Floors give the purchaser the right to receive payments from the seller to the extent a specified interest rate, currency exchange rate or index is less than a specified level during a specified period of time. Collars give the purchaser the right to receive payments from the seller to the extent a specified interest rate, currency exchange rate or index is outside an agreed upon range during a specified period of time. A Portfolio will not use swaps, caps, floors or collars to leverage its exposure to changing interest rates, currency rates, or security values. Nor will a Portfolio sell interest rate caps, floors or collars unless it owns securities that will provide the interest that the Portfolio may be required to pay. The use of swaps, caps and floors exposes the Portfolio to investment risks different than those associated with other security transactions including: . total loss of the Portfolio's investment in swaps and the sale of caps, floors and collars (a Portfolio's purchase of caps, floors and collars can result only in the loss of the purchase price) . investment performance of the Portfolio can be worse than if these techniques were not used if the assumptions used in entering into the transactions were incorrect . since these instruments generally do not trade on exchanges, a Portfolio may not be able to enter into offsetting positions, or may suffer other losses, if the other party to the transaction fails to meet its obligations . more market volatility than other types of investments [SIDEBAR: When-Issued Securities] Purchasing securities "when-issued" is a commitment by a Portfolio to buy a security before the security is actually issued. The amount of the Portfolio's payment obligation and the security's interest rate are determined when the commitment is made, even though no interest accrues until the security is issued, which is generally 15 to 120 days later. The Portfolio will segregate liquid assets with its custodian sufficient at all times to satisfy these commitments. If the value of the security is less when delivered than when the commitment was made, the Portfolio will suffer a loss. [SIDEBAR: Securities Lending] Securities lending involves lending some of a Portfolio's securities to brokers, dealers and financial institutions. As collateral for the loan, the Portfolio receives an amount that is at all times equal to at least 100% of the current market value of the loaned securities. The Portfolio invests the collateral in short-term high investment grade securities, or in a mutual fund that invests in such securities. Securities lending can increase current income for a Portfolio because the Portfolio continues to receive payments equal to the interest and dividends on loaned securities. Also, the investment experience of the cash collateral will inure to the Portfolio. Loans will not have a term longer than 30 days and will be terminable at any time. As with any extension of credit, securities lending exposes a Portfolio to some risks including delay in recovery and loss of rights in the collateral if the borrower fails financially. 44 Metropolitan Series Fund, Inc. --------------------- Principal Office of the Fund 1 Madison Avenue New York, New York 10010 --------------------- Investment Manager Metropolitan Life Insurance Company 1 Madison Avenue New York, New York 10010 (Principal Business Address) Sub-Investment Managers State Street Research & Management Company One Financial Center Boston, Massachusetts 02111 (Principal Business Address) Loomis, Sayles & Company, L.P. One Financial Center Boston, Massachusetts 02111 (Principal Business Address) Janus Capital Corporation 100 Fillmore Street Denver, Colorado 80206-4923 (Principal Executive Offices) T. Rowe Price Associates, Inc. 100 East Pratt Street Baltimore, Maryland 21202 (Principal Business Address) Scudder Kemper Investments, Inc. 345 Park Avenue New York, New York 10154 (Principal Executive Offices) Harris Associates, LP 2 North LaSalle Street Chicago, IL 60602 (Principal Executive Offices) Neuberger Berman Management Inc. 605 Third Avenue New York, NY 10158-0180 (Principal Executive Offices) Santander Global Advisors, Inc. 28 State Street Boston, Massachusetts 02109 (Principal Executive Offices) Custodian, Transfer Agent and Dividend Paying Agent State Street Bank and Trust Company 225 Franklin Street Boston, Massachusetts 02110 (Principal Business Address) No dealer, salesman, or other person has been authorized to give any informa- tion or to make any representations, other than those contained in this Pro- spectus, in connection with the offer made by this Prospectus, and, if given or made, such other information or representations must not be relied upon as hav- ing been authorized by the Fund, Metropolitan Life, State Street Research, Met- ropolitan Tower, Loomis Sayles, T. Rowe Price, Janus, Scudder, Harris, Neu- berger Berman or Santander. This Prospectus does not constitute an offering in any state in which such offering may not lawfully be made. How to learn more: We have incorporated the Statement of Additional Information ("SAI") into this Prospectus. That means the SAI is considered part of this Prospectus as though it were included in it. The SAI contains more information about the Fund. Also, the Fund's annual and semi-annual reports to shareholders (the "reports") contain more information including information on each Portfolio's investments and a discussion of the market conditions and investment strategies that affected each Portfolio's performance for the period covered by the report. How to get copies: To request a free copy of the SAI or the reports or to make any other inquiries, write or call: Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010 Phone: (800) 553-4459 You can also get information about the Fund (including the SAI) from the Securities and Exchange Commission (a copying fee may apply) by visiting or writing to its Public Reference Room or using its Internet sight at: Securities and Exchange Commission Public Reference Room Washington, D.C. 20549 Call 1-800-SEC-0330 (for information about using the Public Reference Room) Internet site: http://www.sec.gov IC# 811-3618 (exp0599)MLIC-LD STATEMENT OF ADDITIONAL INFORMATION FOR METROPOLITAN SERIES FUND, INC. May 1, 1999 The investment options ("Portfolios") currently offered by the Metropolitan Series Fund, Inc. (the "Fund") are: State Street Research Aggressive Growth Portfolio Neuberger Berman Partners Mid Cap Value Portfolio State Street Research Diversified Scudder Global Equity Portfolio Portfolio T. Rowe Price Large Cap Growth State Street Research Growth Portfolio Portfolio T. Rowe Price Small Cap Growth State Street Research Income Portfolio Portfolio Lehman Brothers(R) Aggregate Bond State Street Research Money Market Index Portfolio Portfolio MetLife Stock Index Portfolio Santander International Stock Portfolio (formerly State Street Morgan Stanley(R) EAFE Index Portfolio Research International Stock Portfolio) Russell 2000(R) Index Portfolio Harris Oakmark Large Cap Value Portfolio Janus Mid Cap Portfolio Loomis Sayles High Yield Bond Portfolio This Statement of Additional Information ("SAI") is not a prospectus. It should be read in conjunction with the Prospectus dated May 1, 1999. The annual report for the Fund for the year ending December 31, 1998 accompanies this SAI and is incorporated by reference. A copy of the May 1, 1999 Prospectus and the annual report may be obtained, without charge, from Metropolitan Life Insurance Company, One Madison Avenue, New York, New York 10010, Area 2H or by calling (800) 553-4459. MLIC-LD TABLE OF CONTENTS
Headings Page - -------- ---- The Fund's Organization.................................................... 2 Description of Some Investment Practices, Policies and Risk................ 3 Certain Investment Limitations............................................. 7 Investment Management Arrangements......................................... 8 Directors and Officers of the Fund......................................... 10 Placing Portfolio Transactions............................................. 12 Shareholder Meetings....................................................... 15 Voting..................................................................... 16 Sale and Redemption of Shares.............................................. 16 Pricing of Portfolio Securities............................................ 16 Taxes...................................................................... 18 General Information........................................................ 19 Financial Statements....................................................... 20 Appendix................................................................... 22
THE FUND'S ORGANIZATION The Fund, an open-end management investment company, is a corporation that was formed in Maryland on November 23, 1982. The Fund has 3 billion shares of authorized common stock at $0.01 par value per share. The Board of Directors may classify and reclassify any authorized and unissued shares. The Fund can issue additional classes of shares without shareholder consent. The shares are presently divided into classes (or series), including one for each Portfolio consisting of 100 million shares (200 million shares for the State Street Research Diversified, State Street Research Growth, and MetLife Stock Index Portfolios). Each Portfolio, other than the Janus Mid Cap Portfolio, is "diversified" for purposes of the Investment Company Act of 1940. Each Portfolio's issued and outstanding shares participate equally in dividends and distributions declared by such Portfolio and receive a portion (divided equally among all of the Portfolio's outstanding shares) of the Portfolio's assets (less liabilities) if the Portfolio is liquidated or dissolved. Liabilities which are not clearly assignable to a Portfolio are generally allocated among the Portfolios in proportion to their relative net assets. In the unlikely event that any Portfolio has liabilities in excess of its assets, the other Portfolios may be held responsible for the excess liabilities. MetLife purchased shares of each of the Portfolios at their inception for its general account. MetLife has sold some of those shares, but will not sell shares if the sale would reduce the Fund's net worth below $100,000. MetLife paid all of the organizational expenses of the Fund and will not be reimbursed. B-2 DESCRIPTION OF SOME INVESTMENT PRACTICES, POLICIES, AND RISKS The information that follows expands on the similar discussion in the Fund's Prospectus and does not describe every type of investment, technique, or risk to which a Portfolio maybe exposed. Each Portfolio reserves the right, without notice, to make any investment, or use any investment technique, except to the extent that such activity would require a shareholder vote, as discussed below under "Fundamental Policies." Money market instruments generally have a remaining maturity of no more than 13 months when acquired by the Fund. They include the following: . United States Government securities -- direct obligations (in the form of Treasury bills, notes and bonds) of the United States Government, differing mainly by maturity lengths. . Government Agency Securities -- debt securities issued by agencies or instrumentalities of the United States Government. They are backed by the full faith and credit of the United States, guaranteed by the United States Treasury, supported by the issuing agency's or instrumentality's right to borrow from the United States Treasury, or supported by the issuing agency's or instrumentality's credit. Agency securities include several of the types of instruments discussed below under "Mortgage-Backed Securities." . Certificates of Deposit -- generally short-term, interest-bearing negotiable certificates issued by commercial banks or savings and loan associations against funds deposited in the issuing institution. Any non-negotiable time- deposits must mature in seven days or less. . Bankers' Acceptances -- time drafts drawn by borrowers on commercial banks, usually in connection with an international commercial transaction where both the borrower and the bank guarantee the payment of the draft in its face amount on the maturity date (which is usually within six months). These securities are traded in secondary markets prior to maturity. The Portfolios will not invest in non-negotiable bankers' acceptance maturing in more than 7 days. . Commercial Paper -- short-term unsecured promissory notes issued by corporations, usually to finance short-term credit needs. Commercial paper is generally sold on a discount basis, with maturity from issue not exceeding nine months. The Portfolios may purchase commercial paper with the highest (two highest for the T. Rowe Price Large Cap Growth and T. Rowe Price Small Cap Growth Portfolios) rating (and, for the State Street Research Money Market Portfolio, it must also be rated in one of the top two "modifiers" that indicate the best investment attributes of such rating) given by a nationally recognized statistical rating organization ("NRSRO") or, if unrated (a) of comparable quality or (b) issued by companies having outstanding debt issues in with ratings with one of the top three ratings given by an NRSRO (and for State Street Research Money Market Portfolio the debt issues must be in the top two rating categories). . Variable Amount Master Demand Notes -- commercial paper of companies that permit the purchaser to lend varying investment amounts (up to the maximum indicated in the note) at varying rates to the borrower. The borrower can prepay the amount borrowed at any time with no penalty and the lender can redeem the note at any time and receive the face value plus accrued interest. No secondary market exists for these notes. The same rating/credit quality requirements apply as described above for other forms of commercial paper. . Non-convertible Corporate Debt Securities -- such as bonds and debentures that will mature within a short time and that have credit characteristics comparable to those required above for commercial paper. . Repurchase Agreements -- the purchaser acquires ownership of another money market instrument, and the seller agrees at the time of sale to repurchase such other instrument at a specified time and price which determine the purchaser's yield during the holding period. This insulates the purchaser from market fluctuations unless the seller defaults. Repurchase agreements are collateralized by cash or the purchased (or equivalent) underlying instrument at all times at least equal in value to the price the Fund paid for the underlying instrument plus interest accrued to date. The Fund can B-3 enter into repurchase agreements with primary dealers for periods not to exceed 30 days. Repurchase agreements with a duration of more than 7 days are considered illiquid. If the seller defaults on its repurchase obligation, the Fund could experience a delay in recovery or inadequacy of the collateral and a cost associated with the disposition of the collateral. . Reverse Repurchase Agreements -- the sale of money market instrument by the Fund with an agreement by the Fund to repurchase the instrument at a specified time, price and interest payment. These agreements can be used when interest income earned from the reinvestment of the proceeds (in money market instruments with the same or shorter duration to maturity or resale) is greater than the interest expense of the reverse repurchase transaction. These agreements can also be used by the Fund as a form of borrowing and they therefore are subject to the limitations regarding borrowing by the Fund. In order to minimize the risk that it will have insufficient assets to repurchase the instrument subject to the agreement, the Fund will keep in a segregated account with its custodian liquid assets at least equal to the value of the specified repurchase price or the proceeds received on the sale subject to repurchase, plus accrued interest. Mortgage-Related Securities GNMA -- partial ownership interests in a pool of mortgage loans which are individually guaranteed or insured by the Federal Housing Administration, the Farmers Home Administration or the Veterans Administration. The GNMA certificates are issued and guaranteed by the Government National Mortgage Association, a U.S. Government corporation, and backed by the full faith and credit of the United States. FNMA and FHLMC -- partial ownership interests in pools of mortgage loans. FNMA certificates are issued and guaranteed by the Federal National Mortgage Association, a federally chartered, privately owned corporation and are not backed by the U.S. Government (although the U.S. Secretary of the Treasury has discretionary authority to lend it up to $2.25 billion). FHLMC certificates are issued and guaranteed by the Federal Home Loan Corporation, a federally chartered corporation owned by the Federal Home Loan Bank and are not backed by the U.S. government (although the U.S. Secretary of the Treasury has discretionary authority to lend it up to $2.25 billion). Mortgage-backed securities -- may be issued by governmental or non-governmental entities such as banks and other mortgage lenders. Non-governmental securities may offer higher yield to the Fund but may also expose the Fund to greater price fluctuation and risk than governmental securities. Many issuers guarantee payment of interest and principal on the securities regardless of whether payments are made on the underlying securities, which generally increases the quality and security. Risks which affect mortgage-backed securities' market values or yields, include actual or perceived interest rate changes, creditworthiness of the issuer or guarantor, prepayment rates value of the underlying mortgages and changes in governmental regulation or tax policies. In addition, certain mortgage-related securities may be settled only through privately owned clearing corporations whose solvency and creditworthiness are not backed by the U.S. Government and whose operational problems may result in delays in settlement or losses to a Portfolio. Mortgage-related securities include: . Mortgage-backed bonds, which are secured by a first lien on a pool of single- family detached properties and are also general obligations of their issuers. . Mortgage pass-through bonds, which are secured by a pool of mortgages where the cash flow generated from the mortgage collateral pool is dedicated to bond repayment. . Stripped agency mortgage-backed securities, which are interests in a pool of mortgages, where the cash flow has been separated into its interest only ("interest only" or "IOs") and principal only ("principal only" or "POs") components. IOs or POs, other than government-issued IOs or POs backed by fixed rate mortgages, are considered illiquid securities. . Other mortgage-related securities, which are other debt obligations secured by mortgages on commercial real estate or residential properties. Below investment grade securities (or junk bonds) -- debt securities that are not rated in B-4 (or judged to be of comparable quality to) one of the top four categories by an NRSRO. These securities expose the Fund to more risks than higher rated securities, including: . greater doubt as to the issuer's capacity to pay interest and principal . greater fluctuations in market values due to individual corporate developments . greater risk of default for various reasons including that (1) the issuers of these securities tend to be more highly leveraged and may not have available to them more traditional methods of financing and (2) the securities are unsecured and are generally subordinated to debts of other creditors . greater difficulty in obtaining accurate market quotations for valuation purposes . increased expenses to the extent the Fund must seek recovery due to a default in payment . less liquid trading markets Restricted or illiquid securities -- securities for which there is no readily available market. These securities are priced at fair value under procedures approved by the Fund's Board of Directors. A Portfolio can sell restricted securities only in privately negotiated transactions or in a public offering registered with the Securities and Exchange Commission ("SEC"). Subsequent to the purchase of a restricted security, SEC registration of such security may become necessary and a Portfolio that owns the security may need to pay all or part of the registration expenses and may need to wait until such registration becomes effective before it can sell the security. In addition, the absence of ready markets may delay a Portfolio's sale of an illiquid investment. Delays in disposing of an investment expose a Portfolio to fluctuations in value for longer periods than it desired. Rule 144A securities -- securities that are not registered with the SEC but under certain circumstances may be considered as liquid. Pursuant to procedures approved by the Board of Directors, these securities are subject to ongoing evaluation to monitor their liquidity, and the purchase of these securities could have the effect of increasing the percent of a Portfolio's securities invested in illiquid securities. Liquidity is evaluated based on various factors including: . the availability of trading markets for the security . the frequency of trades and quotes . the number of dealers and potential purchasers . dealer undertakings to make a market . the nature of the security and of the marketplace trades (including disposal time, solicitation methods and mechanics of transfer) Lending portfolio securities. The Fund may pay reasonable finders, administrative and custodial fees to persons that are unaffiliated with the Fund for services in connection with loans of its portfolio securities. Payments received by a Portfolio equal to dividends, interest and other distributions on loaned securities may be treated as income other than qualified income for the 90% test discussed under "Taxes" below. The Fund intends to engage in securities lending only to the extent that it does not jeopardize its qualification as a regulated investment company under the Internal Revenue Code (the "Code"). Options on securities, currencies and indices. Options that are traded on recognized securities exchanges often have less of a risk of loss than those sold "over-the-counter." A Portfolio will not sell the security or currencies against which options have been written until after the option period has expired, a closing purchase transaction is executed, a corresponding put or call option has been purchased, or the sold option is otherwise covered. The sale and purchase of options involves paying brokerage commissions and other transaction costs. In addition, selling covered call options can increase the portfolio turnover rate. The purchase and sale of index options have additional risks. For example if trading of certain securities in the index is interrupted, a Portfolio would not be able to close out options which it had purchased or sold if restrictions on exercise were also imposed. To address such liquidity concerns the Fund limits use of index options to options on indices (1) with a sufficient number of securities to minimize the likelihood of a trading halt and (2) for which there is a developed secondary market. A Portfolio will cover any option it has sold on a stock index by (1) if the option is a call option, segregating with the Fund's custodian bank either (a) cash or other liquid assets having a B-5 value that, when added to any related margin deposits, at all times at least equals the value of the securities comprising the index, or (b) securities that substantially replicate changes in value of the securities in the index; (2) if the option is a put option, segregating with the Fund's custodian bank cash or other liquid assets having a value that, when added to any related margin deposits, at all times at least equals the exercise price; or (3) regardless of whether the option is a call or a put option, holding an offsetting position in the same option at an exercise price that is at least as favorable to the Fund. Forward foreign currency exchange contracts. These contracts are traded in the interbank market through currency traders. The traders do not charge a fee, but they do realize a profit based on the difference between the prices at which they are buying and selling various currencies. The use of these contracts involves various risks including: . inability to enter into a contract at advantageous times or with respect to the desired foreign currencies . poor correlation between a currency's value and any proxy currency that a Portfolio is using . the creditworthiness of the counterparty to the transaction . losses (or lost profits) due to unanticipated or otherwise adverse changes in the relative value of currencies . additional expense due to transaction costs or the need to purchase or sell foreign currency on the spot market to correlate with the currency delivery requirements of the contract The Portfolios will cover outstanding forward currency contracts by maintaining liquid portfolio securities denominated in or exposed to the currency underlying the forward contract or the currency being hedged. To the extent that a Portfolio is not able to cover its forward currency positions with underlying portfolio securities, the Portfolio will have its bank custodian segregate cash or liquid assets having a value equal to the aggregate amount of such Portfolio's commitments under forward contracts. As an alternative to segregating assets, a Portfolio may buy call options permitting such Portfolio to buy the amount of foreign currency being hedged by a forward sale contract or a Portfolio may buy put options permitting it to sell the amount of foreign currency subject to a forward buy contract. Swaps, caps, floors and collars. A Portfolio will not enter into any swap, cap, floor or collar unless the portfolio manager thinks that the other party to the transaction is creditworthy. If the other party defaults, the Portfolio may have contractual remedies pursuant to agreements related to the transaction. Portfolios for which swaps are a permissible investment can enter credit protection swap arrangements which involve the sale by the Portfolio of a put option on a debt security which is exercisable by the buyer upon certain events, such as default by the referenced creditor on the underlying debt or a bankruptcy event of the creditor. The swap market has grown substantially in recent years and the swap market has become relatively liquid due to a large number of banks and investment banks acting as principals and agents and using standardized documentation. Caps, floors and collars are more recent innovations and standardized documentation has not yet been fully developed. For that reason they are less liquid than swaps. Liquidity of swaps, caps, floors and collars will be evaluated based on various factors including: . the frequency of trades and quotations . the number of dealers and prospective purchasers in the marketplace . dealer undertakings to make a market . the nature of the instrument (including demand or tender features) . the nature of the marketplace (including the ability to assign or offset a Portfolio's rights and obligations) Futures contracts and options on futures contracts. A Portfolio will cover any futures contract it has sold, or any call option it has sold on a futures contract, by (1) segregating with the Fund's custodian bank (a) cash or other liquid assets having a value that, when added to any related margin deposits, at all times at least equals the value of the securities or currency on which the futures contract (or related index) is based or (b) securities or currencies that substantially replicate changes in value of the securities or currencies on which the futures contract (or related index) is based or (2) holding an offsetting call option on that futures contract at the same or better B-6 settlement price. A Portfolio will cover any futures contract it has purchased, or any put option it has sold on a futures contract, by (1) segregating with the Fund's custodian bank cash or other liquid assets having a value that, when added to any related margin deposits, at all times at least equals the amount payable upon settlement of such futures contract or (2) holding an offsetting call option on that futures contract at the same or better settlement price. CERTAIN INVESTMENT LIMITATIONS Fundamental policies are those that may not be changed without approval of the outstanding voting shares of each affected Portfolio. If such a vote is required, approval requires a favorable vote of at least the lesser of: (A) 67% of the shares represented (in person or by proxy) at a meeting and entitled to vote thereon; or (B) if at least 50% of such shares are represented at the meeting, a majority of those represented. A policy is fundamental only if the Prospectus or this SAI states that it is fundamental or that it may be changed only by shareholder vote. If the Prospectus or SAI specifically states that one or more Portfolios may engage in practices that would otherwise violate a fundamental policy, such exception is also part of the Fund's fundamental policies. (On the other hand, any policy set forth in the Prospectus that is more restrictive than any fundamental policy on the same subject may be changed without any shareholder vote.) Unless otherwise indicated, all restrictions apply only at the time of purchase. No Portfolio may: . borrow money to purchase securities or purchase securities on margin . engage in the underwriting of securities of other issuers except to the extent that in selling portfolio securities it may be deemed to be a "statutory" underwriter for purposes of the Securities Act of 1933 . issue senior securities . sell call options which are not covered options . sell put options other than to close out option positions previously entered into . invest in commodities or commodity contracts. In this regard, the following aspects of the Prospectus's table of "Certain Investment Practices" are non- fundamental: all of the prohibitions and limitations in item 9; the recognized exchange requirement in, and the omission of any Portfolio that invests in equity securities from, item 10; the recognized exchange requirement and the limitations on purpose in item 11; and all of item 12, except the requirement that the Portfolio must be authorized to use the underlying futures contract. . make loans but this shall not prohibit a Portfolio from entering into repurchase agreements or purchasing bonds, notes, debentures or other obligations of a character customarily purchased by institutional or individual investors . For purposes of the industry concentration limit in item 25 of the Prospectus table, the following additional fundamental policies will apply: domestic crude oil and gas producers, domestic integrated oil companies, international oil companies, and oil service companies each will be deemed a separate industry; money market instruments issued by a foreign branch of a domestic bank will not be deemed to be an investment in a domestic bank. No more than 5% of the Scudder Global Equity Portfolio's assets will be committed to transactions in options, futures or other "derivative" instruments that are intended for any purpose other than to protect against changes in market values of investments the Portfolio owns or intends to acquire, to facilitate the sale or disposition of investments for the Portfolio, or to adjust the effective duration or maturity of fixed income instruments owned by the Portfolio Non-Fundamental Policies are those that may be changed without approval of shareholders. Unless otherwise indicated, all restrictions apply at the time of purchase. The following non-fundamental policies are in addition to those described elsewhere in the Prospectus or SAI. . No Portfolio will acquire securities for the purpose of exercising control over the management of any company . At least 75% of a Portfolio's total assets must be: (1) securities of issuers in which the Portfolio has not invested more than 5% of its total assets, (2) voting securities of issuers as to which the Fund owns no more than 10% of such securities, and (3) securities issued or guaranteed by the U.S. B-7 government, its agencies or instrumentalities. These restrictions do not apply to the Janus Mid Cap Portfolio. . No Portfolio may make any short sale . No Portfolio (except for the Janus Mid Cap Portfolio) may participate on a joint or joint and several basis in any trading account in securities Insurance Law Restrictions The ability to sell contracts in New York requires that each portfolio manager use his or her best efforts to assure that each Portfolio of the Fund complies with the investment restrictions and limitations prescribed by Sections 1405 and 4240 of the New York State Insurance Law and regulations thereunder in so far as such restrictions and limitations are applicable to investment of separate account assets in mutual funds. Failure to comply with these restrictions or limitations will result in the Insurance Companies ceasing to make investments in that Portfolio for the separate accounts. The current law and regulations permit the Fund to make any purchase if made on the basis of good faith and with that degree of care that an ordinarily prudent person in a like position would use under similar circumstances. INVESTMENT MANAGEMENT ARRANGEMENTS Investment Management Agreements and Sub-investment Management Agreements MetLife and the Fund have entered into investment management agreements under which MetLife has the primary management responsibility for the Fund's four index Portfolios and overall responsibility for all Portfolios. In addition, MetLife has entered into sub-investment management agreements for all other Portfolios. For simplicity, each of MetLife and the sub-investment managers are referred to as "managers" when discussing issues affecting all of them. Each agreement continues from year to year with annual approval by (a) the Board of Directors or a majority of that Portfolio's outstanding shares, and (b) a majority of the Board of Directors who are not "interested persons" of any party of the agreement. Each agreement may be terminated by any party to the agreement, without penalty, with 60 days' written notice. Shareholders of a Portfolio may vote to terminate an agreement as to services provided for that Portfolio. Managers make investment decisions and effect transactions based on information from a variety of sources including their own securities and economic research facilities. Managers are also obligated to provide office space, facilities, equipment and personnel necessary to perform duties associated with their designated Portfolio(s). Payment of Fund Expenses As detailed in the Prospectus, MetLife currently pays certain expenses for the Loomis Sayles High Yield Bond, Harris Oakmark Large Cap Value, T. Rowe Price Large Cap Growth, Neuberger Berman Partners Mid Cap Value, Lehman Brothers Aggregate Bond Index, Russell 2000 Index and Morgan Stanley EAFE Index Portfolios to the extent they exceed certain amounts. Apart from any such payment by MetLife, each Portfolio bears its share of all Fund expenses, including those for: (1) fees of the Fund's directors; (2) custodian and transfer agent fees; (3) audit and legal fees; (4) printing and mailing costs for the Fund's prospectuses, proxy material and periodic reports to shareholders; (5) MetLife's investment management fee; (6) brokerage commissions on portfolio transactions (including costs for acquisition, disposition, lending or borrowing of investments); (7) Fund taxes; (8) interest and other costs related to any Fund borrowing; and (9) extraordinary or one- time expenses (such as litigation related costs). All of the Fund's expenses, except extraordinary or one-time expenses, are accrued daily. B-8 Management Fees The Fund pays MetLife for its investment management services. MetLife pays the sub-investment managers for their investment management services. The following table shows the fee schedules for the investment management fees and sub-investment management fees as a percentage per annum of the average net assets and the investment management fees paid to MetLife for each Portfolio:
Sub- Investment Investment Management Management Fee Fee Investment Management Fees Average Schedule-- Schedule-- For the Year Ended December 31, Daily Net % Per % Per --------------------------------- Portfolio Assets Annum Annum 1996 1997 1998 - --------- ----------------- ---------- ---------- ---------- ---------- ----------- State Street Research All assets .25% .25% $ 102,785 $ 105,515 $ 105,727 Money Market State Street Research 1st $500 million $3,351,614 $7,305,001 $13,095,405 Growth .55% .40% next $500 million .50% .35% over $1 billion .45% .30% State Street Research 1st $250 million Income .35% .27% next $250 million .30% .22% $ 911,476 $1,102,819 $ 1,514,111 over $500 million .25% .17% State Street Research 1st $500 million Diversified .50% .35% next $500 million .45% .30% $3,179,254 $5,811,475 $10,067,374 over $1 billion .40% .25% State Street Research 1st $500 million .75% .55% Aggressive Growth next $500 million .70% .50% $8,815,041 $9,931,653 $ 9,539,534 over $1 billion .65% .45% Santander International 1st $500 million .75% .55% Stock next $500 million .70% .50% $2,330,738 $2,258,438 $ 2,161,315 over $1 billion .65% .45% Loomis Sayles High Yield All assets .70% .50% -- $ 84,589 $ 266,117 Bond T. Rowe Price Small Cap 1st $100 million .55% .35% Growth next $300 million .50% .30% -- $ 187,380 $764,242 over $400 million .45% .25% T. Rowe Price Large Cap 1st $50 million .70% .50% Growth over $50 million .60% .40% -- -- $ 3,585 Janus Mid Cap 1st $100 million .75% .55% next $400 million .70% .50% -- $ 263,954 $ 1,584,660 over $500 million .65% .45% Scudder Global Equity 1st $50 million .90% .70% next $50 million .55% .35% -- $ 201,758 $666674,520 next $400 million .50% .30% over $500 million .475% .275% Harris Oakmark Large Cap 1st $250 million .75% .65% Value over $250 million .70% .60% -- -- $ 6,470 Neuberger Berman 1st $100 million .70% .50% Partners Mid Cap Value next $250 million .675% .475% -- -- $ 6,314 next $500 million .65% .45% next $750 million .625% .425% over $1.6 billion .60% .40% MetLife Stock Index All Assets .25% N/A $2,154,140 $3,961,131 $ 6,387,967 Lehman Brothers All Assets .25% N/A -- -- $ 18,962 Aggregate Bond Index Russell 2000 Index All Assets .25% N/A -- -- $ 11,355 Morgan Stanley EAFE All Assets .30% N/A -- -- $ 9,366 Index
B-9 DIRECTORS AND OFFICERS OF THE FUND The Fund's Directors review actions of the Fund's investment manager and sub- investment managers, and decide upon matters of general policy. The Fund's officers supervise the daily business operations of the Fund. The Board of Directors and the Fund's officers are listed below. Unless otherwise noted, the address of each executive officer and director listed below is One Madison Avenue, New York, New York 10010.
Principal Occupation(s) Name, (Age) and Address Position(s) with Fund During Past 5 Years - ------------------------------------------------------------------------------------------------ Steve A. Garban (61)+ Director Retired, formerly Senior Vice-President The Pennsylvania State Finance and Operations and Teasurer, The University Pennsylvania State University 208 Old Main University Park, PA 16802 - ------------------------------------------------------------------------------------------------ David A. Levene (59)* Chairman of the Board, Executive Vice-President, MetLife since Chief Executive Officer 1996; prior thereto, Senior Vice-President and Director and Chief Actuary - ------------------------------------------------------------------------------------------------ Malcolm T. Hopkins (71)+ Director Private Investor, formerly Vice-Chairman of 14 Brookside Road the Board and Chief Financial Officer, St. Biltmore Forest Regis Corp. (forest and paper products) Asheville, NC 28803 - ------------------------------------------------------------------------------------------------ Dean O. Morton (67)+ Director Retired, formerly Executive Vice-President, 3200 Hillview Avenue Chief Operating Officer and Director, Palo Alto, CA 94304 Hewlett-Packard Company - ------------------------------------------------------------------------------------------------ Michael S. Scott Morton Director Jay W. Forrester Professor of Management at (61)+ Sloan School of Management, MIT Massachusetts Institute of Technology ("MIT") 50 Memorial Drive Cambridge, MA 02139-4307 - ------------------------------------------------------------------------------------------------ Arthur G. Typermass Director Retired, formerly Senior Vice-President and (62)* Treasurer, MetLife 43 Chestnut Drive Garden City, NY 11530 - ------------------------------------------------------------------------------------------------ Bradford W. White (33)+* Controller Senior Technical Consultant -- Pensions, MetLife since 1993; Senior Financial Analyst -- Retirement and Savings Center, 1992-1993; prior thereto, Financial Analyst - ------------------------------------------------------------------------------------------------ Christopher P. Nicholas President and Chief Associate General Counsel, MetLife (50)+* Operating Officer - ------------------------------------------------------------------------------------------------ Janet Morgan (36)* Treasurer Assistant Vice-President, MetLife since 1997; prior thereto, Director - ------------------------------------------------------------------------------------------------ Elaine Stevenson (40)* Vice-President Vice-President, MetLife - ------------------------------------------------------------------------------------------------ Lawrence A. Vranka (59)* Vice-President Vice-President, MetLife - ------------------------------------------------------------------------------------------------ Robin Wagner (38)* Secretary Assistant General Counsel, MetLife since 1997, Counsel, 1995-1997; prior thereto, Associate Counsel - ------------------------------------------------------------------------------------------------ Patricia S. Worthington Assistant Secretary Assistant Vice-President and Assistant (42)* Compliance Director of MetLife since 1997; prior thereto Associate Counsel - ------------------------------------------------------------------------------------------------ Nancy A. Turchio (30)* Assistant Secretary Legal Assistant, MetLife since 1994; prior thereto, legal assistant Cadwalader, Wickersham & Taft - ------------------------------------------------------------------------------------------------ Harold Lerner (63)* Assistant Controller Technical Consultant -- Financial Management, MetLife since 1996; prior thereto, Pricing/Contracts Analyst -- Retirement and Savings Center - ------------------------------------------------------------------------------------------------ Dianne Johnson (47)* Assistant Controller Senior Technical Consultant -- Financial Management, MetLife since 1997; Technical Consultant -- Retirement and Savings Center, 1994-1997; prior thereto, Accounting Supervisor -- Retirement and Savings Center
- ----------- (*) Interested Person, as defined in the Investment Company Act of 1940 ("1940 Act"), of the Fund. (+) Serves as a trustee, director and/or officer of one or more of the following investment companies, each of which has a direct or indirect advisory relationship with the Investment Manager or its affiliates: State Street Research Financial Trust, State Street Research Income Trust, State Street Research Money Market Trust, State Street Research Tax-Exempt Trust, State Street Research Capital Trust, State Street Research Master Investment Trust, State Street Research Equity Trust, State Street Research Securities Trust, State Street Research Growth Trust, State Street Research Exchange Trust and State Street Research Portfolios, Inc. B-10 The Directors have been compensated as follows:
(3) Pension or (5) Retirement (4) Total (2) Benefits Estimated Compensation Aggregate Accrued Annual from the Fund (1) Compensation as part of Benefits and Fund Name of from Fund Upon Complex Paid Director(b) Fund(a)(c) Expenses Retirement to Directors(b) - ----------------------------------------------------------------------------- Jeffrey J. Hodgman(d) 0 0 0 0 - ----------------------------------------------------------------------------- Steve A. Garban $29,000 0 0 $110,300 - ----------------------------------------------------------------------------- Malcolm T. Hopkins $27,500 0 0 $ 97,200 - ----------------------------------------------------------------------------- Robert A. Lawrence(e) $26,000 0 0 $ 96,700 - ----------------------------------------------------------------------------- Dean O. Morton $26,000 0 0 $110,700 - ----------------------------------------------------------------------------- Michael S. Scott Morton $26,000 0 0 $115,500 - ----------------------------------------------------------------------------- David A. Levene 0 0 0 0 - ----------------------------------------------------------------------------- Arthur G. Typermass $19,668 0 0 $ 19,668
- ------------ (a) For the fiscal year ended December 31, 1998. (b) Complex is comprised of 10 trusts and two corporations with a total of 31 funds and/or series. "Total Compensation from the Fund and Fund Complex Paid to Directors" is for the 12 months ended December 31, 1998. (c) Directors and officers who are currently active employees of MetLife receive no compensation for services rendered to the Fund other than their regular compensation from MetLife or its affiliate of which they are employees. Effective April 1, 1999 other directors who are not currently active employees of MetLife receive a fee of $15,000 per year, plus $3,500 for each directors' meeting they attend, $500 for each audit committee meeting they attend, and reimbursement for out-of-pocket expenses related to such attendance. Messrs. Garban and Hopkins also each receive $1,500 for attending any contract committee meeting. The chairman of the audit committee receives a fee of $1,500 for each full calendar year during which he/she serves as chairman. (d) Jeffrey J. Hodgman resigned as a director effective May 1, 1998. (e) Robert A. Lawrence resigned as a director effective April 1, 1999. - ------------ None of the above officers and directors of the Fund owns any stock of the Fund. B-11 PLACING PORTFOLIO TRANSACTIONS Each Portfolio's manager has day-to-day responsibility for selecting broker- dealers who will process investment transactions for the Portfolio. The managers follow similar policies and procedures for each Portfolio. When a manager's policy or practice is significantly different, it is specifically identified below. In the discussion that follows, the term broker-dealer includes both brokers (brokerage firms who act as agents in purchases or sales of portfolio investments by the Fund) and dealers (investment firms who act for their own account in selling or purchasing securities to or from the Fund). Primary Policy Each manager's primary policy is to get prompt and reliable execution of orders with the most favorable overall net prices to the Fund. To this end, when selecting the best broker-dealer for a given transaction, each manager will consider one or more of the following: . the price of the security or instrument . the nature of the market for the security or instrument . the size and difficulty of the order . the execution experience of the broker-dealer with respect to specific markets or securities (see, for example, "Fixed Income Securities" and "Over- the-Counter Securities Market" below) . confidentiality . the broker-dealer's financial responsibility . the competitiveness of the commission or spread (see "Competitiveness of Commission Rates and Net Prices" below) . proven integrity and reliability . the quality of execution . the broker-dealer's research and statistical services and capabilities (see "Research and Statistical Services" below) . the broker-dealer's capital clearance and settlement capabilities . desired timing of the trade . any broker rebate of commissions to pay Portfolio expenses under any "directed brokerage" arrangements (see "Directed Brokerage" below) Research and Statistical Services When more than one firm satisfies the Portfolio's other standards, managers may consider the range of services and capabilities that those broker-dealers provide, including: . recommendations and advice about market projections and data, security values, asset allocation and portfolio evaluation, purchasing or selling specific securities, and portfolio strategy . seminars, information, analyses, and reports concerning companies, industries, securities, trading markets and methods, legislative and political developments, changes in accounting practices and tax law, economic and business trends, proxy voting, issuer credit-worthiness, technical charts and portfolio strategy . access to research analysts, corporate management personnel, industry experts, economists, government representatives, technical market measurement services and quotation services, and comparative performance evaluation . products and other services including financial publications, reports and analysis, electronic access to data bases and trading systems, computer equipment, software, information and accessories . statistical and analytical data relating to various investment companies, including historical performance, expenses and fees, and risk measurements In most cases, these services supplement a manager's own research and statistical efforts. Research and statistical information and materials are generally subject to internal analysis before being incorporated into a manager's investment process. Generally, services are received primarily in the form of written reports, computer generated services, telephone contacts and personal meetings. Often managers use internal surveys and other methods to evaluate the quality of research and other services provided by various broker-dealer firms. Results of these studies are available to the managers' trading departments for use when selecting broker-dealers to execute portfolio transactions. Multiple Uses for Services The same research and statistical products and services may be useful for multiple accounts. Managers may use such products and services when managing any of their investment accounts. Therefore, managers may use research and statistical information received from broker- dealers who B-12 have handled transactions for any such account (which may or may not include any Portfolio) in the management of the same or any such other account (which, again, may or may not include that Portfolio). If any research or statistical product or service has a mixed use, so that it also serves functions other than assisting in a manager's investment decision process, then the manager may allocate the costs and value accordingly. Only the portion of the cost or value attributable to a product or service that assists the manager with the investment decision process may be considered by the manager in allocating transactions to broker-dealers. Competitiveness of Commission Rates and Net Prices Brokerage and other services furnished by broker-dealers are routinely reviewed and evaluated. Managers try to keep abreast of commission structures and the prevalent bid/ask spread of the market and/or security in which transactions for the Portfolios occur. Commissions on foreign transactions are often higher and fixed, unlike in the United States where commission rates are negotiable. Against this backdrop, managers evaluate the reasonableness of a commission or net price for each transaction. Other considerations which determine reasonableness of a broker-dealer's commission rates or net prices include: .the difficulty of execution and settlement . the size of the transaction (number of shares, dollar amount, and number of clients involved) . historical commission rates or spreads . rates and prices quoted by other brokers and dealers . familiarity with commissions or net prices paid by other institutional investors . the level and type of business done with the broker-dealer over time . the extent to which broker or dealer has capital at risk in the transaction After considering a combination of all the factors, managers may not necessarily select the broker with the lowest commission rate or the dealer with the lowest net price. Managers may or may not ask for competitive bids based on their judgment as to whether such bids would have a negative effect on the execution process. Compensating Broker-Dealers for Non-Execution Services Managers do not intentionally pay a broker-dealer brokerage commission or net price that is higher than another firm would charge for handling the same transaction in a recognition of services (other than execution services) provided. This is an area where differences of opinion as to fact and circumstances may exist, however. Therefore, to the extent necessary, managers rely on Section 28(e) of the Securities Exchange Act of 1934, which permits managers to pay higher commission rates if the manager determines in good faith that the rate is reasonable in relation to the value of the brokerage, research and statistical services provided. Accordingly, while it is difficult to determine any extent to which commission rates or net prices charged by broker-dealers reflect the value of their services, managers expect commissions to be reasonable in light of total brokerage and research services provided by each particular broker. Although it is also difficult to place an exact dollar value on research and statistical services received from broker-dealers, the managers believe that these services tend to reduce the Portfolio's expenses in the long-run. When purchasing securities for a Portfolio in fixed price underwriting transactions, managers follow instructions received from the Fund as to the allocation of new issue discounts, selling concessions and designations to any brokers or dealers which provide the Fund with research, performance evaluation, master trustee and other services. Absent instructions from the Fund, the manager may make such allocations to broker-dealers which provide it with research, statistical, and brokerage services. Brokerage Allocation Agreements and Understandings Managers may pay cash for certain services provided by external sources or choose to allocate brokerage business as compensation for the services. Managers do not have fixed agreements with any broker-dealer as to the amount of brokerage business which that firm may expect to receive because of the services they supply. However, managers may have understandings with certain firms which acknowledge that in order for such firms to be B-13 able to continuously supply certain services, they need to receive allocation of a specified amount of brokerage business. These understandings are honored to the extent possible in accordance with the policies set forth above. Managers have internal brokerage allocation procedures for that portion of their discretionary client brokerage business where more than one broker-dealer can provide best price and execution. In such cases, managers make judgments as to the level of business which would recognize any research and statistical services provided. In addition, broker-dealers sometimes suggest a level of business they would like to receive in return for the various brokerage, research and statistical services they provide. The actual brokerage received by any firm may be less than the suggested allocations but can, and often do, exceed the suggestions, because the total business is allocated on the basis of all the considerations described above. Broker-dealers are never excluded from receiving business because they do not provide research or statistical services. Directed Brokerage On behalf of the Portfolios, the Fund may request that managers also consider directed brokerage arrangements, which involve rebates of commissions by a broker-dealer to pay Portfolio expenses. The Fund may condition its requests by requiring that managers effect transactions with specified broker-dealers only if the broker-dealers are competitive as to price and execution. While the Fund believes that overall this practice can benefit the Fund, in some cases managers may be unable to negotiate commissions or obtain volume discounts or best execution and commissions charged under directed brokerage arrangements may be higher than those not using such arrangements. Directed brokerage arrangements may also result in a loss of the possible advantage from aggregation of orders for several clients as a single transaction for the purchase or sale of a particular security. Among other reasons why best execution may not be achieved using directed brokerage arrangements is that in, an effort to achieve orderly execution of transactions, execution of orders using directed brokerage arrangements may, at the discretion of the trading desk, be delayed until execution of other orders have been completed. The Board of Directors will monitor directed brokerage transactions to help ensure that they are in the best interest of the Fund and its shareholders. Fixed Income Securities Fixed income securities are generally purchased from the issuer or a primary market-maker acting as principal for the securities on a net basis, with no brokerage commission paid, although the price usually includes undisclosed compensation. Transactions placed through dealers serving as primary market- makers reflect the spread between the bid and asked prices known as a dealer's mark-up. Securities may also be purchased from underwriters at prices which include underwriting fees paid by the issuer. Over-the-Counter Securities Market Orders through the over-the-counter securities market are placed with the principal market-makers for the security, unless a more favorable result is available elsewhere. A principal market-maker is one who actively and effectively trades in the relevant security. Bunching of Orders When securities are purchased or sold for a Portfolio, managers may also be purchasing or selling the same securities for other accounts. Managers may group orders of various accounts for execution to get lower prices and commission rates. To be fair to all accounts over time, managers allocate aggregate orders executed in a series of transactions or orders in which the amount of securities available does not fill the order or price requirements at the average price and, as nearly as practicable, on a pro-rata basis in proportion to the amounts intended to be purchased or sold by each account. Managers also consider the investment objectives, amount of money available to invest, order size, amount an account already has committed to the investment, and relative investment risks. While the Fund believes this practice contributes to better overall execution of portfolio transactions, occasionally this policy may adversely affect the price or number of shares in a particular Portfolio's transaction caused by either increased demand or supply of the security involved in the transaction. The Board of Directors has adopted procedures governing bunching to ensure that bunching remains in the best interest of the Fund and its shareholders. Because the procedures do not B-14 always adequately accommodate all facts and circumstances, exceptions are made to the policy of allocating trades on an adjusted, pro-rata basis. Exceptions to the policy may include not aggregating orders and/or reallocating to: . recognize a manager's negotiation efforts . eliminate de minimus positions . give priority to accounts with specialized investment policies and objectives . give special consideration of an account's characteristics (such as concentrations, duration, or credit risk) . avoid a large number of small transactions which may increase custodial and other transaction costs (which effect smaller accounts disproportionately) Depending on the circumstances, such exceptions may or may not cause an account to receive a more or less favorable execution relative to other accounts. Harris Associates L.P. may use its affiliate, Harris Associates Securities L.P., and Neuberger Berman Management Inc. may use its affiliate, Neuberger Berman, LLC (the "affiliated brokers") as brokers for effecting securities transactions for the respective portfolios for which they are the managers. The Board of Directors, including a majority of the directors who are not "interested" directors, has determined that securities transactions for a Portfolio may be executed through these affiliated brokers, if, in the judgment of the manager, the use of the affiliated broker is likely to result in prices and execution at least as favorable to the Portfolio as those available from other qualified brokers and, if, in such transactions, the affiliated broker charges the Portfolio commission rates at least as favorable as those charged by the affiliated broker to comparable unaffiliated customers in similar transactions. The Board of Directors has adopted procedures designed to provide that commissions, fees or other remuneration paid to affiliated brokers are consistent with this standard. The Portfolios will not effect principal transactions with affiliated brokers. The following table shows the brokerage commissions paid by the Fund for each of the Portfolios for the years ended December 31, 1996, 1997 and 1998:
Portfolio 1996 1997 1998 State Street Research Money Market State Street Research N/A N/A N/A Income State Street Research $1,522,211 $1,771,904 $2,204,538 Diversified State Street Research $2,719,753 $3,228,651 $4,486,471 Growth State Street Research $4,285,962 $5,031,886 $3,260,411 Aggressive Growth Santander $1,971,314 $3,009,725 $2,313,364 International Stock Loomis Sayles High N/A $ 4,236 $ 6,463 Yield Bond T. Rowe Price Small N/A $ 84,657 $ 174,688 Cap Growth T. Rowe Price Large N/A N/A $ 5,222 Cap Growth Janus Mid Cap N/A $ 139,969 $ 482,758 Scudder Global Equity N/A $ 143,783 $ 165,847 Harris Oakmark Large N/A N/A $ 12,228 Cap Value Neuberger Berman N/A N/A $ 11,875 Partners Mid Cap MetLife Stock Index $ 229,771 $ 341,117 $ 469,162 Lehman Brothers N/A N/A N/A Aggregate Bond Index Russell 2000 Index N/A N/A $ 41,989 Morgan Stanley EAFE N/A N/A $ 79,325
SHAREHOLDER MEETINGS Regular annual shareholder meetings are not required and the Fund does not expect to have regular meetings. For certain purposes, the Fund is required to have a shareholder meeting. Examples of the reasons a meeting might be held are to: (1) approve certain agreements required by securities laws; (2) change fundamental investment objectives and restrictions of the Portfolios; and (3) fill vacancies on the Board of Directors when less than a majority have been elected by shareholders. Also, if 10% or more of the outstanding shares request a shareholders' meeting, then by a vote of two-thirds of the Fund's outstanding shares (as of a designated record date) a director may be removed from B-15 office. The Fund assists with all shareholder communications. Except as mentioned above, directors will continue in office and may appoint directors for vacancies. VOTING Each share has one vote and fractional shares have fractional votes. Votes for all Portfolios are generally aggregated. When there is a difference of interests between the Portfolios, votes are counted on a per Portfolio basis and not totaled. Shares in a Portfolio not affected by a matter are not entitled to vote on that matter. A Portfolio-by-Portfolio vote may occur, for example, when there are proposed changes to a particular Portfolio's fundamental investment policies or investment management agreement. Owners of Contracts supported by separate accounts registered as unit investment trusts under the Investment Company Act of 1940 have certain voting interests in Fund shares. The Contract prospectus attached to the Fund Prospectus describes how Contract owners can give voting instructions for Fund shares. Shares held by MetLife's general account or in a separate account not registered as a unit investment trust vote in the same proportion as shares held by the Insurance Companies in their separate accounts registered as unit investment trusts. SALE AND REDEMPTION OF SHARES Portfolio shares, when issued, are fully paid and non-assessable. In addition, there are no preference, preemptive, conversion, exchange or similar rights, and shares are freely transferable. Shares do not have cumulative voting rights. MetLife need not sell any specific number of Fund shares. MetLife will pay the Fund's distribution expenses and costs (which are those arising from activities primarily intended to sell Fund shares). The Fund may suspend sales and redemptions of a Portfolio's shares during any period when (1) trading on the New York Stock Exchange is restricted or the Exchange is closed (other than customary weekend and holiday closings); (2) an emergency exists which makes disposing of portfolio securities or establishing a Portfolio's net asset value impractical; or (3) the Securities and Exchange Commission orders suspension to protect Portfolio shareholders. If the Board of Directors decides that continuing to offer shares of one or more Portfolios will not serve the Fund's best interest (e.g. changing market conditions, regulatory problems or low Portfolio participation), the Fund may stop offering such shares and, by a vote of the Board of Directors, may require redemption (at net asset value) of outstanding shares in such Portfolio(s) upon 30 day's prior written notice to affected shareholders. In the future, the Fund may offer shares to be purchased by separate accounts of life insurance companies not affiliated with MetLife to support insurance contracts they issue. PRICING OF PORTFOLIO SECURITIES Portfolio securities are priced as described in the table that follows. If the data necessary to employ the indicated pricing methods are not available, the investment will be assigned a fair value in good faith pursuant to procedures approved by the Board of Directors. Such "fair value" pricing may also be used if the customary pricing procedures are judged for any reason to result in an unreliable valuation. B-16 PRICING OF SECURITIES CHART
Value Average Established by Last Between Recognized Last Spot Last Bid Exchange or Sale Last Bid Price and Asked Other (primary (primary (primary (primary Amortized Recognized market) market) market) market) Cost* Sources - ---------------------------------------------------------------------------------------------------------------- Portfolio Securities All Traded on Domestic Stock All Portfolios/2 Exchanges Portfolios/1/ L/2/ / except L - ---------------------------------------------------------------------------------------------------------------- Portfolio Securities Traded Primarily on Non-Domestic All Securities Exchanges Portfolios/1/ - ---------------------------------------------------------------------------------------------------------------- Securities Listed or All All Traded on More than All Portfolios/3 Portfolios/2 One Exchange Portfolios/1/ / S/2/ / except S - ---------------------------------------------------------------------------------------------------------------- Domestic Securities All Traded in the Over Portfolios/1 the Counter Market / except S, L, S/1/, NB/1/ L/1/ S/2/ NB and MM MM - ---------------------------------------------------------------------------------------------------------------- Non-U.S. Securities All Traded in the Over All Portfolios/2 the Counter Market Portfolios/1/ / except NB NB/2/ - ---------------------------------------------------------------------------------------------------------------- Short-term Instruments with Remaining Maturity of Sixty Days or All Less Portfolios/1/ - ---------------------------------------------------------------------------------------------------------------- Options on Securities, Indices, or Futures All All Contracts Portfolios/1/ Portfolios/2/ - ---------------------------------------------------------------------------------------------------------------- All Currencies Portfolios/1/ - ---------------------------------------------------------------------------------------------------------------- All Futures Contracts Portfolios/1/ - ----------------------------------------------------------------------------------------------------------------
- ------------ 1. primary method used 2. if primary method is unavailable 3. if both primary and secondary methods are unavailable L. Loomis Sayles High Yield Bond Portfolio Only NB.Neuberger Berman Partners Mid Cap Value Portfolio Only S. Scudder Global Equity Portfolio Only MM.State Street Research Money Market Portfolio Only * Amortized Cost Method: Securities are valued at the cost on the date of purchase and thereafter, a constant proportionate amortization value is assumed until maturity of any discount or premium (regardless of fluctuating interest rates on the market value of the security). Maturity is deemed to be the next date on which the interest rate is to be adjusted. Note, using this method may result in different yield and net asset values than market valuation methods. B-17 TAXES The following summarizes some of the relevant tax considerations associated with the Fund. It is not a complete explanation and should not substitute for careful tax planning and consulting with individual tax advisers. The Fund's tax attributes are allocated among the Portfolios as if they were separate corporations. For example, if a Portfolio has a net capital loss for a taxable year, including any allocated net capital loss carryforwards, such loss(es) will only offset net capital gains of that Portfolio. Also, each Portfolio stands alone to determine that Portfolio's net ordinary income or loss. The Fund currently qualifies (and intends to continue to qualify) as a "regulated investment company" under the Code. To qualify, among other things, each Portfolio must derive at least 90% of its gross income from dividends, interest, payments for security loans, and gains or other income derived from each Portfolio's business of investing in stocks, securities or foreign currencies. As a regulated investment company, the Fund does not pay federal income tax on net ordinary income and net realized capital gains distributed to shareholders. A nondeductible 4% excise tax applies to any regulated investment company on any excess of required distributions for the calendar year over the amount actually distributed. The Fund must distribute 98% of its ordinary income and capital gain net income. The Fund does not expect to incur excise taxes. Dividends paid by a Portfolio from its ordinary income, and distributions of its net realized short-term capital gains, are taxable to the shareholder as ordinary income. Generally, any of a Portfolio's income which represents dividends on common or preferred stock of a domestic corporation (rather than interest income), distributed to the Insurance Companies may be deducted as dividends received, to the extent the deduction is available to a life insurance company. Distributions from the Fund's net realized long-term gains are taxable to the Insurance Companies as long-term capital gains regardless of the holding period of the Portfolio shares. Long-term capital gain distributions are not eligible for the dividends received deduction. Dividends and capital gains distributions may also be subject to state and local taxes. The Fund complies with section 817(h) of the Code and its related regulations. This means that the Fund generally may issue shares only to life insurance company segregated asset accounts (also referred to as separate accounts) that fund variable life insurance or annuity contracts ("variable insurance contracts") and the general account of MetLife which provided the initial capital for the Portfolios. The prospectus for the Contracts discusses in more depth the taxation of segregated asset accounts and of the Contract owner. Section 817(h) of the Code and related regulations require segregated asset accounts investing in the Portfolios to diversify. These diversification requirements, which are in addition to those imposed on the Fund under the 1940 Act and under Subchapter M of the Code, may affect selection of securities for the Portfolios. Failing to meet Section 817(h) requirements may have adverse tax consequences for the insurance company offering the variable insurance contract and result in immediate taxation of the contract owner if the investment in the contract has appreciated in value. The Treasury Department may possibly adopt regulations or the IRS may issue a revenue ruling which may deem a Contract owner, rather than the insurance company, to be treated as owner of the assets of a segregated asset account based on the extent of investment control by the contract owner. As a result, the Fund may take action to assure that a Contract continues to qualify as a variable insurance contract under federal tax laws. For example, the Fund may alter the investment objectives of a Portfolio or substitute shares of one Portfolio for those of another. To the extent legally necessary, a change of investment objectives or share substitution will only occur with prior notice to affected shareholders, approval by a majority of shareholders and approval by the Securities and Exchange Commission. Several unique tax considerations arise in connection with a Portfolio which may invest in foreign securities. The Portfolio may have to pay foreign taxes, which could reduce its investment performance. Dividends paid by a Portfolio corresponding to dividends paid by B-18 non-United States companies do not qualify for the dividends received deduction. Those Portfolios that invest substantial amounts of their assets in foreign securities may make an election to pass through to the Insurance Companies any taxes withheld by foreign taxing jurisdictions on foreign source income. Such an election will result in additional taxable income and income tax to the Insurance Companies. The amount of additional income tax, however, may be more than offset by credits for the foreign taxes withheld, which are also passed through. These credits may provide a benefit to the Insurance Companies. GENERAL INFORMATION Experts The Board of Directors annually approves an independent auditor which is expert in accounting and auditing. Deloitte & Touche LLP, 555 17th Street, Suite 3600, Denver, CO, 80202, is the Fund's independent auditor. The Fund's financial statements for the 12 months ended December 31, 1998 incorporated by reference into this SAI have been audited by Deloitte & Touche LLP. The Fund relies on this firm's report which appears with the financial statements. Introduction of the Euro Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain are members of the European Economic and Monetary Union (the "European Union"). On January 1, 1999, the European Union established a common European currency for participating countries that will generally be known as the "Euro." Each such member country supplements its existing currency with the Euro and intends to replace its existing currency with the Euro on July 1, 2002. Additional European countries that are members of the European Union may elect to supplement their existing currencies with the Euro after January 1, 1999. The introduction of the Euro presents unique risks and uncertainties, including the treatment of outstanding financial contracts after January 1, 1999; the application of exchange rates for existing currencies and the Euro; and the creation of suitable clearing and settlement systems for the new currency. While it is impossible to predict what effect the Euro's introduction may have on a Portfolio's investments in foreign securities and foreign currencies, these and other factors could cause market disruptions and could, among other things, adversely affect the value of securities held by the Portfolio. Custodian Arrangement State Street Bank and Trust Company of Boston, Massachusetts, is the custodian of the assets of all Portfolios. The custodian's duties include safeguarding and controlling the Fund's cash and investments, handling the receipt and delivery of securities, and collecting interest and dividends on the Fund's investments. Portfolio securities purchased in the United States are maintained in the custody of State Street Bank, although such securities may be deposited in the Book-entry system of the Federal Reserve System or with Depository Trust Company. Except as otherwise permitted under applicable Securities and Exchange Commission "no-action" letters or exemptive orders, the Fund holds foreign assets in qualified foreign banks and depositories meeting the requirements of Rule 17f-5 under the Investment Company Act of 1940. Index Sponsors The Prospectus describes certain aspects of the limited relationship the index sponsors have with the Fund. In addition, with respect to Morgan Stanley, the Morgan Stanley EAFE (R) Index Portfolio is not sponsored, endorsed, sold or promoted by Morgan Stanley. Morgan Stanley makes no representation or warranty, express or implied, to the owners of this Portfolio or any member of the public regarding the advisability of investing in funds generally or in this Portfolio particularly or the ability of the MSCI EAFE (R) index to track general stock market performance. Morgan Stanley is the licensor of certain trademarks, service marks and trade names of Morgan Stanley and of the MSCI EAFE (R) index which is determined, composed and calculated by Morgan Stanley without regard to the issuer of this Portfolio or this Portfolio. Morgan Stanley has no obligation to take the needs of the issuer of this Portfolio or the owners of this Portfolio into consideration in determining, composing or calculating the MSCI EAFE (R) index. Morgan Stanley is not responsible for and has not participated in the determination of the timing of, prices at, or B-19 quantities of this Portfolio to be issued or in the determination or calculation of the equation by which this Portfolio is redeemable for cash. Morgan Stanley has no obligation or liability to owners of this Portfolio in connection with the administration, marketing or trading of this Portfolio. ALTHOUGH MORGAN STANLEY SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE INDEXES FROM SOURCES WHICH MORGAN STANLEY CONSIDERS RELIABLE, NEITHER MORGAN STANLEY NOR ANY OTHER PARTY GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEXES OR ANY DATA INCLUDED THEREIN. NEITHER MORGAN STANLEY NOR ANY OTHER PARTY MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE'S CUSTOMERS AND COUNTERPARTIES, OWNERS OF THE PORTFOLIO, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEXES OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. NEITHER MORGAN STANLEY NOR ANY OTHER PARTY MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND MORGAN STANLEY HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEXES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY OR ANY OTHER PARTY HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. The MSCI EAFE (R) Index is the exclusive property of Morgan Stanley. Morgan Stanley Capital International is a service mark of Morgan Stanley and has been licensed for use by MetLife. With respect to Frank Russell Company, the Russell 2000 Index Portfolio is not promoted, sponsored or endorsed by, nor in any way affiliated with Frank Russell Company. Frank Russell Company is not responsible for and has not reviewed the Portfolio nor any associated literature or publications and Frank Russell Company makes no representation or warranty, express or implied, as to their accuracy, or completeness, or otherwise. Frank Russell Company reserves the right at any time and without notice, to alter, amend, terminate or in any way change its index. The Russell 2000(R) Index is a service mark of the Frank Russell Company. Russell(TM) is a trademark of the Frank Russell Company. Frank Russell Company has no obligation to take the needs of any particular fund or its participants or any other product or person into consideration in determining, composing or calculating the index. Frank Russell Company's publication of the index in no way suggests or implies an opinion by Frank Russell Company as to the attractiveness or appropriateness of investment in any or all securities upon which the index is based. FRANK RUSSELL COMPANY MAKES NO REPRESENTATION, WARRANTY, OR GUARANTEE AS TO THE ACCURACY, COMPLETENESS, RELIABILITY, OR OTHERWISE OF THE INDEX OR ANY DATA INCLUDED IN THE INDEX. FRANK RUSSELL COMPANY MAKES NO REPRESENTATION OR WARRANTY REGARDING THE USE, OR THE RESULTS OF USE, OF THE INDEX OR ANY DATA INCLUDED THEREIN, OR ANY SECURITY (OR COMBINATION THEREOF) COMPRISING THE INDEX. FRANK RUSSELL COMPANY MAKES NO OTHER EXPRESS OR IMPLIED WARRANTY, AND EXPRESSLY DISCLAIMS ANY WARRANTY, OF ANY KIND, INCLUDING, WITHOUT MEANS OF LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR ANY DATA OR ANY SECURITY (OR COMBINATION THEREOF) INCLUDED THEREIN. FINANCIAL STATEMENTS The Fund's financial statements for periods ending December 31, 1998, and the related schedules of investments for each Portfolio and report of independent auditors thereon, are included in the Fund's annual report to B-20 shareholders for 1998 that accompanies this Statement of Additional Information and are incorporated by reference into this SAI. B-21 APPENDIX DESCRIPTION OF CERTAIN CORPORATE BOND AND DEBENTURE RATINGS
Standard & Poor's Rating Group (S&P) Rating Moody's Investor Service, Inc. (Moody's) Description Rating Description - ----------------------------------------------------------------------------------------------------------- Aaa Bonds with this rating are judged AAA An obligation with this rating to be of the best quality, has the highest rating assigned carrying the smallest degree or by S&P. The obligor's capacity to investment risk. They are meet its financial commitment on generally referred to as "gilt the obligation is extremely edged." Interest payments are strong. protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. - ----------------------------------------------------------------------------------------------------------- Aa Bonds with this rating are judged AA An obligation with this rating to be of high quality by all differs from the highest standards. Together with the Aaa obligations only in small degree. group, they comprise what are The obligor's capacity to meet generally known as high-grade its financial commitment on the bonds. They are rated lower than obligation is very strong. the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat greater than in Aaa securities. - ----------------------------------------------------------------------------------------------------------- A Bonds with this rating possess A An obligation with this rating is many favorable investment somewhat more susceptible to the attributes and are to be adverse effects of changes in considered as upper-medium-grade circumstances and economic obligations. Factors giving conditions than obligations in security to principal and higher-rated categories. However, interest are considered adequate, the obligor's capacity to meet but elements may be present which its financial commitment on the suggest a susceptibility to obligation is still strong. impairment sometime in the future. - ----------------------------------------------------------------------------------------------------------- Baa Bonds with this rating are BBB An obligation with this rating considered as medium grade exhibits adequate protection obligations, i.e., they are parameters. However, adverse neither highly protected nor economic conditions or change poorly secured. Interest payments circumstances are more likely to and principal security appear lead to weakened capacity of the adequate for the present but obligor to meet its financial certain protective elements may commitment on the obligation. be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. - ----------------------------------------------------------------------------------------------------------- Ba Bonds with this rating are judged BB An obligation with this rating to have speculative elements; has significant speculative their future cannot be considered characteristics, but is less as well-assured. Often, the vulnerable to nonpayment than protection of interest and bonds in the lower ratings. principal payments may be very However, it faces major ongoing moderate, and thereby not well uncertainties or exposure to safeguarded during both good and adverse business, financial or bad times over the future. economic conditions which could Uncertainty of position lead to the obligor's inadequate characterizes bonds in this capacity to meet its financial class. commitment on the obligation. - ----------------------------------------------------------------------------------------------------------- B Bonds with this rating generally B An obligation with this rating is lack characteristics of the more vulnerable to nonpayment desirable investment. Assurance than obligations rated BB, but of interest and principal the obligor currently has the payments of maintenance of other capacity to meet its financial terms of the contract of any long commitment on the obligation. period of time may be small. Adverse business, financial or economic conditions will likely impair the obligator's capacity or willingness to meet its financial commitment on the obligation.
B-22
Rating Moody's Investor Service, Inc. (Moody's) Description Rating Standard & Poor's Rating Group (S&P)Description - -------------------------------------------------------------------------------------------------------------------------- Caa Bonds with this rating are of CCC An obligation with this rating is poor standing. Such issues may be currently vulnerable to in default or there may be nonpayment, and is dependent upon present elements of danger with favorable business, financial, respect to principal or interest. and economic conditions for the obligor to meet its financial, and economic commitment on the obligation. In the event of adverse business, financial or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. - -------------------------------------------------------------------------------------------------------------------------- Ca Bonds with this rating represent C An obligation with this rating obligations which are speculative may be used to cover a situation in a high degree. Such issues are where a bankruptcy petition has often in default or have other been filed or similar action has marked shortcomings. been taken, but payments on this obligation are being continued. - -------------------------------------------------------------------------------------------------------------------------- C Bonds with this rating are the D An obligation rated D is in lowest rated class of bonds, and payment default. This rating issues so rated can be regarded category is used when payments on as having extremely poor an obligation are not made on the prospects of ever attaining any date due even if the applicable real investment standing. grace period has not expired, unless S&P believes that such payments will be made during such grace period. This rating also will be used upon the filing of a bankruptcy petition on an obligation are jeopardized. - -------------------------------------------------------------------------------------------------------------------------- 1 This modifier is used with Aa, A, (+)/(-) These modifiers are used with Baa, Ba and B ratings and ratings from AA to CCC to show indicates the bond possesses relative standing within the strongest investment attributes rating category. within the rating class. - -------------------------------------------------------------------------------------------------------------------------- No Rating This might arise if: (1) an r This symbol attached to the application for rating was not ratings of instruments with received or accepted; (2) the significant non credit risks. It issue or issuer belongs to a highlights risks to principal or group of securities that are not volatility of expected returns rated as a matter of policy; which are not addressed in the (3) there is a lack of essential credit rating. Examples include: data pertaining to the issue or obligations linked or indexed to issuer; (4) the issue was equities, currencies or privately placed in which case commodities; obligations exposed the rating is not published in to severe prepayment risk such as the Moody's publication; or interest only principal only (5) the rating was suspended or mortgage securities; and withdrawn because new and obligations with unusually risky material circumstances arose, the interest terms, such as inverse effects of which preclude floaters. satisfactory analysis; there is no longer available reasonable up-to-date data to permit a judgment to be formed; a bond is called for redemption or for other reasons.
B-23 DESCRIPTION OF COMMERCIAL PAPER RATINGS
Rating Moody's Investor Service, Inc. (Moody's) Description Rating Standard & Poor's Rating Group (S&P)Description - ---------------------------------------------------------------------------------------------------------------------------- Prime Commercial paper with this rating A Commercial paper with this rating is the highest rated based on the is the highest based on: (1) following factors: (1) management liquidity ratios are adequate to of the issuer; (2) economics of meet cash requirements; (2) the the issuer's industry or issuer's long-term senior debt is industries and the speculative- rated "A" or better, although in type risks which may be inherent some cases "BBB" or better may be in certain areas; (3) the allowed; (3) the issuer has issuer's products in relation to access to at least two additional competition and customer channels of borrowing; (4) the acceptance; (4) liquidity; (5) issuer's basic earnings and cash amount and quality of long-term flow have an upward trend with debt; (6) trend of earnings over allowance made for unusual a period of 10 years; (7) circumstances; (5) Typically, the financial strength of any parent issuer's industry is well and the relationships which exist established and the issuer has a with the issuer; and (8) strong position within the recognition by the management of industry; and (6) the reliability obligations which may be present and quality of management are or may arise as a result of unquestioned. public interest questions and preparations to meet such obligations. - ---------------------------------------------------------------------------------------------------------------------------- 1, 2 or 3 These modifiers indicates the 1, 2 or 3 These modifiers indicate the relative degree to which the relative degree to which the commercial paper possesses the commercial paper possesses the qualities that are required to qualities that are required to receive a Prime rating. receive an A rating. - ---------------------------------------------------------------------------------------------------------------------------- (+) Commercial paper with an A-1 rating can be further modified with this modifier to show that they possess overwhelming safety characteristics.
B-24 PART C. OTHER INFORMATION Item 23. Exhibits
Exhibit Number Description ------- ----------- (a)(a). --Articles of Incorporation of Registrant, as amended May 23, 1983* (a)(b). --Articles Supplementary of Registrant* (a)(c). --Articles Supplementary of Registrant* (a)(d). --Articles Supplementary of Registrant* (a)(e). --Articles Supplementary of Registrant* (a)(f). --Articles Supplementary of Registrant* (a)(g). --Articles Supplementary of Registrant* (a)(h). --Articles Supplementary of Registrant+++ (a)(i). --Articles Supplementary of Registrant***** (a)(j). --Articles of Amendment**** (b)(a). --By-Laws of Registrant, as amended January 27, 1988* (b)(b). --Amendment to By-Laws Dated April 24, 1997*** (c). --None, other than Exhibits (a) and (b) above (d)(a). --Investment Management Agreement(s), as amended, relating to the MetLife Stock Index and State Street Research Money Market Portfo- lios* (d)(b). --Investment Management Agreements, as amended, relating to State Street Research Growth, State Street Research Income, State Street Research Diversified, State Street Research Aggressive Growth and Santander International Stock Portfolios*** (d)(c). --Investment Management Agreements relating to Loomis Sayles High Yield Bond, Janus Mid Cap, Scudder Global Equity and T. Rowe Price Small Cap Growth Portfolios** (d)(d). --Investment Management Agreements relating to Neuberger Berman Part- ners Mid Cap Value, T. Rowe Price Large Cap Growth, Harris Oakmark Large Cap Value, Lehman Brothers Aggregate Bond Index, Russell 2000 Index and Morgan Stanley EAFE Index Portfolios***** (d)(e). --Sub-Investment Management Agreements relating to State Street Re- search Growth, State Street Research Income, State Street Research Diversified, State Street Research Aggressive Growth and State Street Research Money Market Portfolios*** (d)(f). --Sub-Investment Management Agreements relating to Scudder Global Equity Portfolio, Neuberger Berman Partners Mid Cap Value, T. Rowe Price Large Cap Growth and Harris Oakmark Large Cap Value Portfolios, Santander International Stock Portfolio***** (d)(g). --Sub-Investment Management Agreements relating to Loomis Sayles High Yield Bond, Janus Mid Cap and T. Rowe Price Small Cap Growth Portfo- lios** (e)(a). --Distribution Agreement* (e)(b). --Addendum to Distribution Agreement* (e)(c). --Second Addendum to Distribution Agreement* (f). --None (g)(a). --Custodian Agreement with State Street Bank & Trust Company* (g)(b). --Revised schedule of remuneration*
C-1
Exhibit Number Description ------- ----------- (g)(c). --Amendment to Custodian Agreement* (g)(d). --Amendments to Custodian Agreement* (h)(a). --Transfer Agency Agreement* (h)(b). --Agreement relating to the use of the "Metropolitan" name and service marks* (h)(c). --Licensing Agreements relating to Morgan Stanley EAFE Index, Russell 2000 Index and Lehman Brothers Aggregate Bond Index Portfolio+ (i)(a). --Opinion and Consent of Counsel with respect to the shares of the State Street Research Growth, State Street Research Income and State Street Research Money Market Portfolios* (i)(b). --Opinion and Consent of Counsel with respect to the shares of the State Street Research Diversified and GNMA Portfolios* (i)(c). --Opinion and Consent of Counsel with respect to the shares of the State Street Research Aggressive Growth and Equity Income Portfo- lios* (i)(d). --Opinion and Consent of Counsel with respect to the shares of the MetLife Stock Index Portfolio* (i)(e). --Opinion and Consent of Counsel with respect to the shares of the Santander International Stock Portfolio* (i)(f). --Opinion and Consent of Counsel with respect to the shares of the Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe Price Small Cap Growth and Scudder Global Equity Portfolios** (i)(g). --Opinion and Consent of Counsel with respect to the shares of the Neuberger Berman Partners Mid Cap Value, T. Rowe Price Large Cap Growth, Harris Oakmark Large Cap Value, Lehman Brothers Aggregate Bond Index, Russell 2000 Index and Morgan Stanley EAFE Index Portfo- lios**** (j)(a). --Consent of Independent Public Accountants+ (j)(b). --Consent of Freedman, Levy, Kroll & Simonds* (k). --None (l)(a). --Stock Purchase Agreement* (l)(b). --Supplementary Stock Purchase Agreement* (l)(c). --Second Supplementary Stock Purchase Agreement* (l)(d). --Third Supplementary Stock Purchase Agreement* (l)(e). --Fourth Supplementary Stock Purchase Agreement* (l)(f). --Fifth Supplementary Stock Purchase Agreement* (l)(g). --Sixth Supplementary Stock Purchase Agreement** (l)(h). --Seventh Supplementary Stock Purchase Agreement***** (m). --None (n). --Financial Data Schedules for the period ending December 31, 1998+ (o). --None (p). --Powers of Attorney++ (q). --Specimen Price Make-Up Sheet+
- -------- + Filed herewith. * Incorporated by reference to the filing of Post-Effective Amendment No. 17 to this Registration Statement on April 30, 1996. ** Incorporated by reference to the filing of Post-Effective Amendment No. 19 to this Registration Statement on February 27, 1997. *** Incorporated by reference to the filing of Post-Effective Amendment No. 20 to the Registration Statement on April 2, 1998. C-2 **** Incorporated by reference to the filing of Post Effective Amendment No. 22 to the Registration Statement on October 6, 1998. ***** Incorporated by reference to the filing of Post Effective Amendment No. 23 to the Registration Statement on January 11, 1999. ++ Powers of Attorney for all signatories except for Messrs. Levene, White and Typermass are incorporated by reference to the filing of Post- Effective Amendment No. 17 to this Registration Statement on April 30, 1996. The Power of Attorney for Mr. White is incorporated by reference to the filing of Post-Effective Amendment No. 18 on December 18, 1996. The Powers of Attorney for Messrs. Levene and Typermass are incorporated by reference to the filing of Post-Effective Amendment No. 21 on July 30, 1998. +++ Incorporated by reference to the filing of Post Effective Amendment No. 18 on December 18, 1996. Item 24. Persons Controlled by or Under Common Control with the Fund C-3 ORGANIZATIONAL STRUCTURE OF METROPOLITAN AND SUBSIDIARIES AS OF DECEMBER 31, 1998 The following is a list of subsidiaries of Metropolitan Life Insurance Company ("Metropolitan") as of December 31, 1998. Those entities which are listed at the left margin (labelled with capital letters) are direct subsidiaries of Metropolitan. Unless otherwise indicated, each entity which is indented under another entity is a subsidiary of such indented entity and, therefore, an indirect subsidiary of Metropolitan. Certain inactive subsidiaries have been omitted from the Metropolitan Organizational listing. The voting securities (excluding directors' qualifying shares, if any) of the subsidiaries listed are 100% owned by their respective parent corporations, unless otherwise indicated. The jurisdiction of domicile of each subsidiary listed is set forth in the parenthetical following such subsidiary. A. Metropolitan Tower Corp. (Delaware) 1. Metropolitan Property and Casualty Insurance Company (Rhode Island) a. Metropolitan Group Property and Casualty Insurance Company (Rhode Island) i. Metropolitan Reinsurance Company (U.K.) Limited (Great Britain) b. Metropolitan Casualty Insurance Company (Rhode Island) c. Metropolitan General Insurance Company (Rhode Island) d. Metropolitan Direct Property and Casualty Insurance Company (Georgia) e. Metropolitan P&C Insurance Services, Inc. (California) f. Metropolitan Lloyds, Inc. (Texas) g. Met P&C Managing General Agency, Inc. (Texas) 2. Metropolitan Insurance and Annuity Company (Delaware) a. MetLife Europe I, Inc. (Delaware) b. MetLife Europe II, Inc. (Delaware) c. MetLife Europe III, Inc. (Delaware) d. MetLife Europe IV, Inc. (Delaware) e. MetLife Europe V, Inc. (Delaware) 3. MetLife General Insurance Agency, Inc. (Delaware) a. MetLife General Insurance Agency of Alabama, Inc. (Alabama) b. MetLife General Insurance Agency of Kentucky, Inc. (Kentucky) c. MetLife General Insurance Agency of Mississippi, Inc. (Mississippi) d. MetLife General Insurance Agency of Texas, Inc. (Texas) e. MetLife General Insurance Agency of North Carolina, Inc. (North Carolina) f. MetLife General Insurance Agency of Massachusetts, Inc. (Massachusetts) 4. Metropolitan Asset Management Corporation (Delaware) (a.) MetLife Capital, Limited Partnership (Delaware). Partnership interests in MetLife Capital, Limited Partnership are held by Metropolitan (90%) and Metropolitan Asset Management Corporation (10%). (i.) MetLife Capital Credit L.P. (Delaware). Partnership interests in MetLife Capital Credit L.P. are held by Metropolitan (90%) and Metropolitan Asset Management Corporation (10%). (1) MetLife Capital CFLI Holdings, LLC (DE) (a.) MetLife Capital CFLI Leasing, LLC (DE) b. MetLife Financial Acceptance Corporation (Delaware). MetLife Capital Holdings, Inc. holds 100% of the voting preferred stock of MetLife Financial Acceptance Corporation. Metropolitan Property and Casualty Insurance Company holds 100% of the common stock of MetLife Financial Acceptance Corporation. c. MetLife Investments Limited (United Kingdom). 23rd Street Investments, Inc. holds one share of MetLife Investments Limited. d. MetLife Investments Asia Limited (Hong Kong). One share of MetLife Investments Asia Limited is held by W&C Services, Inc., a nominee of Metropolitan Asset Management Corporation. 5. SSRM Holdings, Inc. (Delaware) a. GFM Investments Limited (Delaware) b. State Street Research & Management Company (Delaware). Is a sub-investment manager for the Growth, Income, Diversified and Aggressive Growth Portfolios of Metropolitan Series Fund, Inc. i. State Street Research Investment Services, Inc. (Massachusetts) c. SSR Realty Advisors, Inc. (Delaware) i. Metric Management Inc. (Delaware) ii. Metric Property Management, Inc. (Delaware) (1) Metric Realty (Delaware). SSR Realty Advisors, Inc. and Metric Property Management, Inc. each hold 50% of the common stock of Metric Realty. (a) Metric Institutional Apartment Fund II, L.P. (California). Metric Realty holds a 1% interest as general partner and Metropolitan holds an approximately 14.6% limited partnership interest in Metric Institutional Apartment Fund II, L.P. (2) Metric Colorado, Inc. (Colorado). Metric Property Management, Inc. holds 80% of the common stock of Metric Colorado, Inc. iii. Metric Capital Corporation (California) iv. Metric Assignor, Inc. (California) v. SSR AV, Inc. (Delaware) 6. MetLife Holdings, Inc. (Delaware) a. MetLife Funding, Inc. (Delaware) b. MetLife Credit Corp. (Delaware) 7. Metropolitan Tower Realty Company, Inc. (Delaware) 8. Met Life Real Estate Advisors, Inc. (California) 9. Security First Group, Inc. (DE) a. Security First Life Insurance Company (DE) b. Security First Insurance Agency, Inc. (MA) c. Security First Insurance Agency, Inc. (NV) d. Security First Group of Ohio, Inc. (OH) e. Security First Financial, Inc. (DE) f. Security First Investment Management Corporation (DE) g. Security First Management Corporation (DE) h. Security First Real Estate, Inc. (DE) i. Security First Financial Agency, Inc. (TX) 10. Natiloportem Holdings, Inc. (Delaware) B. Metropolitan Tower Life Insurance Company (Delaware) C. MetLife Security Insurance Company of Louisiana (Louisiana) D. MetLife Texas Holdings, Inc. (Delaware) 1. Texas Life Insurance Company (Texas) a. Texas Life Agency Services, Inc. (Texas) b. Texas Life Agency Services of Kansas, Inc. (Kansas) E. MetLife Securities, Inc. (Delaware) F. 23rd Street Investments, Inc. (Delaware) G. Services La Metropolitaine Quebec, Inc. (Quebec, Canada) H. Santander Met, S.A. (Spain). Shares of Santander Met, S.A. are held by Metropolitan (50%) and by an entity (50%) unaffiliated with Metropolitan. 1. Seguros Genesis, S.A. (Spain) 2. Genesis Seguros Generales, Sociedad Anomina de Seguros y Reaseguros (Spain) I. MetLife Saengmyoung Insurance Company Ltd. (Korea). J. Metropolitan Life Seguros de Vida S.A. (Argentina) K. Metropolitan Life Seguros de Retiro S.A. (Argentina). L. Met Life Holdings Luxembourg (Luxembourg) M. Metropolitan Life Holdings, Netherlands BV (Netherlands) N. MetLife International Holdings, Inc. (Delaware) O. Metropolitan Life Insurance Company of Hong Kong Limited (Hong Kong) P. Metropolitan Marine Way Investments Limited (Canada) Q. P.T. MetLife Sejahtera (Indonesia) Shares of P.T. MetLife Sejahtera are held by Metropolitan (80%) and by an entity (20%) unaffiliated with Metropolitan. R. Seguros Genesis S.A. (Mexico) Metropolitan holds 85.49%, Metropolitan Tower Corp. holds 7.31% and Metropolitan Asset Management Corporation holds 7.20% of the common stock of Seguros Genesis S.A. S. Metropolitan Life Seguros de Vida S.A. (Uruguay). One share of Metropolitan Life Seguros de Vida S.A. is held by Alejandro Miller Artola, a nominee of Metropolitan Life Insurance Company. T. Metropolitan Life Seguros E Previdencia Privada S.A. (Brazil) U. Hyatt Legal Plans, Inc. (Delaware) 1. Hyatt Legal Plans of Florida, Inc. (Fl) V. One Madison Merchandising L.L.C. (Connecticut) Ownership of membership interests in One Madison Merchandising L.L.C. is as follows: Metropolitan owns 99% and Metropolitan Tower Corp. owns 1%. W. Metropolitan Realty Management, Inc. (Delaware) 1. Edison Supply and Distribution, Inc. (Delaware) 2. Cross & Brown Company (New York) a. CBNJ, Inc. (New Jersey) X. MetPark Funding, Inc. (Delaware) Y. 2154 Trading Corporation (New York) Z. Transmountain Land & Livestock Company (Montana) AA. Farmers National Company (Nebraska) 1. Farmers National Commodities, Inc. (Nebraska) 2. Farmers National Marketing Group, LLC (Iowa) Ownership of membership interests in Farmers National Marketing Group, LLC is as follows: Farmers National Company (50%) and an entity unaffiliated with Metropolitan (50%). A.B. MetLife Trust Company, National Association. (United States) A.C. Benefit Services Corporation (Georgia) A.D. G.A. Holding Corporation (MA) A.E. TNE-Y, Inc. (DE) A.F. CRH., Inc. (MA) A.G. NELRECO Troy, Inc. (MA) A.H. TNE Funding Corporation (DE) A.I. L/C Development Corporation (CA) A.J. Boylston Capital Advisors, Inc. (MA) 1. New England Portfolio Advisors, Inc. (MA) A.K. CRB Co., Inc. (MA) AEW Real Estate Advisors, Inc. holds 49,000 preferred non-voting shares of CRB Co., Inc. AEW Advisors, Inc. holds 1,000 preferred non-voting shares of CRB Co., Inc. A.L. New England Life Mortgage Funding Corporation (MA) A.M. Mercadian Capital L.P. (DE). Metropolitan holds a 95% limited partner interest and an unaffiliated third party holds 5% of Mercadian Capital L.P. A.N. Mercadian Funding L.P. (DE). Metropolitan holds a 95% limited partner interest and an unaffiliated third party holds 5% of Mercadian Funding L.P. A.O. Tower Resources Group, Inc. (DE) A.P. MetLife New England Holdings, Inc. (DE) 1. Fulcrum Financial Advisors, Inc. (MA) 2. New England Life Insurance Company (MA) a. New England Life Holdings, Inc. (DE) i. New England Securities Corporation (MA) (1) Hereford Insurance Agency, Inc. (MA) (2) Hereford Insurance Agency of Alabama, Inc. (AL) (3) Hereford Insurance Agency of Minnesota, Inc. (MN) (4) Hereford Insurance Agency of Ohio, Inc. (OH) (5) Hereford Insurance Agency of New Mexico, Inc. (NM) ii. TNE Advisers, Inc. (MA) iii. TNE Information Services, Inc. (MA) (1) First Connect Insurance Network, Inc. (DE) (2) Interative Financial Solutions, Inc. (MA) iv. N.L. Holding Corp. (Del)(NY) (1) Nathan & Lewis Securities, Inc. (NY) (2) Nathan & Lewis Associates, Inc. (NY) (a) Nathan and Lewis Insurance Agency of Massachusetts, Inc. (MA) (b) Nathan and Lewis Associates of Texas, Inc. (TX) (3) Nathan & Lewis Associates--Arizona, Inc. (AZ) (4) Nathan & Lewis of Nevada, Inc. (NV) (5) Nathan and Lewis Associates Ohio, Incorporated (OH) b. Exeter Reassurance Company, Ltd. (MA) c. Omega Reinsurance Corporation (AZ) d. New England Pension and Annuity Company (DE) e. Newbury Insurance Company, Limited (Bermuda) 3. Nvest Corporation (MA) a. Nvest, L.P. (DE) Nvest Corporation holds a 1.69% general partnership interest and MetLife New England Holdings, Inc. 3.19% general partnership interest in Nvest, L.P. b. Nvest Companies, L.P. (DE) Nvest Corporation holds a 0.0002% general partnerhship interest in Nvest Companies, L.P. Nvest, L.P. holds a 14.64% general partnership interest in Nvest Companies, L.P. Metropolitan holds a 46.23% limited partnership interest in Nvest Companies, L.P. i. Nvest Holdings, Inc. (DE) (1) Back Bay Advisors, Inc. (MA) (a) Back Bay Advisors, L.P. (DE) Back Bay Advisors, Inc. holds a 1% general partner interest and NEIC Holdings, Inc. holds a 99% limited partner interest in Back Bay Advisors, L.P. (2) R & T Asset Management, Inc. (MA) (a) Reich & Tang Distributors, Inc. (DE) (b) R & T Asset Management L.P. R & T Asset Management, Inc. holds a 0.5% general partner interest and NEIC Holdings, Inc. hold a 99.5% limited partner interest in & Asset Management, L.P. (c) Reich & Tang Services, Inc. (DE) (3) Loomis, Sayles & Company, Inc. (MA) (a) Loomis Sayles & Company, L.P. (DE) Loomis Sayles & Company, Inc. holds a 1% general partner interest and R & T Asset Management, Inc. holds a 99% limited partner interest in Loomis Sayles & Company, L.P. (4) Westpeak Investment Advisors, Inc. (MA) (a) Westpeak Investment Advisors, L.P. (DE) Westpeak Investment Advisors, Inc. holds a 1% general partner interest and Reich & Tang holds a 99% limited partner interest in Westpeak Investment Advisors, L.P. (i) Westpeak Investment Advisors Australia Limited Pty. (5) Vaughan, Nelson Scarborough & McCullough (DE) (a) Vaughan, Nelson Scarborough & McCullough, L.P. (DE) VNSM, Inc. holds a 1% general partner interest and Reich & Tang Asset Management, Inc. holds a 99% limited partner interest in Vaughan, Nelson Scarborough & McCullough, L.P. (i) VNSM Trust Company (6) MC Management, Inc. (MA) (a) MC Management, L.P. (DE) MC Management, Inc. holds a 1% general partner interest and R & T Asset Management, Inc. holds a 99% limited partner interest in MC Management, L.P. (7) Harris Associates, Inc. (DE) (a) Harris Associates Securities L.P. (DE) Harris Associates, Inc. holds a 1% general partner interest and Harris Associates L.P. holds a 99% limited partner interest in Harris Associates Securities, L.P. (b) Harris Associates L.P. (DE) Harris Associates, Inc. holds a 0.33% general partner interest and NEIC Operating Partnership, L.P. holds a 99.67% limited partner interest in Harris Associates L.P. (i) Harris Partners, Inc. (DE) (ii) Harris Partners L.L.C. (DE) Harris Partners, Inc. holds a 1% membership interest and Harris Associates L.P. holds a 99% membership interest in Harris Partners L.L.C. (1) Aurora Limited Partnership (DE) Harris Partners L.L.C. holds a 1% general partner interest (2) Perseus Partners L.P. (DE) Harris Partners L.L.C. holds a 1% general partner interest (3) Pleiades Partners L.P. (DE) Harris Partners L.L.C. holds a 1% general partner interest (4) Stellar Partners L.P. (DE) Harris Partners L.L.C. holds a 1% general partner interest (5) SPA Partners L.P. (DE) Harris Partners L.L.C. holds a 1% general partner interest (8) Graystone Partners, Inc. (MA) (a) Graystone Partners, L.P. (DE) Graystone Partners, Inc. holds a 1% general partner interest and New England NEIC Operating Partnership, L.P. holds a 99% limited partner interest in Graystone Partners, L.P. (9) NEF Corporation (MA) (a) New England Funds, L.P. (DE) NEF Corporation holds a 1% general partner interest and NEIC Operating Partnership, L.P. holds a 99% limited partner interest in New England Funds, L.P. (b) New England Funds Management, L.P. (DE) NEF Corporation holds a 1% general partner interest and NEIC Operating Partnership, L.P. holds a 99% limited partner interest in New England Funds Management, L.P. (10) New England Funds Service Corporation (11) AEW Capital Management, Inc. (DE) (a) AEW Securities, L.P. (DE) AEW Capital Management, Inc. holds a 1% general partnership and AEW Capital Management, L.P. holds a 99% limited partnership interest in AEW Securities, L.P. ii. Nvest Associates, Inc. iii. Snyder Capital Management, Inc. (1) Snyder Capital Management, L.P. NEIC Operating Partnership holds a 99.5% limited partnership interest and Snyder Capital Management Inc. holds a 0.5% general partnership interest. iv. Jurika & Voyles, Inc. (1) Jurika & Voyles, L.P NEIC Operating Partnership, L.P. holds a 99% limited partnership interest and Jurika & Voyles, Inc. holds a 1% general partnership interest. v. Capital Growth Management, L.P. (DE) NEIC Operating Partnership, L.P. holds a 50% limited partner interest in Capital Growth Management, L.P. vi. Nvest Partnerships, LLC ( ) vii. AEW Capital Management L.P. (DE) New England Investment Companies, L.P. holds a 99% limited partner interest and AEW Capital Management, Inc. holds a 1% general partner interest in AEW Capital Management, L.P. (1) AEW II Corporation ( ) (2) AEW Partners III, Inc. ( ) (3) AEW TSF, Inc. ( ) (4) AEW Exchange Management, LLC (5) AEWPN, LLC ( ) (6) AEW Investment Group, Inc. (MA) (a) Copley Public Partnership Holding, L.P. (MA) AEW Investment Group, Inc. holds a 25% general partnership interest and AEW Capital Management, L.P. holds a 75% limited partnership interest in Copley Public Partnership Holding, L.P. (b) AEW Management and Advisors L.P. (MA) AEW Investment Group, Inc. holds a 25% general partnership interest and AEW Capital Management, L.P. holds a 75% limited partnership interest in AEW Management and Advisors L.P. ii. AEW Real Estate Advisors, Inc. (MA) 1. AEW Advisors, Inc. (MA) 2. Copley Properties Company, Inc. (MA) 3. Copley Properties Company II, Inc. (MA) 4. Copley Properties Company III, Inc. (MA) 5. Fourth Copley Corp. (MA) 6. Fifth Copley Corp. (MA) 7. Sixth Copley Corp. (MA) 8. Seventh Copley Corp. (MA). 9. Eighth Copley Corp. (MA). 10. First Income Corp. (MA). 11. Second Income Corp. (MA). 12. Third Income Corp. (MA). 13. Fourth Income Corp. (MA). 14. Third Singleton Corp. (MA). 15. Fourth Singleton Corp. (MA) 16. Fifth Singleton Corp. (MA) 17. Sixth Singleton Corp. (MA). 18. BCOP Associates L.P. (MA) AEW Real Estate Advisors, Inc. holds a 1% general partner interest in BCOP Associates L.P. ii. CREA Western Investors I, Inc. (MA) 1. CREA Western Investors I, L.P. (DE) CREA Western Investors I, Inc. holds a 24.28% general partnership interest and Copley Public Partnership Holding, L.P. holds a 57.62% limited partnership interest in CREA Western Investors I, L.P. iii. CREA Investors Santa Fe Springs, Inc. (MA) (7) Copley Public Partnership Holding, L.P. (DE) AEW Capital Management, L.P. holds a 75% limited partner interest and AEW Investment Group, Inc. holds a 25% general partner interest and CREA Western Investors I, L.P holds a 57.62% Limited Partnership interest. (8) AEW Real Estate Advisors, Limited Partnership (MA) AEW Real Estate Advisors, Inc. holds a 25% general partnership interest and AEW Capital Management, L.P. holds a 75% limited partnership interest in AEW Real Estate Advisors, Limited Partnership. (9) AEW Hotel Investment Corporation (MA) (a.) AEW Hotel Investment, Limited Partnership (MA) AEW Hotel Investment Corporation holds a 1% general partnership interest and AEW Capital Management, L.P. holds a 99% limited partnership interest in AEW Hotel Investment, Limited Partnership. (10) Aldrich Eastman Global Investment Strategies, LLC (DE) AEW Capital Management, L.P. holds a 25% membership interest and an unaffiliated third party holds a 75% membership interest in Aldrich Eastman Global Investment Strategies, LLC. In addition to the entities listed above, Metropolitan (or where indicated an affiliate) also owns an interest in the following entities, among others: 1) CP&S Communications, Inc., a New York corporation, holds federal radio communications licenses for equipment used in Metropolitan owned facilities and airplanes. It is not engaged in any business. 2) Quadreal Corp., a New York corporation, is the fee holder of a parcel of real property subject to a 999 year prepaid lease. It is wholly owned by Metropolitan, having been acquired by a wholly owned subsidiary of Metropolitan in 1973 in connection with a real estate investment and transferred to Metropolitan in 1988. 3) Met Life International Real Estate Equity Shares, Inc., a Delaware corporation, is a real estate investment trust. Metropolitan owns approximately 18.4% of the outstanding common stock of this company and has the right to designate 2 of the 5 members of its Board of Directors. 4) Metropolitan Structures is a general partnership in which Metropolitan owns a 50% interest. 5) Metropolitan owns, via its subsidiary, AFORE Genesis Metropolitan S.A. de C.V., approximately 61.7% of SIEFORE Genesis S.A. de C.V., a mutual fund. 6) Metropolitan owns varying interests in certain mutual funds distributed by its affiliates. These ownership interests are generally expected to decrease as shares of the funds are purchased by unaffiliated investors. 7) Metropolitan Lloyds Insurance Company of Texas, an affiliated association, provides homeowner and related insurance for the Texas market. It is an association of individuals designated as underwriters. Metropolitan Lloyds, Inc., a subsidiary of Metropolitan Property and Casualty Insurance Company ("MET P&C"), serves as the attorney-in-fact and manages the association. 8) Metropolitan directly owns 100% of the non-voting preferred stock of Nathan and Lewis Associates Ohio, Incorporated, an insurance agency. 100% of the voting common stock of this company is held by an individual who has agreed to vote such shares at the direction of N.L. Holding Corp. (DEL), an indirect wholly owned subsidiary of Metropolitan. 9) 100% of the capital stock of Hereford Insurance Agency of Oklahoma, Inc. (OK) is owned by an officer. New England Life Insurance Company controls the issuance of additional stock and has certain rights to purchase such officer's shares. 10) 100% of the capital stock of Fairfield Insurance Agency of Texas, Inc. (TX) is owned by an officer. New England Life Insurance Company controls the issuance of additional stock and has certain rights to purchase such officer's shares. 11) Mezzanine Investment Limited Partnerships ("MILPs"), Delaware limited partnerships, are investment vehicles through which investments in certain entities are held. A wholly owned subsidiary of Metropolitan serves as the general partner of the limited partnerships and Metropolitan directly owns a 99% limited partnership interest in each MILP. The MILPs have various's ownership interests in certain companies. The various MILPs own, directly or indirectly, 100% of the voting stock of the following company: Coating Technologies International, Inc. NOTE: THE METROPOLITAN LIFE ORGANIZATIONAL CHART DOES NOT INCLUDE REAL ESTATE JOINT VENTURES AND PARTNERSHIPS OF WHICH METROPOLITAN LIFE AND/OR ITS SUBSIDIARIES IS AN INVESTMENT PARTNER. IN ADDITION, CERTAIN INACTIVE SUBSIDIARIES HAVE ALSO BEEN OMITTED. Item 25. Indemnification. (a) Maryland Law and By-Laws. The Registrant is required by Article V of its By-Laws to indemnify or advance expenses to directors and officers (or former directors and officers) to the extent permitted or required by the Maryland General Corporation Law ("MGCL") and, in the case of officers (or former officers), only to the extent specifically authorized by resolution of the Board of Directors. Section 2-418 of the MGCL permits indemnification of a director against judgments, penalties, fines, settlements and reasonable expenses actually incurred by the director in connection with any proceeding to which he has been made a party by reason of service as a director, unless it is established that (i) the director's act or omission was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty; or (ii) the director actually received an improper personal benefit in money, property or services; or (iii) in the case of a criminal proceeding, the director had reasonable cause to believe that the act or omission was unlawful. However, indemnification may not be made in any proceeding by or in the right of the corporation in which the director has been adjudged to be liable to the corporation. In addition, a director may not be indemnified in respect of any proceeding charging improper personal benefit to the director, whether or not involving action in the director's official capacity, in which the director was adjudged to be liable on the basis that personal benefit was improperly received. Section 2-418 of the MGCL also requires a corporation, unless limited by its charter, to indemnify a director who has been successful in the defense of a proceeding against reasonable expenses incurred. Reasonable expenses incurred by a director may be paid or reimbursed by a corporation in advance the final disposition of a proceeding upon the receipt of certain written affirmations and undertakings required by Section 2-418. Unless limited by its directors, a Maryland corporation may indemnify and advance expenses to an officer to the same extent it may indemnify a director, and is required to indemnify an officer to the extent required for a director. Notwithstanding the foregoing, Article V of the Registrant's By-Laws provides that nothing contained therein shall be construed to protect any director or officer against any liability to the Registrant or its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. (b) Distribution Agreement. Under the distribution agreement between the Registrant and Metropolitan Life, Metropolitan Life agreed to indemnify and hold harmless any officer or director (or any former officer or director) or any controlling person of the Registrant from damages and expenses arising out of actual or alleged misrepresentations or omissions to state material facts on the part of Metropolitan Life or persons for whom it is responsible or the negligence of any such persons in rendering services under the agreement. (c) Undertaking. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant 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, the Registrant 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. C-14 (d) Insurance. The Registrant's directors are indemnified by Metropolitan Life in the same manner and to the same extent as Metropolitan Life's directors. In addition thereto, Metropolitan Life has purchased an Investment Counselors Errors and Omissions Policy to insure the Registrant's directors and officers. Item 26. Business and other Connections of Investment Manager. Metropolitan Life is a mutual life insurance company which sells insurance policies and annuity contracts. It is authorized to transact business in all states of the United States, the District of Columbia, Puerto Rico and all Provinces of Canada. Its Home Office is located at 1 Madison Avenue, New York, New York 10010 (telephone number 212-578-6130). On December 31, 1998 it had total life insurance in force of approximately $1.7 trillion and total assets under management of approximately $359 billion. Metropolitan Life is the parent of Metropolitan Tower. Metropolitan Life also serves as the investment adviser for certain other advisory clients. Set forth below is a list of each director of Metropolitan Life indicating each business, profession, vocation or employment of a substantial nature in which each such person has been, at any time during the past two fiscal years, engaged for his or her own account or in the capacity of director, officer, partner or trustee.
Organization and Principal Name Position Business Address of Organization ---- -------- -------------------------------- Curtis H. Barnette..... Chairman of the Board Bethlehem Steel Corporation and Chief Executive Bethlehem, PA Officer Director and former International Iron and Steel Chairman Institute, Brussels, Belgium Director and former Pennsylvania Business Chairman Roundtable, Harrisburg, PA Director and former American Iron and Steel Chairman Institute, Washington, DC Director and former West Virginia University Chairman Foundation, Morgantown, WV Trustee Lehigh University Bethlehem, PA Robert H. Benmosche . . Chairman of the Board, Metropolitan Life Insurance President and Chief Company Executive Officer New York, NY Director New York Philharmonic Director New England Financial Trustee Alfred University Joan Ganz Cooney....... Chairman, Executive Com- Children's Television Workshop, mittee New York, NY Director Johnson & Johnson, New Brunswick, NJ Trustee National Child Labor Committee, New York, NY Trustee Children's Television Workshop, New York, NY Trustee Museum of Television and Radio Trustee The New York and Presbyterian Hospitals
C-15
Organization and Principal Name Position Business Address of Organization ---- -------- -------------------------------- Burton A. Dole, Jr. . Retired Chairman, Puritan Bennett, Inc., Overland President and Chief Park, KS Executive Officer Former Chairman of the Nellcor Puritan Bennett, Inc., Board Pleasanton, CA Director Anesthesia Patient Safety Foundation Former Chairman of the Health Industries Manufacturer's Board Association Former Chairman of the Federal Reserve Bank of Kansas Board City Trustee I. Heermann Anesthesia Foundation Gerald Clark......... 7/1/98 Vice-Chairman of Metropolitan Life Insurance the Board and Chief Company, Investment Officer and New York, NY Director; Senior Executive Vice- President and Chief Investment Officer and Director since 1/97; prior thereto Senior Executive Vice- President and Chief Investment Officer Director/Trustee Credit Suisse Group Director/Trustee St. Vincent's Hospital Director/Trustee Villanova University Director/Officer Certain wholly-owned subsidiaries of Metropolitan Life Insurance Company James R. Houghton.... Chairman of the Board Corning Incorporated, Corning, NY Emeritus and Director Director J.P. Morgan & Co., Inc., New York, NY Director Exxon Corp., Dallas, TX Director/Trustee Corning Incorporated Foundation Director/Trustee Corning Museum of Glass Director/Trustee Metropolitan Museum of Art Director/Trustee Pierpont Morgan Library Harry Paul Kamen..... Chairman and Chief Metropolitan Life Insurance Executive Officer Company, (Retired) and Director New York, NY since 7/1/98, prior thereto, Chairman, Chief Executive Officer and Director Director Bethlehem Steel Corporation, Bethlehem, PA Director Banco Santander, Madrid, Spain Director and Treasurer New York City Partnership, New York, NY Director/Trustee Board of Overseers of the School of Arts and Sciences at the University of Pennsylvania Director/Trustee and Carnegie Hall Treasurer Director/Trustee Jewish Museum (Vice-President) Director/Trustee Smith College Director NVEST L.P. Director National Association of Securities Dealers Director/Trustee and Conference Board Vice-Chairman Director/Trustee American Museum of Natural History Director Pfizer Inc.
C-16
Organization and Principal Name Position Business Address of Organization ---- -------- -------------------------------- Helene L. Kaplan..... Of Counsel Skadden, Arps, Slate, Meagher & Flom, New York, NY Director May Department Stores Co., New York, NY Trustee Barnard College, New York, NY Director Mobil Corp., New York, NY Director Bell Atlantic Corporation, New York, NY Director The Chase Manhattan Corporation Trustee American Museum of Natural History Trustee Carnegie Corporation of New York Trustee Catskill Center Conservation and Development Trustee Mount Sinai School of Medicine Trustee Commonwealth Fund Trustee J. Paul Getty Trust Trustee Institute for Advanced Study Trustee New York Academy of Medicine Trustee NYU Medical Center and Health System Charles M. Leighton.. Retired Chairman and CML Group, Inc., Bolton, MA Chief Executive Officer Director CML Group, Inc. Director NVEST Companies, L.P. Former Chairman Listed Company Advisory Committee, New York Stock Exchange Trustee Lahey Clinic Trustee New York Yacht Club America's Cup Challenge Director Fitsense Technology Corp. Allen E. Murray...... Retired Chairman of the Mobil Corporation, New York, NY Board and Chief Executive Officer Director Morgan Stanley, Dean Witter, Discovery Co., New York, NY Director Minnesota Mining and Manufacturing Co., St. Paul, MN Honorary Director American Petroleum Institute, Washington, DC Director Lockheed Martin Corporation, Bethesda, MD Director St. Francis Hospital Foundation Trustee New York University Stewart Nagler....... Vice-Chairman of the Metropolitan Life Insurance Company Board and Chief New York, NY Financial Officer and Director Director Life Insurance Council of New York Director Various Metropolitan Subsidiaries Trustee Boys and Girls Clubs of America Trustee Barnard College Trustee Polytechnic University of New York (Chairman, Finance Committee)
C-17
Organization and Principal Name Position Business Address of Organization ---- -------- -------------------------------- John J. Phelan, Jr...... Retired Chairman and New York Stock Exchange, Inc., Chief Executive Officer New York, NY Director Eastman Kodak Co., Rochester, NY Director Merrill Lynch & Co., Inc., New York, NY Director SONAT, Inc., Birmingham, AL Former President International Federation of Stock Exchanges Director or Trustee Aspen Institute and Cold Spring Harbor Laboratories Director or Trustee Catholic Charities Archdiocese of NY Hugh B. Price........... President and Chief National Urban League, Inc., New Executive Officer York, NY Director Bell Atlantic Corp., New York, NY Director The Urban Institute, New York, NY Director Education Testing Service Director Sears Roebuck and Company Robert G. Schwartz...... Retired Chairman of the Metropolitan Life Insurance Board, President and Company, Chief Executive Officer New York, NY and Director Director Lowe's Companies, Inc., North Wilkesboro, NC Director Potlatch Corporation, San Francisco, CA Director COMSAT Corporation, Washington, DC Director Mobil Corporation, New York, NY Director/Trustee Committee for Economic Development, Washington, DC Director Consolidated Edison Company of New York, Inc., New York, NY Director Lone Star Industries, Inc., Stamford, CT Director/Trustee The Horatio Alger Association of Distinguished Americans, Inc. Ruth Simmons............ President Smith College, Northampton, MA Director Pfizer Inc. Trustee JSTOR Trustee Clarke School for the Deaf William C. Steere, Jr. . Chairman of the Board Pfizer Inc. and Chief Executive Officer Director Dow Jones & Company, Inc. Director Minerals Technologies Inc. Director Texaco Inc. Director New York University Medical Center Director Business Council Director Business Roundtable Director New York Botanical Garden Board of Overseers Memorial Sloan-Kettering Cancer Center
C-18 Set forth below is a list of certain principal officers of Metropolitan Life and officers of Metropolitan Life who may be considered to be involved in Metropolitan Life's investment advisory activities. The principal business address of each officer of Metropolitan Life is One Madison Avenue, New York, New York 10010.
Name of Officer Position --------------- -------- Robert H. Benmosche.......... Chairman of the Board, President and Chief Executive Officer Gerald Clark................. Vice-Chairman of the Board and Chief Investment Officer Stewart G. Nagler............ Vice-Chairman of the Board and Chief Financial Officer Gary A. Beller............... Senior Executive Vice-President and General Counsel C. Robert Henrikson.......... Senior Executive Vice-President William J. Toppeta........... Senior Executive Vice-President John H. Tweedie.............. Senior Executive Vice-President Daniel J. Cavanagh........... Executive Vice-President Jeffrey J. Hodgman........... Executive Vice-President Terence I. Lennon............ Executive Vice-President David A. Levene.............. Executive Vice-President Judy E. Weiss................ Executive Vice-President & Chief Actuary Alexander D. Brunini......... Senior Vice President Richard M. Blackwell......... Senior Vice-President Jon F. Danski................ Senior Vice President and Controller James B. Digney.............. Senior Vice-President William T. Friedewald, M.D. . Senior Vice-President Ira Friedman................. Senior Vice-President Anne E. Hayden............... Senior Vice-President Sibyl C. Jacobson............ Senior Vice-President Joseph W. Jordan............. Senior Vice-President Kernan F. King............... Senior Vice-President Nicholas D. Latrenta......... Senior Vice-President Leland C. Launer, Jr. ....... Senior Vice-President Gary E. Lineberry............ Senior Vice-President James L. Lipscomb............ Senior Vice-President William D. Livesey........... Senior Vice-President James M. Logan............... Senior Vice-President Eugene Marks, Jr. ........... Senior Vice-President William R. Prueter........... Senior Vice-President Joseph A. Reali.............. Senior Vice-President Vincent P. Reusing........... Senior Vice-President Felix Schirripa.............. Senior Vice-President Robert E. Sollmann, Jr. ..... Senior Vice-President Thomas L. Stapleton.......... Senior Vice-President & Tax Director James F. Stenson............. Senior Vice-President Stanley J. Talbi............. Senior Vice-President Richard R. Tartre............ Senior Vice-President James A. Valentino........... Senior Vice-President Lisa M. Weber................ Senior Vice-President William J. Wheeler........... Senior Vice-President and Treasurer Anthony J. Williamson........ Senior Vice-President Louis J. Ragusa.............. Vice-President and Secretary
The business of State Street Research since December 31, 1983 is summarized under "Management of the Fund", in the prospectus constituting Part A of this Registration Statement, which summarization is incorporated herein by reference. C-19 The list of each director and certain officers of State Street Research indicating any other business, profession, vocation or employment of a substantial nature in which each such person is or has been, at any time during the past two fiscal years, engaged for his or her own account or in the capacity of director, officer, employee, partner or trustee is incorporated herein by reference to the filing of Post-Effective Amendment No. 18 to the Registration Statement of State Street Research Financial Trust on February 27, 1998. The list of each director and certain officers of Scudder Kemper Investments, Inc. indicating any other business, profession, vocation or employment of a substantial nature in which each such person is or has been, at any time during the past two fiscal years, engaged for his or her own account or in the capacity of director, officer, employee, partner or trustee is incorporated herein by reference to the filing of Post-Effective Amendment No. 93 to the Registration Statement of Value Equity Trust (File No. 811- 00043) on December 3, 1998. Scudder Kemper Investments, Inc. has stockholders and employees who are denominated officers but do not as such have corporation-wide responsibilities, and therefore are not considered officers. The list of each director and certain officers of Janus indicating any other business, profession, vocation or employment of a substantial nature in which each such person is or has been, at any time during the past five fiscal years, engaged for his or her own account or in the capacity of director, officer, employee, partner or trustee is incorporated herein by reference to the filing of Post-Effective Amendment No. 16 to the Registration Statement for Janus Aspen Series (File No. 33-63212) on April 28, 1998. The list of each director and certain officers of T. Rowe Price indicating any other business, profession, vocation or employment of a substantial nature in which each such person is or has been, at any time during the past two fiscal years, engaged for his or her own account or in the capacity of director, officer, employee, partner or trustee is incorporated herein by reference to Schedules A and D of Form ADV filed by T. Rowe Price pursuant to the Investment Advisers Act of 1940 (SEC File No. 801-856). Loomis Sayles, the sub-adviser of the Loomis Sayles High Yield Bond Portfolio, provides investment advice to the seventeen series of Loomis Sayles Funds, seven series of Loomis Sayles Investment Trust, five series of New England Funds Trust I, one series of New England Funds Trust II, one series of New England Funds Trust III, two series of New England Zenith Fund, all of which are registered investment companies, several other registered investment companies and other organizations and individuals. The sole general partner of Loomis Sayles is Loomis, Sayles & Company, Incorporated, One Financial Center, Boston, Massachusetts 02111. The list of each director and certain officers of Harris Oakmark indicating any other business, profession, vocation or employment of a substantial nature in which each such person is or has been, at any time during the past five fiscal years, engaged for his or her own account or in the capacity of director, officer, employee, partner or trustee is incorporated herein by reference to the filing of Post-Effective Amendment No. 20 to Registration Statement to the Harris Associates Investment Trust (File No. 33-38953) on January 23, 1998. The list of each director and certain officers of Neuberger Berman indicating any other business, profession, vocation or employment of a substantial nature in which each such person is or has been, at any time during the past two fiscal years, engaged for his or her own account or in the capacity of director, officer, employee, partner or trustee is incorporated herein by reference to Schedules A and D of Form ADV for Neuberger Berman Management Inc. pursuant to the Investment Advisers Act of 1940 (SEC File No. 801-8259). The list of each director and certain officers of Santander Global Advisors, Inc. indicating any other business, profession, vocation or employment of a substantial nature in which each such person is or has been, at any time during the past two fiscal years, engaged for his or her own account or in the capacity of director, officer, employee, partner or trustee is incorporated herein by reference to Schedules A and D of Form ADV for Santander Global Advisors, Inc. pursuant to the Investment Advisers Act of 1940 (SEC File No. 801-55017). C-20 Item 27. Principal Underwriters. Not applicable Item 28. Location of Accounts and Records. Accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act and the rules thereunder are maintained at the offices of the Registrant, of State Street Research & Management Company of Boston, Massachusetts, Santander Global Advisors, Inc. of Boston, Massachusetts, Loomis, Sayles & Company, L.P. of Boston, Massachusetts, Janus Capital Corporation of Denver, Colorado, T. Rowe Price Associates, Inc. of Baltimore, Maryland, Scudder Kemper Investments, Inc. of New York, New York, Neuberger Berman Management Incorporated, of New York, New York, Harris Associates L.P. of Boston, Massachusetts and State Street Bank and Trust Company of Boston, Massachusetts. The address of each is set forth on the back cover of the prospectus forming Part A of this Registration Statement and is incorporated herein by reference. Certain records are maintained at the Registrant's office at 1125 Seventeenth Street, Denver, Colorado 80202. Item 29. Management Services. None. Item 30. Undertakings. Not applicable. C-21 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this amended Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this amended Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, and State of New York, on the 1st day of April, 1999. METROPOLITAN SERIES FUND, INC. (Registrant) /s/ Christopher P. Nicholas By: .................................. Christopher P. Nicholas President Pursuant to the requirements of the Securities Act of 1933, this amended Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. Signature Date * .................................... David A. Levene Chairman of the Board and (Principal Executive Officer and Director) * .................................... Steve A. Garban Director * .................................... Malcolm T. Hopkins Director * .................................... Dean O. Morton Director * .................................... Michael S. Scott Morton Director * .................................... Arthur G. Typermass Director * .................................... Bradford W. White Controller (Principal Financial and Accounting Officer) /s/ Christopher P. Nicholas, Esq. *By: ............................... April 1, 1999 Christopher P. Nicholas, Esq. Attorney-in-Fact C-22 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Post-Effective Amendment No. 24 to Registration Statement No. 2-80751 on Form N-1A of our report dated February 19, 1999, appearing in the Statement of Additional Information, which is a part of such Registration Statement, and to the reference to us under the heading "Financial Highlights" appearing in the Prospectus, which is also a part of such Registration Statement. Deloitte & Touche LLP Denver, Colorado April 1 , 1999 C-23 EX-99.(HC) 2 LICENSING AGREEMENTS Exhibit (h)(c) ADDENDUM NO. 1 Addendum No. 1 dated as of November 9, 1998 to the Morgan Stanley Capital International Index License Agreement for Funds/Investment Vehicles ("Agreement") dated as of the date hereof between Morgan Stanley & Co. Incorporated (`Morgan Stanley"), a Delaware corporation and Metropolitan Life Insurance Company, a mutual insurance company organized under the laws of New York ("MetLife" or "Licensee," as used herein and in the Agreement, these terms shall also include Metropolitan Tower Insurance Company, and Metropolitan Series Fund, Inc.). The parties hereto agree to the following changes, additions, deletions, and modifications to the Agreement: 1. Third Whereas clause. In the third whereas clause, the following words -------------------- shall be inserted between "Morgan Stanley Capital International," and "and MSCI": "EAFE," "MSCI EAFE Index," "Morgan Stanley EAFE Index," 2. Forth Whereas clause. The fourth whereas clause shall be deleted in its -------------------- entirety and replaced with: " WHEREAS, Licensee wishes to use the Indexes as the basis of the funds and corresponding investment divisions of separate account products, all as described in Exhibit A annexed hereto and made a part hereof (the "Fund"), to be issued and traded publicly or on a private placement basis." 3. Fifth Whereas clause. The fifth whereas clause shall be amended (i) to add -------------------- the words "and the name" between "writing, trading, marketing and promotion" and "of the Funds" and (ii) to add the words "that are trade publicly or" before the words "on a private placement basis." 4. Section 1. In the first sentence, the first parenthetical phrase "(in --------- accord with the restrictions set forth in Exhibit B)" shall be deleted and replaced with "(in accordance with Exhibit A)." The second parenthetical phrase "(in accordance with the restrictions set forth in Exhibit B)" shall be deleted and replaced with "(in accordance with Exhibit A)." 5. Section 1. The last sentence in this section shall be revised as follows: --------- "Licensee shall not disseminate electronically or in any other fashion any information relating to the composition of the Indexes. As used in this Agreement, the term "Licensee" and "MetLife" shall mean Metropolitan Life Insurance Company, Metropolitan Tower Insurance Company, and Metropolitan Series Fund, Inc." 6. Section 2. The second sentence in this section shall be deleted in its --------- entirety and replaced with: "This Agreement shall automatically be renewed for additional one year terms unless terminated by any party providing written notice of its intent to terminate to the other parties at least ninety (90) days prior to the end of the immediately preceding term or as otherwise permitted under this Agreement." 7. Section 3. Section 3 shall be amended to read as follows: --------- "Licensee shall pay to Morgan Stanley annual license fees as set forth in Exhibit A with respect to the Indexes and the Marks in connection with the Funds. Licensee shall pay the license fees for the first term of this Agreement upon execution of this Agreement. For any additional terms, the license fees shall be due forty five (45) days after Licensee's receipt of an invoice for such license fees." 8. Subsection 4(a). This subsection shall be amended as follows: --------------- "At any time during the term of this Agreement, either party may give the other party ninety (90) days prior written notice of termination if the terminating party believes in good faith that material damage or harm is occurring to the reputation or goodwill of the terminating party by reason of its continued performance hereunder, and such notice shall be effective on the date of such termination unless the other party shall correct the condition causing such damage or harm within the notice period. In the event of termination under this paragraph 4(a) by Licensee, Licensee shall receive a pro rata refund of license fees." 9. Subsection 4(b). In this subsection, the phrase "thirty (30) days" shall be --------------- replaced with the phrase "ninety (90) days." 10. Subsection 4(c). The last sentence of this subsection shall be deleted in --------------- its entirety and replaced with: "In the event that any of the Indexes is discontinued and Licensee does not exercise such option or that at least one substitute or replacement index is not made available, Licensee shall be entitled to a pro rata refund of license fees." 11. Subsection 4(d). The following clause shall be added to the end of the --------------- first sentence of this subsection: "(iii) if Morgan Stanley assigns all or any portion of its rights under this Agreement other than to Morgan Stanley Capital International Inc. and Licensee provides such written notice within 30 days of Morgan Stanley's notice pursuant to Section 12(a) of this Agreement." 2 12. Subsection 4(d). The last sentence shall be deleted in its entirety and --------------- replaced with: "In the event of termination under this paragraph 4(d), Licensee shall be entitled to a pro rata refund of license fees." 13. Subsection 4(f). A new subsection 4(f) shall be added as follows: --------------- "Morgan Stanley shall refund license fees to Licensee under the conditions outlined in this Section 4. For any term in which a refund is due, Morgan Stanley shall promptly refund to Licensee a sum equal to one-twelfth of the license fee paid by Licensee for each full month remaining of the applicable one year term." 14. Section 5. This section shall be revised to read as follows: --------- "Upon termination of this Agreement, all rights granted to Licensee under this Agreement shall cease." 15. Subsection 6(a). This subsection shall be revised as follows: --------------- " (a) Licensee shall use its best efforts to protect the goodwill and reputation of Morgan Stanley in connection with its use of the Indexes and the Marks under this Agreement. Licensee shall submit to Morgan Stanley for its preview and approval all advertisements, brochures, and promotional and informational material (other than price quotations and performance for a Fund)(collectively, "Informational Materials") relating to or referring to Morgan Stanley, the Indexes, or the Marks. Morgan Stanley shall respond to Licensee no later than five days after the date it receives the Informational Materials. If Morgan Stanley does not respond within this five-day period, Morgan Stanley shall be deemed to have approved of such Informational Materials. Morgan Stanley's approval shall be confined solely to the use of or description of Morgan Stanley, the Marks, and the Indexes and such approval shall not be unreasonably withheld or delayed by Morgan Stanley. Notwithstanding the foregoing, once any Informational Materials have been approved by Morgan Stanley, no approval is required for any modifications to such approved Informational Materials which do not change the use of or description of Morgan Stanley, the Marks, and/or the Indexes." 16. Subsection 6(d). A new subsection 6(d) shall be added as follows: --------------- " (a) Morgan Stanley `s Capital International unit shall neither express an opinion in any communication concerning Licensee or the Funds nor use Licensee's name without Licensee's prior written approval." 3 17. Subsection 7(a). This subsection shall be deleted in its entirety and --------------- replaced with: "At Morgan Stanley's expense, Licensee shall cooperate reasonably with Morgan Stanley in the maintenance of all Morgan Stanley common law and statutory rights in the Indexes and the Marks, including copyrights and other proprietary rights, to the extent that Licensee uses the Indexes and Marks pursuant to this Agreement, and shall take such acts and execute such instruments as are reasonably necessary and appropriate to such purposes." 18. Subsection 7(b). This subsection shall be amended as follows: --------------- "Licensee shall not refer to the names of the Indexes in any manner which might cause confusion as to Morgan Stanley's responsibility for preparing and disseminating the Indexes or as to the identity of Licensee and its relationship to the Funds. Any and all references by Licensee to the names of the Indexes that were approved by Morgan Stanley pursuant to this Agreement shall not be subject to this provision." 19. Subsection 8(a). In the first sentence of this subsection, the words --------------- "Morgan Stanley's claim and does not challenge" shall be inserted between "Licensee acknowledges" and "that the indexes are selected, arranged and prepared." 20. Subsection 8(c). In this subsection, clause (ii) shall be revised as ---------------- follows: "(ii) required by law (in the opinion of counsel), governmental or self-regulatory agency, or court order to be disclosed by a party, provided as much prior written notice of such disclosure, as reasonably possible, is given to the other party." 21. Subsection 9(a). In subsection 9(a) the words "and Marks" shall be added --------------- between "and that use of the Indexes" and "as provided herein shall not infringe." 22. Subsection 9(b)(i). This section shall be divided into subsections 9(b)(i), ------------------ (ii) and (iii). The existing section 9b shall be renumbered as subsection 9(b)(i). In subsection 9(b)(i), the preamble shall be amended as follows: "(b) Licensee agrees to include the following disclaimer in the Statement of Additional Information for the Fund and shall furnish a copy thereof to Morgan Stanley:" 4 23. Subsection 9(b)(i). The following sentences shall be added to the end of ------------------ this subsection: "The MSCI EAFE Index is the exclusive property of Morgan Stanley. Morgan Stanley Capital International is a service mark of Morgan Stanley and has been licensed for use by MetLife." 24. Subsection 9(b)(ii). A new subsection 9(b)(ii) shall be added as follows: ------------------- "(b)(ii) Licensee agrees to use the following disclaimer in all other Informational Material (including the prospectuses for the Funds and insurance products funded by the Funds, all forms of sales material, and material that is used internally with brokers only) shall contain: Morgan Stanley sponsors the MSCI EAFE Index, Lehman Brothers sponsors the Lehman Brothers Aggregate Bond Index, the McGraw Hill Companies, Inc. sponsors the Standard & Poor's Composite Stock Price Index, and Frank Russell Company sponsors the Russell 2000 Index (together referred to as "index sponsors"). The index sponsors have no responsibility for and do not participate in the management of the Portfolio assets or sale of the Portfolio's shares. Each index and its associated service marks are the exclusive property of the respective index sponsors. The Metropolitan Series Fund, Inc. Statement of Additional Information contains a more detailed description to the limited relationship the index sponsors have with MetLife and the Fund. 25. Subsection 9(b)(iii). A new subsection 9(b)(iii) shall be added as follows: -------------------- "(b)(iii) To the extent that the terms "Funds" refers to the corresponding investment divisions of separate account products, as described in Exhibit A, the parties agree that the foregoing disclaimers may be modified to refer to the separate account products (including without limitation life insurance and annuities issued by Metropolitan Life Insurance Company and Metropolitan Tower Life Insurance Company) and the related policy holder and contract holders for those products. Morgan Stanley agrees to work with Licensee to revise any disclaimers to the extent such revisions are required by a governmental agency having jurisdiction over Licensee or any Funds. The parties further agree that to the extent that one or more Informational Materials are bound together in a single volume, or otherwise distributed together, Licensee is not obligated to apply the foregoing disclaimer more than once in the materials, provided the disclaimer applies to all such Informational Materials." 26. Subsection 9(d). This subsection shall be amended as follows: --------------- 5 " (d) Licensee represents and warrants to Morgan Stanley that the Funds shall not violate any applicable law, including but not limited to banking and securities laws." 27. Subsection 9(e). This subsection shall be revised as follows: --------------- "(e) NO PARTY SHALL BE LIABLE FOR ANY LOST PROFITS, LOST SAVINGS, OR OTHER CONSEQUENTIAL DAMAGES, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF OR COULD HAVE FORSEEN SUCH DAMAGES. THE LIMITATIONS ON LIABILITY AND REMEDIES CONTAINED IN THIS SUBSECTION 9(e) ABOVE SHALL NOT APPLY TO (i) LIABILITY ARISING UNDER SECTION 10 OF THIS AGREEMENT; AND/OR (ii) DAMAGES INCURRED DUE TO INTENTIONAL OR GROSSLY NEGLIGENT ACTIONS OR INACTIONS OF ANY PARTY. 28. Subsection 10. The following paragraph shall be added to the end of this ------------- section: "Morgan Stanley shall indemnify and hold harmless Licensee (and its parent, subsidiaries, and affiliates, and its and their respective officers, directors, employees and agents) against any and all judgments, damages, costs or losses of any kind (including reasonable attorneys' and experts' fees) arising out of any claims or actions relating to Morgan Stanley's rights to license the Indexes and Marks as set forth in this Agreement, including, but not limited to, all copyright, trademark, trade secret, and all other intellectual property rights; provided that (i) Licensee notifies Morgan Stanley promptly of any such claim or action and (ii) Morgan Stanley shall have no liability to Licensee (or them) to the extent such judgments, damages, costs or losses are attributable to any negligent act or omission or any breach of this Agreement by Licensee (and/or them). Morgan Stanley shall bear all expenses in connection with the defenses and/or settlement of any such claim or action. Licensee shall have the right, at its own expense, to participate in the defense or any claim or action or action against which it is indemnified hereunder; provided, however, it shall have no right to control the defense, consent of judgment, or agree to settle any such claim or action without the written consent of Morgan Stanley. Morgan Stanley, in the defense of any such claim, except with the written consent of Licensee, shall not consent to entry of any judgment or enter into any settlement which (i) does not include, as an unconditional term, the grant by the claimant to Licensee of a release of all liabilities in respect of such claims or (ii) otherwise adversely affect the rights of Licensee. This provision shall survive the termination of this Agreement." 29. Subsection 12(a). The following clause shall be added to the end of the ---------------- last sentence in this subsection: "provided that Morgan Stanley provides Licensee written notice of any such assignment at least (10) business days prior to the effective date of such 6 assignment other than an assignment to Morgan Stanley Capital International Inc." 30. Subsection 12 (c). Delete this subsection in its entirety and replace it ----------------- with: " (c) Sections 3,4,5,7(a),7(b),8,9(a),9(d),9(e),10 and 12 shall survive any termination or expiration of this Agreement." 31. Subsection 12(d). The first paragraph of this subsection shall be revised ---------------- as follows: " (d) All notices and other communications under this Agreement, shall be (i) in writing, (ii) delivered by hand, by overnight mail with a signed confirmation of receipt, by electronic mail with a confirmation that the recipient has opened such mail; or by registered or certified mail, return receipt requested, to the addresses set forth below or such addresses any party shall specify by a written notice to the other parties, and (iii) deemed given upon receipt: 32. Exhibit B. Delete Exhibit B in its entirety. --------- IN WITNESS WHEREOF, the parties have caused the signatures of their authorized representatives to be hereunder affixed. METROPOLITAN LIFE INSURANCE MORGAN STANLEY & CO. COMPANY INCORPORATED By: s/Barbara A. Hume By: s/Paul Keeler ----------------------- ----------------- Name: Barbara A. Hume Name: Paul Keeler Title: Vice President Title: Principal Date: 11/4/98 Date: 11/11/98 7 Order No.: __________ Client Code/Reference No.:____________ License Agreement Date: _____________ SCHEDULE A I. Products to which Licensee agrees to subscribe:
Frequency (check) (Daily Weekly Monthly) Effective Dates Price Print Products ____ DM Perspective Qtr ___ ______ _______ To _______ ______ ____ EM Perspective ______ _______ To _______ ______ Tracker Products ____ Developed Markets Tracker ______ ______ ______ _______ To _______ ______ ____ Developed Markets Evaluator ______ ______ ______ _______ To _______ ______ ____ Emerging Markets Tracker ______ ______ ______ _______ To _______ ______ ____ Emerging Markets Evaluator ______ ______ ______ _______ To _______ ______ ____ Evaluator Plus ______ ______ ______ _______ To _______ ______ ____ AC Asia Pacific ex Japan Tracker ______ ______ ______ _______ To _______ ______ ____ AC Asia Pacific ex Japan Evaluator ______ ______ ______ _______ To _______ ______ ____ Other Fees (see attached) ______ ______ ______ _______ To _______ ______ ______ ______ ______ _______ To _______ ______ PC Products Vendor _____ ______ ______ ______ _______ To _______ ______ ____ Country Industry Indices (w/ val ratios) ______ ______ ______ _______ To _______ ______ ____ Enhanced Index Module ______ ______ ______ _______ To _______ ______ ____ Developed Markets Module ______ ______ ______ _______ To _______ ______ ____ Emerging Markets Module ______ ______ ______ _______ To _______ ______ ____ AC Pacific Module ______ ______ ______ _______ To _______ ______ ____ Other Fees (see attached) ______ ______ ______ _______ To _______ ______ ____ Historic Data Purchase Options ($___ per year) ______ ______ ______ _______ To _______ ______ ______ ______ ______ _______ To _______ ______ Index Data Services (circle product) ____ DM/EM/AC Index Service ______ ______ ______ _______ To _______ ______ ____ AC Asia/Pacific Index Services ______ ______ ______ _______ To _______ ______ ____ DM/EM/AC Enhanced Index Service ______ ______ ______ _______ To _______ ______ ____ AC Asia/Pacific Enhanced Index Service ______ ______ ______ _______ To _______ ______ Other Index Services ____ DM Announcement Service ______ ______ ______ _______ To _______ ______ ____ EM Announcement Service ______ ______ ______ _______ To _______ ______ ____ Preliminary Index Calculation ______ ______ ______ _______ To _______ ______ ______ ______ ______ _______ To _______ ______ MSCI Country Industry Indices ____ Full Feed ______ ______ ______ _______ To _______ ______ ____ Full Feed plus Valuation Ratios ______ ______ ______ _______ To _______ ______ ____ Regional/Country Selection Report ______ ______ ______ _______ To _______ ______ ____ Data Item Report (check) ______ ______ ______ _______ To _______ ______ ____ Index Levels in USD ______ ______ ______ _______ To _______ ______ ____ Index Levels in Local Currency ______ ______ ______ _______ To _______ ______ ____ Market Caps ______ ______ ______ _______ To _______ ______ ____ Valuation Ratios ______ ______ ______ _______ To _______ ______ Historical Data (see attached) ____ Index Level Data ______ ______ ______ _______ To _______ ______ ____ Developed Markets Company Data ______ ______ ______ _______ To _______ ______ ____ Emerging Markets Company Data ______ ______ ______ _______ To _______ ______ ______ ______ ______ _______ To _______ ______ Custom Index (see attached) ______ ______ ______ _______ To _______ ______ Other (see attached) Fee for Funds Agreement ______ ______ ______ 11/9/98 To 11/8/99 ______
See Exhibit A for details regarding the Data included with each of the above products. II. Location(s) at which Licensee may use the Service: New Jersey and NY, New York (see Exhibit A for description) III. Description of business unit(s) of Licensee permitted to use the Service. Investment Dep't and Marketing IV. Terms of Payment: x Annual, in advance x Taxable --- --- On time, in advance Non-taxable --- --- The parties acknowledge that this Schedule A shall be an integral part of the agreement among the parties hereto to which it is attached or which possesses the same reference number and/or date set forth above. ACKNOWLEDGED AND AGREED: LICENSEE: LICENSOR: Met Life MORGAN STANLEY & CO. INCORPORATED - ----------------------------- (Company Name) By: /s/ Barbara A. Hume By: /s/ Paul T. Keeler --------------------------- ------------------------------ Name: Barbara A. Hume Name: Paul T. Keeler -------------------------- -------------------------- (printed) (printed) Date: 11/4/98 Date: 11/11/98 -------------------------- -------------------------- PAYOR: (If applicable) ------------------------------ (Payor Company Name) By: --------------------------- Name: Prepared By: J.D. -------------------------- ------------------ (printed) Date: Date: 10/29/98 -------------------------- -------------------------- RUSSELL EQUITY INDEXES PASSIVE FUND LICENSE AGREEMENT This License Agreement (hereinafter the "Agreement") is entered into this 1st day of July, 1998 (hereinafter the "Effective Date"), by and between FRANK RUSSELL COMPANY (hereinafter "FRC"), a Washington corporation with offices at 909 A Street, Tacoma, Washington 98402 and Metropolitan Life Insurance Company, a corporation of New York, having is place of business at 334 Madison Avenue, Convent Station, NJ 07961-0633 (hereinafter "USER"). The parties agree as follows: 1.0 DEFINITIONS: 1.1 "The Russell Indexes" shall mean the U.S. equity security indexes set forth and designated in Exhibit A and the associated Performance Values. 1.2 "Russell Mark" shall mean the trademark or service mark set forth in Exhibit A for the indicated Russell Index. 1.3 "Confidential Information" shall mean the information and know how of FRC that is the subject of Section 15.1. 1.4 "OnLine Agreement" shall mean FRC's OnLine Agreement for Russell OnLine Product Support Service. 1.5 "Performance Value" shall mean the following at the aggregate index level: the percentage total return or the total return index value of the designated Russell Index. 2.0 LICENSE GRANT: 2.1 SEE ADDENDUM 2.2 FRC reserves the right, at any time, for any reason and without prior notice, to alter, amend, terminate or in any way change the Russell Indexes; provided, however that FRC shall notify USER of any such alteration, amendment, change or termination promptly and in accordance with FRC's then current practices for notification of other licensees of the Russell Indexes. 3.0 ACCEPTANCE AND FRC SUPPORT: 3.1 FRC agrees to supply the following information and materials to USER to be used in accordance with the terms and conditions of this Agreement: (a) a monthly list of constituent holdings in electronic format indicating the number of available shares held of each company in the Russell Indexes; (b) monthly reports of the Performance Values of the Russell Indexes; and (c) rules as to the make-up of the Russell Indexes. 3.2 The reports referenced in Section 3.1(a) and (b) shall be provided on or before the tenth business day of the subsequent month. 3.3 USER shall be deemed to have accepted the information and materials supplied pursuant to Section 3.1 upon delivery. 3.4 If FRC discovers what it determines, in its sole discretion, to be a material error in the Russell Indexes it will attempt to correct such error in accordance with its then current practices for index amendment. 4.0 PRICE AND PAYMENT: 4.1 USER agrees to pay FRC or its invoicing subsidiary the amount(s) and within the times stated in this Section 4.0 and Exhibit A. 4.2 Payments shall be due thirty (30) days after receipt of invoice. 4.3 Prices stated are exclusive of any and all federal, state and other governmental taxes, duties, licenses, fees, excises or tariffs now and hereinafter arising out of, or imposed in connection with the transaction covered by this Agreement, including without means of limitation, USER's use of the Russell Indexes. Such charges shall be paid by USER. FRC, however, shall be responsible for all taxes based upon its net income or personal property ownership. 4.4 FRC may change its prices at anytime upon at least ninety (90) days prior notice. 4.5 USER agrees to make such payments to the address on the above-referenced invoice(s) or to such address or account as FRC may specify from time to time. USER agrees to specify the FRC or invoicing subsidiary invoice number, if any, with respect to which payment is made. 4.6 Payments made by USER by directing commissions to Frank Russell Securities shall be credited at Frank Russell Securities' current applicable rate at the time payment is received. 4.7 Provided USER and FRC have entered into an OnLine Agreement covering at least one of the Russell Indexes covered under this Agreement and USER has at all times complied with the terms and conditions of such OnLine Agreement and this Agreement, than FRC shall grant USER a credit equal to _________ hours of Prepaid Hours for the then current term of that OnLine Agreement. The credit shall be applicable to fees owed under that OnLine Agreement and may only be used pursuant to the terms and conditions of that OnLine Agreement. 5.0 FRC WARRANTIES: 5.1 FRC warrants that: (a) it has sufficient right, title, and interest in the Russell Indexes to enter into this Agreement; (b) the Russell Indexes do not infringe upon any U.S. patent or U.S. Copyright, and (c) the Russell Indexes do not violate the trade secret rights of any third party. SEE ADDENDUM 1 5.2 FRC agrees to indemnify, hold harmless and defend USER from and against any and all damages, costs, and expenses, including reasonable attorney fees, incurred in connection with a claim which, if true, would constitute a breach of the foregoing warranties (hereinafter "Infringement Claims"); provided FRC is notified promptly in writing of the Infringement Claim and has sole control over its defense or settlement, and USER provides reasonable assistance in the defense of the same. 5.3 Following notice of an Infringement Claim, FRC may, at its expense, without obligation to do so, procure for USER the right to continue to use the alleged infringing Russell Index(es) or, without obligation to do so, may replace or modify the Russell Index(es) to make it non-infringing. 5.4 FRC shall have no liability for any Infringement Claim based on USER's i) use of any Russell Index after FRC's notice that USER should cease use of such Russell Index, or ii) use of any release of a Russell Index other than the latest release of that Russell Index. For all Infringement Claims arising under Section 5.4, USER agrees to indemnify and hold FRC harmless from and against all damages, costs and expenses, including reasonable attorney's fees. 5.5 FRC's obligations to USER for any Infringement Claims made against USER shall only extend to those arising from the use of a Russell Index inside the geographical boundaries of the United States, Canada, Japan, Australia and the EC and USER releases and discharges FRC from any and all other Infringement Claims. 6.0 OWNERSHIP: 6.1 This Agreement is a license and not a sale of the Russell Indexes. 6.2 All rights not expressly granted are reserved by FRC, including, without means of limitation, the right to alter, modify, adapt, translate, or create derivative works. 6.3 USER agrees its use of the Russell Indexes shall not directly or indirectly create in or for USER any right, title, or interest in the Russell Indexes. 7.0 LIMITATIONS ON USE OF RUSSELL INDEXES: 7.1 USER will not, without the prior written consent of FRC, transfer, loan, sell, lease, rent, assign, disclose, publish, or copy in whole or in part: (a) the Russell Indexes; (b) the list of constituents and available shares held for any Russell Index; (c) the rules as to the make-up of any Russell Index; or (d) any supporting documentation or other data supplied by FRC. The above limitation regarding disclosure and publication is not applicable to the Russell Indexes' Performance Values; provided, USER gives FRC proper attribution pursuant to Section 14.0. SEE ADDENDUM 7.2 USER shall not use the Russell Indexes or any part thereof in any fashion that may infringe any copyrights or other proprietary interests FRC or any third party may have therein. 7.3 Notwithstanding anything to the contrary herein, USER shall only use the Russell Indexes inside the geographical boundaries of the country(ies) listed in Exhibit A. 7.4 As a condition of the rights granted to USER under this Agreement, USER will timely make all disclosures to its clients and potential client necessary to adequately inform them of the relationship between FRC and USER including, without means of limitation, the information set forth in Exhibit B. 7.5 USER shall only use the Russell Indexes for the operation of USER's business. 7.6 USER shall not use the Russell Indexes as part of any timesharing service, service bureau or similar arrangement. 7.7 The Russell Indexes may only be used in conjunction with a single microcomputer (i.e., with a single CPU) permitting access by one individual user at a time and shall not be made available to multiple users at any one time by any means. 8.0 DISCLAIMER OF WARRANTIES AND RISK OF PERFORMANCE: 8.1 FRC MAKES NO WARRANTIES, EXPRESS OR IMPLIED, OTHER THAN THE EXPRESS WARRANTIES CONTAINED IN SECTION 5.0 OF THE AGREEMENT. ANY AND ALL OTHER WARRANTIES OF ANY KIND WHATSOEVER, INCLUDING, WITHOUT MEANS OF LIMITATION, THOSE FOR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ARE EXPRESSLY DISCLAIMED WITH RESPECT TO THE RUSSELL INDEXES OR ANY DATA INCLUDED THEREIN OR ANY SECURITY (OR COMBINATION THEREOF) COMPRISING THE RUSSELL INDEXES. FRC MAKES NO REPRESENTATION, WARRANTY OR GUARANTEE AS TO THE ACCURACY, COMPLETENESS, RELIABILITY, OR OTHERWISE OF THE RUSSELL INDEXES OR ANY DATA INCLUDED THEREIN. FRC does not warrant, guarantee or make any representations regarding the use, or the results of use, of the Russell Indexes or any data included therein or any security (or combination thereof) comprising the Russell Indexes. The entire risk as to such use, results of use and the performance of the Russell Indexes and the above-referenced data and securities are assumed by USER. 8.2 FRC will obtain data from sources it believes to be reliable, but the accuracy and completeness of the Russell Indexes and the data included therein are not guaranteed and they are supplied on an "AS IS" basis. 8.3 FRC'S PUBLICATION OF THE RUSSELL INDEXES IN NO WAY SUGGESTS OR IMPLIES AN OPINION BY FRC AS TO THE ATTRACTIVENESS OF INVESTMENT IN ANY OR ALL OF THE SECURITIES UPON WHICH THE RUSSELL INDEXES ARE BASED. 9.0 TERM: 9.1 Provided this Agreement has been properly executed by an authorized officer of USER and an authorized officer of FRC, the term of this Agreement shall run from the Effective Date until the earlier of: a) termination in accordance with the terms and conditions of this Agreement; or 2 b) one (1) year from the Effective Date. 9.2 Provided that this Agreement has not been terminated by either party prior to the expiration of its term, as extended, and USER has complied with all the terms and conditions of this Agreement, then each year upon expiration of its then current term the Agreement shall automatically extend for an additional one (1) year period unless either party gives the other at least ninety (90) days prior written notice of its intention to not so extend the term of the Agreement. 10.0 DEFAULT AND TERMINATION: 10.1 After the first year of this Agreement either party may terminate this Agreement without cause upon at least ninety (90) days prior notice. 10.2 This Agreement may terminate if any of the following events of default occurs: a) if either party materially fails to perform or comply with this Agreement or any provision hereof; b) if USER fails to strictly comply with the provisions of Sections 15.0 and 16.0; c) if USER becomes insolvent or admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; d) if a petition under any foreign, state or United States bankruptcy act, receivership statute, or the like, as they now exist, or as they may be amended is filed by USER; or e) if such a petition is filed by any third party, or an application for a receiver is filed by anyone and such petition or application is not resolved favorably to USER within sixty (60) days. 10.3 Termination, due to a breach of Section 7.0, 15.0 or 16.0 shall be effective upon notice. In all other cases termination arising under Section 10.2 shall be effective thirty (30) days after notice of termination to the defaulting party if the defaults have not been cured within such thirty (30) day period. 10.4 USER acknowledges that monetary damages may not be a sufficient remedy for unauthorized disclosure or use of Confidential Information or the Russell Indexes or the associated trademarks and service marks and that FRC shall be entitled, without waiving any other rights or remedies, to such injunctive or equitable relief as may be deemed proper by a court of competent jurisdiction. 10.5 The rights and remedies of the parties provided herein shall not be exclusive and are in addition to any other rights or remedies provided by law or this Agreement. 11.0 OBLIGATIONS ON TERMINATON: 11.1 Upon expiration or termination of this Agreement, USER shall cease using the Russell Indexes and shall return or destroy all full or partial copies of the Russell Indexes and associated data and comply with Section 14.7. 11.2 Sections 10, 11, 12, 13, 14, 15, 17 and 18 shall survive the termination of this Agreement. 12.0 LIMITATION OF LIABILITY: 12.1 FRC's liability to USER under any provision of this Agreement, including, without means of limitation, Section 5, or any transaction contemplated by this Agreement, shall not exceed one hundred percent (100%) of the amount having then been actually paid by USER to FRC in the most recent twelve (12) calendar month period under Section 4.0. FRC's limitation of liability is cumulative with all FRC's expenditures being aggregated to determine satisfaction of the limit. The existence of claims or suits against more than one Russell Index will not enlarge or extend the limit. USER releases FRC from all obligations, liability, claims or demands in excess of the limitation. The parties acknowledge the other parts of this Agreement rely upon the inclusion of Section 12. 13.0 DISCLAIMER OF DAMAGES AND LIMITATION OF REMEDY: 13.1 The rights and remedies granted under Section 5.0 constitute USER's sole and exclusive remedy against FRC, its officers, agents and employees for negligence, inexcusable delay, breach of warranty, express or implied, or for any default whatsoever relating to the condition of the Russell Indexes and any data included therein. 13.2 USER AGREES FRC SHALL NOT BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, ECONOMIC OR PUNITIVE DAMAGES OR FOR ANY CLAIMS AGAINST USER BY ANY OTHER PARTY EVEN IF FRC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR CLAIMS. 13.3 USER agrees to indemnify and hold FRC harmless from any and claim arising out of, or in connection with, USER's use of the Russell Index(es) including, without means of limitation, those made by employees, customers or clients of USER. 13.4 USER may not bring any action pertaining to this Agreement more than one (1) year after the event giving rise to the cause of action has occurred. 14.0 TRADEMARKS AND COPYRIGHT NOTICES: 14.1 All materials, including advertising, sales promotion, or demonstration materials which refer directly to the Russell Indexes shall expressly state that Frank Russell Company is the owner of the trademarks and service marks relating to the Russell Indexes in language consistent with Exhibit A and substantially similar to the following: "The Russell 1000(R) Index is a trademark/service mark of the Frank Russell Company. Russell(TM) is a trademark of the Frank Russell Company." USER shall make no other use of Russell Marks. 14.2 For each Russell Mark USER agrees to use the appropriate trademark symbol (either "(TM)" or "?" or "(R)"), as set forth in Exhibit A or FRC designates by written notice from time to time, in a superscript whenever such a Russell Mark is first mentioned in the above-referenced materials or 3 in any other manner in connection with the associated Russell Index. 14.3 Upon written request from FRC, USER shall forward to FRC samples of the above-referenced materials which refer to product name(s), service mark(s) or trademark(s). 14.4 USER agrees its use of the above shall not directly or indirectly create in or for USER any right, title or interest in such service mark(s), trademark(s) or tradename(s) and their attendant goodwill. 14.5 USER agrees to maintain the high level of quality accorded products and services associated with, and marketed by, FRC under its trademarks and service marks. 14.6 USER shall undertake no action that will interfere with or diminish FRC's right, title and interest in FRC's trademarks, service marks and Russell Indexes. USER will not at any time use any name, trademark or service mark confusingly similar to a FRC name, trademark or service mark. 14.7 Upon termination or expiration of this Agreement, USER shall cease and desist from all of any of the above-referenced product or service name(s) and associated trademark(s) and service mark(s) and, upon request, deliver to FRC or destroy all material upon which the same appear. 14.8 USER shall also indicate that FRC is the owner of the copyrights relating to the Russell Indexes and is the source of the Russell Indexes Performance Values. USER shall include such copyright notices as FRC shall supply or designate from time to time. 15.0 NON-DISCLOSURE AGREEMENT: 15.1 USER expressly undertakes to retain in confidence all information and know how transmitted to USER by FRC that FRC has identified as being proprietary and/or confidential or that, by the nature of the circumstances surrounding the disclosure, ought in good faith to be treated as proprietary or confidential, and will make no use of such information and know how except under the terms and during the existence of this Agreement. However, USER shall have no obligation to maintain the confidentiality of information that: (i) it received rightfully from another party prior to its receipt from FRC; (ii) FRC has disclosed to a third party without any obligation to maintain such information in confidence; or (iii) is independently developed by USER. USER shall take all necessary security measures to ensure the above. USER's obligations under this section shall extend to the earlier of such time as the information protected hereby is in the public domain through no fault of USER or ten (10) years following the termination or expiration of this Agreement. The confidential relationship arising hereunder shall not be affected by Section 21.3. 16.0 ASSIGNMENT AND ENTIRE AGREEMENT: 16.1 This Agreement and any rights or obligations hereunder, shall not be assigned, delegated or sublicensed by USER without the prior written permission of FRC. It will inure to the benefit of and is binding upon USER, FRC, their affiliates and successors. 16.2 Any attempted assignment, delegation or sublicense in violation of this section shall be void. 16.3 This Agreement, including Exhibits A and B, is the entire Agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous communications. It shall not be modified except in writing signed by both parties. 17.0 NOTICES: 17.1 All notices in connection with this Agreement shall be deemed given on the day they are (a) deposited in the U.S. mails, postage prepaid, certified or registered, return receipt requested; or (b) sent by international air express, air courier, (e.g., DHL, Federal Express or Airborne Express), charges prepaid, certified or registered, return receipt requested, addressed as follows: USER: MetLife 334 Madison Avenue Convent Station, NJ 07961-0633 Attention: Richmond Bates With a Copy To: MetLife One Madison Avenue Area 2H New York, NY 10010 Attention: Barbara A. Hume FRC: Frank Russell Company 909 A Street Tacoma, WA 98402 Attention: Martin F. Ryan, Managing Director 18.0 APPLICABLE LAW: 18.1 This Agreement shall be construed and controlled by the laws of the state of Washington and USER consents to jurisdiction and venue of the state and federal courts sitting in the state of Washington. 19.0 ATTORNEYS' FEES: 19.1 If either FRC or USER employs attorneys to enforce any rights arising out of or relating to this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees, costs and other expenses. 20.0 DELAY IN PERFORMANCE: 20.1 Neither party shall be liable for failure or delay in the performance of any of its obligations, except obligations for the payment of money, under this Agreement, if such failure or delay is caused by circumstances beyond its reasonable control such as acts of God, riot, or war. Strikes or other labor difficulties which are capable of being terminated on terms unacceptable to the party so affected shall not be considered circumstances within the control of such party. 21.0 MISCELLANEOUS: 21.1 No waiver of any breach of any provision of this Agreement shall constitute a waiver of any prior, concurrent or subsequent breach of the same or any other provisions hereof, and no waiver shall be effective unless made in 4 writing and signed by an authorized representative of the waiving party. 21.2 If any provision of this Agreement shall be held by a court of competent jurisdiction to be illegal, invalid or unenforceable, the remaining provisions shall remain in full force and effect. 21.3 Neither this Agreement, nor any terms and conditions contained herein, shall be construed as creating a fiduciary relationship of any kind between the parties or between FRC and USER's clients, customers or prospective clients or customers. Without limitation as to the foregoing, USER acknowledges that its decisions (a) whether to utilize the Russell Indexes or any subset of the securities underlying the same and (b) the appropriate investments to make, if any, for it to re-balance a portfolio of securities designed to replicate a Russell Index or a subset thereof shall be made independently of FRC. 21.4 Neither this Agreement, nor any terms and conditions contained herein, shall be construed as creating a partnership, franchise, joint venture, agency or employment relationship between the parties. 21.5 Time is of the essence in this Agreement. 21.6 The section headings used in this Agreement and the attached Exhibits are intended for convenience only and shall not be deemed to supersede or modify any provisions. IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates set forth below. All signed copies of this Agreement shall be deemed to be originals. FRANK RUSSELL COMPANY METLIFE FRC (USER) Daniel Birmingham Barbara Hume - ----------------- ------------ By By Daniel Birmingham Barbara Hume - ----------------- ------------ Name (Print) Name (Print) Client Executive Vice-President - ---------------- -------------- Title Title 11/10/98 Date Date EXHIBIT A Russell Indexes: - ---------------- The Russell Indexes shall mean the U.S. equity security index(es) designed below and the associated Performance Value(s): Russell 3000(R) Index Russell 2000(R) Growth Index - -- -- Russell 1000(R) Index Russell Midcap(TM) Value Index - -- -- X Russell 2000(R) Index Russell MidCap(TM) Growth Index - -- -- Russell 2500(TM) Index Russell 200(TM) Growth Index - -- -- Russell Top 200(TM) Index Russell 3000(R) Growth Index - -- -- Russell 1000(R) Value Index Russell 3000(R) Growth Index - -- -- Russell 1000(R) Growth Index Russell 2500(TM) Growth Index - -- -- Russell 2000(R) Value Index Russell 2500(TM) Value Index - -- -- Annual License Fee: - ------------------- USER agrees to pay FRC an annual license fee of ____________ Dollars per Index to use the Russell Index(es) as designated above. The total annual license fee pursuant to the immediately preceding sentence shall be ___________ Dollars. Additional Provisions: - ---------------------- (a) County of Use: USA EXHIBIT B Client Disclosure SEE ADDENDUM ------------ 1) [Name of USER's Product] is not promoted, sponsored or endorsed by, nor in any way affiliated with Frank Russell Company. Frank Russell Company is not responsible for and has not reviewed [name of USER's Product] nor any associated literature or publications and Frank Russell Company makes no representations or warranty, express or implied, as to their accuracy, or completeness, or otherwise. 2) Frank Russell Company reserves the right, at any time and without notice, to alter, amend, terminate or in any way change its index(es). Frank Russell Company has no obligation to take the needs of any particular fund or its participants or any other product or person into consideration in determining, composing or calculating the Index(es). 3) Frank Russell Company's publication of the Index(es) in no way suggests or implies an opinion by Frank Russell Company as to the attractiveness or appropriateness of investment in any or all securities upon which the Index(es) is (are) based. FRANK RUSSELL COMPANY MAKES NO REPRESENTATION, WARRANTY, OR GUARANTEE AS TO THE ACCURACY, COMPLETENESS, RELIABILITY, OR OTHERWISE OF THE INDEX(ES) OR ANY DATA INCLUDED IN THE INDEX(ES). FRANK RUSSELL COMPANY MAKES NO REPRESENTATION OR WARRANTY REGARDING THE USE, OR THE RESULTS OF USE, OF THE INDEX(ES) OR ANY DATA INCLUDED THEREIN, OR ANY SECURITY (OR COMBINATION THEREOF) COMPRISING THE INDEX(ES). FRANK RUSSELL COMPANY MAKES NO OTHER EXPRESS OR IMPLIED WARRANTY, AND EXPRESSLY DISCLAIMS ANY WARRANTY, OF ANY KIND, INCLUDING, WITHOUT MEANS OF LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEX(ES) OR ANY DATA OR ANY SECURITY (OR COMBINATION THEREOF) INCLUDED THEREIN. SEE ADDENDUM ------------ 5 ADDENDUM -------- Addendum to the Russell Equity Indexes Passive Fund License Agreement (the "Agreement") entered into as of the Effective Date of the Agreement by and between Frank Russell Company ("FRC") and Metropolitan Life Insurance Company ("USER"). The parties hereto agree to the following changes, additions an modifications to the Agreement: 1) Subsection 2.1 (License Grant) ------------------------------ Substitute the following language: Subject to Section 7.0 below and notwithstanding anything to the contrary in this agreement, FRC grants USER a non-exclusive license (i) to use the Russell Indexes as the basis of funds issued by USER and (ii) to refer to the Russell Indexes and Russell Marks in connection with the marketing and naming of USER's funds. (The term "funds" means funds issued, managed and sold by USER, and corresponding investment divisions of separate account products including, but not limited to, life insurance and annuities issued by Metropolitan Life Insurance Company and Metropolitan Towers Life Insurance Company.) 2) Subsection 5.1(b) (FRC Warranties) ---------------------------------- Add the words "U.S. trademark or service mark" at the end of this clause. 3) Subsection 7.1 (Limitations on Use of Russell Indexes) ------------------------------------------------------ Add the phrase "Except for information provided by FRC that is required to be disclosed by regulatory or governmental agencies," to the beginning of this subsection. 4) Exhibit B. Client Disclosure ---------------------------- 1. Modify Exhibit B as follows: (i) USER will include all of the language set forth in Exhibit B in "The Statement of Additional Information" for the Metropolitan Series Fund. (ii) USER will include in all other informational materials (including Prospectuses and all forms of sales material and material that is used internally or with brokers only), the following language: "Morgan Stanley sponsors the MSCI EAFE Index, Lehman Brothers sponsors the Lehman Brothers Aggregate Bond Index , the McGraw Hill Companies, Inc. sponsors the Standard & Poor's 500 Composite Stock Price Index, and Frank Russell Company sponsors the Russell 2000 Index (together referred to as "index sponsors"). The index sponsors have no responsibility for and do not participate in the management of the Portfolio assets or sale of the Portfolio shares. Each index and its associated trademark and service marks are the exclusive property of the respective index sponsors. The Metropolitan Series Fund, Inc. Statement Additional Information contains a more detailed description of the limited relationship the index sponsors have with MetLife and the Fund." 2. Add the following provisions to Exhibit B: FRC agrees that to the extent one or more informational materials and contracts are bound together in a single volume or otherwise distributed together, USER is not obligated to apply the foregoing disclaimer 6 more than once in the bound materials. FRC also agrees to work with MetLife to revise any disclaimers to the extent such revisions are required by a governmental agency having jurisdiction over MetLife or its Funds. IN WITNESS WHEREOF, the parties have executed this Addendum as of the dates set forth below. All signed copies of this Addendum shall be deemed to be originals. FRANK RUSSELL COMPANY METROPOLITAN LIFE INSURANCE COMPANY By: /s/ Daniel Birmingham By: /s/ Barbara A. Hume --------------------- ------------------- Name: Daniel Birmingham Name: Barbara A. Hume ----------------- --------------- Title Client Executive Title: Vice-President ---------------- -------------- Date: 11/10/98 Date: 7 CONFIDENTIAL ------------ MORGAN STANLEY CAPTIAL INTERNATIONAL INDEX LICENSE AGREEMENT ----------------------- FOR FUNDS/INVESTMENT VEHICLES ----------------------------- AGREEMENT, dated as of November 9, 1998, by and between MORGAN STANLEY & CO. INCORPORATED ("Morgan Stanley"), a Delaware corporation, having an office at 1585 Broadway, New York, NY 10036, and Metropolitan Life Insurance Company ("Licensee"), a mutual life insurance company organized under the laws of New York, having an office at One Madison Avenue, New York, New York 10010. WHEREAS, Morgan Stanley is an international investment banking and brokerage firm which owns rights in and to certain stock indexes and the proprietary data contained therein (and which, through its Morgan Stanley Capital International ("MSCI") department, engages in a variety of business activities in connection with such indexes and data), among which are the indexes listed in Exhibit A, annexed hereto and made apart hereof (such indexes and data contained therein are hereinafter referred to as the "Indexes"); WHEREAS, Morgan Stanley calculates, maintains and publishes the Indexes; WHEREAS, Morgan Stanley uses in commerce and owns trade name, trademark and service mark rights to the designations "Morgan Stanley," "Morgan Stanley Capital International" and "MSCI" (such rights are hereinafter individually and collectively referred to as the "Marks"); WHEREAS, Licensee wishes to use the Indexes as the basis of the funds/investment vehicles described in Exhibit B, annexed hereto and made a part hereof (the "Funds"), to be issued and traded on a private-placement basis; WHEREAS, Licensee wishes to use the Indexes and the Marks in connection with writing, trading, marketing and promotion of the Funds on a private-placement basis and in connection with making disclosure about the Funds under applicable laws, rules and regulations in order to indicate that Morgan Stanley is the source of the Indexes; and WHEREAS, Licensee wishes to obtain Morgan Stanley's authorization to use the Indexes and refer to the Indexes and the Marks in connection with the Funds pursuant to the terms and conditions hereinafter set forth. 1 NOW, THEREFORE, the parties hereto agree as follows: 1. Grant of License ---------------- Subject to the terms and conditions of this Agreement, Morgan Stanley grants to Licensee a non-transferable, non-exclusive, license (i) to use one or more of the Indexes as the basis, or a component, of the Funds (in accord with the restrictions set forth in Exhibit B) issued, entered into, written, sold and/or purchased by Licensee, and (ii) to use and refer to the Indexes and the Marks in connection with the writing, trading, marketing and promotion of the Funds (in accordance with the restrictions set forth in Exhibit B) and in connection with making such disclosure about the Funds as Licensee deems necessary or desirable under any applicable laws, rules or regulations in order to indicate the source of the Indexes. Licensee shall not disseminate electronically or in any other fashion any quotations or other information relating to the Indexes or the Funds. 2. Term ---- The term of the license granted hereunder shall commence on November 9, 1998 and shall continue for one year thereafter. It is the intention of the parties to renew this Agreement for successive one-year renewal terms pursuant to such terms and conditions as the parties may agree upon. 3. License Fees ------------ Upon execution of this Agreement, Licensee shall pay to Morgan Stanley a license fee of $15,000 with respect to use of the Indexes listed in Exhibit A in connection with the Funds. 4. Termination ----------- (a) At any time during the term of this Agreement, either party may give the other party thirty (30) days' prior written notice of termination if the terminating party believes in good faith that material damage or harm is occurring to the reputation or goodwill of the terminating party by reason of its continued performance hereunder, and such notice shall be effective on the date of such termination unless the other party shall correct the condition causing such damage or harm within the notice period. In the event of termination under this paragraph 4(a), no refund of any of the license fees will be made. (b) In the case of breach of any of the material terms and conditions of this Agreement by either party, the other party may terminate this Agreement by giving thirty (30) days' prior written notice of its intent to terminate, and such notice shall be effective on the date of such termination unless the breaching party shall correct such breach within the notice period. In the event of termination 2 under this paragraph 4(b) by Morgan Stanley, no refund of any of the license fees will be made. In the event of termination under this paragraph 4(b) by Licensee, Licensee shall be entitled to a pro rata refund of the license fees. (c) Morgan Stanley shall have the right, in its sole discretion, to cease compilation and publication of any of the Indexes and, in the event that any of the Indexes is discontinued, to terminate this Agreement if Morgan Stanley does not offer a replacement or substitute Index. In the event that Morgan Stanley intends to discontinue any index, Morgan Stanley shall give Licensee at least ninety (90) days written notice prior to such discontinuance, which notice shall specify whether a replacement or substitute index will be available. Licensee shall have the option hereunder within sixty (60) days after receiving such written notice from Morgan Stanley to notify Morgan Stanley in writing of its intent to use the replacement index under the terms of this Agreement. In the event that any of the Indexes is discontinued and Licensee does not exercise such option or that at least one substitute or replacement index is not made available, Licensee shall be entitled to a refund of the license fee, computed by multiplying the license fee by a fraction the numerator of which is Morgan Stanley's standard license fee for the discontinued Index, as in effect on the first day of the initial or renewal term during which such Index is discontinued, and the denominator of which is the license fee paid under this Agreement and then pro-rating such Fund over the remainder of the applicable one-year term. (d) Licensee may terminate this Agreement upon written notice to Morgan Stanley if (i) Licensee is informed of the final adoption of any legislation or regulation that materially impairs Licensee's ability to issue, enter into, write, sell, purchase, market or promote the Funds; and (ii) any material litigation or regulatory proceeding regarding the Funds is threatened or commences. In the event of termination under this paragraph 4(d), no refund of any portion of the license fee will be made. (e) Morgan Stanley may terminate this Agreement upon written notice to Licensee if (i) Morgan Stanley is informed of the final adoption of any legislation or regulation that materially impairs Morgan Stanley's ability to license and provide the Indexes under this Agreement; or (ii) any material litigation or regulatory proceeding regarding the Funds is threatened or commenced. In the event that Morgan Stanley terminates this Agreement, Licensee shall be entitled to a pro rata refund of the license fee. 5. Rights upon termination ----------------------- Upon termination of this Agreement, Licensee shall cease to use the Indexes and cease referring to the Indexes and the Marks with the Funds. 6. Fund Promotion -------------- (a) Licensee shall use its best efforts to protect the goodwill and reputation of Morgan Stanley in connection with its use of the Indexes and the Marks under this 3 Agreement. Licensee shall submit to Morgan Stanley for its preview and approval all advertisements, brochures, and promotional and information material (other than price quotations for a Fund) ("Informational Materials") relating to or referring to Morgan Stanley, the Indexes, the Marks or the Funds. Morgan Stanley's approval shall be confined solely to the use of or description of Morgan Stanley, the Marks, and the Indexes and shall not be unreasonably withheld or delayed by Morgan Stanley. (b) Morgan Stanley is not obligated to engage in any marketing or promotional activities in connection with the Funds or in making any representation or statement to investors or prospective investors in connection with the promotion by Licensee of the Funds. (c) Licensee acknowledges and agrees that Morgan Stanley, in granting the permission contained in this Agreement, does not express or imply any approval of the Funds or of Licensee and Licensee further agrees not to make any statement which expresses or implies that Morgan Stanley approves, endorses or consents to the promotion, marketing, and arrangement by Licensee of the Funds or that Morgan Stanley makes any judgment or expresses any opinion in respect of the Licensee. 7. Protection Of Value Of License ------------------------------ (a) Licensee shall cooperate reasonably with Morgan Stanley in the maintenance of all Morgan Stanley common law and statutory rights in the Indexes and the Marks, including copyrights and other proprietary rights, and shall take such acts and execute such instruments as are reasonably necessary and appropriate to such purposes, including the use by the Licensee of the following notice when referring to the Indexes or the Marks in any advertisement, offering circular, prospectus, brochure, or promotional or informational material relating to the Funds: The [Name of particular index] index is the exclusive property of Morgan Stanley. Morgan Stanley Capital International is a service mark of Morgan Stanley and has been licensed for use by [Name of Licensee]. or such similar language as may be approved in advance by Morgan Stanley. (b) Licensee shall not refer to the names of the Indexes in any manner which might cause confusion as to Morgan Stanley's responsibility for preparing and disseminating the Indexes or as to the identity of Licensee and its relationship to the Funds. 8. Proprietary Rights ------------------ (a) License acknowledges that the Indexes are selected, arrange and prepared by Morgan Stanley through the application of methods and standards of judgment used and developed through the expenditure of considerable work, time and money by Morgan 4 Stanley. Licensee also acknowledges that the Indexes and the Marks are the exclusive property of Morgan Stanley, and the Indexes and their compilation and composition and changes therein are in the control and discretion of Morgan Stanley. (b) Morgan Stanley reserves all rights with respect to the Indexes and the Marks except those expressly licensed to Licensee hereunder. (c) Each party shall treat as confidential and shall not disclose or transmit to any third party any confidential and proprietary information of the other party, including the terms of this Agreement or (in the case of Morgan Stanley) Informational Materials submitted to Morgan Stanley pursuant to paragraph 6(a) hereof, provided that the documentation or other written materials containing such information are designated as "Confidential" or "Proprietary" by the providing party and such information is not available generally to the public or otherwise available to the receiving party from a source other than the providing party. Notwithstanding the foregoing, if requested or required (by interrogatories, requests for information or documents, subpoena, or other process) either party may reveal such information if such information to be disclosed is (i) approved in writing by the other party for disclosure or (ii) required by law (in the opinion of counsel), regulatory agency or court order to be disclosed by a party, provided prior written notice of such required disclosure is given to the other party. Except with respect to disclosure made pursuant to (i) and (ii) in the immediately preceding sentence, each party shall treat as confidential the terms of this Agreement. The provisions of this paragraph shall survive any termination of this Agreement for five (5) years from disclosure by either party to the other party of the last such confidential and proprietary information. 9. Warranties; Disclaimers ----------------------- (a) Morgan Stanley represents and warrants that Morgan Stanley is the owner of rights granted to Licensee herein and that use of the Indexes as provided herein shall not infringe any trademark, copyright, other proprietary right, or contractual right of any person not a party to this Agreement. (b) Licensee agrees expressly to be bound itself by and furthermore to include all of the following disclaimers and limitations in Informational Materials and any contract(s) relating to the Funds and upon request to furnish a copy (copies) thereof to Morgan Stanley: This fund is not sponsored, endorsed, sold or promoted by Morgan Stanley. Morgan Stanley makes no representations or warranty, express or implied, to the owners of this fund or any member of the public regarding the advisability of investing in funds generally or in this fund particularly or the ability of the [ ] index to track general stock market performance. Morgan Stanley is the licensor of certain trademarks, service marks and trade names of Morgan Stanley and of the [ ] index which is determined, composed and 5 calculated by Morgan Stanley without regard to the issuer of this fund or this fund. Morgan Stanley has no obligation to take the needs of the issuer of this fund or the owners of this fund into consideration in determining, composing or calculating the [ ] index. Morgan Stanley is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of this fund to be issued or in the determination or calculation of the equation by which this fund is redeemable for cash. Morgan Stanley has no obligation or liability to owner of this fund in connection with the administration, marketing or trading of this fund. ALTHOUGH MORGAN STANLEY SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE INDEXES FROM SOURCES WHICH MORGAN STANLEY CONSIDERS RELIABLE, NEITHER MORGAN STANLEY NOR ANY OTHER PARTY GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEXES OR ANY DATA INCLUDED THEREIN. NEITHER MORGAN STANLEY NOR ANY OTHER PARTY MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE'S CUSTOMERS AND COUNTERPARTIES, OWNERS OF THE FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEXES OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER - USE. NEITHER MORGAN STANLEY NOR ANY OTHER PARTY MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND MORGAN STANLEY HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEXES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY OR ANY OTHER PARTY HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. (c) Each party represents and warrants to the other that it has the authority to enter into this Agreement according to its terms and that its performance does not violate any laws, regulations or agreements applicable to it. (d) Licensee represents and warrants to Morgan Stanley that the Funds shall not violate any applicable laws, including but not limited to banking, commodities and Funds laws. (e) Neither party shall have any liability for lost profits or consequential damages arising out of this Agreement. 6 (f) The provisions of this Section 9 shall survive any termination of this Agreement. 10. Indemnification --------------- Licensee shall indemnify and hold harmless Morgan Stanley, its parent, subsidiaries, affiliates, and their officers, directors, employees and agents against any and all judgments, damages, costs or losses of any kind (including reasonable attorneys' and experts' fees) as a result of claims or actions brought by third parties against Morgan Stanley which arise from any act or omission of Licensee which constitutes a breach of this Agreement or is in any manner related to the Funds; provided, however, that (i) Morgan Stanley notifies Licensee promptly of any such claim or action, and (ii) Licensee shall have no liability to Morgan Stanley if such judgments, damages, costs or losses are attributable to any negligent act or omission by Morgan Stanley, its parent, affiliates, subsidiaries or any of their employees or agents. Licensee shall bear all expenses in connection with the defense and/or settlement of any such claim or action. Morgan Stanley shall have the right, at its own expense, to participate in the defense of any claim or action against which it is indemnified hereunder; provided, however, it shall have no right to control the defense, consent to judgment, or agree to settle any such claim or action, without the written consent of Licensee. Licensee, in the defense of any such claim, except with the written consent of Morgan Stanley, shall not consent to entry of any judgment or enter into any settlement which (i) does not include, as an unconditional term, the grant by the claimant to Morgan Stanley of a release of all liabilities in respect of such claims or (ii) otherwise adversely affects the rights of Morgan Stanley. This provision shall survive the termination of this Agreement. 11. Force Majeure ------------- Neither Morgan Stanley nor Licensee shall bear responsibility or liability for any losses arising out of any delay in or interruptions of their respective performance of their obligations under this Agreement due to any act of God, act of governmental authority, act of the public enemy or due to war, riot, fire, flood, civil commotion, insurrection, labor difficulty (including, without limitation, any strike, or other work stoppage or slowdown), severe or adverse weather conditions or other cause beyond the reasonable control of the party so affected, provided that such party had exercised due diligence as the circumstances reasonably required. 12. Other Matters ------------- (a) This Agreement is solely and exclusively between the parties as now constituted and, unless otherwise provided, shall not be assigned or transferred by either party, without prior written consent of the other party, and any attempt to so assign or transfer this Agreement without such written consent shall be null and void. Notwithstanding the foregoing, this Agreement may be assigned without such consent to Morgan Stanley's parent or any subsidiary or affiliate of Morgan Stanley. 7 (b) This Agreement constitutes the entire agreement of the parties hereto with respect to its subject matter and may be amended or modified only by a writing signed by duly authorized officers of both parties. This Agreement supersedes all previous Agreements between the parties with respect to the subject matter of this Agreement. There are no oral or written collateral representations, agreements, or understandings except as provided herein. (c) No breach default, or threatened breach of this Agreement by either party shall relieve the other party of its obligations or liabilities under this Agreement with respect to the protection of the property or proprietary nature of any property which is the subject of this Agreement. (d) All notices and other communications under this Agreement shall be (i) in writing, (ii) delivered by hand or by registered or certified mail, return receipt requested, to the addresses set forth below or such addresses as either party shall specify by a written notice to the other and (iii) deemed given upon receipt. Notice to Morgan Stanley: Morgan Stanley & Co. Incorporated - ------------------------ 1585 Broadway New York, NY 10036 Attn: Paul Keeler, Principal ---- and Morgan Stanley & Co. Incorporated 1585 Broadway New York, NY 10036 Attn: General Counsel ---- and Notice to Licensee: Metropolitan Life Insurance Company - ------------------ One Madison Avenue New York, NY 10010 Attn: Barbara A. Hume, V.P. ---- and Metropolitan Life Insurance Company Law Department One Madison Avenue New York, NY 10010 Attn: Anthony D'Amore ---- Associate General Counsel 8 (e) This Agreement shall be interpreted, construed and enforced in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first set forth above. MORGAN STANLEY & CO. METROPOLITAN LIFE INCORPORATED INSURANCE COMPANY By:/s/Paul Keeler By:/s/Barbara A. Hume -------------- ------------------ Title: Principal Title: Vice President Name: Paul Keeler Name: Barbara A. Hume Date: 11/11/98 Date: 11/4/98 --------- -------- 9 EXHIBIT A --------- List of the Indexes (and Marks) Related License Fees For the initial term of this Agreement, the annual license fee shall be (a) for each Fund that uses MSCI or EAFE in its name and otherwise uses the Indexes as set forth in this Agreement; and (b) for each Fund that uses the Indexes as set forth in this Agreement but not does not MSCI or EAFE in its name. Indexes and Marks* License Fee Metropolitan Series Fund, Inc. Morgan Stanley EAFE Index Portfolio and corresponding investment divisions of separate Account products including, but not limited to, life insurance and annuities issued by Metropolitan Life Insurance Company and Metropolitan Tower Life Insurance Company $ MetLife International Stock Index Portfolio $ - -------------------------------------------------------------- -------- Total License Fee $ *Marks included with License Fees - --------------------------------- Morgan Stanley Morgan Stanley Capital International MSCI MSCI EAFE Morgan Stanley EAFE Index 10 EXHIBIT B --------- Description of the Funds 11 Metropolitan Life Insurance Company One Madison Avenue, New York, NY 10010-3690 212 578-2211 [LOGO OF METLIFE(R) APPEARS HERE] Barbara A. Hume Vice-President Tel 212-578-6811 October 19, 1998 Mr. Steven D. Berkley Managing Director Lehman Brothers Inc. 3 World Financial Center 11th Fl. New York, NY 10285-0011 Dear Steven: I am delighted that Lehman Brothers has agreed to license Metropolitan Life Insurance Company ("MetLife") the use of the Lehman Brothers indices and name (collectively the "Licenses") in our upcoming new portfolio. As stated in your September 18, 1998 letter to Lisa Krizman, MetLife is licensed to use the Lehman Brothers bond indices as the basis for a MetLife index fund. You later agreed in a telephone conversation with Daphne Thomas Jones that MetLife could also use "Lehman Brothers Aggregate Bond Index" as the name of the new bond index portfolio of the Metropolitan Series Fund and the corresponding investment divisions of MetLife and its subsidiaries and affiliates (the "Portfolio"). In order to proceed in accordance with our mutual understanding, we would like to reach agreement about the following terms and conditions that will govern the Licenses: 1. The non-exclusive, non-transferable, world-wide Licenses shall commence as of the date of this letter and shall continue for a period of one year from the above date, subject to prior termination for material breach of this agreement; and, shall renew automatically, subject to 90 days advance written notice by either party. 2. Each party shall indemnify the other against any and all judgments, damages, costs or losses of any kind (including reasonable attorneys fees; collectively "Losses") as a result of claims or actions brought by third parties, as follows: (a) MetLife will indemnify Lehman Brothers with respect to claims or action which arise from the Portfolio; provided that MetLife shall have no liability to Lehman Brothers to the extent such Losses arise from the willful act or omission of Lehman Brothers; and (b) Lehman Brothers agrees to indemnify MetLife (and its subsidiaries and affiliates) with respect to any type to intellectual property, misappropriation, dilution, infringement, or trade secret claims or actions which arise by virtue of MetLife's use of the Lehman Brothers bond indices, names, trademarks, and service marks; provided that Lehman Brothers shall have no liability to MetLife to the extent such Losses arise from MetLife's unauthorized use of such indices, names, trademarks, and service marks. The indemnification by both parties shall survive the termination or expiration of the Licenses. 3. NEITHER PARTY SHALL BE LIABLE FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES FOR LOST PROFITS, EVEN IF ADVISED OF THE POSSIBILITY OF OR IF IT COULD HAVE FORESEEN SUCH DAMAGES. 4. MetLife shall include the following disclaimer in informational materials and contracts relating to the Portfolio as follows: Morgan Stanley sponsors the MSCI EAFE Index, Lehman Brothers sponsors the Lehman Brothers Aggregate Bond Index, the McGraw Hill Companies, Inc. sponsors the Standard and Poor's 500 Composite Stock Price Index, and Frank Russell Company sponsors the Russell 2000 Index (together referred to as "index sponsors"). The index sponsors have no responsibility for and do not participate in the management of the Portfolio's assets or sale of the Portfolio's shares. Each index and its associated trademarks and service marks are the exclusive property of the respective index sponsors. 5. Lehman Brothers agrees to the extent that one or more informational materials and contracts are bound together in a single volume, or otherwise distributed together, MetLife is not obligated to apply the foregoing disclaimer more than once in the bound materials. Lehman Brothers also agrees to work with MetLife to revise any disclaimers to the extent such revisions are required by a governmental agency having jurisdiction over MetLife or the Portfolio. 6. Notices will be sent to each other (or a designee) pursuant to this letter by certified mail or Federal Express or similar overnight carrier. If you agree with the foregoing, please sign below and return this letter to me. We believe that the expected success of the Metropolitan Series Fund should also bring even greater brand recognition to Lehman Brothers. We appreciate your cooperation with our endeavor. Sincerely, /s/ Barbara A. Hume ------------------- Barbara A. Hume AGREED TO BY: /s/ Steven D. Berkley - --------------------- Steven D. Berkley Lehman Brothers Inc. EX-27.1 3 FINANCIAL DATA SCHEDULE - STATE STREET GROWTH
6 1 STATE STREET RESEARCH GROWTH 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 2,358,963,391 3,115,379,401 6,407,064 98,226,832 163,770 3,220,177,067 8,226,272 0 99,869,684 108,095,956 0 2,308,999,366 83,888,115 73,600,071 0 (243,490) 46,895,674 0 756,429,561 3,112,081,111 31,436,543 10,581,378 0 14,255,930 27,761,991 239,776,427 400,556,939 668,095,357 0 (27,738,839) (258,432,068) 0 5,102,533 2,631,861 7,817,372 763,019,528 0 65,551,315 (266,642) 0 13,095,405 0 14,255,930 2,673,480,469 31.92 0.36 8.52 (0.36) (3.34) 0 37.10 0.005 0 0
EX-27.2 4 FINANCIAL DATA SCHEDULE - STATE STREET INCOME
6 2 STATE STREET RESEARCH INCOME 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 532,517,230 543,321,376 11,920,551 32,705,567 3,441 587,950,935 28,324,280 0 32,772,282 61,096,562 0 518,319,931 41,223,047 32,555,011 0 (805,846) 0 (1,583,102) 10,923,390 526,854,373 0 30,269,946 0 1,831,738 28,438,208 9,707,383 3,228,435 41,374,026 0 (30,426,440) (9,521,620) 0 7,477,573 1,962,957 3,153,420 114,663,742 1,182,387 0 0 (1,768,865) 1,514,111 0 1,831,738 464,125,395 12.66 0.75 0.42 (0.80) (0.25) 0.00 12.78 0.004 0 0
EX-27.3 5 FINANCIAL DATA SCHEDULE - STATE ST. MONEY MARKET
6 3 STATE STREET RESEARCH MONEY MARKET 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 40,885,432 40,885,432 293,382 30,879 14 41,209,707 0 0 24,972 24,972 0 41,179,711 3,978,258 3,803,743 2,735 0 2,289 0 0 41,184,735 0 2,354,117 0 200,623 2,153,494 (76) 0 2,153,418 0 (2,137,755) 0 0 3,845,201 3,877,485 206,800 1,704,896 0 2,365 (13,004) 0 105,727 0 200,623 42,129,861 10.38 0.54 0.00 (0.57) 0.00 0.00 10.35 0.005 0 0.00
EX-27.4 6 FINANCIAL DATA SCHEDULE - STATE STREET DIVERSIFIED
6 4 STATE STREET RESEARCH DIVERSIFIED 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 2,322,535,791 2,679,818,583 25,266,049 171,403,539 80,300 2,876,568,471 46,694,660 0 172,886,745 219,581,405 0 2,279,495,227 144,508,015 116,712,757 0 (1,752,166) 21,743,921 0 357,500,084 2,656,987,066 14,244,449 75,031,119 0 11,146,529 78,129,039 155,325,065 178,233,566 411,687,670 0 (75,191,870) (172,104,275) 0 15,958,606 1,719,344 13,555,996 674,755,352 0 38,523,132 (4,689,336) 0 10,067,374 0 11,146,529 2,307,711,151 16.98 0.60 2.70 (0.57) (1.32) 0.00 18.39 0.005 0 0.00
EX-27.5 7 FINANCIAL DATA SCHEDULE - STATE ST. AGGR. GROWTH
6 5 STATE STREET RESEARCH AGGRESSIVE GROWTH 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 1,107,137,141 1,410,938,228 39,509,731 186,179,721 869 1,636,628,549 15,641,620 0 189,650,343 205,291,963 0 1,121,538,868 48,463,463 50,412,220 0 (4,933,464) 10,929,301 0 303,801,881 1,355,893,071 3,643,316 3,861,386 0 10,160,545 (2,655,843) 74,327,301 106,901,703 178,573,161 0 0 (82,562,223) 0 4,160,571 9,025,121 2,915,793 39,380,974 0 14,785,660 (2,215,320) 0 9,539,534 0 10,160,545 1,355,893,071 27.61 (0.06) 3.75 0.00 (1.77) 0.00 29.53 0.007 0 0.00
EX-27.6 8 FINANCIAL DATA SCHEDULE - MET LIFE STOCK INDEX
6 6 MET LIFE STOCK INDEX 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 1,946,769,784 3,089,695,399 37,357,336 63,038,162 8,586 3,190,099,483 20,225,976 0 57,954,523 78,180,499 0 1,928,363,249 87,960,338 70,203,936 0 (77,573) 40,707,693 0 1,142,925,615 3,111,918,984 37,814,969 558,808 0 7,585,833 30,787,944 139,102,116 462,459,475 632,349,535 0 (30,643,302) (97,483,702) 0 17,844,211 3,717,661 3,629,852 1,091,438,948 0 0 (222,216) (910,720) 6,387,967 0 7,585,833 2,541,817,107 28.78 0.37 7.75 (0.36) (1.16) 0.00 35.38 0.003 0 0.00
EX-27.7 9 FINANCIAL DATA SCHEDULE - SANTANDER INT'L STOCK
6 7 SANTANDER INTERNATIONAL STOCK 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 271,654,085 298,316,479 1,169,816 6,215,632 326,433 306,028,360 1,473,648 0 7,173,800 8,647,448 0 255,239,426 21,027,451 22,885,826 1,518,261 0 14,179,961 0 26,443,264 297,380,912 4,749,079 681,552 0 2,940,759 2,489,872 24,540,552 30,689,967 57,720,391 0 (3,280,730) (82,089) 0 13,289,786 15,388,430 240,269 30,292,103 2,309,120 0 0 (10,278,503) 2,161,315 0 2,940,759 287,549,392 11.67 0.13 2.50 (0.16) 0.00 0.00 14.14 0.010 0 0.00
EX-27.8 10 FINANCIAL DATA SCHEDULE - LOOMIS SAYLES HIGH YIELD
6 8 LOOMIS SAYLES HIGH YIELD BOND 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 50,684,573 41,573,301 921,770 2,399,699 8,812 44,903,582 76,225 0 2,424,366 2,500,591 0 51,800,454 5,054,215 2,741,057 0 (41,560) 0 (244,699) (9,111,204) 42,402,991 185,335 4,079,504 0 327,095 3,937,744 142,105 (8,033,164) (3,953,315) 0 (3,978,631) (395,661) 0 2,279,158 490,894 524,895 14,599,325 0 8,857 (672) 0 266,117 0 396,768 37,811,861 10.14 0.88 (1.65) (0.89) (0.09) 0.00 8.39 0.009 0 0
EX-27.9 11 FINANCIAL DATA SCHEDULE - JANUS MID CAP
6 9 JANUS MID CAP 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 286,548,974 369,177,417 10,800,585 56,944,396 6,622 436,929,020 7,026,414 0 58,398,695 65,425,109 0 279,783,214 21,304,301 8,132,247 0 (528,985) 9,559,547 0 82,690,135 371,503,911 542,009 765,721 0 1,805,270 (497,540) 12,255,248 71,842,949 83,600,657 0 0 (1,768,641) 0 15,312,520 2,249,439 108,974 267,652,270 0 0 (31,445) (927,060) 1,584,660 0 1,805,270 221,586,465 12.77 (0.02) 4.77 0.00 (0.08) 0.00 17.44 0.008 0 0
EX-27.10 12 FINANCIAL DATA SCHEDULE - T. ROWE PRICE SMALL CAP
6 10 T. ROWE PRICE SMALL CAP GROWTH 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 170,383,367 197,861,663 16,710 32,919,770 0 230,798,143 3,060,909 0 38,605,268 41,666,277 0 178,493,580 15,387,997 7,915,609 0 (39,366) 0 (16,800,545) 27,478,297 189,131,966 383,958 540,690 0 956,668 (32,020) (16,406,136) 22,428,525 5,990,369 0 0 0 0 14,274,228 6,801,840 0 95,111,960 0 0 (7,343) (426,436) 764,242 0 956,668 143,088,809 11.88 0 0.41 0 0 0 12.29 0.007 0 0
EX-27.11 13 FINANCIAL DATA SCHEDULE - SCUDDER GLOBAL EQUITY
6 11 SCUDDER GLOBAL EQUITY 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 103,042,270 114,344,353 357,884 8,950,142 90,643 123,743,022 573,300 0 9,454,725 10,028,025 0 101,853,797 9,187,904 5,595,122 0 (12,776) 985,419 0 10,887,026 113,714,997 1,451,008 876,076 0 871,628 1,455,456 1,391,861 8,945,738 11,793,055 0 (1,464,777) (287,752) 0 7,095,699 3,646,289 143,372 53,002,855 0 0 (3,455) (118,690) 674,520 0 928,521 90,640,044 10.85 0.16 1.57 (0.16) (0.04) 0.00 12.38 0.010 0 0
EX-27.12 14 FINANCIAL DATA SCHEDULE - HARRIS OAKMARK LG. CAP
6 12 HARRIS OAKMARK LARGE CAP VALUE 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 8,818,916 8,691,316 234,031 2,215 5,163 8,932,725 264,147 0 10,539 274,686 0 8,786,162 892,739 0 0 (523) 0 0 (129,131) 8,658,039 17,908 11,349 0 6,444 22,813 0 (127,600) (104,787) 0 (23,336) 0 0 890,538 243 2,444 8,658,039 0 0 0 0 6,470 0 16,503 6,357,980 10.00 0.03 (0.30) (0.03) 0 0 9.70 0.007 0 0
EX-27.13 15 FINANCIAL DATA SCHEDULE - NEUBERGER BERMAN MID CAP
6 13 NEUBERGER & BERMAN PARTNERS MID CAP VALUE 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 9,003,415 9,271,766 86,655 2,883 5,870 9,367,174 708,813 0 11,266 720,079 0 8,171,528 805,727 0 13,924 0 193,292 0 268,351 8,647,095 24,596 6,258 0 6,383 24,471 193,292 268,351 486,114 0 (10,547) 0 0 819,020 14,292 999 8,647,095 0 0 0 0 6,314 0 17,492 6,463,510 10.00 0.03 0.71 (0.01) 0.00 0.00 10.73 0.007 0 0
EX-27.14 16 FINANCIAL DATA SCHEDULE - T. ROWE PRICE LARGE CAP
6 14 T. ROWE PRICE LARGE CAP GROWTH 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 6,577,405 6,983,815 283,121 2,319 6,436 7,275,691 525,979 0 10,014 535,993 0 6,330,176 611,505 0 1,476 0 1,788 0 406,261 6,739,701 3,978 4,262 0 2,876 5,365 1,788 406,259 413,411 0 (3,889) 0 0 611,872 725 358 6,739,701 0 0 0 0 3,585 0 15,063 3,960,091 10.00 0.01 1.02 (0.01) 0.00 0.00 11.02 0.005 0 0
EX-27.15 17 FINANCIAL DATA SCHEDULE - LEHMAN BRO. AGGREG. BOND
6 15 LEHMAN BROTHERS AGGREGATE BOND INDEX 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 66,804,014 67,037,221 1,172,752 0 9,761 68,219,734 9,076,667 0 333,542 9,410,209 0 58,554,038 5,848,165 0 0 (23,240) 45,520 0 233,207 58,809,525 0 443,393 0 32,694 410,699 45,520 233,207 689,426 0 (433,940) 0 0 5,978,010 173,326 43,481 58,809,525 0 0 0 0 18,962 0 45,942 53,600,962 10.00 0.07 0.07 (0.08) 0.00 0.00 10.06 0.004 0 0
EX-27.16 18 FINANCIAL DATA SCHEDULE - MORGAN STANLEY EAFE
6 16 MORGAN STANLEY EAFE INDEX 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 24,143,851 25,965,578 479,353 9,864 17,398 26,472,193 989,274 0 29,468 1,018,742 0 23,758,026 2,357,015 0 0 (1,920) 0 (123,680) 1,821,025 25,453,451 21,434 17,532 0 15,915 23,051 (123,680) 1,821,025 1,720,396 0 (24,971) 0 0 2,373,243 18,562 2,334 25,453,451 0 0 0 0 9,366 0 45,895 22,353,194 10.00 0.01 0.80 (0.01) 0.00 0.00 10.80 0.005 0 0
EX-27.17 19 FINANCIAL DATA SCHEDULE - RUSSELL 2000 INDEX
6 17 RUSSELL 2000 INDEX 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 36,402,790 38,282,499 431,920 20,810 17,154 38,752,383 575,799 0 29,819 605,618 0 36,226,074 3,621,808 0 10,315 0 30,667 0 1,879,709 38,146,765 77,390 11,823 0 19,235 69,978 30,667 1,879,709 1,980,354 0 (59,663) 0 0 3,615,979 78 5,907 38,146,765 0 0 0 0 11,355 0 49,925 33,061,687 10.00 0.02 0.53 (0.02) 0 0 10.53 0.004 0 0
EX-99.Q 20 SPECIMEN PRICE MAKE-UP SHEET Exhibit q Specimen Price Make-Up Sheet December 31, 1998
Value of Registrant's Total Portfolio Securities Outstanding Offering Price and other Assets Securities Per Unit State Street Research Growth Portfolio $3,112,081,111 83,888,115 $37.10 State Street Research Income Portfolio $ 526,854,373 41,223,047 $12.78 State Street Research Money Market Portfolio $ 41,184,735 3,978,258 $10.35 State Street Research Diversified Portfolio $2,656,987,066 144,508,015 $18.39 State Street Research Aggressive Growth Portfolio $1,431,336,586 48,463,463 $29.53 MetLife Stock Index Portfolio $3,111,918,984 87,960,338 $35.38 Santander International Stock Portfolio $ 297,380,912 21,027,451 $14.14 Loomis Sayles High Yield Bond Portfolio $ 42,402,991 5,054,215 $ 8.39 Janus Mid Cap Portfolio $ 371,503,911 21,304,301 $17.44 T. Rowe Price Small Cap Growth Portfolio $ 189,131,966 15,387,997 $12.29 Scudder Global Equity Portfolio $ 113,714,997 9,187,904 $12.38 Harris Oakmark Large Cap Value Portfolio $ 8,658,039 892,739 $ 9.70 Neuberger&Berman Partners Mid Cap Value Portfolio $ 8,647,095 805,727 $10.73 T. Rowe Price Large Cap Growth Portfolio $ 6,739,701 611,505 $11.02 Lehman Brothers Aggregate Bond Index Portfolio $ 58,809,525 5,848,165 $10.06 Morgan Stanley EAFE Index Portfolio $ 25,453,451 2,357,015 $10.80 Russell 2000 Index Portfolio $ 38,146,765 3,621,808 $10.53
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