<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 18, 1996
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. 18 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[_]
Amendment No. 20 [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
----------------
HARRY P. KAMEN, 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.
[_] on (date) pursuant to paragraph (b) of Rule 485.
[_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
[_] on (date) pursuant to paragraph (a)(1) of Rule 485.
[X] 75 days after filing pursuant to paragraph (a)(2) of Rule 485.
[_] on (date) pursuant to paragraph (a)(2) of Rule 485.
PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF COMMON SHARES. THE
REGISTRANT'S RULE 24f-2 NOTICE FOR THE YEAR ENDED DECEMBER 31, 1995 WAS FILED
WITH THE COMMISSION ON FEBRUARY 29, 1996.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
METROPOLITAN SERIES FUND, INC.
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a)
----------------
<TABLE>
<CAPTION>
N-1A
ITEM NO. PROSPECTUS HEADING
-------- ------------------
<C> <S> <C>
1. Cover..................................... Cover Page
2. Synopsis.................................. *
3. Condensed Financial Information........... Supplementary Financial
Information
4. General Description of Registrant......... The Fund and its Purpose;
General Information About
the Fund and its Shares;
Investments in the
Portfolios
5. Management of the Fund.................... Management of the Fund
6. Capital Stock and other Securities........ Dividends, Distributions
and Taxes; General Infor-
mation About the Fund and
its Shares
7. Purchase of Securities Being Offered...... Sale and Redemption of
Shares
8. Redemption or Repurchase.................. Sale and Redemption of
Shares
9. Pending Legal Proceedings................. *
</TABLE>
- --------
* Not Applicable
I-1
<PAGE>
METROPOLITAN SERIES FUND, INC.
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a)
----------------
<TABLE>
<CAPTION>
N-1A STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION HEADING
-------- -----------------------
<C> <S> <C>
10. Cover Page................................ Cover Page
11. Table of Contents......................... Table of Contents
12. General Information and History........... *
13. Investment Objectives and Policies........ Investment Practices and
Policies
14. Management of the Registrant.............. Directors and Officers
15. Control Persons and Principal Holders of
Securities............................... *
16. Investment Advisory and Other Services.... Investment Management
Arrangements
17. Brokerage Allocation...................... Investment Management
Arrangements
18. Capital Stock and Other Securities........ Sale and Redemption of
Shares
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Sale and Redemption of
Shares
20. Tax Status................................ Taxes
21. Underwriters.............................. Sale and Redemption of
Shares
22. Calculations of Yield Quotations of Money
Market Funds............................. *
23. Financial Statements...................... Financial Statements
</TABLE>
- --------
* Not Applicable
I-2
<PAGE>
PROSPECTUS
for
METROPOLITAN SERIES FUND, INC.
Metropolitan Series Fund, Inc. ("Fund") is an investment company designed to
meet a wide range of investment objectives with its separate Portfolios. The
eleven Portfolios currently available are: State Street Research Growth
Portfolio, State Street Research Income Portfolio, MetLife Money Market
Portfolio, State Street Research Diversified Portfolio, State Street Research
Aggressive Growth Portfolio, MetLife Stock Index Portfolio, GFM International
Stock Portfolio, Loomis Sayles High Yield Bond Portfolio, Janus Mid Cap
Portfolio, T. Rowe Price Small Cap Growth Portfolio and Scudder Global Equity
Portfolio. Each Portfolio resembles a separate fund issuing its own shares.
Metropolitan Life Insurance Company ("Metropolitan Life") is the investment
manager for the Fund, State Street Research & Management Company ("State
Street Research"), a wholly-owned subsidiary of Metropolitan Life, is the sub-
investment manager with respect to the State Street Research Growth, State
Street Research Income, State Street Research Diversified and State Street
Research Aggressive Growth Portfolios, GFM International Investors Limited
("GFM"), a subsidiary of Metropolitan Life, is the sub-investment manager of
the GFM International Stock Portfolio. Loomis, Sayles & Company, L.P. ("Loomis
Sayles"), whose general partner is indirectly owned by Metropolitan Life, is
the sub-investment manager with respect to the Loomis Sayles High Yield Bond
Portfolio. Janus Capital Corporation ("Janus") is the sub-investment manager
for the Janus Mid Cap Portfolio. T. Rowe Price Associates, Inc. ("T. Rowe
Price") is the sub-investment manager for the T. Rowe Price Small Cap Growth
Portfolio and Scudder, Stevens & Clark, Inc. ("Scudder") is the sub-investment
manager for the Scudder Global Equity Portfolio.
The investment objectives of these Portfolios are as follows:
STATE STREET RESEARCH GROWTH PORTFOLIO: to achieve long-term growth of capital
and income, and moderate current income, by investing primarily in common
stocks that are believed to be of good quality or to have good growth
potential or which are considered to be undervalued based on historical
investment standards.
STATE STREET RESEARCH INCOME PORTFOLIO: to achieve the highest possible total
return, by combining current income with capital gains, consistent with
prudent investment risk and preservation of capital, by investing primarily in
fixed-income, high-quality debt securities. (The term "high-quality" is used
to describe certain debt securities rated within the three highest grades by
credit rating services as explained under "State Street Research Income
Portfolio.")
METLIFE MONEY MARKET PORTFOLIO: to achieve the highest possible current income
consistent with preservation of capital and maintenance of liquidity, by
investing primarily in short-term money market instruments. INVESTMENT IN THIS
PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT.
STATE STREET RESEARCH DIVERSIFIED PORTFOLIO: to achieve a high total return
while attempting to limit investment risk and preserve capital by investing in
equity securities, fixed-income debt securities, or short-term money market
instruments, or any combination thereof, at the discretion of State Street
Research.
STATE STREET RESEARCH AGGRESSIVE GROWTH PORTFOLIO: to achieve maximum capital
appreciation by investing primarily in common stocks (and equity and debt
securities convertible into or carrying the right to acquire common stocks) of
emerging growth companies, undervalued securities or special situations.
METLIFE STOCK INDEX PORTFOLIO: to equal the performance of the Standard &
Poor's 500 Composite Stock Price Index (adjusted to assume reinvestment of
dividends) by investing in the common stock of companies which are included in
the index.
GFM INTERNATIONAL STOCK PORTFOLIO: to achieve long-term growth of capital by
investing primarily in common stocks and equity-related securities of non-
United States companies.
LOOMIS SAYLES HIGH YIELD BOND PORTFOLIO: To achieve high total investment
return through a combination of current income and capital appreciation. The
Portfolio will normally invest at least 65% of its assets in fixed income
securities of below investment grade quality.
JANUS MID CAP PORTFOLIO: To provide long-term growth of capital. It pursues
this objective by investing primarily in securities issued by medium sized
companies.
T. ROWE PRICE SMALL CAP GROWTH PORTFOLIO: To achieve long-term capital growth
by investing in small growth companies.
SCUDDER GLOBAL EQUITY PORTFOLIO: To achieve long-term growth of capital
through a diversified portfolio of marketable securities, primarily equity
securities, including common stocks, preferred stocks and debt securities
convertible into common stocks. The Portfolio invests on a worldwide basis in
equity securities of companies which are incorporated in the U.S. or in
foreign countries. It also may invest in the debt securities of U.S. and
foreign issuers. Income is an incidental consideration.
There can be no assurance that the objectives of any Portfolio will be
realized.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE LOOMIS SAYLES HIGH YIELD FUND WILL NORMALLY INVEST AT LEAST 65% OF ITS
ASSETS IN LOWER-RATED SECURITIES, COMMONLY KNOWN AS "JUNK BONDS" AND MAY
INVEST SUBSTANTIALLY ALL OF ITS ASSETS IN SUCH SECURITIES. INVESTMENTS OF THIS
TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF PRINCIPAL AND NON-PAYMENT OF
INTEREST. INVESTORS SHOULD ASSESS CAREFULLY THE RISKS ASSOCIATED WITH AN
INVESTMENT IN THE LOOMIS SAYLES HIGH YIELD BOND PORTFOLIO.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED, ENDORSED
OR GUARANTEED BY, THE UNITED STATES GOVERNMENT, ANY BANK OR OTHER DEPOSITORY
INSTITUTION, SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE COMPANY,
THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, ENTITY OR PERSON AND ARE
SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.
This Prospectus sets forth concisely information about the Fund that a
prospective investor ought to know before investing. Additional information
about the Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information which is incorporated herein by reference.
The Statement of Additional Information is available upon request and without
charge from Metropolitan Life Insurance Company, One Madison Avenue, New York,
New York 10010, Attention: Retirement and Savings Center, Area 2H; telephone
number (212) 578-4057. Inquiries may be made to the same address or telephone
number.
This Prospectus should be read and retained for future reference.
The date of this Prospectus is March 3, 1997. The date of the Statement of
Additional Information is March 3, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Fund and its Purpose............................................ 2
Financial Highlights................................................ 3
Investments in the Portfolios....................................... 6
Investment Objectives and General Investment Policies.............. 6
State Street Research Growth Portfolio............................ 6
State Street Research Income Portfolio............................ 7
MetLife Money Market Portfolio.................................... 8
State Street Research Diversified Portfolio....................... 8
State Street Research Aggressive Growth Portfolio................. 9
MetLife Stock Index Portfolio..................................... 9
GFM International Stock Portfolio................................. 10
Loomis Sayles High Yield Bond Portfolio........................... 11
T. Rowe Price Small Cap Growth Portfolio.......................... 12
Janus Mid Cap Portfolio........................................... 13
Scudder Global Equity Portfolio .................................. 14
Fundamental Investment Policies.................................... 15
Other Investment Practices......................................... 16
Diversification of Investment in Foreign Countries................. 20
Management of the Fund.............................................. 22
General Information About the Fund and its Shares................... 26
Dividends, Distributions and Taxes.................................. 27
Sale and Redemption of Shares....................................... 27
</TABLE>
THE FUND AND ITS PURPOSE
Metropolitan Series Fund, Inc. is an open-end management investment company.
The Fund is a "series" type of mutual fund which issues separate classes (or
series) of stock, each of which currently represents a separate portfolio of
investments. The Fund's classes of shares are issued and redeemed at net asset
value without a sales load.
The shares of the Fund are offered to Metropolitan Life and its affiliated
insurance companies ("Insurance Companies"), including Metropolitan Tower Life
Insurance Company ("Metropolitan Tower"), in order to fund certain of their
separate accounts used to support various insurance contracts including
variable life insurance policies, whether scheduled premium, flexible premium
or single premium policies, or variable annuity contracts (such policies and
contracts being hereinafter referred to as the "Contracts"). Not all of the
current Portfolios of the Fund are available to each of the separate accounts
which hold shares of the Fund. The rights of an Insurance Company holding Fund
shares for a separate account are different from the rights of the owner of a
Contract. The terms "shareholder" or "shareholders" in this Prospectus shall
refer to the Insurance Companies, and not to any Contract owner.
The structure of the Fund permits Contract owners, within the limitations
described in the appropriate Contract, to allocate the amounts under the
Contracts for ultimate investment in the various Portfolios of the Fund. See
the prospectus or other material which is attached at the front of this
Prospectus for a description of the appropriate Contract, which Portfolios of
the Fund are available to such Contract owners and 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
such Contract.
It is conceivable that in the future it may be disadvantageous for
scheduled, flexible and single premium variable life insurance separate
accounts and variable annuity separate accounts to invest simultaneously in
the Fund. However, the Fund, Metropolitan Tower and Metropolitan Life do not
currently foresee any such disadvantages to variable annuity contract owners
or to flexible premium, scheduled premium or single premium variable life
insurance policy owners. The Fund's Board of Directors intends to monitor
events 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.
PROSPECTUS 2
<PAGE>
FINANCIAL HIGHLIGHTS
[to be updated by amendment]
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, 1996 Management's
Discussion and Analysis which appears under the caption "Financial Statements"
in the Statement of Additional Information. No material is included relating
to the Loomis Sayles High Yield Bond Portfolio, Janus Mid Cap Portfolio, T.
Rowe Price Small Cap Growth Portfolio or Scudder Global Equity Portfolio,
which were added to the Fund on March 1, 1997.
<TABLE>
<CAPTION>
STATE STREET RESEARCH GROWTH PORTFOLIO
--------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
31, 1995 31, 1994 31, 1993 31, 1992 31, 1991 31, 1990 31, 1989 31, 1988 31, 1987 31, 1986
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED DATA FOR A
SHARE OF CAPITAL STOCK
OUTSTANDING THROUGHOUT
THE PERIOD:
NET ASSET VALUE:
Beginning of period.... $ 21.81 $ 23.27 $ 21.72 $ 21.56 $ 17.20 $ 19.34 $ 14.64 $ 13.89 $ 13.72 $ 12.75
---------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net investment income.. .35 .30 .28 .34 .41 .51 .54 .71 .37 .54
Net realized and
unrealized
gain (loss)........... 6.83 (1.06) 3.24 2.13 5.39 (2.15) 4.81 .78 .63 .76
---------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations............. 7.18 (.76) 3.52 2.47 5.80 (1.64) 5.35 1.49 1.00 1.30
---------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
Dividends from net
investment income..... (.35) (.30) (.28) (.29) (.42) (.50) (.52) (.74) (.35) (.33)
Dividends from net
realized capital
gains................. (1.08) (.40) (1.69) (2.02) (1.02) -- (.13) -- (.48) --
---------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions..... (1.43) (.70) (1.97) (2.31) (1.44) (.50) (.65) (.74) (.83) (.33)
---------- --------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE: End of
period................. $ 27.56 $ 21.81 $ 23.27 $ 21.72 $ 21.56 $ 17.20 $ 19.34 $ 14.64 $ 13.89 $ 13.72
========== ========= ======== ======== ======== ======== ======== ======== ======== ========
Total Return........... 33.14% (3.25)% 14.40% 11.56% 33.09% (8.50)% 36.64% 10.69% 7.19% 10.16%
Net assets at end of
period................ $1,094,751 $ 746,433 $640,413 $351,028 $232,160 $153,255 $140,279 $ 99,982 $ 96,177 $ 22,968
(In Thousands)
SIGNIFICANT RATIOS:
Operating expenses to
average net assets.... 0.31% 0.32% 0.28% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Net investment income
to average net assets. 1.46% 1.40% 1.19% 1.52% 2.04% 2.83% 2.98% 4.83% 2.30% 3.01%
Portfolio turnover
(Note 1).............. 42.52% 57.27% 66.27% 63.74% 62.29% 39.86% 58.01% 51.21% 45.36% 56.79%
<CAPTION>
STATE STREET RESEARCH INCOME PORTFOLIO
--------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
31, 1995 31, 1994 31, 1993 31, 1992 31, 1991 31, 1990 31, 1989 31, 1988 31, 1987 31, 1986
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED DATA FOR A
SHARE OF CAPITAL STOCK
OUTSTANDING THROUGHOUT
THE PERIOD:
NET ASSET VALUE:
Beginning of period.... $11.32 $12.59 $12.22 $12.32 $11.16 $11.10 $10.58 $10.47 $13.74 $12.28
---------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net investment income.. .83 .91 .83 .90 .94 1.16 .99 .95 .97 1.20
Net realized and
unrealized gain
(loss)................ 1.38 (1.31) .86 (.05) 1.14 (.05) .41 .02 (1.27) 1.15
---------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations............. 2.21 (.40) 1.69 .85 2.08 1.11 1.40 .97 (.30) 2.35
---------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
Dividends from net
investment income..... (.80) (.87) (.88) ( .71) (.92) (1.05) (.88) (.86) (1.76) (.89)
Dividends from net
realized capital
gains................. -- -- (.44) (.24) -- -- -- -- (1.21) --
---------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions..... (.80) (.87) (1.32) (.95) (.92) (1.05) (.88) (.86) (2.97) (.89)
---------- --------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE: End of
period................. $12.73 $11.32 $12.59 $12.22 $12.32 $11.16 $11.10 $10.58 $10.47 $13.74
========== ========= ======== ======== ======== ======== ======== ======== ======== ========
Total Return........... 19.55% (3.15)% 11.36% 6.91% 17.31% 10.03% 13.35% 9.28% (1.87%) 19.63%
Net assets at end of
period................ $ 349,913 $ 275,659 $299,976 $156,245 $ 87,412 $ 54,531 $ 48,629 $ 35,670 $ 27,800 $ 26,163
(In Thousands)
SIGNIFICANT RATIOS:
Operating expenses to
average net assets.... 0.34% 0.35% 0.32% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Net investment income
to average net assets
...................... 7.01% 7.02% 6.39% 7.16% 7.61% 9.80% 8.81% 8.26% 8.34% 8.35%
Portfolio turnover
(Note 1).............. 102.88% 141.15% 136.98% 151.74% 78.87% 82.93% 51.03% 74.10% 79.59% 169.06%
</TABLE>
- -------
* Footnotes appear on Page 5.
PROSPECTUS 3
<PAGE>
<TABLE>
<CAPTION>
METLIFE MONEY MARKET PORTFOLIO
--------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
31, 1995 31, 1994 31, 1993 31, 1992 31, 1991 31, 1990 31, 1989 31, 1988 31, 1987 31, 1986
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED DATA FOR A
SHARE OF CAPITAL STOCK
OUTSTANDING THROUGHOUT
THE PERIOD:
NET ASSET VALUE:
Beginning of period.... $10.48 $10.49 $10.52 $10.59 $10.67 $10.49 $10.32 $10.18 $10.78 $10.87
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net investment income... .59 .40 .28 .39 .57 .86 .95 .76 .64 .70
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations............. .59 .40 .28 .39 .57 .86 .95 .76 .64 .70
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
Dividends from net
investment income...... (.62) (.41) (.31) (.46) (.65) (.68) (.78) (.62) (1.24) (.79)
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions..... (.62) (.41) (.31) (.46) (.65) (.68) (.78) (.62) (1.24) (.79)
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE: End of
period................. $10.45 $10.48 $10.49 $10.52 $10.59 $10.67 $10.49 $10.32 $10.18 $10.78
======= ======== ======== ======== ======== ======== ======== ======== ======== ========
Total Return............ 5.59% 3.85% 2.90% 3.73% 6.10% 8.23% 9.28% 7.55% 6.22% 6.72%
Net assets at end of
period................. $40,456 $39,961 $44,321 $55,412 $70,946 $78,014 $41,779 $26,907 $17,147 $12,116
(In Thousands)
SIGNIFICANT RATIOS:
Operating expenses to
average net assets..... 0.49% 0.44% 0.38% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Net investment income to
average net assets..... 5.39% 3.76% 2.85% 3.68% 5.93% 7.68% 8.82% 7.33% 6.06% 6.50%
Portfolio turnover ..... N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
STATE STREET RESEARCH DIVERSIFIED PORTFOLIO
----------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED JULY 25, 1986
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER TO DECEMBER
31, 1995 31, 1994 31, 1993 31, 1992 31, 1991 31, 1990 31, 1989 31, 1988 31, 1987 31, 1986
---------- -------- -------- -------- -------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED DATA FOR A
SHARE OF CAPITAL
STOCK OUTSTANDING
THROUGHOUT THE
PERIOD:
NET ASSET VALUE:
Beginning of period.. $13.40 $14.41 $13.58 $13.61 $11.47 $12.16 $10.58 $10.34 $10.34 $10.00
---------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Income From Investment
Operations
Net investment
income.............. .59 .51 .46 .53 .62 .68 .75 .73 .56 .22
Net realized and
unrealized gain
(loss).............. 3.02 (.95) 1.58 .74 2.23 (.68) 1.54 .23 (.18) .12
---------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Total From Investment
Operations........... 3.61 (.44) 2.04 1.27 2.85 .00 2.29 .96 .38 .34
---------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Less Distributions
Dividends from net
investment income... (.58) (.50) (.54) (.55) (.62) (.69) (.71) (.72) (.38) --
Dividends from net
realized capital
gains............... (.48) (.07) (.67) (.75) (.09) -- -- -- -- --
---------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Total Distributions... (1.06) (.57) (1.21) (1.30) (.71) (.69) (.71) (.72) (.38) --
---------- -------- -------- -------- -------- -------- -------- -------- -------- -------
NET ASSET VALUE: End
of period............ $15.95 $13.40 $14.41 $13.58 $13.61 $11.47 $12.16 $10.58 $10.34 $10.34
========== ======== ======== ======== ======== ======== ======== ======== ======== =======
Total Return......... 27.03% (3.06)% 12.75% 9.48% 24.84% 0.00% 21.76% 9.25% 3.63% 3.40%
Net assets at end of
period.............. $1,114,834 $892,826 $743,798 $334,480 $232,276 $184,879 $172,968 $134,303 $112,867 $15,144
(In Thousands)
SIGNIFICANT RATIOS:
Operating expenses to
average net assets.. 0.31% 0.32% 0.29% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%*
Net investment income
to average net
assets.............. 3.92% 3.66% 3.16% 3.85% 4.94% 5.74% 6.30% 6.64% 5.27% 5.48%*
Portfolio turnover
(Note 1)............ 79.29% 96.49% 95.84% 114.67% 70.56% 62.51% 50.61% 70.14% 61.30% 23.80%
</TABLE>
- -------
* Footnotes appear on Page 5.
PROSPECTUS 4
<PAGE>
<TABLE>
<CAPTION>
STATE STREET RESEARCH AGGRESSIVE GROWTH PORTFOLIO
---------------------------------------------------------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED APRIL 29, 1988
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER TO DECEMBER
31, 1995 31, 1994 31, 1993 31, 1992 31, 1991 31, 1990 31, 1989 31, 1988
------------ ------------ ------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED DATA FOR
A SHARE OF
CAPITAL STOCK
OUTSTANDING
THROUGHOUT THE
PERIOD:
NET ASSET VALUE:
Beginning of
period.......... $22.05 $22.54 $19.52 $18.11 $10.95 $12.41 $10.42 $10.00
-------- -------- -------- -------- -------- -------- -------- ------
Income From
Investment
Operations
Net investment
income......... (.01) .05 .04 .08 .06 .15 .20 .16
Net realized and
unrealized gain
(loss)......... 6.50 (.48) 5.06 1.77 7.25 (1.43) 3.00 .36
-------- -------- -------- -------- -------- -------- -------- ------
Total From
Investment
Operations...... 6.49 (.43) 5.10 1.85 7.31 (1.28) 3.20 .52
-------- -------- -------- -------- -------- -------- -------- ------
Less
Distributions
Dividends from
net investment
income......... -- (.05) (.06) (.10) (.07) (.14) (.14) (.10)
Dividends from
net realized
capital gains.. (2.67) (.01) (2.02) (.34) (.08) (.04) (1.07) --
-------- -------- -------- -------- -------- -------- -------- ------
Total
Distributions... (2.67) (.06) (2.08) (.44) (.15) (.18) (1.21) (.10)
-------- -------- -------- -------- -------- -------- -------- ------
NET ASSET VALUE:
End of period... $25.87 $22.05 $22.54 $19.52 $18.11 $10.95 $12.41 $10.42
======== ======== ======== ======== ======== ======== ======== ======
Total Return.... 29.50% (1.88)% 22.63% 10.39% 66.41% (10.34)% 30.94% 5.21%
Net assets at
end of period.. $958,915 $590,047 $387,949 $129,249 $ 45,858 $ 15,409 $ 11,280 $4,738
(In Thousands)
SIGNIFICANT
RATIOS:
Operating
expenses to
average net
assets......... 0.81% 0.82% 0.79% 0.75% 0.75% 0.75% 0.75% 0.75%*
Net investment
income to
average net
assets......... (0.06%) 0.24% 0.18% 0.46% 0.45% 1.41% 1.41% 2.06%*
Portfolio
turnover (Note
1) ............ 255.83% 186.52% 120.82% 100.95% 146.12% 271.31% 226.39% 94.35%
</TABLE>
<TABLE>
<CAPTION>
METLIFE STOCK INDEX PORTFOLIO
-------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED MAY 1, 1990
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER TO DECEMBER
31, 1995 31, 1994 31, 1993 31, 1992 31, 1991 31, 1990
-------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
SELECTED DATA FOR
A SHARE OF
CAPITAL STOCK
OUTSTANDING
THROUGHOUT THE
PERIOD:
NET ASSET VALUE:
Beginning of
period.......... $13.87 $14.25 $13.27 $12.76 $9.96 $10.00
-------- -------- -------- -------- ------- ------
Income From
Investment
Operations
Net investment
income......... .32 .33 .35 .36 .35 .23
Net realized and
unrealized gain
(loss)......... 4.79 (.17) .98 .60 2.82 (.05)
-------- -------- -------- -------- ------- ------
Total From
Investment
Operations...... 5.11 .16 1.33 .96 3.17 10.18
-------- -------- -------- -------- ------- ------
Less
Distributions
Dividends from
net investment
income......... (.32) (.32) (.35) (.26) (.37) (.22)
Dividends from
net realized
capital gains.. (.10) (.22) -- (.19) -- --
-------- -------- -------- -------- ------- ------
Total
Distributions... (.42) (.54) (.35) (.45) (.37) (.22)
-------- -------- -------- -------- ------- ------
NET ASSET VALUE:
End of period... $18.56 $13.87 $14.25 $13.27 $12.76 $9.96
======== ======== ======== ======== ======= ======
Total Return.... 36.87% 1.18% 9.54% 7.44% 29.76% 1.95%
Net assets at
end of period.. $635,823 $363,001 $282,700 $144,692 $54,183 $6,956
(In Thousands)
SIGNIFICANT
RATIOS:
Operating
expenses to
average net
assets......... 0.32% 0.33% 0.32% 0.25% 0.24% 0.25%*
Net investment
income to
average net
assets......... 2.22% 2.51% 2.51% 2.74% 2.98% 4.12%*
Net expenses to
average net
assets.........
Operating
expenses to
average net
assets before
voluntary
expense
reimbursements.
Net investment
income to
average net
assets before
voluntary
expense
reimbursements.
Portfolio
turnover (Note
1) ............ 6.35% 6.66% 13.99% 17.54% 1.18% 3.50%
<CAPTION>
GFM INTERNATIONAL STOCK PORTFOLIO
----------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED MAY 1, 1991
DECEMBER DECEMBER DECEMBER DECEMBER TO DECEMBER
31, 1995 31, 1994 31, 1993 31, 1992 31, 1991
--------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
SELECTED DATA FOR
A SHARE OF
CAPITAL STOCK
OUTSTANDING
THROUGHOUT THE
PERIOD:
NET ASSET VALUE:
Beginning of
period.......... $12.30 $12.33 $8.63 $9.71 $10.00
--------- --------- --------- ---------- -----------
Income From
Investment
Operations
Net investment
income......... .03 .08 .02 .05 .05
Net realized and
unrealized gain
(loss)......... .07 .54 4.52 (1.04) (.20)
--------- --------- --------- ---------- -----------
Total From
Investment
Operations...... .10 .62 4.54 (.99) 9.85
--------- --------- --------- ---------- -----------
Less
Distributions
Dividends from
net investment
income......... (.04) -- (.26) (.09) (.14)
Dividends from
net realized
capital gains.. (.07) (.65) (.58) -- --
--------- --------- --------- ---------- -----------
Total
Distributions... (.11) (.65) (.84) (.09) (.14)
--------- --------- --------- ---------- -----------
NET ASSET VALUE:
End of period... $12.29 $12.30 $12.33 $8.63 $9.71
========= ========= ========= ========== ===========
Total Return.... 0.84% 5.08% 47.76% (10.21)% (1.55)%
Net assets at
end of period.. $297,461 $272,952 $120,781 $18,998 $10,809
(In Thousands)
SIGNIFICANT
RATIOS:
Operating
expenses to
average net
assets.........
Net investment
income to
average net
assets......... 0.21% .08% 0.15% 0.89% 1.01%*
Net expenses to
average net
assets......... 1.01% 1.04% 1.14% 0.97% 0.97%*
Operating
expenses to
average net
assets before
voluntary
expense
reimbursements. -- -- 1.15% -- --
Net investment
income to
average net
assets before
voluntary
expense
reimbursements. -- -- 0.15% -- --
Portfolio
turnover (Note
1) ............ 86.24% 65.84% 88.90% 65.09% 29.41%
</TABLE>
- -------
* Ratios have been determined based on annualized operating results for the
period. Twelve-month results may be different.
Total return information shown in the Financial Highlights tables does not
reflect expenses that apply at the separate account level or to related
insurance products. Inclusion of these charges would reduce the total return
figures for all periods shown.
(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. For the year ended December 31, 1995, excluding short-term
securities, purchases of securities amounted to $489,702,902,
$332,005,213, $762,472,356, $2,021,984,610, $176,294,937 and $229,872,910,
and sales of securities amounted to $377,323,949, $299,203,930,
$745,575,956, $1,889,874,185, $30,311,462 and $261,521,471 for the State
Street Research Growth, State Street Research Income, State Street
Research Diversified, State Street Research Aggressive Growth, MetLife
Stock Index and GFM International Stock Portfolios, respectively.
PROSPECTUS 5
<PAGE>
...............................................................
INVESTMENTS IN THE PORTFOLIOS
...............................................................................
INVESTMENT OBJECTIVES AND GENERAL INVESTMENT POLICIES
Each Portfolio of the Fund has different general investment objectives,
which are described below, and different rates of portfolio turnover. The rate
of portfolio turnover, however, 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 and business conditions. 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 the State Street Research Growth,
State Street Research Income, State Street Research Diversified, State Street
Research Aggressive Growth, MetLife Stock Index, and GFM International Stock
Portfolios are set forth in the Financial Highlights. It is estimated that the
annual portfolio turnover will be approximately 60% for the Loomis Sayles High
Yield Bond Portfolio, will be between 120% and 125% for the Janus Mid Cap
Portfolio, will be approximately % for the T. Rowe Price Small Cap Growth
Portfolio and will be approximately 50% or less for the Scudder Global Equity
Portfolio.
Also, the Fund intends to comply with the various requirements of the
Internal Revenue Code so as to qualify as a "regulated investment company"
thereunder. (See "Dividends, Distributions and Taxes.") Among such
requirements is a limitation that less than 30% of the amount of gross income
which each Portfolio may derive from gain on the sale or other disposition of
instruments may be with respect to instruments held for less than three
months. Accordingly, the ability of any Portfolio to effect certain short-term
portfolio transactions may be limited. The Fund also intends to comply with
the diversification requirements of the Internal Revenue Code (see "Taxes" in
the Statement of Additional Information).
Each Portfolio which invests in equity securities may invest up to 10% of
its total assets in shares of other investment companies (up to 5% of which
may be invested in any single investment company), including unit investment
trusts that issue shares representing separate rights to capital appreciation
and dividends in respect of the common stock of various issuers. Such
investments may in effect include the payment of duplicative management or
other fees. Other limitations may apply (see "Certain Investment Limitations"
in the Statement of Additional Information).
Since investment involves both opportunities for gain and risks of loss, no
assurance can be given that the Portfolios will achieve their objectives.
Contract owners should carefully review the objectives and policies of the
Portfolios and consider their ability to assume the risks involved before
purchasing a Contract and allocating amounts thereunder to particular
Portfolios.
The prices of the types of securities usually purchased for the State Street
Research Growth, State Street Research Aggressive Growth, MetLife Stock Index,
GFM International Stock, Loomis Sayles High Yield Bond, T. Rowe Price Small
Cap Growth, Janus Mid Cap and Scudder Global Equity Portfolios and, to some
extent, for the State Street Research Diversified Portfolio tend to fluctuate
more than the prices of the securities usually purchased for the State Street
Research Income Portfolio or the MetLife Money Market Portfolio. Therefore,
the net asset value of these first nine Portfolios may experience greater
short-term and long-term variations than the last two listed Portfolios.
While certain of the investment techniques, instruments and risks associated
with each Portfolio are included in the discussion that follows, further
information on these subjects appears under the headings "Fundamental
Investment Policies" and "Certain Investment Practices" in this Prospectus.
State Street Research Growth Portfolio
The State Street Research Growth Portfolio seeks long-term growth of capital
and income, and moderate current income. The State Street Research Growth
Portfolio will seek to achieve a superior overall return, while at the same
time attempting to minimize the effects of significant stock market declines.
It is anticipated that there will be a mix of assets in the State Street
Research Growth Portfolio. A portion of the State Street Research Growth
Portfolio may be invested in equity securities of good quality and in well-
established companies where the stock price is considered to represent good
value, based on factors including historical investment standards, such as
price/book value ratios and price/earnings ratios. Another portion of the
State Street Research Growth Portfolio may be invested in smaller emerging
growth companies. These are companies that are in the development stage of
their life cycles and that are expected to achieve above-average earnings
growth. Typically, these companies are benefiting from new developments in
advanced technology or are providing new products and services to consumers. A
third portion of the State Street Research Growth Portfolio may be held in
short-term fixed income investments.
The mix of assets in the State Street Research Growth Portfolio will vary
with prevailing economic and
PROSPECTUS 6
<PAGE>
...............................................................
market conditions. Consequently, the three portions of the State Street
Research Growth Portfolio's assets will not be invested in any specified
proportions. Generally, the greater portion of assets will be invested in
equity securities of established companies. Up to 25% of the assets may be
invested in securities convertible into common stocks. The State Street
Research Growth Portfolio may acquire convertible securities and warrants.
Investments in relatively smaller companies involve greater risk than is
customarily associated with more established companies. These risks are
discussed below under "State Street Research Aggressive Growth Portfolio."
However, the State Street Research Growth Portfolio will endeavor to control
risk by investing in a diversified group of companies and industries. The
State Street Research Growth Portfolio will also seek to shift funds into
short-term instruments of the type described in the first paragraph under
"MetLife Money Market Portfolio" for defensive purposes in periods of adverse
market conditions and in periods when short-term rates appear more attractive
than prospective equity returns.
State Street Research Income Portfolio
The primary investment objective of the State Street Research Income
Portfolio is to achieve the highest possible total return, by combining
current income with capital gains, consistent with prudent investment risk. An
additional objective is preservation of capital. In seeking to achieve these
objectives, the Portfolio will invest at least 75% of the value of its assets
in straight debt securities which have a rating within the three highest
grades as determined by Standard & Poor's Ratings Group (Standard & Poor's) or
Moody's Investor Services Inc. (Moody's). (See "Investment Practices and
Policies" in the Statement of Additional Information for a discussion of these
ratings.) In the event that securities held by the Portfolio fall below those
ratings, the Portfolio will not be obligated to dispose of such securities and
may continue to hold such securities if, in the opinion of Metropolitan Life
or State Street Research, such investment is considered appropriate under the
circumstances.
From time to time, up to 25% of the State Street Research Income Portfolio's
total assets may be invested in straight debt securities which are not rated
within the three highest grades of Standard & Poor's or Moody's as described
above, or in convertible debt securities, convertible preferred and preferred
stocks of companies, the senior securities of which have a rating within the
three highest grades of Standard & Poor's or Moody's applicable to such
securities. Debt securities within the top credit categories (i.e., rated AAA,
AA or A by Standard & Poor's or Aaa, Aa or A by Moody's) comprise what are
generally known as high-grade bonds. Medium-grade bonds (i.e., rated BBB by
Standard & Poor's or Baa by Moody's) lack outstanding investment
characteristics and also have speculative characteristics, but are regarded as
having an adequate capacity to pay principal and interest, although adverse
economic conditions or changing circumstances are more likely to lead to a
weakening of such capacity than that for higher grade bonds. Such debt
securities, as well as those in higher grade categories, are generally known
as investment grade securities. A discussion of the characteristics of and
risks of investing in securities that are less than investment grade is
included below under "Loomis Sayles High Yield Bond Portfolio."
During the period January 1, 1996 to December 31, 1996, the percentage of
the State Street Research Income Portfolio's total investments on an average
annual basis invested in securities of each rating category was as follows:
% in securities rated AAA or its equivalent, % in securities rated AA or
its equivalent, % in securities rated A or its equivalent, % in securities
rated BBB or its equivalent, % in securities rated BB or its equivalent, %
in securities rated B or its equivalent, and % in securities rated CCC or
its equivalent on a dollar weighted basis. The above percentages reflect
ratings as of the time of purchase and subsequent changes, if any, including
downgrades, for the period the securities were held. Of these securities, 100%
were rated by a nationally recognized statistical rating organization
("NRSRO"). If at any time the State Street Research Income Portfolio purchases
unrated investments, such investments would be purchased only if considered by
the Fund's Board of Directors to be of comparable quality to the portfolio
investments rated by an NRSRO.
The maturity of debt securities is considered long (ten years or more),
intermediate (one to ten years), or short-term (twelve months or less). The
proportion invested by the Portfolio in each category will generally vary
depending upon an analysis of market values and trends by State Street
Research.
The State Street Research Income Portfolio will be subject to market risks
resulting from changes in interest rates. However, the Portfolio's emphasis on
high-grade bonds should, overall, minimize the financial risks of its
investments. Moreover, the State Street Research Income Portfolio may forego
attempting to achieve the highest levels of income in the short term in order
to limit risk of loss.
The State Street Research Income Portfolio will not directly purchase common
stocks or warrants. However,
PROSPECTUS 7
<PAGE>
...............................................................
it may retain up to 10% of the value of its total assets in common stocks
acquired either by conversion of fixed income securities or by the exercise of
warrants attached thereto.
When prevailing market or economic conditions warrant, a portion of the State
Street Research Income Portfolio may be invested in short-term instruments of
the type described in the first paragraph under "MetLife Money Market
Portfolio" below, to effectively utilize cash reserves.
MetLife Money Market Portfolio
The investment objective of the MetLife Money Market Portfolio is to achieve
the highest possible current income consistent with preservation of capital and
maintenance of liquidity, by investing primarily in short-term money market
instruments. The MetLife Money Market Portfolio will invest in short-term
United States government securities, government agency securities, bank
certificates of deposit and bankers' acceptances, short-term corporate debt
securities (such as commercial paper), variable amount master demand notes and
repurchase and reverse repurchase agreements. The types of money market
instruments in which the MetLife Money Market Portfolio may invest are
described more fully in "Investment Practices and Policies," in the Statement
of Additional Information.
The MetLife Money Market Portfolio will limit its investments to securities
that are determined to have "minimal credit risks" and that are "Eligible
Securities." Eligible Securities have a remaining maturity at the time of
purchase of not more than thirteen months. They are rated in one of the two
highest rating categories by at least two NRSROs (or by the only NRSRO that has
rated the security), or, if unrated, are of comparable quality. The MetLife
Money Market Portfolio will not invest more than five percent of its assets in
Eligible Securities which are not rated in the highest short-term rating
category by at least two NRSROs (or by the only NRSRO that has rated the
instrument), or comparable unrated securities ("Second Level Securities").
In addition to the requirements set forth in fundamental investment policy
number 1 under "Investment Practices and Policies" in the Statement of
Additional Information, the MetLife Money Market Portfolio generally will not
invest more than five percent of its assets in the securities of any one
issuer, excluding United States government securities, measured at the time of
purchase. Moreover, the Portfolio will invest no more than the greater of (i)
one percent of its assets and (ii) one million dollars, in the Second Level
Securities of any one issuer. Finally, the Portfolio will maintain a dollar
weighted average maturity of not more than ninety days.
The value of the securities in the MetLife Money Market Portfolio can be
expected to vary inversely with the changes in prevailing interest rates. Thus,
if interest rates increase after a security is purchased, that security, if
sold, might be sold at less than cost. Conversely, if interest rates decline
after purchase, the security, if sold, might be sold at a profit. In either
instance, if the security were held to maturity, no gain or loss would normally
be realized as a result of these fluctuations. Substantial redemptions of
shares of the MetLife Money Market Portfolio could require the sale of
portfolio investments at a time when a sale might not be desirable.
State Street Research Diversified Portfolio
The investment objective of the State Street Research Diversified Portfolio
is to achieve a high total return while attempting to limit investment risk and
preserve capital by investing in equity securities, fixed-income debt
securities, or short-term money market instruments, or any combination thereof,
at the discretion of State Street Research. State Street Research will manage
the investments of the Portfolio as if they constituted the complete investment
program of an investor. It is anticipated that State Street Research will vary
the portion of the State Street Research Diversified Portfolio's assets
invested in each type of security after considering economic conditions, the
general level of common stock prices, interest rates, and other relevant
considerations, including the risks of each type of security. The equity
securities portion of the Portfolio will be similar in composition to and
consist of securities that are permissible investments for the State Street
Research Growth Portfolio, the fixed-income debt securities portion will be
similar in composition to and consist of securities that are permissible
investments for the State Street Research Income Portfolio, and the short-term
money market instruments portion will consist of securities of a type described
in the first paragraph under "MetLife Money Market Portfolio" above.
There are no limitations with respect to the percent of the assets of the
State Street Research Diversified Portfolio that may be invested in each of the
three portions described above. Thus, from time to time it may invest entirely
in equity securities, entirely in fixed-income debt securities, entirely in
short-term money market instruments, or any combination of these types of
securities in accordance with the full, complete and total discretion of State
Street Research, subject to the oversight of Metropolitan Life and the Board of
Directors of the Fund.
The State Street Research Diversified Portfolio seeks to reduce the need of
an investor in the Fund to
PROSPECTUS 8
<PAGE>
...............................................................
consider in which of several types of investments various amounts of his or
her monies should be invested, depending on the current economic environment.
This difficult task depends on the ability to select appropriate investments
at the appropriate time in light of anticipated changes in market conditions.
The State Street Research Diversified Portfolio also is designed to reduce the
risks associated with investments in any one type of security by utilizing a
variety of investments. However, the performance of the Portfolio will depend
upon State Street Research's judgment and ability to structure the investments
in the Portfolio to maximize return in anticipation of changing market
conditions. Obviously, there is no assurance that such goals will be achieved.
State Street Research Aggressive Growth Portfolio
The primary investment objective of the State Street Research Aggressive
Growth Portfolio is to achieve maximum capital appreciation by investing
primarily in common stocks (and equity and debt securities convertible into or
carrying the right to acquire common stocks) of emerging growth companies,
undervalued securities or special situations. Current income is not a
consideration in the selection of investments for the Portfolio.
State Street Research considers emerging growth companies to be less mature
companies that are growing substantially faster than the overall U.S. economy.
The Portfolio will invest in those emerging growth companies believed to offer
appreciation potential greater than the stock market as a whole. State Street
Research considers securities to be undervalued or to be special situations
when, for example, the stock of larger and more mature companies trade at
prices below what State Street Research believes to be the companies'
intrinsic value, and therefore offer the potential for above-average
investment returns. State Street Research also seeks to identify securities
that are undervalued due to adverse operating results, economic or industry
conditions or unfavorable publicity. Securities are selected for the State
Street Research Aggressive Growth Portfolio based on a continuous study of
trends in industries and companies, earning power, growth features and other
investment criteria.
The State Street Research Aggressive Growth Portfolio may not be suitable
for all investors because of the risks described below. Investing in stocks of
companies that offer high appreciation potential involves greater risk than is
customarily associated with investing in more established companies.
Investment in relatively less mature companies involves certain risks since
such companies often have limited product lines, markets or financial
resources, and their management may lack depth of experience. The common
stocks of less mature companies frequently are traded only on smaller
securities exchanges or in the over-the-counter market. Therefore, the
securities of smaller companies may have limited marketability and may be
subject to more abrupt or erratic market movements than securities of larger
companies or the market averages in general. The State Street Research
Aggressive Growth Portfolio will also seek to shift funds into short-term
instruments of the type described in the first paragraph under "MetLife Money
Market Portfolio" for defensive purposes in periods of adverse market
conditions and in periods when short-term rates appear more attractive than
prospective equity returns.
MetLife Stock Index Portfolio
The investment objective of the MetLife Stock Index Portfolio is to equal
the performance of the Standard & Poor's 500 Composite Stock Price Index ("S&P
Index") (adjusted to assume reinvestment of dividends) by investing in the
common stock of companies which are included in the S&P Index. The S&P Index
consists of 500 common stocks, most of which are listed on the New York Stock
Exchange. In choosing the 500 stocks which are included in the S&P Index,
Standard & Poor's Equity Services considers market values and industry
diversification. Most of the stocks in the S&P Index are issued by companies
among the largest, in terms of the aggregate market value of their outstanding
stock, measured by the market price per share multiplied by the number of
shares outstanding. Stocks that are not among the five hundred largest are
included in the S&P Index for diversification purposes. Standard & Poor's
Equity Services may, from time to time, add or remove stocks from the S&P
Index. Standard & Poor's Equity Services is not a sponsor of, or in any other
way affiliated with, the Fund.
The MetLife Stock Index Portfolio attempts to duplicate the total return of
the S&P Index while maintaining low transaction costs. The Portfolio will
invest in equity securities that, as a group, reflect the composite
performance of the S&P Index based on a computer program that tracks the
performance of the various stocks in the S&P Index. As is the case with the
S&P Index, the Portfolio will invest in both dividend paying and non-dividend
paying common stocks. The Portfolio may not own, at the same time, each
individual stock in the S&P Index. The Portfolio, upon commencement of
operations, held about 350 of the stocks included in the S&P Index. Since the
commencement of operations, the number has increased to include approximately
470 stocks included
PROSPECTUS 9
<PAGE>
...............................................................
in the S&P Index as the Portfolio has grown in total assets. As the total
assets in the Portfolio continue to increase it is possible that the number of
stocks held by the Portfolio may also increase to include all 500 stocks
included in the S&P Index.
The MetLife Stock Index Portfolio uses a correlation coefficient to measure
the relationship between the performance of the Portfolio and the S&P Index. A
perfect correlation would produce a coefficient of 1.00 which would be achieved
when the Portfolio's net asset value, including the value of its dividends,
increases or decreases in exact proportion to the change in the S&P Index. The
Portfolio will attempt to maintain a target correlation coefficient of at least
.95. If this target is in danger of not being achieved, the components of total
return of both the Portfolio and the S&P Index would be broken down to
determine the source of the difference so that corrective steps could be taken.
The Portfolio may also diversify differently by industry segment (such as
automotive industry, airline industry, electronics industry) than does the S&P
Index. It is expected that initially approximately 60% of the assets in the
Portfolio will be allocated based on a simple capitalization basis, with the
remaining assets allocated on an industry weighted basis. The Portfolio will be
rebalanced only if it deviates from the appropriate weightings by a certain
percent depending on the particular stock or industry. The Portfolio will not
purchase any common stock that is not included in the S&P Index.
Under normal circumstances, at least 75% of the total assets of the Portfolio
will be common stocks included in the S&P Index. (Circumstances that would not
be considered normal include an unusual cash flow pattern such as an
unexpectedly large inflow of cash which the portfolio manager is unable to
invest quickly and completely in such stocks because of the amount of the cash,
or a major catastrophe like atomic war or a natural disaster which prevents
investment in common stocks.) A portion of the Portfolio may temporarily be
invested in short-term investments of the type described in the first paragraph
under "MetLife Money Market Portfolio", pending withdrawal or investment.
The MetLife Stock Index Portfolio will not utilize a defensive investment
approach in periods of adverse market conditions such as generally declining
stock prices. Therefore, an investor participating in the Portfolio bears the
risk of such adverse market conditions. The Portfolio's return may be lower
than the return of the S&P Index because of brokerage and other transaction
costs, other Portfolio or Fund expenses, and tracking error.
The MetLife Stock Index Portfolio will not trade in securities for short-term
profits. Generally, the Portfolio will only trade securities to reflect changes
in the S&P Index or to carry out appropriate rebalancing for diversification
purposes or to more closely track the return of the S&P Index.
GFM International Stock Portfolio
The investment objective of the GFM International Stock Portfolio is to
achieve long-term growth of capital by investing primarily in common stocks and
equity-related securities of non-United States ("U.S.") companies. Non-U.S.
companies for these purposes are companies domiciled outside the United States.
Current income is not a specific prerequisite in the selection of portfolio
securities. Management will measure long-term growth in U.S. dollars. To
achieve its objective, the GFM International Stock Portfolio will, under normal
circumstances, invest at least 65% of its net assets in common stocks and
equity-related securities of established larger capitalization non-U.S.
companies having attractive long-term prospects for growth of capital. Equity-
related securities in which the Portfolio may invest include: preferred stocks,
securities convertible into or exchangeable for common stocks, and warrants. Up
to 25% of the assets may be invested in securities convertible or exchangeable
into common stocks. See "Other Investment Practices--Convertible Securities and
Warrants" for a discussion of convertible securities. The GFM International
Stock Portfolio may also invest up to 5% of its net assets in common stocks and
equity-related securities of smaller capitalization emerging growth companies
that GFM expects will achieve above-average long-term earnings growth. The GFM
International Stock Portfolio may also acquire privately placed equity
securities, limited to 5% of the Portfolio's net assets. The foregoing
percentage limitations are as of the time of investment.
Although the GFM International Stock Portfolio will be primarily invested in
common stocks and equity-related securities of non-U.S. companies, to the
extent it is not so invested, it may be invested in other types of securities,
including: (i) high and medium quality debt securities of domestic and non-U.S.
issuers rated at least Baa or its equivalent by an NRSRO or, if unrated, of
comparable investment quality as determined by GFM and (ii) high-quality
domestic and non-U.S. money market instruments, including repurchase agreements
with non-U.S. banks and broker-dealers and "synthetic" money market positions.
See "Other Investment Practices" for information concerning repurchase
agreements and synthetic money market positions. Under normal market and
economic conditions, the
PROSPECTUS 10
<PAGE>
...............................................................
Portfolio intends to invest primarily in non-U.S. equity and debt securities.
Nevertheless, if current or anticipated political, market, or economic
conditions warrant, the Portfolio may for temporary or defensive purposes
invest in domestic money market instruments, debt securities, and equity
securities without limitation.
The common stocks and equity-related securities purchased by the GFM
International Stock Portfolio are generally expected to be traded on a non-U.S.
stock exchange or on an established over-the-counter market. The Portfolio will
also invest in common stocks and equity-related securities of non-U.S.
companies through the purchase of American Depository Receipts ("ADRs"),
European Depository Receipts ("EDRs"), and International Depository Receipts
("IDRs"). See "Foreign Securities" for a further discussion of these
investments.
The GFM International Stock Portfolio intends to invest primarily in
securities denominated in currencies other than the U.S. dollar, may
temporarily hold funds in bank deposits or money market investments denominated
in non-U.S. currencies, and may receive interest, dividends, and sale proceeds
in non-U.S. currencies. As a result, the Portfolio will engage in currency
exchange transactions to convert currencies to or from U.S. dollars. These
currency transactions may be on a spot (i.e., cash) basis at the spot rate
prevailing in the non-U.S. exchange market. To reduce risks associated with
currency fluctuations, the Portfolio may also enter into forward foreign
currency exchange contracts to purchase or sell selected currencies, may write
covered put and call options on selected currencies, may purchase put or call
options on selected currencies, may sell or purchase currency futures
contracts, and may sell or purchase put or call options on currency futures
contracts. Such transactions will be used for hedging purposes or to earn
additional income, but in no event for leveraging purposes. See "Other
Investment Practices" for information concerning these investment techniques
and the manner in which they may be used by the Portfolio.
Loomis Sayles High Yield Bond Portfolio
The Loomis Sayles High Yield Bond Portfolio investment objective is to
achieve high total investment return through a combination of current income
and capital appreciation. The Portfolio will normally invest at least 65% of
its assets in fixed income securities of below investment grade quality, which
are securities rated below BBB by Standard & Poor's or below Baa by Moody's,
including securities in the lowest rating categories, and unrated securities
that Loomis Sayles determines to be of comparable quality (commonly referred to
as "junk bonds").
The Portfolio seeks to attain its objective by normally investing
substantially all of its assets in debt securities, although up to 20% of its
assets at the date of investment may be invested in preferred stocks and up to
10% of its assets in common stocks. The Portfolio may also invest in
convertible bonds, when-issued securities, collateralized mortgage obligations
("CMOs"), zero coupon securities and Rule 144A securities. The Portfolio may
invest any portion of its assets in securities of Canadian issuers and up to
50% of its assets at the date of investment in the securities of other foreign
issuers. The Portfolio may purchase securities on a "when issued" basis and may
enter into interest rate, currency and index swaps.
A security will be treated as being of investment grade quality if at the
time the Portfolio acquires it at least one major rating agency has rated the
security in its top four rating categories (even if another such agency has
issued a lower rating), or if the security is unrated but Loomis Sayles
determines it to be of investment grade quality. Lower rated fixed income
securities generally provide higher yields, but are subject to greater credit
and market risk, than higher quality fixed income securities. Lower rated fixed
income securities are considered predominantly speculative with respect to the
ability of the issuer to meet principal and interest payments. Achievement of
the investment objective of the Portfolio investing in lower rated fixed income
securities may be more dependent on the sub-investment manager's own credit
analysis than is the case with higher quality bonds. The market for lower rated
fixed income securities may be more severely affected than some other financial
markets by economic recession or substantial interest rate increases, by
changing public perceptions of this market or by legislation that limits the
ability of certain categories of financial institutions to invest in these
securities. In addition, the secondary market may be less liquid for lower
rated fixed income securities. This lack of liquidity at certain times may
affect the values of these securities and may make the valuation and sale of
these securities more difficult. Securities in the lowest rating categories may
be in poor standing or in default. Securities in the lowest investment grade
category (BBB or Baa) have some speculative characteristics. For more
information about the ratings services' descriptions of the various rating
categories, see "Investment Practices and Policies" in the Statement of
Additional Information.
The Loomis Sayles High Yield Bond Portfolio may invest in asset-backed
securities. Through the use of trusts and special purpose corporations,
automobile and credit card receivables are securitized in structures similar to
mortgage-related security structures. Generally, the issuers of asset-backed
securities are
PROSPECTUS 11
<PAGE>
...............................................................
special purpose entities and do not have any significant assets other than the
receivables securing such obligations. In general, the collateral supporting
asset-backed securities is of shorter maturity than mortgage loans. Instruments
backed by pools of receivables are similar to mortgage-related securities in
that they are subject to unscheduled prepayments of principal prior to
maturity. This creates risks that are of the same type described with respect
to the prepayment feature of mortgage-related securities under "Other
Investment Practices--Mortgage-Related Securities". When the obligations are
prepaid, the Portfolio will ordinarily reinvest the prepaid amounts in
securities the yields of which reflect interest rates prevailing at the time.
Therefore, a Portfolio's ability to include high-yielding asset-backed
securities will be adversely affected to the extent that prepayments of
principal must be reinvested in securities that have lower yields than the
prepaid obligations. Moreover, prepayments of securities purchased at a premium
could result in a realized loss.
The maturity of debt securities is considered long (ten years or more),
intermediate (one to ten years), or short-term (twelve months or less). The
proportion invested by the Portfolio in each category will generally vary
depending upon an analysis of market values and trends by Loomis Sayles. The
Portfolio will be subject to market risks resulting from changes in interest
rates. When prevailing market or economic conditions warrant, a portion of the
Portfolio may be invested in short-term instruments of the type described in
the first paragraph under "MetLife Money Market Portfolio" above, to
effectively utilize cash reserves.
T. Rowe Price Small Cap Growth Portfolio
The investment objective of the T. Rowe Price Small Cap Growth Portfolio is
to achieve long-term capital growth by investing in small growth companies.
The Portfolio invests in stocks of a diversified group of small companies
expected to increase earnings per share at a rate in excess of that achieved by
the overall market. These are companies in the development stage of their
corporate life cycle, yet have demonstrated or are expected to achieve long-
term earnings growth which generally reaches new highs per share during each
major business cycle. The Portfolio normally will invest at least 65% of its
total assets in small companies, as classified at the time of purchase. Small
companies are defined as those whose market capitalization would place them in
the bottom 10% of the S&P 500, which includes companies with capitalizations
approximately less than $1.5 billion. This range is expected to change on a
regular basis. Subject to the above policy, the Portfolio may also invest in
larger issues.
Small companies may offer greater potential for capital appreciation since
they are often overlooked or undervalued by investors. Small-capitalization
stocks are less actively followed by stock analysts than are larger-
capitalization stocks, and less information is available to evaluate small-cap
stock prices. As a result, compared with larger-capitalization stocks, there
may be greater variations between the current stock price and the estimated
underlying value, which could represent greater opportunity for appreciation.
On the other hand, investing in small companies involves greater risk than is
customarily associated with more established companies. Such risks of investing
in less mature companies are described above under "State Street Research
Aggressive Growth Portfolio."
T. Rowe Price uses a combination of fundamental research and quantitative
strategies to select stocks and assemble the overall portfolio. A key part of
the process is the analysis of a set of competitive mutual funds which have a
history of investing in the small growth style. Based on this analysis,
quantitative procedures are used to construct decision rules which can be used
to score companies regarding their suitability for the Portfolio. Other factors
include fundamental analysis of the companies' prospectuses, potential for
positive new information about the company, and the valuation of the stock. By
helping to identify new companies for the portfolio, identifying risks in the
Portfolio's holdings and otherwise supplementing the quantitative decision
rules, T. Rowe Price research analysts play an important role in stock
selection for the Portfolio. Generally the Portfolio will be very well
diversified, containing more than 250 securities when it reaches sufficient
asset size.
Although the Portfolio may hold significant positions in cash or other short-
term securities for defensive purposes, it is expected that under most
conditions it will remain primarily invested in equity or equity-like
securities.
Although the Portfolio will invest primarily in U.S. common stocks, it may
also purchase other types of securities, for example, foreign securities,
convertible securities, fixed income securities of all kinds (without regard to
quality or rating), and warrants when considered consistent with the
Portfolio's investment objective and program. T. Rowe Price may also engage in
a variety of investment management practices such as buying and selling futures
and options and investing in any type of security or instrument (including
certain potentially high-risk derivatives) whose investment characteristics are
consistent with the Portfolio's investment program. The Portfolio may also
invest in private placements.
PROSPECTUS 12
<PAGE>
....................................................
The Portfolio will hold a certain portion of its assets in U.S. and foreign
dollar-denominated money market securities, including repurchase agreements, in
the two highest rating categories, maturing in one year or less. For temporary,
defensive purposes, the Portfolio may make investment without limitation in
such securities. This reserve position provides flexibility in meeting
redemptions, expenses and the timing of new investments and serves as a short-
term defense during periods of unusual market volatility.
The Portfolio observes the following operating policies: (1) the Portfolio
may invest up to 20% of its total assets (excluding cash reserves) in foreign
securities; (2) the Portfolio will not purchase a noninvestment-grade debt
security if immediately after such purchase the Portfolio would have more than
5% of its total assets invested in such securities; (3) with respect to options
on securities, the total market value of securities against which the Portfolio
has written call or put options may not exceed 25% of its total assets; and (4)
the Portfolio will not commit more than 5% of its total assets to premiums when
purchasing call or put options. The foregoing percentages are determined at the
time of initial investment.
Janus Mid Cap Portfolio
The Janus Mid Cap Portfolio is a non-diversified portfolio whose investment
objective is to provide long-term growth of capital. It pursues this objective
by investing primarily in securities issued by medium-sized companies. The
Portfolio will normally invest at least 65% of its assets in securities issued
by medium-sized companies. Medium-sized companies are those whose market
capitalizations fall within the range of companies in the S&P MidCap 400 Index
(the "S&P MidCap"). Companies whose capitalization falls outside this range
after the Portfolio's initial purchase continue to be considered medium-sized
companies for purposes of this policy. As of December 31, 1995, the S&P MidCap
included companies with capitalizations between approximately $118 million to
$7.5 billion. The range of the S&P MidCap is expected to change on a regular
basis. Subject to the above policy, the Portfolio may also invest in smaller or
larger issuers.
The Janus Mid Cap Portfolio is a non-diversified portfolio. Diversification
is a means of reducing risk by investing assets in a broad range of stocks or
other securities. A "non-diversified" portfolio has the ability to take larger
positions in a smaller number of issuers. Because the appreciation or
depreciation of a single stock may have a greater impact on the net asset value
of a non-diversified portfolio, its share price can be expected to fluctuate
more than a comparable diversified portfolio.
Medium-sized companies may suffer more significant losses as well as realize
more substantial growth than larger capitalized, more established issuers.
Thus, investments in such companies tend to be more volatile and somewhat
speculative.
The Portfolio invests primarily in common stocks selected for their growth
potential. The Portfolio may invest to a lesser degree in other types of
securities, including preferred stock, warrants, convertible securities and
debt securities. The Portfolio may invest substantially all of its assets in
common stock to the extent Janus believes that the relevant market environment
favors profitable investing in those securities. The Portfolio manager
generally takes a "bottom up" approach to building the Portfolio. In other
words, the manager seeks to identify individual companies with earnings growth
potential that may not be recognized by the market at large. Although themes
may emerge in the Portfolio, securities are generally selected without regard
to any defined industry sector or other similarly defined selection procedure.
Realization of income is not a significant investment consideration. Any income
realized on the Portfolio's investments will be incidental to its objective.
The Portfolio may also purchase securities of foreign issuers pursuant to the
same selection criteria applicable to domestic issuers. In addition, factors
such as expected levels of inflation, government policies influencing business
conditions, the outlook for currency relationships, and prospects for relative
economic growth among countries, regions or geographic areas may warrant
greater consideration in selecting foreign stocks. If appropriate, the
Portfolio may purchase foreign securities through dollar-denominated ADRs,
which do not involve the same direct currency and liquidity risks as securities
denominated in foreign currency and which are issued by domestic banks and
publicly traded in the United States, as well as EDRs and Global Depository
Receipts ("GDRs").
The Portfolio may invest in "special situations" from time to time. A special
situation arises when it is believed that the securities of a particular
company will be recognized and appreciate in value due to a specific
development at that company. Developments creating a special situation might
include a new product or process, a management change or a technological
breakthrough. Investment in special situations may carry an additional risk of
loss in the event that the anticipated development does not occur or does not
result in the anticipated economic impact on the value of a company's
securities.
The Portfolio may enter into futures contracts on securities, financial
indices and foreign currencies and
PROSPECTUS 13
<PAGE>
................................................................
options on such contracts and may invest in options on securities, financial
indices and foreign currencies including "over the counter" options, forward
contracts and interest rate swaps and swap-related products. The Portfolio
intends to use most derivative instruments primarily to hedge the value of its
security holdings against potential adverse movements in securities prices,
foreign currency markets or interest rates. To a limited extent, the Portfolio
may also use derivative instruments for non-hedging purposes such as seeking
to increase the Portfolio's income or otherwise seeking to enhance return.
The use of futures, options, forward contracts and swaps exposes the
Portfolio to additional investment risks and transaction costs. (See "Writing
Covered Put and Call Options and Purchasing Put and Call Options," "Futures
Contracts and Options on Futures Contracts," and "Foreign Currency Exchange
Contracts" below under "Other Investment Practices.")
Although the Portfolio will normally invest primarily in equity securities,
it may increase its cash position when investment opportunities believed to
have desirable risk/reward characteristics cannot be located. The Portfolio
may also invest in preferred stocks, warrants, government securities,
corporate bonds and debentures, high-grade commercial paper, certificates of
deposit or other debt securities when it is believed there is an opportunity
for capital growth for such securities or so that the Portfolio may receive a
return on idle cash. When the Portfolio invests in such securities, investment
income will increase and may constitute a large portion of the return on the
Portfolio. Consequently, the Portfolio may not participate in market advances
or declines to the extent that it would if it remained fully invested in
common stocks.
The Portfolio may also invest overnight in money market funds including
those managed by Janus, for defensive purposes or as a means of receiving a
return on idle cash. This will not result in any additional charges to the
Portfolio. Pursuant to an exemptive order granted by the Securities and
Exchange Commission ("SEC"), the Janus Mid Cap Portfolio and other funds
advised by Janus may also transfer daily uninvested cash balances into one or
more joint trading accounts. Assets in the joint trading accounts are invested
in money market instruments and the proceeds are allocated to the
participating funds on a pro rata basis.
Scudder Global Equity Portfolio
The investment objective of the Scudder Global Equity Portfolio is to
achieve long-term growth of capital through a diversified portfolio of
marketable securities, primarily equity securities, including common stocks,
preferred stocks and debt securities convertible into common stocks. The
Portfolio invests on a worldwide basis in equity securities of companies which
are incorporated in the U.S. or in foreign countries. It also may invest in
the debt securities of U.S. and foreign issuers. Income is an incidental
consideration.
The Portfolio invests in companies that Scudder believes will benefit from
global economic trends, promising technologies or products and specific
country opportunities resulting from changing geopolitical, currency or
economic relationships. It is expected that investments will be spread broadly
around the world. The Portfolio will be invested usually in securities of
issuers located in at least three countries, one of which may be the U.S. The
Portfolio may be invested 100% in non-U.S. issues, and for temporary defensive
purposes may be invested 100% in U.S. issues, although under normal
circumstances it is expected that both foreign and U.S. investments will be
represented in the Portfolio. It is expected that investments will include
companies of varying size as measured by assets, sales or capitalization.
The Portfolio generally invests in equity securities (primarily common
stock) of established companies listed on U.S. or foreign securities
exchanges, but also may invest in securities traded over-the-counter. It also
may invest in debt securities convertible into common stock and convertible
and non-convertible preferred stock, and fixed income securities (including
fixed-income securities of governments, government agencies and supranational
agencies) when Scudder believes the potential for appreciation will equal or
exceed that available from investments in equity securities. These debt and
fixed-income securities will be predominantly investment-grade securities,
that is, those rated Aaa, Aa, A or Baa by Moody's or AAA, AA, A or BBB by S&P
or those of equivalent quality as determined by Scudder. The Portfolio may not
invest more than 5% of its total assets in debt securities rated, at the time
of investment, Baa or below by Moody's, or BBB or below by S&P or deemed by
Scudder to be of comparable quality. The lower the quality of such debt
securities, the more their risks render them like equity securities. The
Portfolio may invest in securities which are rated as low as C by Moody's or D
by S&P at the time of purchase. Such securities may be in default with respect
to payment of principal or interest. (See "Investment Practices and Policies"
in the Statement of Additional Information for a discussion of these ratings).
Fixed-income securities also may be held for temporary defensive purposes
when Scudder believes market conditions so warrant and for temporary
PROSPECTUS 14
<PAGE>
...............................................................
investment. Similarly, the Portfolio may invest in cash equivalents (including
foreign money market instruments, such as bankers' acceptances, certificates
of deposit, commercial paper, short-term government and corporate obligations
and repurchase agreements) for temporary defensive purposes and for liquidity.
The Portfolio may invest in closed-end investment companies holding foreign
securities.
The Portfolio is designed for long-term investors who can accept
international investment risk. Since the Portfolio normally will be invested
in both U.S. and foreign securities markets, changes in the Portfolio's share
price may have a low correlation with movements in the U.S. markets. The
Portfolio's share price will reflect the movements of both the different stock
and bond markets in which it is invested and the currencies in which the
investments are denominated; the strength or weakness of the U.S. dollar
against foreign currencies may account for part of the Portfolio's investment
performance.
The Portfolio may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or fixed-income
market movements), to manage the effective maturity or duration of fixed-
income securities in the Portfolio or to enhance potential gain. These
strategies may be executed through the use of derivative contracts. Such
strategies are generally accepted as a part of modern portfolio management and
are regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Portfolio may
purchase and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currencies or
currency futures. These transactions may be used without limit to attempt to
protect against possible changes in the market value of securities held in or
to be purchased for the Portfolio resulting from securities markets or
currency exchange rate fluctuations, to protect the Portfolio's unrealized
gains in the value of its portfolio securities, to facilitate the sale of such
securities for investment purposes, to manage the effective maturity or
duration of fixed-income securities in the Portfolio, or to establish a
position in the derivatives markets as a temporary substitute for purchasing
or selling particular securities. Some of these transactions may also be used
to enhance potential gain although no more than 5% of the Portfolio's assets,
at the time of investment, will be committed to such transactions entered into
for non-hedging purposes. Any or all of these investment techniques may be
used at any time and in any combination, and there is no particular strategy
that dictates the use of one technique rather than another, as use of any such
transaction is a function of numerous variables including market conditions.
The ability of the Portfolio to utilize these transactions successfully will
depend on the Scudder's ability to predict pertinent market movements, which
cannot be assured.
The Fund may establish other portfolios from time to time.
FUNDAMENTAL INVESTMENT POLICIES
The Fund has adopted the following fundamental policies relating to the
investment of assets of the Portfolios and their activities. Additional
fundamental investment policies are described in the Fund's Statement of
Additional Information at "Investment Practices and Policies." The fundamental
policies discussed below and in the Statement of Additional Information,
unlike the general objectives and policies discussed above, may not be changed
without approval by the requisite vote of the outstanding voting shares of
each Portfolio affected. Unless otherwise indicated, all restrictions apply at
the time of purchase.
No Portfolio may:
1. write call options which are not covered options (see "Writing Covered
Put and Call Options and Purchasing Put and Call Options" under "Other
Investment Practices");
2. (except for the GFM International Stock, Loomis Sayles High Yield Bond,
T. Rowe Price Small Cap Growth, Janus Mid Cap and Scudder Global Equity
Portfolios, which may write covered put options) write put options, except
to close out option positions previously entered into;
3. invest in commodities or commodity contracts, except that: (i) any
Portfolio that invests in equity securities may purchase and sell stock
index futures contracts, may write covered call options and purchase put and
call options on such stock index futures contracts and may enter into
closing
PROSPECTUS 15
<PAGE>
...............................................................
transactions with respect to such options; (ii) all Portfolios may purchase
and sell interest rate futures contracts, may write covered call options and
purchase put and call options on such interest rate futures contracts and
may enter into closing transactions with respect to such options; (iii) all
Portfolios may write covered call options and purchase put and call options
on indices and may enter into closing transactions with respect to such
options, to the extent that investment in a particular index is economically
appropriate for the management of the Portfolio's underlying securities and
consistent with its investment objective(s) and policies; and (iv) the GFM
International Stock, Loomis Sayles High Yield Bond, T. Rowe Price Small Cap
Growth, Janus Mid Cap and Scudder Global Equity Portfolios may purchase and
sell stock index, interest rate, and currency futures contracts, may write
covered put and call options on such futures contracts, may purchase put and
call options on such futures contracts, and may enter into closing
transactions with respect to options on such futures contracts;
4. make loans, provided, however, that this restriction shall not prohibit
a Portfolio from (a) entering into repurchase agreements (see "Investment
Practices and Policies," in the Statement of Additional Information), (b)
purchasing bonds, notes, debentures or other obligations of a character
customarily purchased by institutional or individual investors (whether or
not publicly distributed) and (c) making loans of its portfolio securities
or other assets which do not thereupon cause in excess of 20% (in the case
of the T. Rowe Price Small Cap Growth and the Scudder Global Equity
Portfolios, 33 1/3%, and in the case of the Janus Mid Cap Portfolio, 25%) of
the value of the Portfolio's total assets to consist of loaned securities or
assets (see "Lending of Portfolio Securities" in the Statement of Additional
Information for a discussion of additional risks associated with such
practice); or
5. (except for the GFM International Stock, the T. Rowe Price Small Cap
Growth and the Scudder Global Equity Portfolios, which may invest all of
their assets in securities of foreign issuers, the Loomis Sayles High Yield
Bond Portfolio which may invest all of its assets in securities of Canadian
issuers and up to 50% of its assets in the securities of other foreign
issuers, and the Janus Mid Cap Portfolio which may invest up to 30% of its
total assets at the time of acquisition in foreign securities denominated in
foreign currency and not publicly traded in the United States) purchase
securities of foreign issuers if more than 10% of the value of the
Portfolio's total assets would thereupon be invested in such securities.
However, up to 25% of the value of the Portfolio's total assets may be
invested in securities (i) issued, assumed or guaranteed by foreign
governments, or political subdivisions or instrumentalities thereof,
(ii) assumed or guaranteed by domestic issuers or (iii) issued, assumed or
guaranteed by foreign issuers having a class of securities listed for
trading on the New York Stock Exchange. (See "Foreign Securities" for a
discussion of additional risks associated with such investments.)
OTHER INVESTMENT PRACTICES
Writing Covered Put and Call Options and Purchasing Put and Call Options. In
order to earn additional income or as a hedge against or to minimize
anticipated declines in the value of its securities, each Portfolio may write
(sell) covered call options on securities and stock indices and may purchase
call options to close out covered call options previously entered into. In
addition, to earn additional income, the GFM International Stock, Loomis
Sayles High Yield Bond, T. Rowe Price Small Cap Growth, Janus Mid Cap and
Scudder Global Equity Portfolios may write covered put options on securities
and stock indices and may purchase put options to close out such covered put
options previously written. The GFM International Stock, Loomis Sayles High
Yield Bond, T. Rowe Price Small Cap Growth and Janus Mid Cap Portfolios (in
addition to the Scudder Global Equity Portfolio, but only to the extent
described under "Scudder Global Equity Portfolio," above) also may write
covered call and covered put options on currencies and may purchase call and
put options to close out covered put and covered call options previously
written. These Portfolios may write covered call and covered put options on
currencies to hedge against anticipated declines in the exchange rate of the
currencies in which such Portfolio's securities held or to be purchased are
denominated or to earn additional income for the Portfolio.
As a general matter, a call option gives the holder (purchaser) the right to
buy and obligates the writer (seller) to sell, in return for a premium paid,
the underlying security or currency at the exercise price during the option
period. As a general matter, a put option gives the holder (purchaser) the
right to sell and obligates the writer (seller) to purchase, in return for a
premium paid, the underlying security or currency at the exercise price during
the option period. In economic effect, a stock index call or put option is
similar to an option on a particular security, except that the value of the
option depends on the weighted value of the group of securities comprising the
index, rather than a particular security, and settlements are made in cash
PROSPECTUS 16
<PAGE>
...............................................................
rather than by delivery of a particular security. The Portfolios will write
covered call options only with respect to equity securities, bonds, stock and
bond indices and currencies which correlate with that Portfolio's particular
portfolio securities.
Options written by the Portfolios will be "covered" by segregating liquid
assets with the Fund custodian that at all times at least equal the Fund's
obligations under options it has written, by purchasing an appropriate
offsetting option or other derivative instruments, or (in the case of a call
option written by the Fund) owning the securities or other investments subject
to the options.
Each Portfolio may also purchase put and call options with respect to
securities and indices that correlate with that Portfolio's securities and the
GFM International Stock, Loomis Sayles High Yield Bond, T. Rowe Price Small
Cap Growth, Janus Mid Cap and Scudder Global Equity Portfolios may purchase
put and call options on currencies that correlate with that Portfolio's
investments. A Portfolio may purchase put options for defensive purposes in
order to protect against an anticipated decline in the value of its portfolio
securities or, with respect to the GFM International Stock, Loomis Sayles High
Yield Bond, T. Rowe Price Small Cap Growth, Janus Mid Cap and Scudder Global
Equity Portfolios, the currencies in which its securities are denominated or,
with respect to the Scudder Global Equity Portfolio, the currencies in which
Scudder anticipates its securities may be denominated at some point in the
future (see "proxy hedging" below). As the holder of a put option with respect
to individual securities or currencies, the Portfolio has the right to sell
the securities or currencies underlying the options and to receive a cash
payment at the exercise price at any time during the option period. As the
holder of a put option on an index, the Portfolio has the right to receive,
upon exercise of the option, a cash payment equal to a multiple of any excess
of the strike price specified by the option over the value of the index. A
Portfolio may purchase call options in order to acquire the securities or
currencies underlying the option or, with respect to options on indices, to
receive income equal to the value of such index over the strike price. As the
holder of a call option with respect to individual securities or currencies,
the Portfolio obtains the right to purchase the underlying security or
currency at the exercise price at any time during the option period. With
respect to options on an index, the holder of a call option obtains the right
to receive, upon exercise of the option, a cash payment equal to the multiple
of any excess of the value of the index on the exercise date over the strike
price specified in the option.
The Portfolios will write only covered options that are listed on recognized
securities exchanges except that the Janus Mid Cap Portfolio and the Scudder
Global Equity Portfolio may write "over the counter" covered options. Those
Portfolios may also purchase over-the-counter options. Such over-the-counter
options may be less liquid and more difficult to price than exchange traded
options.
Although these investment practices may be used to generate additional
income and to attempt to reduce the effect of any adverse price movement in
the security or currency subject to the option, they do involve certain risks
that are different in some respects from investment risks associated with
similar funds which do not engage in such activities. These risks include the
following: writing covered call options--the inability to effect closing
transactions at favorable prices and the inability to participate in the
appreciation of the underlying securities or currencies above the exercise
price; writing covered put options--the inability to effect closing
transactions at favorable prices and the obligation to purchase the specified
securities or currencies or to make a cash settlement on the stock index at
prices which may not reflect current market values or exchange rates; and
purchasing put and call options--possible loss of the entire premium paid. In
addition, the effectiveness of hedging through the purchase or sale of index
options will depend upon the extent to which price movements in the portion of
the securities portfolios being hedged correlate with price movements in the
selected index. Perfect correlation may not be possible because the securities
held or to be acquired by a Portfolio may not exactly match the composition of
the index on which options are written. If the forecasts of the manager or a
sub-investment manager, as applicable, regarding movements in securities
prices, interest rates or exchange rates are incorrect, the Portfolio's
investment results may have been better without the hedge. A more thorough
description of these investment practices and their associated risks is
contained in the Fund's Statement of Additional Information.
The options and futures markets of foreign countries are small compared to
those of the United States and consequently are characterized in most cases by
less liquidity than are the U.S. markets. In addition, foreign markets may be
subject to less detailed reporting requirements and regulatory controls than
U.S. markets. Furthermore, investments in options in foreign markets are
subject to many of the same risks as other foreign investments. See "Foreign
Securities" below.
Futures Contracts and Options on Futures Contracts. All the Portfolios
except the MetLife Stock Index Portfolio may purchase and sell futures
contracts on debt securities and indices of debt securities (i.e. interest
rate futures contracts) as a hedge against or to minimize adverse principal
fluctuations resulting from
PROSPECTUS 17
<PAGE>
...............................................................
anticipated interest rate changes or as an efficient means to adjust their
exposure to the bond market. The State Street Research Growth, State Street
Research Diversified, State Street Research Aggressive Growth, MetLife Stock
Index, GFM International Stock, Loomis Sayles High Yield Bond, T. Rowe Price
Small Cap Growth, Janus Mid Cap and Scudder Global Equity Portfolios may, where
appropriate, enter into futures contracts on equity securities or stock indices
to provide a hedge for a portion of that particular Portfolio's equity holdings
or to enhance return. Stock index futures contracts may be used as a way to
implement either an increase or decrease in portfolio exposure to the equity
markets in response to changing market conditions. The GFM International Stock,
Loomis Sayles High Yield Bond, T. Rowe Price Small Cap Growth, Janus Mid Cap
and Scudder Global Equity Portfolios may also purchase and sell currency
futures contracts as a hedge to protect against anticipated changes in currency
rates or as an efficient means to adjust its exposure to the currency market.
Each Portfolio may also write (sell) covered call options on, and purchase
put and call options on, futures contracts of the type which that Portfolio is
permitted to purchase or sell, and may enter into closing transactions with
respect to such options on futures contracts purchased or sold. The GFM
International Stock, T. Rowe Price Small Cap Growth, the Loomis Sayles High
Yield Bond, the Janus Mid Cap and the Scudder Global Equity (except on options
or futures on individual corporate debt or equity) Portfolios may also write
covered put options on such futures contracts and may enter into closing
transactions with respect to such options. In each case, options on futures
contracts will be used only for the same purposes that the Portfolio may use
futures contracts. The Portfolios will not enter into futures contracts or
write options on futures for leveraging purposes and will only enter into
futures contracts or related options that are traded on a recognized futures
exchange. No Portfolio will enter into futures contracts or options thereon if
immediately thereafter the sum of the amounts of initial margin deposits on the
Portfolio's open futures contracts and options written on futures and premiums
paid for unexpired options on futures contracts would exceed 5% of the value of
that Portfolio's total assets; provided, however, that in the case of an option
that is "in-the-money" at the time of purchase, the "in-the-money" amount may
be excluded in calculating the 5% limitation. Nevertheless, a transaction by
the T. Rowe Price Small Cap Growth, Loomis Sayles High Yield Bond, Janus Mid
Cap and Scudder Global Equity Portfolios will not be subject to this
limitation, if the transaction is "bona fide hedging," as defined by the
Commodity Futures Trading Commission.
The use of futures contracts by the Portfolios entails certain risks,
including but not limited to the following: no assurance that futures contracts
transactions can be offset at favorable prices; possible reduction of a
Portfolio's income due to the use of hedging; possible reduction in value of
both the securities or currency hedged and the hedging instrument; possible
lack of liquidity due to daily limits on price fluctuations; imperfect
correlation between the contract and the securities or currencies being hedged;
and potential losses in excess of the amount initially invested in futures
contracts themselves. If the expectations of the investment manager or a sub-
investment manager, as applicable, regarding movements in securities prices,
interest rates or exchange rates are incorrect, a Portfolio may have
experienced better investment results without use of these instruments. The use
of futures contracts and options on futures contracts requires special skills
in addition to those needed to select portfolio securities. A further
discussion of futures contracts and options and their associated risks is
contained in the Statement of Additional Information.
Foreign Securities. Subject to the restrictions contained in fundamental
investment policy number 5 and each Portfolio's investment objectives and
policies, each Portfolio may purchase securities of foreign issuers (including
foreign governments) or securities denominated in foreign currencies.
When investing in common stocks and equity-related securities of foreign
issuers, the Portfolios may purchase ADRs, EDRs, IDRs and GDRs. ADRs are U.S.
dollar-denominated certificates issued by a U.S. bank or trust company and
represent the right to receive securities of a foreign issuer deposited in a
domestic bank or foreign branch of a U.S. bank. 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. ADRs are traded on domestic exchanges or in the
U.S. over-the-counter market and, generally, are in registered form. EDRs and
IDRs are traded on non-U.S. exchanges or in non-U.S. over-the-counter markets
and, generally, are in bearer form. Investment in ADRs has certain advantages
over direct investment in the underlying non-U.S. securities because (i) ADRs
are U.S. dollar-denominated investments which are registered domestically,
easily transferable, and for which market quotations are generally readily
available, and (ii) issuers whose securities are represented by ADRs are
subject to the same auditing, accounting, and financial reporting standards as
domestic issuers.
Each Portfolio may also, in accordance with its specific investment
objectives, policies, and restrictions,
PROSPECTUS 18
<PAGE>
...............................................................
purchase high-quality U.S. dollar-denominated money market securities of
foreign issuers. Such money market securities may be registered domestically
and traded on domestic exchanges or in the U.S. over-the-counter market (e.g.
Yankee securities), or may be registered abroad and traded exclusively in
foreign markets (e.g. Eurodollar securities).
Although investments in foreign securities by each Portfolio may reduce
overall risk by providing further diversification, investments in securities
of foreign issuers, particularly non-governmental issuers, involve certain
specific risks which are not ordinarily associated with investments in
domestic issuers. The securities of non-U.S. issuers held by the Portfolios
generally will not be registered under, nor will the issuers thereof be
subject to, the reporting requirements of the U.S. Securities and Exchange
Commission. Accordingly, there may be less publicly available information
about the securities and about the foreign company or government issuing them
than is available about a domestic company or government entity. Companies
outside the United States are not subject to the same accounting, auditing,
and financial reporting standards, practices, and requirements applicable to
domestic companies. Stock markets outside the United States may not be as
developed or as efficient as those in the United States, and government
supervision and regulation of those stock markets and brokers is not identical
to that in the United States. The securities of some non-U.S. companies may be
less liquid and more volatile than securities of comparable U.S. companies,
and settlement of transactions with respect to such securities may sometimes
be delayed beyond periods customary in the United States, which might present
liquidity concerns. Further, fixed brokerage commissions on certain non-U.S.
stock exchanges are generally higher than negotiated commissions on United
States exchange-listed securities, and custodial costs with respect to these
securities generally exceed domestic costs. In addition, with respect to some
countries, there is the possibility of unfavorable changes in investment or
exchange control regulations, expropriation, or confiscatory taxation,
limitations on the removal of funds or other assets of the Portfolios,
political or social instability, or diplomatic developments that could
adversely affect investments in those countries. Further, the value of each
Portfolio's securities denominated in foreign currencies will be affected
favorably or unfavorably by changes in currency exchange rates and exchange
control regulations, and the Portfolios may incur costs in connection with
conversions between various currencies.
The investment manager or a sub-investment manager, as applicable, will
consider these and other factors before investing in foreign securities, and
no such investments will be made unless, in their view, the potential benefits
to a Portfolio are deemed to outweigh the risks and such investments will meet
the policies, standards and objectives of a particular Portfolio.
Forward Foreign Currency Exchange Contracts. When the Portfolios invest in
securities denominated in currencies other than U.S. dollars, such securities
may be affected favorably or unfavorably by changes in currency rates. Each
Portfolio (except the MetLife Stock Index Portfolio) may use forward foreign
currency exchange contracts ("forward currency contracts") to hedge the
currency risk relating to securities denominated in or exposed to foreign
currency that are purchased, sold, or held by that Portfolio. A forward
currency contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the forward currency contract agreed upon by the parties, at a price set at
the time of the contract. These forward currency contracts are principally
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. Except as discussed in
the following paragraph, the Portfolios may enter into forward currency
contracts under two circumstances. First, when a Portfolio has entered into a
contract to purchase or sell a security denominated in or exposed to a foreign
currency, that Portfolio may be able to protect itself against a possible
loss, between the trade date and the settlement date for such security,
resulting from an adverse change in the relationship between the U.S. dollar
and the foreign currency in which such security is denominated or exposed, by
entering into a forward currency contract in U.S. dollars for the purchase or
sale of foreign currency. However, this practice may limit potential gains
which might result from a positive change in such currency relationships.
Second, when the management for a Portfolio believes that the currency of a
particular country may suffer or enjoy a substantial movement against the U.S.
dollar (or another currency), that Portfolio may enter into a forward currency
contract to sell or buy an amount of foreign currency approximating the value
of some or all of that Portfolio's securities denominated in or exposed to
foreign currency. Portfolios that invest in foreign securities may "hedge"
their exposure to potentially unfavorable currency changes by purchasing a
contract to exchange one currency for another on some future date at a
specified exchange rate. In certain circumstances, a "proxy currency" may be
substituted for the currency in which the investment is denominated, a
strategy known as "proxy hedging." Although foreign currency transactions will
be used primarily to protect a Portfolio's foreign securities from adverse
currency movements relative to the dollar, they involve the risk
PROSPECTUS 19
<PAGE>
...............................................................
that anticipated currency movements will not occur and the Portfolio's total
return could be reduced. The forecasting of currency market movements is
extremely difficult and whether such a hedging strategy will be successful is
highly uncertain.
The GFM International Stock, Loomis Sayles High Yield Bond, T. Rowe Price
Small Cap Growth, Janus Mid Cap and Scudder Global Equity Portfolios may enter
into forward currency contracts for non-hedging purposes, provided that no more
than 5%, at the time of investment, of the Portfolio's assets will be committed
to such transactions.
Synthetic Non-U.S. Money Market Positions. Money market securities
denominated in foreign currencies are permissible investments of the GFM
International Stock and Scudder Global Equity Portfolios. In addition to, or in
lieu of direct investment in such securities, the GFM International Stock and
Scudder Global Equity Portfolios may construct a synthetic non-U.S. money
market position by (i) purchasing a money market instrument denominated in U.S.
dollars and (ii) concurrently entering into a forward currency contract to
deliver a corresponding amount of U.S. dollars in exchange for a foreign
currency on a future date and at a specified rate of exchange. Because of the
availability of a variety of highly liquid short-term U.S. dollar-denominated
money market instruments, a synthetic money market position utilizing such U.S.
dollar-denominated instruments may offer greater liquidity than direct
investment in a money market instrument denominated in a foreign currency.
Diversification of Investment in Foreign Countries. The GFM International Stock
and Scudder Global Equity Portfolios intend to broadly diversify their holdings
by both the number of companies and the countries in which they will invest.
Under normal circumstances, each Portfolio expects to have investments in at
least three different countries outside the U.S. No more than 20% of net assets
of a Portfolio will be invested in any one country at any one time except that
an additional 15% of net assets may be invested in securities of issuers
located in Australia, Canada, France, the United Kingdom, or Germany and an
additional 22% of net assets may be invested in securities of issuers located
in Japan. Each Portfolio has no other set limits related to the geography of
its investments and expects to invest in companies located in Western Europe,
the Pacific Basin, and Latin America. When allocating investments among
geographic regions and individual countries, GFM or Scudder, as applicable,
considers various factors, such as: prospects for relative economic growth
among countries, regions or geographic areas; expected levels of inflation;
government policies influencing business conditions; and the outlook for
currency relationships.
Mortgage-Related Securities. The Portfolios may invest in Fannie Maes,
Freddie Macs, CMOs, and related securities, including Ginnie Maes and mortgage-
backed securities. Such mortgage-related securities represent a direct or
indirect interest in a pool of mortgages. They may be issued or guaranteed by
U.S. Government instrumentalities or by non-governmental entities. The issuer's
obligation to make interest and principal payments is secured by the underlying
portfolio of mortgages or mortgage-backed securities. In the event of
sufficient early prepayments on the underlying mortgages, the class or series
of CMOs first to mature generally will be retired prior to its maturity. As
with other mortgage-backed securities, the early retirement of a particular
class or series of CMOs held by a Portfolio could involve the loss of any
premium the Portfolio paid when it acquired the investment and could result in
the Portfolio's reinvesting the proceeds at a lower interest rate than the
retired security paid. Because of the early retirement feature, mortgage-
related securities may be more volatile than many other fixed-income
investments. Also CMOs and other mortgage-backed securities are valued based on
expected prepayment rates. Changing expectations about prepayment rates (due to
changing interest rates or other factors) will result in higher or lower market
values for these securities after they are purchased by a Portfolio. The
foregoing characteristics can cause the market value of CMOs and other
mortgage-backed securities to increase less in a decreasing interest rate
environment and to decrease more in an increasing interest rate environment
than would be the case with respect to otherwise comparable debt securities
that are not subject to prepayment features.
All of the Portfolios except for the MetLife Money Market Portfolio and
MetLife Stock Index Portfolio also may purchase "IOs," which are entitled to
the interest payments from a class or series of mortgage-related securities,
and "POs," which are entitled to the principal payments. As compared with
mortgage-related securities that provide for periodic interest payments, POs
generally will experience greater increases in value in response to falling
interest rates or increases in prepayment rates as originally estimated.
Conversely, they will decrease in value more as a result of increasing interest
rates or reductions from originally estimated prepayment rates. IOs also are
highly volatile, and their value will generally change in the opposite
direction from changes in the related POs' value as a result of changes in
interest rates or prepayment rates as originally estimated. If the underlying
mortgages are prepaid, the IOs have no further value and a Portfolio,
therefore, may not recover all of its investment.
Common and Preferred Stocks. Stocks represent shares of ownership in a
company. Equity securities of
PROSPECTUS 20
<PAGE>
...............................................................
companies with relatively small market capitalization may be more volatile
than the securities of larger, more established companies and than the broad
equity market indexes. Generally, preferred stock has a specified dividend and
ranks after bonds and before common stocks in its claim on income for dividend
payments and on assets should the company be liquidated. After other claims
are satisfied, common stockholders participate in company profits on a pro
rata basis; profits may be paid out in dividends or reinvested in the company
to help it grow. Increases and decreases in earnings are usually reflected in
a company's stock price, so common stocks generally have the greatest
appreciation and depreciation potential of all corporate securities. While
most preferred stocks pay a dividend, a Portfolio may purchase preferred stock
where the issuer has omitted, or is in danger of omitting, payment of its
dividend. Such investments would be made primarily for their capital
appreciation potential.
Convertible Securities and Warrants. Securities convertible into common
stocks consist primarily of bonds or preferred stocks which have warrants
attached or which are exchangeable into a specified number of shares of common
stock. Traditionally, convertible securities have paid dividends or interest
at rates higher than common stocks but lower than nonconvertible securities.
They generally participate in the appreciation or depreciation of the
underlying stock into which they are convertible, but to a lesser degree. In
recent years, convertibles have been developed which combine higher or lower
current income with options and other features. Warrants are options to buy a
stated number of shares of common stock at a specified price anytime during
the life of the warrants (generally, two or more years).
Private Placements. These securities are sold directly to a small number of
investors, usually institutions. Unlike public offerings, such securities are
not registered with the SEC. Certain privately offered securities are Rule
144A securities which can be resold only to certain qualified institutional
buyers. Private Placements may be illiquid and their sale may involve
substantial delays and additional costs. The absence of a trading market may
make it difficult to ascertain a market value for an illiquid or restricted
investment. Rule 144A securities may be considered liquid under procedures
adopted by the Fund's Board of Directors.
Zero Coupon Securities. These securities accrue interest at a specified
rate, but do not pay interest in cash on a current basis. A Portfolio is
required to distribute the income on zero coupon securities to Portfolio
shareholders as the income accrues, even though the Portfolio is not receiving
the income in cash on a current basis. Thus the Portfolio may have to sell
other investments to obtain cash to make income distributions. Zero coupon
securities are subject to greater market fluctuations from changing interest
rates than debt obligations of comparable maturities which make current cash
distributions of interest.
Other Derivative Transactions. The Loomis Sayles High Yield Bond, Janus Mid
Cap and Scudder Global Equity Portfolios may engage in swap transactions,
specifically interest rate, currency and index swaps, and in the purchase or
sale of related caps, floors and collars. In a typical interest rate swap
agreement, one party agrees to make payments equal to a floating interest rate
on a specified amount (the "notional amount") in return for payments equal to
a fixed interest rate on the same amount for a specified period. If a swap
agreement provides for payments in different currencies, the parties might
agree to exchange the notional amount as well. The purchaser of an interest
rate cap or floor, upon payment of a fee, has the right to receive payments
(and the seller of the cap is obligated to make payments) to the extent a
specified interest rate exceeds (in the case of a cap) or is less than (in the
case of a floor) a specified level over a specified period of time or at
specified dates. The purchaser of an interest rate collar, upon payment of a
fee, has the right to receive payments (and the seller of the collar is
obligated to make payments) to the extent that a specified interest rate falls
outside an agreed upon range over a specified period of time or at specified
dates.
Index and currency swaps, caps, floors, and collars are similar to those
described in the preceding paragraph, except that, rather than being
determined by variations in specified interest rates, the obligations of the
parties are determined by variations in specified interest rate or currency
indices.
The amount of a Portfolio's potential gain or loss on any swap transaction
is not subject to any fixed limit. Nor is there any fixed limit on the
Portfolio's potential loss if it sells a cap, floor or collar. If a Portfolio
buys a cap, floor or collar, however, the Portfolio's potential loss is
limited to the amount of the fee that it has paid. Swaps, caps, floors and
collars tend to be more volatile than many other types of investments.
Nevertheless, a Portfolio will use these techniques only as a risk management
tool and not for purposes of leveraging the Portfolio's market exposure or its
exposure to changing interest rates, security values or currency values.
Rather, a Portfolio will use these transactions only to preserve a return or
spread on a particular investment or portion of its investments, to protect
against currency fluctuations, as a duration management technique, to protect
against any increase in the price of securities the Portfolio anticipates
purchasing at a later date, or to gain
PROSPECTUS 21
<PAGE>
...............................................................
exposure to certain markets in the most economical way possible. Nor will a
Portfolio sell interest rate caps, floors or collars if it does not own
securities providing the interest that the Portfolio may be required to pay.
The use of swaps, caps, floors and collars involves investment techniques
and risks different from those associated with other Portfolio security
transactions. If the sub-investment manager is incorrect in its forecasts of
market values, interest rates, currency rates and other applicable factors,
the investment performance of a Portfolio will be less favorable than if these
techniques had not been used. These instruments are typically not traded on
exchanges. Accordingly, there is a risk that the other party to certain of
these instruments will not perform its obligations to the Fund or that a
Portfolio may be unable to enter into offsetting positions to terminate its
exposure or liquidate its investment under certain of these instruments when
it wishes to do so. Such occurrences could result in losses to the Portfolio.
The sub-investment manager, however, will consider such risks and will enter
into swap, cap, floor, and collar transactions only when it believes that the
risks are not unreasonable.
Purchasing Securities on a "When Issued" Basis. The purchase of securities
on a "when issued" basis means that a Portfolio will enter into a commitment
to buy the security before the security has been issued. The Portfolio's
payment obligation and the interest rate on the security are determined when
the Portfolio enters into the commitment. The security is typically delivered
to the Portfolio 15 to 120 days later. No interest accrues on the security
between the time the Portfolio enters into the commitment and the time the
security is delivered. If the value of the security being purchased falls
between the time a Portfolio commits to buy it and the payment date, the
Portfolio may sustain a loss. The risk of the loss is in addition to the
Portfolio's risk of loss on the securities actually in its portfolio at the
time. In addition, when the Portfolio buys a security on a when-issued basis,
it is subject to the risk that market rates of interest will increase before
the time the security is delivered, with the result that the yield on the
security delivered to the Portfolio may be lower than the yield available on
other, comparable securities at the time of delivery. If the Portfolio has
outstanding obligations to buy when-issued securities, it will maintain liquid
assets in a segregated account at its custodian bank in an amount sufficient
to satisfy these obligations.
MANAGEMENT OF THE FUND
...............................................................................
The directors, in addition to reviewing the actions of the Fund's investment
manager and sub-investment manager, as set forth below, decide upon matters of
general policy. The Fund's officers supervise the daily business operations of
the Fund. A listing of the Board of Directors and the officers of the Fund is
set forth under "Directors and Officers" in the Statement of Additional
Information.
Metropolitan Life is the investment manager and principal underwriter and
distributor for the Fund. Metropolitan Life also manages investment assets
owned by it, by certain companies affiliated with it and by certain other
entities. Metropolitan Life is a mutual life insurance company which sells
insurance policies and annuity contracts. On September 1, 1996, it had total
life insurance in force of approximately $ trillion and total assets under
management of approximately $275 billion. Metropolitan Life is the parent of
Metropolitan Tower.
State Street Research is the sub-investment manager with respect to the
State Street Research Growth, State Street Research Income, State Street
Research Diversified and State Street Research Aggressive Growth Portfolios.
State Street Research is a Delaware corporation, and is a wholly-owned
indirect subsidiary of Metropolitan Life, which currently provides investment
research and management services to a family of mutual funds and a limited
number of other substantial institutional clients, such as trustees for
corporate pension plans, endowments and foundations. State Street Research has
a history that dates to 1924, with the founding of America's second mutual
fund. On December 31, 1995, State Street Research and its subsidiaries had
investment arrangements in effect for about $30.5 billion in assets. State
Street Research's fees for sub-investment management services are paid by
Metropolitan Life.
GFM is the sub-investment manager with respect to the GFM International
Stock Portfolio. Formed in 1990, GFM is an English corporation and a
subsidiary of Metropolitan Life. The firm was formed to provide pension funds,
401(k) plans, foundations, endowments, corporations and financial institutions
with a range of investment management services related to the international
marketplace. On December 31, 1995, GFM had investment management arrangements
in effect for over $1.529 billion in assets. GFM's fees for sub-investment
management services are paid by Metropolitan Life.
Loomis Sayles, is the sub-investment manager of the Loomis Sayles High Yield
Bond Portfolio. Founded in 1926, Loomis Sayles is one of the country's oldest
and largest investment firms. Loomis Sayles's general partner is indirectly
owned by New England Investment Companies, L.P., a publicly-traded limited
partnership whose general manager is indirectly owned by Metropolitan Life.
Loomis Sayles's fees for sub-investment management services are paid by
Metropolitan Life.
PROSPECTUS 22
<PAGE>
...............................................................
T. Rowe Price is the sub-investment manager of the T. Rowe Price Small Cap
Growth Portfolio. Founded in 1937 by the late Thomas Rowe Price, T. Rowe Price
and its affiliates managed over $90 billion for over three and a half million
individual and institutional investor accounts as of December 31, 1996. T.
Rowe Price's fees for sub-investment management services are paid by
Metropolitan Life.
Janus is the sub-investment manager to the Janus Mid Cap Portfolio. Janus is
a Colorado corporation. Janus began providing investment services at its
inception in 1970 and currently serves as investment adviser to all of the
Janus funds, as well as adviser or subadviser to other mutual funds and
individual, corporate, charitable and retirement accounts. Janus's fees for
sub-investment management services are paid by Metropolitan Life.
Scudder is the sub-investment manager of the Scudder Global Equity
Portfolio. Scudder is a Delaware Corporation that was founded in 1919. As of
November 1, 1996, Scudder managed in excess of $100 billion for many private
accounts and over 50 mutual fund portfolios. Scudder also has been a leader in
international mutual funds for over 40 years. Scudder manages the Japan Fund
and nine closed-end funds that invest in countries around the world. Assets of
international investment company clients of Scudder exceeded $8 billion as of
September 30, 1996. Scudder's fees for sub-investment management services are
paid by Metropolitan Life.
Metropolitan Life, subject to review by the Fund's Board of Directors, is
responsible for the overall management of each Portfolio and has ultimate
responsibility for making decisions to buy, sell or hold any particular
security for each Portfolio and day to day responsibility for making such
decisions for the MetLife Money Market and the MetLife Stock Index Portfolios.
State Street Research, subject to review by the Fund's Board of Directors and
by Metropolitan Life, and any sub-investment manager that has been appointed
for a Portfolio, has the day-to-day responsibility for making decisions to
buy, sell or hold any particular security for that Portfolio. Metropolitan
Life is also obligated to perform general administrative and management
services for the Fund.
For providing investment management services to each of the State Street
Research Growth, State Street Research Income, State Street Research
Diversified, MetLife Stock Index and MetLife Money Market Portfolios,
Metropolitan Life receives monthly compensation from the Portfolios at an
annual rate of .25% of the average daily value of the aggregate net assets of
that Portfolio. For providing investment management services to the State
Street Research Aggressive Growth Portfolio and the GFM International Stock
Portfolio, Metropolitan Life receives monthly compensation at an annual rate
of .75% of the average daily value of the aggregate net assets of that
Portfolio. The advisory fee payable by the State Street Research Aggressive
Growth Portfolio is higher than advisory fees paid by many other investment
companies of the same type, but the Fund's Board of Directors believes it to
be justifiable in consideration of the extremely careful scrutiny and analysis
necessary to select and continuously follow the kinds of investments in which
such Portfolio engages in light of such Portfolio's investment objectives and
policies. Moreover, the advisory fee is comparable to other investment
companies with similar investment objectives. For providing investment
management services to the Loomis Sayles High Yield Bond Portfolio,
Metropolitan Life receives monthly compensation from the Portfolio at an
annual rate of .70% of the average daily value of the aggregate net assets of
the Portfolio. For providing investment management services to the T. Rowe
Price Small Cap Growth Portfolio, Metropolitan Life receives monthly
compensation from the Portfolio at an annual rate of .55% of the average daily
value of the aggregate net assets of the Portfolio up to $100 million, .50% of
such assets on the next $300 million and .45% of such assets on amounts in
excess of $400 million. For providing investment management services to the
Janus Mid Cap Portfolio, Metropolitan Life receives monthly compensation from
the Portfolio at an annual rate of .75% of the average daily value of the
aggregate net assets of the Portfolio up to $100 million, .70% of such assets
on the next $400 million and .65% of such assets on amounts in excess of $500
million. For providing investment management services to the Scudder Global
Equity Portfolio, Metropolitan Life receives monthly compensation from the
Portfolio at an annual rate of .90% of the average daily value of the
aggregate net assets of the Portfolio up to $50 million, .55% of such assets
on the next $50 million, .50% of such assets on the next $400 million and
.475% of such assets on amounts in excess of $500 million. In addition,
Metropolitan Life has agreed to waive a portion of its fee equal to .50% of
the average daily value of the aggregate net assets of the Scudder Global
Equity Portfolio during the first six months of such Portfolio's operations
and .25% of the average daily value of the aggregate net assets of the
Portfolio during the next six months of such Portfolio's operations. During
1995, such fees aggregated $14,648,069 for all of the Portfolios.
For providing sub-investment management services with respect to the State
Street Research Growth Portfolio and the State Street Research Diversified
Portfolio, State Street Research receives from
PROSPECTUS 23
<PAGE>
...............................................................
Metropolitan Life an annual percentage fee, calculated on the month ending
value of the aggregate net assets of the particular Portfolio, of 1/2 of 1%
for the first $5 million of Portfolio assets, 3/8 of 1% for the next $5
million of assets, 1/4 of 1% for the next $190 million of assets and 1/5 of 1%
for assets above $200 million. For such services to the State Street Research
Income Portfolio, State Street Research receives from Metropolitan Life an
annual percentage fee, calculated on the month ending value of the aggregate
net assets of the State Street Research Income Portfolio, of 1/4 of 1% for the
first $25 million of Portfolio assets, 3/16 of 1% for the second $25 million
of assets and 1/8 of 1% for assets above $50 million. For providing sub-
investment management services for the State Street Research Aggressive Growth
Portfolio, State Street Research receives from Metropolitan Life an annual
percentage fee, calculated on the month ending value of the aggregate net
assets of the State Street Research Aggressive Growth Portfolio, of 3/4 of 1%.
During 1993, 1994 and 1995, sub-investment management fees for the State
Street Research Growth, State Street Research Income, State Street Research
Diversified, and State Street Research Aggressive Growth Portfolios aggregated
$4,527,470, $7,652,865 and $10,412,735, respectively.
For providing sub-investment management services for the GFM International
Stock Portfolio, GFM receives from Metropolitan Life an annual percentage fee,
calculated on the month ending value of the aggregate net assets of the GFM
International Stock Portfolio, of .60%. During 1993, 1994 and 1995, sub-
investment management fees for the GFM International Stock Portfolio
aggregated $331,866, $1,389,924 and $1,634,069, respectively. For providing
sub-investment management services for the Loomis Sayles High Yield Bond
Portfolio, Loomis Sayles receives from Metropolitan Life an annual percentage
fee, calculated on the average daily value of the aggregate net assets of the
Portfolio, of .50%. During 1994, 1995 and 1996, no sub-investment management
fees were paid with respect to the Loomis Sayles High Yield Bond Portfolio
because the Portfolio had not yet commenced operations. For sub-investment
management services with respect to the T. Rowe Price Small Cap Growth
Portfolio, T. Rowe Price receives from Metropolitan Life an annual percentage
fee, calculated daily on the average daily value of the aggregate net assets
of the Portfolio, of .35% up to $100 million .30% of such assets on the next
$300 million and .25% of such assets on amounts in excess of $400 million.
During 1994, 1995 and 1996, no sub-investment management fees were paid with
respect to the T. Rowe Price Small Cap Growth Portfolio because the Portfolio
had not yet commenced operations. For sub-investment management services with
respect to the Janus Mid Cap Portfolio, Janus receives from Metropolitan Life
an annual percentage fee, calculated daily on the average daily value of the
aggregate net assets of the Portfolio, of .55% of the average daily value of
the aggregate net assets of the Portfolio up to $100 million, .50% of such
assets on the next $400 million and .45% of such assets on amounts in excess
of $500 million. During 1996 no sub-investment management fees were paid with
respect to the Janus Mid Cap Portfolio because the Portfolio had not yet
commenced operations. For sub-investment management services with respect to
the Scudder Global Equity Portfolio, Scudder receives from Metropolitan Life
an annual percentage fee, calculated daily on the average daily value of the
aggregate net assets of the Portfolio, of .70% of the average daily value of
the aggregate net assets of the Portfolio up to $50 million, .35% of such
assets on the next $50 million, .30% of such assets on the next $400 million
and .275% of such assets on amounts in excess of $500 million. Scudder has
agreed to waive a portion of its fee equal to .50% of the average daily value
of the aggregate net assets of the Portfolio during the first six months of
such Portfolio's operations and .25% of the average daily value of the
aggregate net assets of the Portfolio during the next six months of such
Portfolio's operations. During 1996 no advisory fees were paid with respect to
the Scudder Global Equity Portfolio because the Portfolio had not yet
commenced operations. The Fund has no responsibility for the payment of fees
to State Street Research, GFM, Loomis Sayles, T. Rowe Price, Janus or Scudder.
John T. Wilson is the portfolio manager for the State Street Research Growth
Portfolio and for the equity portion of the State Street Research Diversified
Portfolio. Mr. Wilson is a member of the State Street Research Equity Group's
Growth Team and a Vice President of the Firm. Mr. Wilson joined the Firm in
1996 as a portfolio manager. Before joining State Street Research, Mr. Wilson
served as a portfolio manager with Phoenix Home Mutual Life Insurance Company.
He received a B.A. from Trinity College and an M.B.A. from Duke University.
Mr. Wilson has six years of investment experience.
Kim M. Peters manages the State Street Research Income Portfolio and the
fixed income portion of the State Street Research Diversified Portfolio. Mr.
Peters is the lead portfolio manager for the State Street Research Fixed
Income Group's Corporate Team and is a Senior Vice President of the firm. He
joined State Street Research in 1986 as a security analyst and was named Vice
President in 1989 and became Senior Vice President in 1994. Mr. Peters
previously served as Registration and Compliance Specialist at the State
PROSPECTUS 24
<PAGE>
Historical Society of Wisconsin. He earned an A.B. from Clark University, an
M.S. from the University of Wisconsin and an M.B.A. from the University of
Wisconsin Graduate School of Business. He has ten years of investment
experience. Frederick R. Kobrick manages the State Street Research Aggressive
Growth Portfolio. He is the lead portfolio manager for the State Street
Research Equity Group's Aggressive Growth Team and a member of the Investment
Research Committee. He joined State Street Research in 1985 as Vice President
and became Senior Vice President in 1989. Previously, Mr. Kobrick served as a
security analyst and portfolio manager at Thorndike, Doran, Paine & Lewis. He
received a B.A. from Boston University and an M.B.A. from Harvard Business
School. Mr. Kobrick has 25 years of investment experience.
The GFM International Stock Portfolio is managed by Rosamunde M. Price,
Steven J. Brunnock and Ian R. Vose of GFM. Mrs. Price's and Mr. Brunnock's
principal occupation is portfolio manager with GFM. They have managed the
Portfolio since its inception in January 1992 and have been with GFM since its
formation in 1990. Mr. Vose's principal occupation is Chief Executive and
Chief Investment Officer of GFM. For the five years prior to joining GFM, Mrs.
Price served as Chief Investment Manager (Equities) at Deutsche Bank Capital
Management (UK) Ltd., Senior Fund Manager at Nippon Credit International Ltd.
and Investment Director of the Civil Aviation Authority Pension Fund. For the
five years prior to joining GFM, Mr. Brunnock served as United Kingdom
Portfolio Manager of MGM Assurance plc. For the five years prior to joining
GFM, Mr. Vose served as Director of MG International Fund Management and Chief
Investment Officer of MG-Tokai Bank Fund Management.
The Loomis Sayles High Yield Bond Portfolio is managed by Daniel J. Fuss and
Kathleen C. Gaffney. Mr. Fuss serves as Executive Vice President, Director and
Managing Partner of Loomis Sayles. Prior to joining Loomis Sayles in 1976, Mr.
Fuss spent more than four years as Vice President with The Boston Company. He
also worked for the Endowment Management & Research Company. Mr. Fuss is a
Certified Financial Analyst and Certified Investment Counselor. He serves on
various charitable boards and committees, including Pope John Medical/Moral
Institute, Archdiocese of Boston Peace & Justice Commission and the Lincoln
Filene Center. Mr. Fuss received a B.S. in Finance in 1955 and an M.B.A. in
1965 from Marquette University. Ms. Gaffney serves as Vice President of Loomis
Sayles Fund. She has 12 years of investment experience. Her background
includes equity and fixed income trading and portfolio management. Her
responsibilities are the active management of institutional tax-exempt
accounts as well as continuing a specialized capability in the management of
convertible securities. She is a Chartered Financial Analyst and Member of the
Boston Society of Security Analysts. Ms. Gaffney received her B.A. from the
University of Massachusetts in 1983.
The T. Rowe Price Small Cap Growth Portfolio is managed by an Investment
Advisory Committee composed of the following members: Richard T. Whitney,
Chairman, Kristen Culp, and Donald J. Peters. The Committee Chairman has day-
to-day responsibility for managing the Portfolio 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 since 1986.
The Janus Mid Cap Portfolio is managed by James P. Goff. Mr. Goff manages
mid-cap growth and small-cap growth equity accounts for Janus. Mr. Goff is
also the portfolio manager of the Aggressive Growth Portfolio of Janus Aspen
Series and the Janus Enterprise Fund and co-manager of the Janus Venture Fund.
Prior to joining Janus in 1988, Mr. Goff spent two years with Fred Alger
Management as an associate analyst. He holds an undergraduate degree in
Economics from Yale University. Mr. Goff is a Chartered Financial Analyst and
a member of the Institute of Chartered Financial Analysts. He has managed
portfolios funding variable insurance products since 1993.
The Scudder Global Equity Portfolio is managed by Carol L. Franklin, William
E. Holzer, Alice Ho and Nicholas Bratt. Mr. Holzer is a Managing Director at
Scudder. His responsibilities include global and equity investment strategy
and portfolio management. He is a member of Scudder's Currency Committee.
Prior to joining Scudder in 1980, Mr. Holzer was with Bankers Trust Co. in the
International Department and, prior to that, was a security analyst for five
years in the United Kingdom. Mr. Holzer graduated with honors from the
University of Lancaster in 1970 and received an M.B.A. from New York
University. Alice Ho is a member of the portfolio management team responsible
for global equity accounts. She joined Scudder in 1986 and has managed
portfolios for both the Institutional Equity Group and the Private Investment
Counsel Group. Prior to that, she was with the Malaysian Trade Council for two
years. Ms. Ho received a B.A. in journalism from California State University,
Los Angeles in 1983. She is a member of the Society of Financial Analysts in
New York. As Director of the Global Equity Group, Nicholas Bratt is
responsible for the firm's equity activities. He received a B.A. with honors
from St. John's College, Oxford University in 1970, and as a Fulbright
Scholar, an M.B.A. from Columbia University in 1972. Prior to joining Scudder
in 1976 he was Far East Specialist and International Fund
PROSPECTUS 25
<PAGE>
Manager with Morgan, Grenfell & Co., Ltd. in London. His current
responsibilities include equity investment strategy. He is also President of
Scudder's open- and closed-end equity funds that invest overseas. Mr. Bratt is
a former chairman of the New York Association of Foreign Analysts.
Prior to May 16, 1993, Metropolitan Life was obligated to pay all expenses
of each Portfolio of the Fund other than the investment management fees
payable to Metropolitan Life, brokerage commissions on portfolio transactions
(including any other direct costs related to the acquisition, disposition,
lending or borrowing of portfolio investments), taxes payable by the Fund,
interest and any other costs related to borrowings by the Fund, and any
extraordinary or non-recurring expenses (such as legal claims and liabilities
and litigation costs and any indemnification related thereto). Since that
date, the Fund has been obligated to pay all of its own expenses. However,
Metropolitan Life reserves the right, in its sole discretion, to pay all or a
portion of the expenses of the Fund or any of its Portfolios, and to terminate
such voluntary payment at any time upon notice to the Board of Directors and
shareholders of the Fund.
GENERAL INFORMATION ABOUT THE FUND AND ITS SHARES
...............................................................................
The Fund was incorporated under the laws of the State of Maryland on
November 23, 1982 and filed articles supplementary with the State of Maryland
with respect to the State Street Research Diversified Portfolio on October 25,
1984, with respect to the Aggressive Growth and three other Portfolios on
October 19, 1987 and February 2, 1988, with respect to the MetLife Stock Index
Portfolio on January 30, 1990, with respect to the GFM International Stock
Portfolio on August 7, 1990 and with respect to the Loomis Sayles High Yield
Bond, T. Rowe Price Small Cap Growth, Janus Mid Cap and Scudder Global Equity
Portfolios on December , 1996. The authorized capital stock of the Fund
consists of 2,000,000,000 shares of common stock, par value $0.01 per share.
The shares of common stock are presently divided into thirteen classes (or
series) including: State Street Research Growth Portfolio common stock, State
Street Research Income Portfolio common stock, MetLife Money Market Portfolio
common stock, State Street Research Diversified Portfolio common stock, State
Street Research Aggressive Growth Portfolio common stock, MetLife Stock Index
Portfolio common stock, GFM International Stock Portfolio common stock, Loomis
Sayles High Yield Bond Portfolio common stock, T. Rowe Price Small Cap Growth
Portfolio common stock, Janus Mid Cap Portfolio common stock and Scudder
Global Equity Portfolio common stock. Each class currently consists of
100,000,000 shares. The Board of Directors of the Fund may classify and
reclassify any authorized and unissued shares of capital stock, and the Fund
reserves the right to issue additional classes of shares without the consent
of shareholders.
As a Maryland corporation, the Fund is not required to hold regular annual
shareholder meetings and, in the normal course, does not expect to hold such
meetings. The Fund, is, however, required to hold shareholder meetings for
such purposes as, for example: (i) approving certain agreements as required by
the 1940 Act; (ii) changing fundamental investment objectives and restrictions
of the Portfolios; and (iii) filling vacancies on the Board of Directors in
the event that less than a majority of the directors have been elected by
shareholders. The Fund expects that there will be no meetings of shareholders
for the purpose of electing directors unless and until such time as less than
a majority of the directors holding office have been elected by shareholders.
At such time, the directors then in office will call a shareholder meeting for
the election of directors. In addition, holders of record of not less than
two-thirds of the outstanding shares of the Fund may remove a director from
office by a vote cast in person or by proxy at a shareholder meeting called
for that purpose at the request of holders of 10% or more of the outstanding
shares of the Fund. The Fund has the obligation to assist in such shareholder
communications. Except as set forth above, directors will continue in office
and may appoint successor directors.
All shares of common stock, of whatever class, are entitled to one vote, and
the votes of all classes are cast on an aggregate basis, except on matters
where the interests of the Portfolios differ. In such a case, the voting is on
a Portfolio-by-Portfolio basis. Approval or disapproval by the shares in one
Portfolio on such a matter would not generally be a prerequisite to approval
or disapproval by shares in another Portfolio; and shares in a Portfolio not
affected by a matter generally would not be entitled to vote on that matter.
Examples of matters which would require a Portfolio-by-Portfolio vote are
changes in fundamental investment policies of a particular Portfolio and
approval of changes in any investment management agreement relating to a
particular Portfolio.
Each issued and outstanding share in a Portfolio is entitled to participate
equally in dividends and distributions declared by such Portfolio and to
receive its pro rata share of the assets of such Portfolio remaining after
satisfaction of outstanding liabilities upon liquidation or dissolution. For
these purposes, and for purposes of determining the sale and redemption prices
of shares,
PROSPECTUS 26
<PAGE>
any assets which are not clearly allocable to a particular Portfolio or
Portfolios are allocated in the manner determined by the Board of Directors.
Accrued liabilities which are not clearly allocable to one or more Portfolios
would generally be allocated among the Portfolios in proportion to their
relative net assets before adjustment for such unallocated liability. In the
unlikely event that any Portfolio incurred liabilities in excess of its
assets, the other Portfolios could be held liable for such excess.
Metropolitan Life provided the initial capital for the Fund by purchasing
for its general account $10,000,000 worth of shares of each of the State
Street Research Growth Portfolio, State Street Research Income Portfolio and
MetLife Money Market Portfolio on May 16, 1983, $7,000,000 worth of shares of
the State Street Research Diversified Portfolio on July 31, 1986, $3,000,000
worth of shares of the State Street Research Aggressive Growth Portfolio on
April 29, 1988, $5,000,000 worth of shares of the MetLife Stock Index
Portfolio on May 1, 1990, $10,000,000 worth of shares of the GFM International
Stock Portfolio on May 1, 1991, $ ,000,000 worth of shares for the Loomis
Sayles High Yield Bond Portfolio on March 1, 1997, $5,000,000 worth of shares
for the T. Rowe Price Small Cap Growth Portfolio on March 1, 1997, $5,000,000
worth of shares for the Janus Mid Cap Portfolio on March 1, 1997 and
$10,000,000 worth of shares for the Scudder Global Equity Portfolio on March
1, 1997. Metropolitan Life has withdrawn portions of such investment from time
to time, but has agreed not to make any redemption request if it would reduce
the Fund's net worth below $100,000. Metropolitan Life paid all of the
organizational expenses of the Fund and will not be reimbursed by the Fund.
Owners of Contracts supported by separate accounts registered as unit
investment trusts under the Investment Company Act of 1940 have certain voting
interests in respect of Fund shares. See the prospectus for the Contracts or
other material which is attached at the front of this Prospectus for a
description of the rights granted such Contract owners to instruct voting of
Fund shares. The Fund has been advised that shares held by Metropolitan Life
in its general account and in a separate account not registered as a unit
investment trust will be voted in the same proportion as the shares held by
the Insurance Companies in their separate accounts registered as unit
investment trusts. As of March 1, 1997, Metropolitan Life owned in its general
account and in the separate account not registered as a unit investment trust
approximately %, %, %, %, %, % and %, respectively, of the
outstanding shares of the State Street Research Growth Portfolio, State Street
Research Income Portfolio, State Street Research Diversified Portfolio,
MetLife Money Market Portfolio, State Street Research Aggressive Growth
Portfolio, MetLife Stock Index Portfolio and GFM International Stock Portfolio
and 100% of the outstanding shares of each of the Loomis Sayles High Yield
Bond Portfolio, T. Rowe Price Small Cap Growth Portfolio, Janus Mid Cap
Portfolio and Scudder Global Equity Portfolio.
The Fund's Transfer and Dividend Paying Agent is State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts 02110. State Street
Research is not affiliated with State Street Bank and Trust Company.
DIVIDENDS, DISTRIBUTIONS AND TAXES
...............................................................................
The Fund intends to qualify as a "regulated investment company" under
certain provisions of the Internal Revenue Code (the "Code"). Under such
provisions, the Fund will not be subject to federal income tax on such part of
its net ordinary income and net realized capital gains which it distributes to
shareholders.
It is the Fund's intention to distribute substantially all the net
investment income, if any, of each Portfolio. The Fund must distribute by the
end of each calendar year substantially all the ordinary income and capital
gains of each Portfolio to avoid the imposition of an excise tax on certain
undistributed amounts (see "Taxes" in the Statement of Additional
Information). For dividend purposes, net investment income of each Portfolio
will consist of all payments of dividends or interest received by such
Portfolio (plus or minus any amortized purchase discount or premium, less the
estimated expenses of such Portfolio). Dividends from investment income of the
Portfolios are expected to be declared annually and reinvested in additional
full and fractional shares of the Portfolio. However, the Board of Directors
may decide to declare dividends at other intervals.
All net realized long or short-term capital gains of the Fund, if any, are
declared and distributed at least annually either during or after the close of
the Fund's fiscal year to the shareholders of the Portfolio or Portfolios to
which such gains are attributable and are reinvested in additional full and
fractional shares of the Portfolio.
For a discussion of the impact on Contract owners of income taxes the
Insurance Companies may owe as a result of (a) their ownership of Fund shares,
(b) their receipt of dividends and distributions thereon, and (c) their gains
from the purchase and sale thereof, reference should be made to the prospectus
or other material for the Contracts attached at the front of this Prospectus.
PROSPECTUS 27
<PAGE>
...............................................................
SALE AND REDEMPTION OF SHARES
...............................................................................
Metropolitan Life is the principal underwriter and distributor of the Fund's
shares. Metropolitan Life is also the principal underwriter and distributor of
the Contracts.
The Insurance Companies place orders for the purchase or redemption of
shares of each Portfolio, based on, among other things, the amount of net
Contract premiums or purchase payments transferred to the separate accounts,
transfers to or from a separate account investment division, policy loans,
loan repayments, and benefit payments to be effected on a given date pursuant
to the terms of the Contracts. Such orders are effected, without sales charge,
at the net asset value per share for each Portfolio determined as of 4:00
p.m., New York City time, on that same date.
The net asset value of the shares of each Portfolio of the Fund is
determined once daily immediately after the declaration of dividends, if any,
and is currently determined at 4:00 p.m., New York City time, on each day
during which the New York Stock Exchange is open for trading or, on days other
than when the New York Stock Exchange is open, on which it is determined that
there is a sufficient degree of trading in the Fund's portfolio securities
that the current net asset value of its shares might be materially affected.
Net asset value per share of each Portfolio is calculated by dividing the
value of all of that Portfolio's securities plus the value of its other assets
(including dividends and interest received or accrued), less all liabilities
(including accrued expenses and dividends payable), by the number of
outstanding shares of the Portfolio. For purposes of determining the value of
a Portfolio's assets, cash and receivables will be valued at their face
amounts. Interest will be recorded as accrued and dividends will be recorded
on the ex-dividend date.
Except with respect to short-term debt instruments having a remaining
maturity of 60 days or less, securities, options and futures contracts held by
the State Street Research Growth, State Street Research Income, State Street
Research Diversified, State Street Research Aggressive Growth, MetLife Stock
Index, GFM International Stock, Loomis Sayles High Yield Bond, T. Rowe Price
Small Cap Growth, Janus Mid Cap and Scudder Global Equity Portfolios will be
valued at market value. Securities and assets for which market quotations are
not readily available will be valued at fair value as determined in good faith
by or under the direction of the Board of Directors of the Fund. Short-term
debt instruments with a remaining maturity of 60 days or less will be valued
on an amortized cost basis.
The Fund will value all debt instruments held by the MetLife Money Market
Portfolio utilizing the amortized cost method of valuation. All other
securities and assets of the MetLife Money Market Portfolio will be valued in
accordance with the preceding paragraph.
PROSPECTUS 28
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
METROPOLITAN SERIES FUND, INC.
Metropolitan Series Fund, Inc., is an investment company designed to meet a
wide range of investment objectives with its separate Portfolios. The eleven
Portfolios currently available are: State Street Research Growth Portfolio,
State Street Research Income Portfolio, MetLife Money Market Portfolio, State
Street Research Diversified Portfolio, State Street Research Aggressive Growth
Portfolio, MetLife Stock Index Portfolio, GFM International Stock Portfolio,
Loomis Sayles High Yield Bond Portfolio, Janus Mid Cap Portfolio, T. Rowe
Price Small Cap Growth Portfolio and Scudder Global Equity Portfolio.
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Prospectus dated March 3, 1997. A copy of the
Prospectus may be obtained from Metropolitan Life Insurance Company, One
Madison Avenue, New York, New York 10010, Area 2H, telephone number (212) 578-
4057.
The date of this Statement of Additional Information is March 3, 1997.
One Madison Avenue, New York, New York 10010 Telephone (212) 578-2674
18000100038 (0397)
96041AT1 (exp 0598) MLIC-LD
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Practices and Policies....................................... B- 3
Money Market Instruments............................................... B- 3
Mortgage-Related Securities............................................ B- 5
Stripped Agency Mortgage-Backed Securities............................. B- 6
High Yield Securities.................................................. B- 6
Illiquid or Restricted Securities...................................... B- 7
Warrants............................................................... B- 8
Debt Instrument Ratings................................................ B- 8
Certain Investment Limitations......................................... B-10
Insurance Law Restrictions............................................. B-11
Certain Investment Practices........................................... B-11
Lending of Portfolio Securities....................................... B-11
Options and Futures................................................... B-12
Forward Foreign Currency Exchange Contracts........................... B-17
Other Derivative Transactions......................................... B-19
Industry Classifications............................................... B-20
Directors and Officers.................................................. B-23
Investment Management Arrangements...................................... B-24
Investment Management Agreements and Sub-Investment Management Agree-
ments................................................................. B-24
Payment of Expenses.................................................... B-26
Allocation of Portfolio Brokerage...................................... B-26
Sale and Redemption of Shares........................................... B-32
Taxes................................................................... B-34
General Information..................................................... B-35
Experts................................................................ B-35
Custodian and Transfer Agent........................................... B-35
Financial Statements.................................................... B-36
</TABLE>
B-2
<PAGE>
................................................................
INVESTMENT PRACTICES AND POLICIES
...............................................................................
MONEY MARKET INSTRUMENTS
Certain money market instruments in which the MetLife Money Market Portfolio
and the State Street Research Diversified Portfolio may invest are described
below. The State Street Research Income Portfolio, the State Street Research
Growth Portfolio, the State Street Research Aggressive Growth Portfolio, the
MetLife Stock Index Portfolio, the GFM International Stock Portfolio the
Loomis Sayles High Yield Bond Portfolio, the Janus Mid Cap Portfolio, the T.
Rowe Price Small Cap Growth Portfolio and the Scudder Global Equity Portfolio
may also invest in such instruments to the extent otherwise consistent with
their investment objectives. See "Investment Objectives and General Investment
Policies," in the Prospectus.
United States Government Securities: These consist of various types of
marketable securities issued by the United States Treasury, i.e., bills, notes
and bonds. Such securities are direct obligations of the United States
government and differ mainly in the length of their maturity. Treasury bills,
the most frequently issued marketable government security, have a maturity of
up to one year and are issued on a discount basis.
Government Agency Securities: These consist of debt securities issued by
agencies and instrumentalities of the United States Government, including the
various types of instruments currently outstanding or which may be offered in
the future. Agencies include, among others, the Federal Housing
Administration, Government National Mortgage Association, Farmers Home
Administration, Export-Import Bank of the United States, Maritime
Administration, General Services Administration and Tennessee Valley
Authority. Instrumentalities include, for example, the National Bank for
Cooperatives, each of the Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Farm Credit Banks, Federal National Mortgage Association and the
United States Postal Service. Such securities are backed by the full faith and
credit of the United States (e.g. U.S. Treasury Bills), guaranteed by the
United States Treasury (e.g. Government National Mortgage Association
mortgage-backed securities), supported by the issuing agency's or
instrumentality's right to borrow from the United States Treasury (e.g.
Federal National Mortgage Association Discount Notes) or supported by the
issuing agency's or instrumentality's credit. Certain of the foregoing
instruments which constitute mortgage-related securities are discussed under
"Mortgage--Related Securities" below.
Bank Money Investments: These include certificates of deposit and bankers'
acceptances. Certificates of deposit are generally short-term, interest-
bearing negotiable certificates issued by commercial banks or savings and loan
associations against funds deposited in the issuing institution. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower, usually
in connection with an international commercial transaction (to finance the
import, export, transfer or storage of goods). The borrower is liable for
payment as well as the bank, which unconditionally guarantees to pay the draft
at its face amount on the maturity date. Most acceptances have maturities of
six months or less and are traded in secondary markets prior to maturity.
Except for the Loomis Sayles High Yield Bond, T. Rowe Price Small Cap Growth,
Janus Mid Cap and Scudder Global Equity Portfolios, a Portfolio will not
invest in any security issued by a commercial bank or a savings and loan
association unless the bank or association is organized and operating in the
United States, has total assets of at least $1 billion and is a member of the
Federal Deposit Insurance Corporation; provided that this limitation shall not
prohibit investments in foreign branches or agencies of banks which meet the
foregoing requirements. No Portfolio will invest in non-negotiable time-
deposits maturing in more than seven days.
Short-Term Corporate Debt Instruments: These include commercial paper
(including variable amount master demand notes); i.e., short-term, unsecured
promissory notes issued by corporations to finance short-term credit needs.
Commercial paper is usually sold on a discount basis and has a maturity at the
time of issuance not exceeding nine months.
Variable amount master demand notes are obligations of companies that permit
the Fund to invest fluctuating amounts at varying rates of interest pursuant
to arrangements between the Fund, as lender, and the companies, as borrowers.
The Fund will have the right, at any time, to increase the amount lent up to
the full amount provided by a note or to decrease the amount. The borrower
will have the right, at any time, to prepay up to the full amount of the
amount borrowed without penalty. Because the notes are direct lending
obligations between the Fund and borrowers, they are generally not traded and
there is no secondary market. However, the Fund will have the right to redeem
a note at any time and receive face value plus accrued interest. Consequently,
the Fund's ability to receive repayment will depend upon the borrower's
ability to pay principal and interest on the Fund's demand. The Fund will
invest only in either notes that have the ratings described below for
commercial paper, or (because notes are not typically rated by credit rating
agencies) unrated notes that are issued by companies that have the rating
described below for issuers of commercial paper. The Fund does not expect that
the notes will be backed by bank letters of credit. The Fund's investment
manager or
B-3
<PAGE>
sub-investment managers, as applicable, will value the notes held by the Fund,
taking into account such factors as the issuer's earning power, cash flows and
other liquidity ratios.
Also included are non-convertible corporate debt securities (e.g., bonds and
debentures) with no more than two years (thirteen months with respect to the
MetLife Money Market Portfolio) remaining to maturity at the date of
settlement. Corporate debt securities with a remaining maturity of less than
thirteen months are liquid (and tend to become more liquid as their maturities
lessen) and are traded as money market securities. Issues with between
thirteen months and two years remaining to maturity tend to have greater
liquidity and considerably less market value fluctuation than longer term
issues.
Commercial paper investments at the time of purchase will be rated "A" ("A-
1" or "A-2" with respect to the MetLife Money Market Portfolio) by Standard &
Poor's Ratings Group (Standard & Poor's) or "Prime" ("Prime-1" or "Prime-2"
with respect to the MetLife Money Market Portfolio) by Moody's Investor
Services, Inc. (Moody's), or, if not rated, issued by companies having an
outstanding debt issue rated at least "A" ("AA" or "Aa" with respect to the
MetLife Money Market Portfolio) by Standard & Poor's or by Moody's. The
MetLife Money Market Portfolio's investments in corporate bonds and debentures
(which must have maturities at the date of settlement of thirteen months or
less) must be rated at the time of purchase at least "AA" or its equivalent by
at least two nationally recognized statistical rating organizations
("NRSRO's") or by one NRSRO if only one has rated such securities ("Requisite
NRSRO's") or if unrated are of comparable investment quality. See below for a
discussion of the aforementioned corporate bond and commercial paper ratings.
Repurchase Agreements: Under these arrangements, a Portfolio would invest in
securities subject to repurchase agreements with a bank or dealer. A
repurchase agreement is an instrument under which the purchaser (i.e., the
Portfolio) acquires ownership of the obligation (debt security) and the seller
agrees, at the time of the sale, to repurchase the obligation at a mutually
agreed upon time and price, thereby determining the yield during the
purchaser's holding period. This results in a fixed rate of return insulated
from market fluctuations during such period, unless the seller defaults on its
repurchase obligations.
The underlying securities will consist only of U.S. government or government
agency securities, certificates of deposit, commercial paper or banker's
acceptances or other money market instruments. For the MetLife Money Market
Portfolio, the underlying securities will consist of either (i) U.S.
government or government agency securities or (ii) a security rated in the
highest rating category by the requisite NRSRO's as defined above. Repurchase
agreements will be collateralized by cash or the purchased (or equivalent)
securities, and, during the term of a repurchase agreement, the seller will be
required to provide such additional collateral as is necessary to maintain the
value of all of the collateral at a level at least equal to the repurchase
price. Repurchase agreements usually are for short periods, such as under one
week. Repurchase agreements will be entered into with primary dealers for
periods not to exceed 30 days and only with respect to underlying money market
securities in which the Fund may otherwise invest as described above.
Repurchase agreements will not be entered into for a duration of more than
seven days if, as a result, more than 15% (10% for the MetLife Money Market
and Scudder Global Equity Portfolios) of the value of a Portfolio's total
assets would be invested in such agreements or other illiquid securities.
Repurchase agreements could be viewed as a form of loan made by the Fund to
the seller of the agreement, with the security subject to repurchase, in
effect, serving as "collateral" for the loan. The Fund will in all cases seek
to assure that the amount of collateral with respect to any repurchase
agreement is adequate. As with a true extension of credit, however, there is
risk of delay in recovery or inadequacy of the "collateral," should the seller
of the repurchase agreement fail financially. Also, the Fund could incur
disposition costs in connection with disposition of the collateral if the
seller defaults. The Fund will enter into repurchase agreements only with
sellers deemed to be creditworthy and only when the economic benefit to the
Fund is believed to justify the attendant risks. The Fund has adopted
standards for the sellers with whom it will enter into repurchase agreements
which it believes are reasonably designed to assure that such a party presents
no serious risk of becoming involved in bankruptcy proceedings within the time
frame contemplated by the repurchase agreement.
Reverse Repurchase Agreements: These agreements involve the sale of money
market securities held by a Portfolio, with an agreement to repurchase the
securities at an agreed upon price, date and interest payment. The proceeds of
the reverse repurchase agreement would be used to purchase other money market
securities either maturing, or under an agreement to resell, at a date
simultaneous with or prior to the expiration of the reverse repurchase
agreement. Reverse repurchase agreements will be utilized only when the
interest income to be earned from the investment of the proceeds from the
transaction is greater than the interest expense of the reverse repurchase
transaction.
B-4
<PAGE>
................................................................
Reverse repurchase agreements could be viewed as a form of borrowing by the
Fund and are therefore subject to the Fund's restrictions with respect to
borrowing generally. See fundamental investment policy number 2. The Fund
intends to take reasonable steps to ensure against the risk that it will have
insufficient assets to repurchase securities subject to such agreements. With
regard to each reverse repurchase agreement, therefore, the Fund intends to
maintain in a segregated account liquid assets (such as cash, U.S. government
securities or other appropriate liquid assets) equal in value to the specified
repurchase price or, if there is no specified price, to the proceeds received
on the sale subject to repurchase plus accrued interest.
MORTGAGE-RELATED SECURITIES
The Portfolios may invest in certain mortgage-related securities to the
extent otherwise consistent with their investment objectives and policies.
A mortgage-related security is an interest in a pool of mortgages. Most
mortgage-related securities are pass-through securities, which means that they
provide investors with payments consisting of both interest and principal as
the mortgages in the underlying mortgage pool are paid off. The following
types of mortgage-related securities, which represent the majority of the
mortgage securities currently available, are issued by government-sponsored
organizations formed to increase the availability of mortgage credit.
Ginnie Maes: These are mortgage-backed pass-through certificates (Ginnie
Maes) that are issued by the Government National Mortgage Association (GNMA)
and are guaranteed as to timely payment of interest and principal by GNMA and
backed by the full faith and credit of the United States. Ginnie Maes
represent partial ownership interests in a pool of mortgage loans which are
individually insured by the Federal Housing Administration or by the Farmers
Home Administration, or guaranteed by the Veterans Administration. GNMA is a
U.S. government corporation within the Department of Housing and Urban
Development.
Fannie Maes and Freddie Macs: These are pass-through securities issued by
the Federal National Mortgage Association (FNMA) and the Federal Home Loan
Mortgage Corporation (FHLMC). FNMA guarantees full and timely payment of
interest and principal on Fannie Maes and FHLMC guarantees full and timely
payment of interest and full and ultimate payment of principal on Freddie
Macs. These guarantees are backed, respectively, by the credit of FNMA, a
federally chartered, privately owned corporation, and FHLMC, a federally
chartered corporation owned by the Federal Home Loan Banks. In no
circumstances does the full faith and credit of the United States guarantee
any payments on the FNMA or FHLMC certificates. Although the Secretary of the
Treasury of the United States has discretionary authority to lend FNMA up to
$2.25 billion outstanding at any time, neither the United States nor any
agency thereof is obligated to finance FNMA's or FHLMC's operations or to
assist FNMA or FHLMC in any other manner.
The following types of mortgage-related securities may be issued by
governmental or non-governmental entities such as banks and other mortgage
lenders. Non-governmental securities may offer a higher yield but may also be
subject to greater price fluctuation and risk than governmental securities.
Mortgage-Backed Securities: These include mortgage pass-through bonds and
mortgage-backed bonds. A mortgage pass-through bond is an interest in a pool
of mortgages where the cash flow generated from the mortgage collateral pool
is dedicated to bond repayment. Mortgage-backed bonds are general obligations
of their issuers, payable out of the issuers' general funds and additionally
secured by a first lien on a pool of single-family detached properties.
Mortgage-related securities also include other debt obligations secured by
mortgages on commercial real estate or residential properties.
Many issuers or servicers of mortgage-related securities guarantee timely
payment of interest and principal on the securities, whether or not payments
are made when due on the underlying mortgages. This kind of guarantee
generally increases the quality of a security, but does not mean that the
security's market value and yield will not change. Like other bond
investments, the value of mortgage-related securities will tend to rise when
interest rates fall, and fall when rates rise. Their value may also change
because of changes in the market's perception of the creditworthiness of the
organization that issued or guarantees them or changes in the value of the
underlying mortgages. In addition, the mortgage securities market in general
may be adversely affected by changes in governmental regulation or tax
policies.
Mortgage-related securities can have stated maturities of up to thirty
years, depending on the length of the mortgages underlying the securities. In
practice, unscheduled or early payments of principal on the underlying
mortgages may make the securities' effective maturity shorter than this. For
example, a security based on a pool of thirty-year mortgages is generally
estimated to have an average life of twelve years. The relationship between
mortgage prepayments and interest rates may give some high-yielding mortgage-
related securities less
B-5
<PAGE>
................................................................
potential for growth in value than conventional bonds with comparable
maturities.
Certain mortgage-related securities may only be settled through privately
owned clearing corporations whose solvency and creditworthiness are not backed
by the United States government or its agencies or instrumentalities. Certain
operational problems of such clearing corporations may result in delays in
settlement of mortgage-related securities transactions and may also result in
losses to a Portfolio.
STRIPPED AGENCY MORTGAGE-BACKED SECURITIES
Stripped Agency Mortgage-Backed securities represent interests in a pool of
mortgages, the cash flow of which has been separated into its interest and
principal components. "IOs" (interest only securities) receive the interest
portion of the cash flow while "POs" (principal only securities) receive the
principal portion. Stripped Agency Mortgage-Backed Securities may be issued by
U.S. Government Agencies or by private issuers similar to those described
under "Collateralized Mortgage Obligations" in the Prospectus with respect to
CMOs. As interest rates rise and fall, the value of IOs tends to move in the
same direction as interest rates. The value of the other mortgage-backed
securities described herein, like other debt instruments, will tend to move in
the opposite direction compared to interest rates.
The cash flows and yields on IO and PO classes are extremely sensitive to
the rate of principal payments (including prepayments) on the related
underlying mortgage assets. For example, a rapid or slow rate of principal
payments may have a material adverse effect on the prices of IOs or POs,
respectively. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, an investor may fail to recoup fully its
initial investment in an IO class of a stripped mortgage-backed security, even
if the IO class is rated AAA or Aaa or is derived from a full faith and credit
obligation. Conversely, if the underlying mortgage assets experience slower
than anticipated prepayments of principal, the price on a PO class will be
affected more severely than would be the case with a traditional mortgage-
backed security.
IOs and POs, other than government-issued IOs or POs backed by fixed rate
mortgages, are considered illiquid securities and, accordingly, a Portfolio
must limit investments in such securities, together with all other illiquid
securities, to 15% of a Portfolio's net assets. The position of the Securities
and Exchange Commission ("SEC") is that, the determination of whether to
purchase a particular government-issued IO and PO backed by fixed rate
mortgages may be made on a case by case basis under guidelines and standards
established by the Fund's Board of Directors. The Fund's Board of Directors
has delegated to the manager and sub-investment managers, as applicable, the
authority to determine the liquidity of these investments based on the
following guidelines: the type of issuer; type of collateral, including age
and prepayment characteristics; rate of interest on coupon relative to current
market rates and the effect of the rate on the potential for prepayments;
complexity of the issue's structure, including the number of tranches; size of
the issue and the number of dealers who make a market in the IO or PO.
HIGH YIELD SECURITIES
The State Street Research Income, State Street Research Diversified, Loomis
Sayles High Yield, Janus Mid Cap, T. Rowe Price Small Cap Growth and Scudder
Global Equity Portfolios, as described in the Prospectus invest or can invest
in securities rated BBB or below by one of the nationally recognized
statistical rating organizations ("NRSROs") or if unrated, will be of similar
investment quality as determined by the manager or sub-investment manager, as
applicable. Medium-grade bonds (rated, for example, BBB by an NRSRO) lack
outstanding investment characteristics, but are regarded as having an adequate
capacity to pay principal and interest. Such debt securities, as well as those
in higher grade categories, are generally known as investment grade
securities.
Bonds rated BB or lower are generally known as high yield securities or
"junk bonds." Such high yield securities are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and principal in accordance with the terms of the obligation.
The market values of such high yield securities tend to reflect individual
corporate developments to a greater extent than higher rated securities, which
react primarily to fluctuations in the general level of interest rates. Such
high yield securities also tend to be more sensitive to real or perceived
adverse economic conditions or changes in interest rates than higher rated
securities.
Companies that issue high yield debt securities are often highly leveraged
and may not have available to them more traditional methods of financing.
Therefore, the risk associated with acquiring the debt securities of such
issuers generally is greater than is the case with higher rated bonds. For
example, during an economic downturn or a sustained period of rising interest
rates, highly leveraged issuers of high yield securities may experience
"financial stress" and may not have sufficient revenues to meet their payment
obligations. Such an
B-6
<PAGE>
................................................................
issuer's ability to service its debt obligations may also be adversely
affected by specific corporate developments, or the issuer's inability to meet
specific projected business forecasts, or the unavailability of additional
financing. Risk of loss due to default by the issuer is also significantly
greater for the holders of high yield securities because such securities are
generally unsecured and are generally subordinated to the debts of other
creditors of the issuer.
The Portfolios that invest in high yield securities may have difficulty
disposing of certain high yield securities, particularly those perceived to
have a high credit risk, because there may be a thin trading market for such
securities. Because not all dealers maintain markets in all high yield
securities, there is not an established retail secondary market for certain of
these securities, and it is anticipated that such securities could be sold
only to a limited number of dealers or institutional investors. Moreover, to
the extent a secondary trading market for high yield debt securities does
exist, it is generally less liquid than the secondary market for higher rated
debt securities. The lack of a highly liquid secondary market for certain high
yield securities may have an adverse impact on the market price for such debt
securities and the Portfolio's ability to dispose of particular issues when
necessary to meet its liquidity needs or in response to a specific economic
event such as a deterioration in the creditworthiness of the issuer. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of high yield securities,
especially in a thinly traded market. The lack of a liquid secondary market
for certain debt securities may also make it more difficult to obtain accurate
market quotations for purposes of valuing certain of its high yield portfolio
securities. Market quotations are generally available on many high yield
issues only from a limited number of dealers and may not necessarily represent
firm bids of such dealers or prices for actual sales.
In addition, it is possible that an economic recession could severely
disrupt the market for such securities. In addition, it is possible that an
economic downturn could adversely affect the ability of the issuers of such
securities to repay principal and pay interest on such securities.
Factors adversely impacting the market value of high yield securities may
adversely impact the net asset values of each Portfolio that invest in them to
the extent, the Portfolio owns such securities. In addition, each such
Portfolio may incur additional expenses to the extent it is required to seek
recovery upon a default in the payment of principal or interest on its
portfolio securities. These Portfolios will not rely primarily on ratings of
NRSROs, but, rather, will rely primarily on the judgment, analysis, and
experience of the manager or sub-investment manager, as applicable, in
evaluating the creditworthiness of any issuer of high yield securities. In
their evaluation, the manager or sub-investment manager, as applicable, will
take into consideration, among other things, the issuer's financial resources,
its sensitivity to economic conditions and trends, its operating history, the
quality of the issuer's management, and regulatory matters.
From time to time, proposals have been discussed regarding new legislation
designed to limit the use of certain high yield securities by issuers in
connection with leveraged buy-outs, mergers and acquisitions, or to limit the
deductibility of interest payments on such securities. Such proposals if
enacted into law could: (i) reduce the market for such securities generally;
(ii) negatively affect the financial condition of issuers of high yield
securities by removing or reducing a source of future financing; and (iii)
negatively affect the value of specific high yield issuers and the high yield
market in general. However, the likelihood of any such legislation being
enacted in the near future or the actual effect of such legislation is
uncertain.
ILLIQUID OR RESTRICTED SECURITIES
Restricted securities may be sold only in privately negotiated transactions
or in a public offering with respect to which a registration statement is in
effect under the Securities Act of 1933 (the "1933 Act"). Where registration
is required, a Portfolio may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time a Portfolio may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, a Portfolio might obtain a less
favorable price than prevailed when it decided to sell. Restricted securities
will be priced at fair value as determined in accordance with procedures
prescribed by the Fund's Board of Directors. If through the appreciation of
illiquid securities or the depreciation of liquid securities, a Portfolio
should be in a position where more than 15% of the value of its net assets
(10% as to the MetLife Money Market and Scudder Global Equity Portfolios) is
invested in illiquid assets, including illiquid restricted securities, such
Portfolio will take appropriate steps to protect liquidity.
Notwithstanding the above, a Portfolio may purchase securities which, while
privately placed, are eligible for purchase and sale under Rule 144A under the
1933 Act. This rule permits certain qualified institutional buyers, such as
the Fund, to trade in privately placed securities even though such securities
B-7
<PAGE>
................................................................
are not registered under the 1933 Act. The manager and sub-investment managers,
as applicable, under the supervision of the Fund's Board of Directors, will
consider whether securities purchased under Rule 144A are illiquid and thus
subject to such Portfolio's restriction of investing no more than 15% of a
Portfolio's net assets (10% as to the MetLife Money Market and Scudder Global
Equity Portfolios) in illiquid securities. A determination of whether a Rule
144A security is liquid or not is a question of fact. In making this
determination, the manager and sub-investment managers, as applicable, will
consider the trading markets for the specific security, taking into account the
unregistered nature of a Rule 144A security. In addition, the manager and sub-
investment managers, as applicable, could consider the (1) frequency of trades
and quotes, (2) number of dealers and potential purchases, (3) dealer
undertakings to make a market, and (4) nature of the security and of
marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer). The liquidity of
Rule 144A securities would be monitored, and if as a result of changed
conditions it is determined that a Rule 144A security is no longer liquid, a
review of the Portfolio that holds such security holdings of illiquid
securities would be made to determine what, if any, steps are required to
assure that such Portfolio does not invest more than 15% of its net assets (10%
as to the MetLife Money Market and Scudder Global Equity Portfolios) in
illiquid securities. Investing in Rule 144A securities could have the effect of
increasing the amount of a Portfolio's assets invested in illiquid securities
if qualified institutional buyers are unwilling to purchase such securities.
WARRANTS
Warrants have no voting rights, pay no dividends and have no rights with
respect to the assets of the corporation issuing them. Warrants basically are
options to purchase equity securities at a specific price valid for a specific
period of time. They do not represent ownership of the securities, but only the
right to buy them. Warrants differ from call options in that warrants are
issued by the issuer of the security which may be purchased on their exercise,
whereas call options may be written or issued by anyone. The prices of warrants
do not necessarily move parallel to the prices of the underlying securities.
DEBT INSTRUMENT RATINGS
The ratings of certain debt instruments in which the Portfolios may invest
are described below.
DESCRIPTION OF CERTAIN CORPORATE BOND AND DEBENTURE RATINGS OF MOODY'S INVESTOR
SERVICES, INC.:
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are 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 which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. They are rated lower than 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 which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may 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 which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
B-8
<PAGE>
................................................................
C--Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Should no rating be assigned by Moody's, the reason may be one of the
following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not rated
as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
NOTE: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa1,
A1, Baa1, Ba1 and B1.
DESCRIPTION OF CERTAIN CORPORATE BOND AND DEBENTURE RATINGS OF STANDARD &
POOR'S RATINGS GROUP:
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a strong capacity to pay interest and repay principal,
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C--The rating C is reserved for income bonds on which no interest is being
paid.
D--Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
DESCRIPTION OF COMMERCIAL PAPER RATINGS:
................................................................................
Commercial paper rated A (highest quality) by Standard & Poor's has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt is rated "A" or better, although in some
cases "BBB" credits may be allowed. The issuer has access to at least two
additional channels of borrowing. Basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances. Typically, the issuer's
industry is well established and the issuer has a strong position within the
industry. The reliability and quality of management are unquestioned. The
relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2 or A-3. (Those A-1 issues
determined to possess overwhelming safety characteristics are denoted with a
plus (+) sign: A-1+.)
The rating Prime is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
evaluation of the management of the issuer; economic evaluation of the issuer's
industry or industries and an appraisal of speculative-type risks which may be
inherent in certain areas; evaluation of the issuer's products in relation to
competition and customer acceptance; liquidity; amount and quality of long-term
debt; trend of earnings over a period of 10 years; financial strength of any
parent company and the relationships which exist with the issuer; and
recognition by the management of obligations which may be present or may arise
as a result of public interest questions and preparations to meet such
obligations. These factors are all considered in determining whether the
commercial paper is rated Prime-1, Prime-2 or Prime-3.
B-9
<PAGE>
................................................................
CERTAIN INVESTMENT LIMITATIONS
The investment limitations not described in the Prospectus and generally
common to the Portfolios are described below. The following four fundamental
policies may not be changed without approval by the requisite vote of the
outstanding voting shares of each Portfolio affected. Unless otherwise
indicated, all restrictions apply at the time of purchase.
No Portfolio may:
1. make any investment which would thereupon cause more than 25% of the
value of the total assets of the Portfolio to be invested in securities
issued by companies principally engaged in any one industry, provided,
however, that (a) utilities will be divided according to their services so
that, for example, gas, gas transmission, electric and telephone will each
be deemed a separate industry, (b) oil and oil related companies will be
divided by type so that, for example, domestic crude oil and gas producers,
domestic integrated oil companies, international oil companies and oil
service companies will each be deemed a separate industry, (c) savings and
loan associations and finance companies will each be deemed a separate
industry, and (d) with respect to the money market portion of the State
Street Research Diversified Portfolio and the MetLife Money Market
Portfolio, securities issued or guaranteed by the United States government,
its agencies or instrumentalities, and with respect to the MetLife Money
Market Portfolio and the State Street Research Diversified Portfolio, debt
securities issued by domestic banks (excluding foreign branches of domestic
banks), shall not be subject to this restriction;
2. borrow money or purchase securities on margin, provided, however, that
this restriction shall not prohibit a Portfolio from (a) obtaining such
short-term credits as are necessary for the clearance of portfolio
transactions, (b) temporarily borrowing up to 5% (33 1/3% in the case of the
Scudder Global Equity Portfolio) of the value of the Portfolio's total
assets for extraordinary or emergency purposes, such as for permitting
redemption requests to be honored which might otherwise require the sale of
securities at a time when it is not in the Portfolio's best interests, (c)
entering into reverse repurchase agreements with banks, or (d) with respect
to the GFM International Stock, Loomis Sayles High Yield Bond, T. Rowe Price
Small Cap Growth, Janus Mid Cap and Scudder Global Equity Portfolios,
purchasing securities on a "when-issued" basis. Collateral arrangements
entered into by the Portfolios to make margin deposits in connection with
futures contracts, including options on futures contracts, are not for these
purposes deemed to be the purchase of a security on margin. The aggregate
amount of obligations identified in (a), (b) and (c) above, when incurred,
will not exceed one-third of the amount by which the Portfolio's total
assets exceed its total liabilities (excluding the liabilities represented
by such obligations). If at any time a Portfolio's obligations of such type
exceed the foregoing limitation, such obligations will be promptly reduced
to the extent necessary to comply with the limitation. Scudder will not
purchase additional securities for the Scudder Global Equity Portfolio
unless the aggregate amount of obligations identified in (b) and (c) above
do not exceed 5%. The Fund will not issue senior securities, other than
those which represent such type obligations. For purposes hereof, writing
covered call and put options and entering into futures contracts and options
thereon to the extent permitted in fundamental investment policy numbers 1,
2 and 3 in the Prospectus shall not be deemed to involve the issuance of
senior securities or borrowings;
3. 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; or
4. make any investment in real estate interests that would thereupon cause
more than 10% of the value of the Portfolio's total assets to be invested in
real estate interests, including real estate mortgage loans, but this policy
shall not be deemed to restrict investment in real estate investment trusts
listed on stock exchanges or shares of real estate companies.
The following investment restrictions may be changed without approval of
shareholders.
To the extent that 25% of the total assets of any Portfolio may become
invested in the four oil related industries listed in paragraph 1.(b) above in
the aggregate, the Fund will disclose such fact.
No Portfolio will acquire securities for the purpose of exercising control
over the management of any company or, except for the Janus Mid Cap Portfolio,
if such acquisition would thereupon cause more than 25% of the value of the
Portfolio's total assets to consist of (1) securities (other than securities
issued or guaranteed by the United States government, its agencies and
instrumentalities) which, together with other securities of the same issuer,
constitute more than 5% of the value of the Portfolio's total assets and (2)
voting securities of issuers more than 10% of whose outstanding voting
securities are owned by the Fund. With respect to the
B-10
<PAGE>
................................................................
MetLife Money Market Portfolio, no more than 5% of the Portfolio's total
assets, at the time of purchase, will be invested in the securities of any one
issuer (other than securities issued or guaranteed by the United States
government, its agencies and instrumentalities), except that it may invest up
to 25% of its total assets in First Tier Securities (as defined in Rule 2a-7
under the 1940 Act) of a single issuer for a period of three business days
after the purchase of such securities. See "MetLife Money Market Portfolio" in
the Prospectus for additional limitations concerning diversification with
respect to the MetLife Money Market Portfolio.
No Portfolio will purchase securities of other investment companies if such
purchase would thereupon cause more than 10% of the value of the total assets
in the Portfolio to be invested in the securities of investment companies or
more than 5% of such value to be invested in the securities of any one
investment company, or would cause the Fund to own more than 3% of the total
outstanding voting stock of any such company (or together with other investment
companies having the same investment adviser to own more than 10% of the total
outstanding voting stock of any closed-end investment company). Securities of
investment companies may also be acquired as part of a merger, consolidation,
acquisition of assets or reorganization. In addition, no Portfolio will make
any investment in repurchase agreements having a maturity of more than seven
days or any other illiquid assets if, as a result, more than 15% (10% as to the
MetLife Money Market and Scudder Global Equity Portfolios) of the Portfolio's
total assets would be invested in illiquid assets.
The Fund will not make any short sale or, except for the Janus Mid Cap
Portfolio, participate on a joint or joint and several basis in any trading
account in securities. The latter policy, however, does not prohibit combining
orders for portfolio securities as described in "Investment Management
Agreements and Sub-Investment Management Agreements."
INSURANCE LAW RESTRICTIONS
In order to be able to sell Contracts in New York, the investment manager for
the Fund and each sub-investment manager for a Portfolio have agreed to use
their 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 Insurance Law, and the regulations promulgated thereunder, insofar
as such investment restrictions and limitations are applicable to the
investment of separate account assets in mutual funds. If any Portfolio fails
to comply with such restrictions or limitations, the Insurance Companies will
cease making investments in that Portfolio for the separate accounts.
Currently, the Fund is permitted by New York law 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. Also,
Delaware Insurance Law, which governs Metropolitan Tower's investments,
currently contains no requirements or limitations on the investments of assets
held in a separate account formed for the purpose of issuing variable
contracts.
CERTAIN INVESTMENT PRACTICES
LENDING OF PORTFOLIO SECURITIES:
Subject to the restriction contained in fundamental investment policy number
4 in the Prospectus, each Portfolio from time to time may lend some of its
securities to brokers, dealers and financial institutions and receive as
collateral cash or United States Treasury securities which at all times while
the loan is outstanding will be maintained by the borrower in amounts equal to
at least 100% of the current market value of the loaned securities. Any cash
collateral will be invested in short-term high-grade securities, or in a mutual
fund that invests in such investments which can increase the current income of
the Portfolio lending its securities, since the Portfolio continues to receive
payments equal to interest and dividends on the loaned securities during the
period of the loan. Any gain or loss in the market value of loaned securities
or securities in which cash collateral is invested during the term of the loan
would also inure to the Portfolio.
Loans of portfolio securities will not have terms longer than 30 days and
will be terminable at any time. The Fund may pay reasonable finders,
administrative and custodial fees to persons unaffiliated with the Fund for
services in connection with such loans.
Payments equal to the dividends, interest, and other distributions received
by a Portfolio on loaned securities may, for tax purposes, be treated as income
other than qualified income for the 90% test discussed under "Taxes" below. The
Fund intends to lend portfolio securities only to the extent that such activity
does not jeopardize the Fund's qualification as a regulated investment company
under the Internal Revenue Code (the "Code").
If the borrower fails to maintain the requisite amount of collateral, the
loan automatically terminates, and the Fund could use the collateral to replace
the securities, while holding the borrower liable for any excess of the
replacement cost over the amount of collateral. As with any extension of
credit, there are risks of delay in recovery, and in some cases even loss of
rights in the collateral, should the borrower of the securities fail
B-11
<PAGE>
................................................................
financially. However, loans of portfolio securities will be made only to firms
deemed to be creditworthy and only when the economic benefit to the Fund is
believed to justify the attendant risks. On termination of a loan, the
borrower is required to return the loaned securities to the Fund.
OPTIONS AND FUTURES:
Options on Portfolio Securities and Currencies: Subject to the restrictions
contained in fundamental investment policies numbers 1, 2 and 3 in the Pros-
pectus, all the Portfolios may write (sell) covered call options and may
purchase put and call options with respect to securities in their portfolio.
In addition, the GFM International Stock Portfolio, Loomis Sayles High Yield
Bond Portfolio, T. Rowe Price Small Cap Growth Portfolio, Janus Mid Cap
Portfolio and Scudder Global Equity Portfolio may purchase put and call
options on currencies and write covered put and call options on securities or
currencies. The other Portfolios may write put options only to the extent
necessary to close out option positions previously entered into. At the
present time, the MetLife Money Market Portfolio and the MetLife Stock Index
Portfolio do not intend to write or purchase such options.
A call option gives the purchaser of such option, in exchange for the option
premium, the right to buy (and obligates the writer to sell) the underlying
security or currency at the price specified in the option (the "exercise
price") at any time until the option expires, generally within three to nine
months. The exercise price, plus the option premium paid, will always be
greater than the market price of the underlying security or currency at the
time the option is written. A put option gives the purchaser of such option,
in exchange for the option premium, the right to sell (and obligates the
writer to purchase) the underlying security or currency at the exercise price
at any time before the option expires.
If a covered call or put option written by a Portfolio expires unexercised,
the Portfolio will realize as income, in the form of a short-term capital
gain, the premium it received for the sale of the option, less the brokerage
commission it paid i.e., the "net premium." If a call option written by a
Portfolio is exercised, a decision over which the Portfolio has no control,
the Portfolio must sell the underlying security or currency to the option
holder at the exercise price. By writing a covered call option, the Portfolio
foregoes, in exchange for the net premium, the opportunity to profit from any
increase in the value of the underlying security or currency above the
exercise price plus the premium paid. Therefore, call options may be written
when the manager or a sub-investment manager, as applicable, believe that the
security or currency should be held, but no increase in price or only a
moderate increase within the option period is expected.
By writing a covered put option, a Portfolio receives premium income but
obligates itself to purchase from the option holder, at the price specified in
the option, the particular security or currency underlying the option at any
time prior to the expiration of the option period, regardless of the market
value of the security or currency during the option period. Therefore, put
options will be written when the manager or sub-investment manager, as
applicable, believes that the security's or currency's price will rise during
the exercise period and, consequently, the option will not be exercised.
If an option purchased by a Portfolio expires unexercised, the Portfolio
will experience a loss in the amount of the premium paid for the option. The
Portfolio will generally decide to exercise a put option if the market price
of the underlying security or currency falls below the exercise price; it will
generally decide to exercise a call option if the market price of the
underlying security or currency exceeds the exercise price. Therefore, options
may be purchased when the manager or sub-investment manager, as applicable,
believes that, in the case of a put, the security or currency should be held
but its market price may fall, or, in the case of a call, the security or
currency should be purchased in the future and its market price may rise.
In order to reduce the risk of loss, a Portfolio will write an option only
if there is an organized market for the option on a recognized securities
exchange except that the Janus Mid Cap and Scudder Global Equity Portfolios
may write covered options "over the counter." A Portfolio will not sell the
securities or currencies against which options have been written until after
the option period has expired, a closing purchase transaction, if available,
has been executed, a corresponding put or call option has been purchased or
the written option is otherwise covered.
Options are traded on certain recognized securities exchanges, including the
Chicago Board Options Exchange, the American Stock Exchange, the Philadelphia
Stock Exchange, the Pacific Stock Exchange and the Midwest Stock Exchange. The
Portfolio may terminate its obligation as the writer of an option by
purchasing on such exchange an option with the same exercise price and
expiration date as the option previously written (a "closing purchase
transaction"). If the Portfolio cannot enter into a closing purchase
transaction (for example, because no such options are available for purchase),
the Portfolio will continue to bear the risk of loss of the appreciation, if
any, in the price of the underlying security or currency
B-12
<PAGE>
................................................................
during the remaining term of the option, if it has written a call option, or
the Portfolio will continue to be obligated to purchase the specified
securities or currencies at the exercise price, regardless of the market value
or exchange rate, if it has written a put option.
Both sales and purchases of options require the Portfolio to pay brokerage
commissions. To the extent that an option sold by the Portfolio is exercised,
the Portfolio may incur brokerage commissions or other transaction costs in
reinvesting the proceeds received upon such exercise. Also, writing covered
call options can increase a Portfolio's turnover rate.
When a Portfolio sells a covered call or put option, an amount equal to the
net premium (the premium less the commission) received by the Portfolio is
included in the liability section of the Portfolio's statement of assets and
liabilities as a deferred credit. The amount of the deferred credit
subsequently will be marked-to-market to reflect the current value of the
option written. If an option expires on its stipulated expiration date or if
the Portfolio enters into a closing purchase transaction, the Portfolio will
realize a gain (or loss, if the cost of a closing purchase transaction exceeds
the net premium received when the option was sold), and the deferred credit
related to such option will be eliminated. If a call option sold by the
Portfolio is exercised, the Portfolio will realize a long-term or short-term
gain or loss from the sale of the underlying security or currency, and the
proceeds of the sale will be increased by the premium previously received on
the option. The writing of such call options will not affect the holding
period of the underlying security. If a put option sold by the Portfolio is
exercised, the Portfolio's cost for the security or currency purchased will be
reduced by the premium previously received on the option written.
Options on Indices: The State Street Research Growth, State Street Research
Diversified, State Street Research Aggressive Growth, GFM International Stock,
Loomis Sayles High Yield Bond, T. Rowe Price Small Cap Growth, Janus Mid Cap,
and Scudder Global Equity Portfolios may utilize options on stock indices.
While it has no present intention to do so, the MetLife Stock Index Portfolio
may in the future utilize such options. Options on stock indices are similar
to options on stock, except that all settlements are made in cash rather than
by delivery of the stock, and gains or losses depend on price movements in the
stock market generally (or in a particular industry or segment of the market
represented by the index) rather than price movements in individual stocks.
Upon payment of a specified premium at the time an option on a stock index
is entered into, the purchaser of a call option on a stock index obtains the
right to receive, upon exercise of the option, a sum of money equal to a
multiple of any excess of the value of the specified stock index, on the
exercise date, over the exercise or "strike" price specified by the option.
The purchaser of a put option on a stock index obtains the right to receive,
upon exercise of the option, a sum of money equal to a multiple of any excess
of the strike price over the value of the stock index.
The writer of a stock index option has obligations which correspond to the
purchaser's rights. Thus, for example, the writer of a call option on a stock
index, in consideration of the option premium received, has the obligation to
pay, upon exercise, a dollar amount equal to a multiple of any excess of the
value of the specified stock index on the date of exercise over the strike
price specified in the option. The writer of a put option on a stock index, in
consideration of the option premium received, has the obligation to pay, upon
exercise, a dollar amount equal to a multiple of any excess of the value of
the strike price specified in the option over the value of the specified stock
index on the date of exercise.
The Portfolios will cover call options on a stock index written by, for
example, holding in a segregated account, with the custodian for the Fund,
portfolio securities that substantially replicate the movement of the
particular index upon which the call option was written or sufficient cash or
liquid assets to cover the outstanding position. In addition, the Portfolios
may also choose to cover call options written by holding a separate call
option permitting the purchase of the same stock index at the same strike
price. The Portfolios will cover put options on a stock index written by, for
example, holding in a segregated account, with the custodian for the Fund,
cash or liquid assets equal to the strike price of the put option or by
holding a separate put option permitting the purchase of the same stock index
at the same strike price.
The State Street Research Growth, State Street Research Diversified and
State Street Research Aggressive Growth Portfolios may write covered call
options on a stock index and the GFM International Stock, Loomis Sayles High
Yield Bond, T. Rowe Price Small Cap Growth, Janus Mid Cap and Scudder Global
Equity Portfolios may write covered call and put options on a stock index for
the same purposes as they might write covered call and put options on their
portfolio securities.
A securities index fluctuates with changes in the market values of the
securities included in the index. For example, some options on securities
indices are based on a broad market index such as the Standard & Poor's 500 or
the NYSE Composite Index, or a narrower market
B-13
<PAGE>
................................................................
index such as the Standard & Poor's 100. Indices may also be based on an
industry or market segment such as the AMEX Oil and Gas Index or the Computer
and Business Equipment Index. Options on stock indices are currently traded on
the following exchanges, among others: The Chicago Board Options Exchange; New
York Stock Exchange; and American Stock Exchange. Options on other types of
securities indices, which do not currently exist, may be introduced and traded
on exchanges in the future.
Options on indices relating to certain debt securities, referred to as
interest rate indices, may be introduced in the future. In the event that a
liquid market develops for options on an interest rate index, and the Board of
Directors of the Fund authorizes a particular Portfolio to use such an option,
the Portfolio may do so. Where permitted, all the Portfolios may utilize
options on interest rate indices in a manner similar to that described above
with respect to options on stock indices.
The Portfolios' purchase and sale of options on indices will be subject to
the same risks as those applicable to options on individual securities. In
addition, the distinctive characteristics of options on indices create certain
risks that are not present with options on individual securities. For example,
index prices may be distorted if trading of certain securities included in the
index is interrupted. Trading in the index options also may be interrupted in
certain circumstances, such as, for example, if trading were halted in a
substantial number of securities included in the index. If this occurred, a
Portfolio would not be able to close out options which it had purchased or
written and, if restrictions on exercise were imposed, would be unable to
exercise an option it holds, which could result in substantial losses to the
Portfolio. The Portfolios may purchase or write options only on indices which
include a sufficient number of securities to minimize the likelihood of a
trading halt in such options. In addition, the ability to establish and close
out positions on options on indices will be subject to the development and
maintenance of a liquid secondary market for such options. The Portfolios will
not purchase or sell any option on an index unless and until, in the opinion
of the investment manager or sub-investment manager, as applicable, the market
for such options has developed sufficiently that the risk in connection with
such transactions is acceptable.
The effectiveness of hedging through the purchase of options on indices will
depend upon the extent to which price movements in the portion of the
securities portfolio being hedged correlate with price movements in the
selected index. Perfect correlation is not possible because the securities
held or to be acquired by a Portfolio will not exactly match the composition
of the indices on which options are written. In the purchase of options on
indices the principal risk is that the premium and transaction costs paid by a
Portfolio in purchasing an option will be lost as a result of unanticipated
movements in the price of the securities comprising the index for which the
option has been purchased. In writing call options on indices, the principal
risks are the inability to effect closing transactions at favorable prices and
the inability to participate in the appreciation of the underlying securities.
In writing put options on indices, the principal risks are the inability to
effect closing transactions at favorable prices and the obligation to make a
cash settlement relating to the stock index at prices which may not reflect
current market values.
Futures Transactions: A futures contract is an agreement to buy or sell a
security or currency (or deliver a final cash settlement price, in the case of
a contract relating to an index or otherwise not calling for physical delivery
at the end of trading in the contract) for a set price in the future. Trading
in futures is regulated in the U.S. under the Commodity Exchange Act by the
Commodity Futures Trading Commission ("CFTC"). Futures contracts trade on
certain regulated contract markets through an open outcry auction on the
exchange floor. Consistent with their investment objectives and policies, the
Portfolios may purchase or sell futures contracts to effect hedging
transactions, to establish or decrease market exposure in an efficient manner
or to enhance income. A hedge includes transactions in which the Portfolios
utilize futures contracts in order to protect the value of underlying
portfolio securities or the currencies in which they are denominated from
adverse fluctuations in the financial markets.
Positions taken in the futures markets are not normally held until delivery
or cash settlement is required, but instead are liquidated through offsetting
transactions that may result in a gain or a loss. While futures positions
taken by a Portfolio will usually be liquidated in this manner, the Portfolio
may instead make or take delivery of underlying securities or currencies
whenever it appears economically advantageous for the Portfolio to do so. A
clearing organization associated with the exchange on which futures are traded
assumes responsibility for closing out transactions and guarantees that, as
between the clearing members of an exchange, the sale and purchase obligations
will be performed with regard to all positions that remain open at the
termination of the contract.
Upon entering into a futures contract, a Portfolio is required to deposit
with a futures commission merchant or in a segregated custodial account a
certain percentage (presently less than ten percent) of the
B-14
<PAGE>
................................................................
futures contract's market value as "initial margin." Initial margin is in the
nature of a performance bond or good faith deposit on the contract which is
returned upon termination of the futures contract if all contractual
obligations have been satisfied. The initial margin in most cases consists of
cash or U.S. government securities. Subsequent cash payments, called
"variation margin," may be required as a result of marking the contracts to
market on a daily basis as the contract value fluctuates.
The use of futures contracts entails certain risks in addition to those
stated below, including but not limited to: possible reduction in the
Portfolio's income; possible reduction in value of both the securities or
currencies hedged and the related futures contract; and potential losses in
excess of the amount initially invested in the futures contracts themselves.
The use of futures contracts requires special skills in addition to those
needed to select portfolio securities or currencies.
Stock Index Futures Contracts: The State Street Research Growth, State
Street Research Diversified, State Street Research Aggressive Growth, MetLife
Stock Index, GFM International Stock, Loomis Sayles High Yield Bond, T. Rowe
Price Small Cap Growth, Janus Mid Cap and Scudder Global Equity Portfolios,
consistent with their investment objectives and policies, may use stock index
futures to establish or decrease market exposure in an efficient manner, to
attempt to reduce the risk of investments in equity securities by hedging
portions of their underlying portfolios or to enhance income. A stock index
futures contract is an agreement in which the seller of the contract agrees to
deliver to the buyer an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is made.
No physical delivery of the underlying stocks in the index is made.
The State Street Research Growth, State Street Research Diversified, State
Street Research Aggressive Growth, MetLife Stock Index, GFM International
Stock, Loomis Sayles High Yield Bond, T. Rowe Price Small Cap Growth, Janus
Mid Cap and Scudder Global Equity Portfolios may engage in stock index futures
transactions as a hedge against market risk resulting from market conditions
and over-all economic prospects with respect to the value of portfolio
securities held by the Portfolios or which the Portfolios intend to purchase,
as distinguished from stock-specific risk resulting from the market's
evaluation of the merits of a particular security. For example, a Portfolio
might sell stock index futures contracts to hedge against a decline in the
value of securities held in the Portfolio. Alternatively, a Portfolio might
buy stock index futures contracts to hedge against a rise in the value of
securities the Portfolio intends to acquire. A Portfolio may also use stock
index futures to enhance income.
A Portfolio's successful use of stock index futures contracts depends upon
the ability of the manager or sub-investment manager, as applicable, to
accurately assess the direction of the stock market and is subject to various
additional risks. The correlation between movement in the price of the stock
index futures contract and the price of the securities being hedged is
imperfect and the risk from imperfect correlation increases as the composition
of the Portfolio's securities diverges from the composition of the relevant
index. In addition, the ability of a Portfolio to close out a futures position
depends on a liquid secondary market. There is no assurance that liquid
secondary markets will exist for any particular futures contract at any
particular time. See also the risks noted above under "Futures Transactions."
Interest Rate Futures Contracts: Each of the Fund's Portfolios, consistent
with its investment objective and policies, may buy and sell futures contracts
on interest-bearing securities (such as U.S. Treasury Bonds, U.S. Treasury
Notes, three-month U.S. Treasury Bills, Eurodollar Certificates of Deposit,
and GNMA certificates) for hedging purposes or to establish or decrease market
exposure in an efficient manner. Further, in the event that a liquid market
develops for futures contracts based on an interest rate index, and the Board
of Directors of the Fund authorizes a particular Portfolio to use such futures
contracts, the Portfolio may do so. Futures contracts on interest-bearing
securities and interest rate indices are referred to collectively as "interest
rate futures contracts." The Portfolios will engage in transactions in only
those interest rate futures contracts that are traded on a commodities
exchange or a board of trade and are standardized as to maturity date and
underlying financial instrument.
For example, a Portfolio might sell an interest rate futures contract to
hedge against a decline in the market value of debt securities the Portfolio
owns. A Portfolio might also purchase an interest rate futures contract to
hedge against an anticipated increase in the value of debt securities the
Portfolio intends to acquire. The risks of interest rate futures contracts are
briefly described above in connection with the proposed use of stock index
futures contracts and in the general description of "Futures Transactions." In
addition, a Portfolio's successful use of interest rate futures contracts
depends upon the ability of the manager or sub-investment manager, as
applicable, to accurately assess interest rate moves. Further, because there
are a limited number of types of interest rate futures contracts, it is likely
that
B-15
<PAGE>
................................................................
the financial futures contracts available to a Portfolio will not exactly
match any debt securities the Portfolio intends to hedge or acquire. To
compensate for differences in historical volatility between securities a
Portfolio intends to hedge or acquire and the interest rate futures contracts
available to it, the Portfolio could purchase or sell futures contracts with a
greater or lesser value than any debt securities it wished to hedge or
intended to purchase. This imperfect correlation between the interest rate
futures contract and the debt securities being hedged is another risk.
Currency Futures Contracts: The GFM International Stock, Loomis Sayles High
Yield Bond, Scudder Global Equity, T. Rowe Price Small Cap Growth and Janus
Mid Cap Portfolios may buy and sell futures contracts on currencies. The
Portfolios will engage in transactions in only those currency futures
contracts that are traded on a national or foreign commodities exchange or a
board of trade and are standardized as to maturity date and the underlying
financial instrument.
Currency futures contracts may be used as a hedge against changes in
prevailing currency exchange rates in order to establish more definitively the
return on foreign securities held or intended to be acquired by the Portfolio.
In this regard, the Portfolio could sell currency futures contracts to offset
the effect of expected decreases in currency exchange rates and purchase such
contracts to offset the effect of expected increases in currency exchange
rates. The Portfolios may also use currency futures for any other purpose that
they could use forward currency contracts. Although techniques other than the
sale and purchase of currency futures contracts could be used for these
purposes, currency futures contracts may be an effective and relatively low
cost means of implementing these strategies.
Options on Futures: The State Street Research Growth, State Street Research
Diversified, State Street Research Aggressive Growth, MetLife Stock Index, GFM
International Stock, T. Rowe Price Small Cap Growth, Loomis Sayles High Yield
Bond, Janus Mid Cap and Scudder Global Equity Portfolios may purchase put and
call options on stock index futures contracts, write (i.e., sell) covered call
options on stock index futures contracts and enter into closing transactions
with respect to such options. The GFM International Stock, T. Rowe Price Small
Cap Growth, Loomis Sayles High Yield Bond, Janus Mid Cap and Scudder Global
Equity Portfolios may also write covered put options on stock index futures
contracts, may write covered put and call options on currency futures
contracts, may purchase put and call options on currency futures contracts and
may enter into closing transactions with respect to such options. In addition,
all of the Portfolios are permitted to purchase put and call options on
interest rate futures contracts, write covered call options on interest rate
futures contracts and enter into closing transactions with respect to such
options. In addition, the GFM International Stock, T. Rowe Price Small Cap
Growth, Loomis Sayles High Yield Bond, Janus Mid Cap and Scudder Global Equity
Portfolios may write covered put options on interest rate futures contracts. A
call option on a futures contract gives the purchaser the right, in return for
the premium paid, to purchase a futures contract (assume a "long" position) at
a specified exercise price at any time before the option expires. A put option
gives the purchaser the right, in return for the premium paid, to sell a
futures contract (assume a "short" position), for a specified exercise price,
at any time before the option expires. Upon the exercise of a call, the writer
of the option is obligated to sell the futures contract (to deliver a "long"
position to the option holder) at the option exercise price, which will
presumably be lower than the current market price of the contract in the
futures market. Upon exercise of a put, the writer of the option is obligated
to purchase the futures contract (to deliver a "short" position to the option
holder) at the option exercise price, which will presumably be higher than the
current market price of the contract in the futures market.
When a Portfolio as a purchaser of an option on a futures contract exercises
such option and assumes a long futures position in the case of a call, or a
short futures position in the case of a put, its gain will be credited to its
futures margin account. Any loss suffered by the writer of the option on a
futures contract will be debited to its futures variation margin account.
However, as with the trading of futures, most participants in the options
markets do not seek to realize their gains or losses by exercise of their
option rights. Instead, the holder of an option will usually realize a gain or
loss by buying or selling an offsetting option (i.e., entering into a closing
transaction) at a market price that will reflect an increase or a decrease
from the premium originally paid as a purchaser or required as a writer.
Options on futures contracts can be used by a Portfolio for the same
purposes as might be addressed by the direct purchase or sale of the
underlying futures contracts themselves. Depending on the pricing of the
option, compared to either the futures contract upon which it is based or upon
the price of the underlying securities or currencies themselves, it may or may
not be less risky then direct ownership of the futures contract or the
underlying securities or currencies.
In contrast to a futures transaction, in which only transaction costs are
involved, benefits received by a Portfolio as a purchaser in an option
transaction will be reduced by the amount of the premium paid as well as by
transaction costs. In the event of an adverse market
B-16
<PAGE>
................................................................
movement, however, a Portfolio which purchased an option will not be subject
to a risk of loss on the option transaction beyond the price of the premium it
paid plus its transaction costs. Purchasers of options who do not exercise
their options prior to the expiration date will suffer a loss of the entire
premium.
If a Portfolio writes covered call or put options on futures contracts, the
Portfolio will receive a premium but will assume a risk of adverse movement in
the price of the underlying futures contract comparable to that involved in
holding a futures position. If the option is not exercised, the Portfolio will
realize a gain in the amount of the premium, which may partially offset
unfavorable changes in the value of securities held in the Portfolio or to be
acquired for the Portfolio. If the option is exercised, the Portfolio will
incur a loss in the option transaction, which will be reduced by the amount of
the premium it has received, but which may also partially offset favorable
changes in the value of its portfolio securities or currencies. For example,
the writing of a call option on a futures contract can constitute a partial
hedge against declining prices of underlying securities or currencies. If the
futures price at expiration is below the exercise price, the Portfolio will
retain the full amount of the option premium, which provides a partial hedge
against any decline that may have occurred in the value of the Portfolio's
holdings of securities or currencies.
While the purchaser or writer of an option on a futures contract may
normally terminate its position by selling or purchasing an offsetting option
of the same series, a Portfolio's ability to establish and close out options
at fairly established prices will be subject to the existence of a liquid
market. A Portfolio will not purchase or write options on futures contracts
unless, in the opinion of the manager or sub-investment manager, as
applicable, the market for such options has sufficient liquidity that the
risks associated with such options transactions are not unacceptable.
Limitations on the Use of Futures Contracts and Options Thereon and Options
on Indices: In instances involving the purchase or sale of a futures contract
or the writing of covered call options on futures contracts, each Portfolio
will be required to either (i) segregate cash or liquid assets that, together
with any related margin deposits, are sufficient to cover the outstanding
position or (ii) cover the futures contract or option written on such contract
by owning the instruments or currency underlying the futures contract or
option thereon or by holding a separate option permitting it to purchase or
sell the same futures contract or option at the same strike price or better.
In instances involving the writing of covered put options on futures
contracts, the Portfolios will be required to (i) segregate cash or liquid
assets that, together with any related margin deposits, at least equal the
strike price of the put options written or (ii) purchase a put option on the
same futures contract at the same strike price as that written by the
Portfolio. Where such positions are covered by the segregation of sufficient
cash, cash equivalents, other liquid securities or underlying securities, such
amounts will be held in a segregated account with the Fund's custodian to
collateralize the position, thereby insuring that the use of such futures
contracts and options thereon is unleveraged.
A Portfolio may not establish a position in a futures contract or an option
thereon if immediately thereafter the sum of the amount of initial margin
deposits on all open futures contracts and options the Portfolio has written
thereon, and premiums paid for unexpired options on futures contracts would
exceed 5% of the market value of that Portfolio's total assets; provided,
however, that in the case of an option that is "in-the-money" at the time of
the purchase, the "in-the-money" amount may be excluded in calculating the 5%
limitation. This restriction, however, does not apply to positions that the T.
Rowe Price Small Cap Growth, Janus Mid Cap and Scudder Global Equity
Portfolios may take that are within the CFTC's definition of "bona fide
hedging" transactions. In addition, shares of the Portfolios may not be sold
or advertised as a participation in a commodity pool or other vehicle for
trading in the commodity futures or options markets. Finally, the Portfolios
must agree to submit information to the CFTC, as requested, to demonstrate
compliance with applicable regulations and to assist the CFTC in collecting
data and refining its hedging standards.
With respect to options on indices, in order to insure that call options
written by the Portfolios on indices are covered and, therefore, unleveraged,
the Portfolios would be required to: (i) hold in a segregated account, with
the Fund's custodian, portfolio securities that substantially replicate the
movement of the particular index upon which the call option was written or
sufficient cash or liquid assets to cover the outstanding position, or (ii)
hold a separate option permitting the purchase or sale of the same stock index
at the same strike price or better. With respect to put options written on
stock indices, the Portfolios will (i) segregate sufficient cash or liquid
assets equal to the strike price of the put option written or (ii) purchase a
put option on the same index at the same strike price as that written by the
Portfolio.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS:
Each Portfolio, except for the MetLife Stock Index Portfolio, may use
forward foreign currency exchange contracts ("forward currency contracts") to
hedge the
B-17
<PAGE>
................................................................
currency risk relating to securities denominated in or exposed to foreign
currency that are purchased, sold, or held by that Portfolio.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract as agreed by the parties, at a price set at the time
of the contract. In the case of a cancelable forward currency contract, the
holder has the unilateral right to cancel the contract at maturity by paying a
specified fee. Forward currency contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks)
and their customers. They generally have no deposit requirement, and no
commissions are charged at any stage for trades. Although foreign exchange
traders do not charge a fee for currency conversion, they do realize a profit
based on the difference (the "spread") between prices at which they are buying
and selling various currencies. Thus, a trader may offer to sell a foreign
currency to a Portfolio at one rate, while offering a lower rate of exchange
should the Portfolio desire to resell that currency to the dealer.
At the maturity of a forward currency contract, a Portfolio may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity, a Portfolio may enter into a closing transaction involving
the purchase or sale of an offsetting contract. Closing transactions with
respect to forward currency contracts are usually effected with the currency
trader that is a party to the original forward contract.
As described in the Prospectus, each Portfolio may enter into a forward
currency contract under two circumstances. First, when a Portfolio has entered
into a contract to purchase or sell a security denominated in or exposed to
foreign currency, it may protect itself against a possible loss between the
trade date and the settlement date resulting from an adverse change in the
relationship between the U.S. dollar and the foreign currency by entering into
a forward currency contract in U.S. dollars for the purchase or sale of
foreign currency. Second, when management of a Portfolio believes a particular
foreign currency may suffer or enjoy a substantial movement against the U.S.
dollar (or another currency in a cross hedging transaction), the Portfolio may
enter into a forward currency contract to sell or buy an amount of such
currency approximating the value of some or all of the Portfolio's securities
denominated in or exposed to such foreign currency. A Portfolio may also use a
proxy currency for one of the currencies in these transactions. (A proxy
currency is one whose value the investment manager or sub-investment manager
believes will maintain a close relationship to the value of the currency for
which it is being substituted.) However, the precise matching of the amounts
of forward currency contracts and the value of any portfolio securities being
hedged will not generally be possible, because the future value of such
securities in foreign currencies will change as a consequence of movements in
the market value of those securities between the dates the forward currency
contracts are entered into and the dates they mature.
As set forth in the Prospectus, the GFM International Stock, Loomis Sayles
High Yield Bond, T. Rowe Price Small Cap Growth, Janus Mid Cap and Scudder
Global Equity Portfolios may also invest a limited amount of their assets in
forward currency contracts used for non-hedging purposes.
Since it is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward currency
contract, it may be necessary for a Portfolio to purchase additional foreign
currency on the spot (i.e., cash) market (and bear the expense of such
purchase) if the market value of the securities being hedged is less than the
amount of foreign currency the Portfolio would be obligated to deliver upon
the sale of such securities. Conversely, it may be necessary for the Portfolio
to sell some of the foreign currency received upon the sale of Portfolio
securities on the spot market if the market value of such securities exceeds
the amount of foreign currency the Portfolio is obligated to deliver.
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's custodian will segregate
cash or liquid assets having a value equal to the aggregate amount of such
Portfolio's commitments under forward contracts entered into with respect to
position hedges, cross-hedges and anticipatory hedges. If the value of the
securities used to cover a position or the value of segregated assets
declines, a Portfolio will find alternative cover or segregate additional cash
or high-grade liquid assets on a daily basis so that the value of the covered
and segregated assets will be equal to the amount of such Portfolio's
commitments with respect to such 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.
B-18
<PAGE>
...............................................................
The use of forward currency contracts involves various risks. A Portfolio may
not always be able to enter into a forward currency contract when management
deems it advantageous to do so, for instance, if the Portfolio is unable to
find a counterparty to the transaction at an attractive price. Furthermore, a
Portfolio may not be able to purchase forward currency contracts with respect
to all of the foreign currencies in which its portfolio securities may be
denominated. In those circumstances, and in a cross hedging forward currency
contract, the correlation between the movements in the exchange rates of the
subject currency and the currency in which the portfolio security is
denominated (or to which it is exposed) may not be precise. Forward currency
contracts are not guaranteed by a third party and, accordingly, each party to a
forward currency contract is dependent upon the creditworthiness and good faith
of the other party. A default on the contract would deprive a Portfolio of
unrealized profits or force the Portfolio to cover its commitments for purchase
or sale of currency, if any, at the current market price. Finally, the cost of
purchasing forward currency contracts in a particular currency will reflect, in
part, the rate of return available on instruments denominated in that currency.
The cost of purchasing forward currencies that in general yield high rates of
return may thus tend to reduce the rate of return toward the rate of return
that would be earned on assets denominated in U.S. dollars.
OTHER DERIVATIVE TRANSACTIONS
Subject to the conditions set forth in the Prospectus, the Loomis Sayles High
Yield Bond, T. Rowe Price Small Cap Growth, Janus Mid Cap and Scudder Global
Equity Portfolios may use swaps, caps, floors and collars. A Portfolio will
usually enter into swaps on a net basis; that is, the two payment streams are
netted out in a cash settlement on the payment date or dates specified in the
instrument, with the Portfolio receiving or paying, as the case may be, only
the net amount of the two payments.
Each Portfolio will maintain cash or liquid assets in a segregated account
with its custodian in an amount sufficient at all times to cover its current
obligations under swaps, caps, floors and collars. If a Portfolio enters into a
swap agreement on a net basis, it will segregate assets with a daily value at
least equal to the excess, if any, of the Portfolio's accrued obligations under
the swap agreement over the accrued amount the Portfolio is entitled to receive
under the agreement. If a Portfolio enters into a swap agreement on other than
a net basis, or sells a cap, floor or collar, it will segregate assets with a
daily value at least equal to the full amount of the Portfolio's accrued
obligations under the agreement.
The Portfolios will not enter into any swap, cap, floor or collar, unless the
other party to the transaction (the "Counterparty") is deemed creditworthy by
the sub-investment manager. If a Counterparty defaults, the Portfolio may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years, with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Caps, floors and collars are more recent innovations
for which standardized documentation has not yet been fully developed and, for
that reason, they are less liquid than swaps.
The liquidity of swaps, caps, floors and collars will be determined by the
sub-investment manager based on various factors, including (1) the frequency of
trades and quotations, (2) the number of dealers and prospective purchasers in
the marketplace, (3) dealer undertakings to make a market, (4) the nature of
the instrument (including any demand or tender features) and (5) the nature of
the marketplace for trades (including the ability to assign or offset a
Portfolio's rights and obligations relating to the investment). Such
determination will govern whether the instrument will be deemed within the 15%
(or 10% for the MetLife Money Market and Scudder Global Equity Portfolios)
restriction on investments in securities that are not readily marketable.
B-19
<PAGE>
INDUSTRY CLASSIFICATIONS
In determining how much of each of the State Street Research Growth, State
Street Research Income, State Street Research Diversified and State Street
Research Aggressive Growth Portfolios are invested in a given industry, the
industry classifications set forth below, grouped by sectors, are currently
used. Companies engaged in the business of financing will be classified
according to the industries of their parent companies or industries that
otherwise most affect such financing companies. Issuers of asset-backed pools
will be classified as separate industries based on the nature of the
underlying assets, such as mortgages, credit card receivables, etc.
<TABLE>
<CAPTION>
BASIC INDUSTRIES CONSUMER STAPLE SCIENCE & TECHNOLOGY
- ---------------- --------------- --------------------
<S> <C> <C>
Chemical Business Service Aerospace
Diversified Container Computer Software & Service
Electrical Equipment Drug Electronic Components
Forest Products Food & Beverage Electronic Equipment
Machinery Hospital Supply Office Equipment
Metal & Mining Personal Care
Railroad Printing & Publishing
Truckers Tobacco
UTILITY ENERGY CONSUMER CYCLICAL
- ------- ------ -----------------
Electric Oil Refining and Marketing Airline
Gas Oil Production Automotive
Gas Transmission Oil Service Building
Telephone Hotel & Restaurant
Photography
OTHER FINANCE Recreation
- ----- -------
Retail Trade
Trust Certificates-- Bank Textile & Apparel
Government Related Lending Financial Service
Asset-backed--Mortgages Insurance
Asset-backed--Credit Card
Receivables
</TABLE>
In determining how much of the GFM International Stock Portfolio is invested
in a given industry, the industry classifications set forth below, grouped by
sectors, are currently used.
<TABLE>
<CAPTION>
ENERGY RESOURCES MATERIALS CAPITAL EQUIPMENT
- ---------------- --------- -----------------
<S> <C> <C>
Energy Resources (includes all oils) Building Materials and Components Aerospace and Military
Utilities Electrical, Gas, Water Chemicals Technology
Forest Products and Paper Construction and Housing
CONSUMER GOODS Metals--Non ferrous Data Processing and
- --------------
Appliances and Household Durables Metals--Steel Reproduction
Automobiles Misc. Materials and Commodities Electrical and Electronics
Beverages and Tobacco Electrical Components and
Food and Household Products SERVICES Instruments
--------
Health and Personal Care Broadcasting and Publishing Energy Equipment and
Recreation, Other Consumer Goods Business and Public Services Services
Textiles and Apparel Leisure and Tourism Industrial Components
Merchandising Machinery and Engineering
MULTI-INDUSTRY Telecommunications
- --------------
Multi-Industry Transportation--Airlines FINANCE
-------
Transportation--Road and Rail Banking
MINING Transportation--Shipping Financial Services
- ------
Gold Mines Wholesale and International Trade Insurance
Real Estate
Collective Investment Programs
</TABLE>
B-20
<PAGE>
In determining how much of the Loomis Sayles High Yield Bond Portfolio is
invested in a given industry, the industry classifications set forth below,
grouped by sectors are currently used.
<TABLE>
<S> <C>
GOVERNMENTS FINANCE
----------- -------
Banks
UTILITIES Captive & Independents
---------
Gas Other
Electric
TELEPHONE INDUSTRIAL
--------- ----------
Consumer
FINANCIAL--EQUIPMENT TRUST Cyclical
--------------------------
Energy
MORTGAGE-RELATED (CMO) Manufacturing
----------------------
Service
Transportation
</TABLE>
In determining how much of the T. Rowe Price Small Cap Growth Portfolio is
invested in a given industry, the industry classifications set forth below,
grouped by sectors are currently used.
In determining how much of the T. Rowe Price Small Cap Growth Portfolio is
invested in a given industry, the T. Rowe Price Small Cap Growth Portfolio will
rely primarily on industry classifications as published by BARRA, Inc. To the
extent that BARRA, Inc. classifications are so broad that the primary economic
characteristics in a single class are materially different, the Portfolio may
further classify issuers in accordance with industry classifications as
published by the SEC as well as the Emerging Company Investment Service (ECIS).
B-21
<PAGE>
In determining how much of the Janus Mid Cap Portfolio is invested in a
given industry, the Janus Mid Cap Portfolio will rely primarily on industry
classifications as published by Bloomberg L.P., provided that financial
service companies will be classified according to the end users of their
services (for example, automobile finance, bank finance and diversified
finance are each considered to be a separate industry). To the extent that
Bloomberg L.P. classifications are so broad that the primary economic
characteristics in a single class are materially different, the Portfolio may
further classify issuers in accordance with industry classifications as
published by the SEC.
In determining how much of the Scudder Global Equity Portfolio is invested
in a given industry, the industry classifications set forth below, grouped by
sectors are currently used.
<TABLE>
<S> <C> <C>
CONSUMER DISCRETIONARY MEDIA ENERGY
- ---------------------- ----- ------
Apparel & Shoes Advertising Engineering
Department & Chain Stores Broadcasting & Entertainment Oil & Gas Production
Home Furnishings Cable Television Oil Companies
Hotels & Casinos Print Media Oil/Gas Transmission
Recreational Products Miscellaneous Oilfield Services/Equipment
Restaurants Miscellaneous
Specialty Retail SERVICE INDUSTRIES
------------------
Miscellaneous Asset Management METALS & MINERALS
-----------------
EDP Services Coal Mining
CONSUMER STAPLES Environmental Services Precious Metals
- ----------------
Alcohol & Tobacco Investment Steel & Metals
Consumer Electronic & Photographic Miscellaneous Commercial Services Miscellaneous
Products Miscellaneous Consumer Services
Consumer Specialties Printing/Publishing CONSTRUCTION
------------
Farming Miscellaneous Building Materials
Food & Beverage Building Products
Package Goods/Cosmetics DURABLES Forest Products
--------
Textiles Aerospace Homebuilding
Miscellaneous Automobiles Miscellaneous
Construction/Agricultural Equipment
HEALTH Leasing Companies TRANSPORTATION
- ------ --------------
Biotechnology Telecommunications Equipment Air Freight
Generic Drugs Tires Airlines
Health Industry Services Miscellaneous Marine Transportation
Hospital Management Railroads
Medical Supply & Specialty MANUFACTURING Trucking
-------------
Pharmaceuticals Chemicals Miscellaneous
Miscellaneous Containers & Paper
Diversified Manufacturing UTILITIES
---------
COMMUNICATIONS Electrical Products Electric Utilities
- --------------
Cellular Telephone Hand Tools Natural Gas Distribution
Telephone/Communications Industrial Specialty Water Supply
Miscellaneous Machinery/Components/Controls Miscellaneous
Office Equipment/Supplies
FINANCIAL Specialty Chemicals MISCELLANEOUS
- --------- -------------
Banks Wholesale Distributors Miscellaneous
Insurance Miscellaneous
Business Finance CREDIT CARD RECEIVABLES
Consumer Finance -----------------------
Other Financial Companies TECHNOLOGY Miscellaneous
----------
Real Estate Computer Software
Miscellaneous Diverse Electronic Products AUTOMOBILE RECEIVABLES
----------------------
EDP Peripherals Miscellaneous
Electronic Components/Distributors
Electronic Data Processing HOME EQUITY LOANS
-----------------
Military Electronics Miscellaneous
Office/Plant Automation
Semiconductors MANUFACTURED HOUSING
--------------------
Miscellaneous RECEIVABLES
-----------
Miscellaneous
</TABLE>
B-22
<PAGE>
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations for
at least the last five years are set forth below. Unless otherwise noted, the
address of each executive officer and director is One Madison Avenue, New
York, New York 10010.
DIRECTORS AND OFFICERS
The directors and officers of Portfolios and their principal occupations for
at least the last five years are set forth below. Unless otherwise noted, the
address of each executive officer and director is One Madison Avenue, New
York, New York 10010.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME, (AGE) AND ADDRESS POSITION(S) DURING PAST 5 YEARS
----------------------- ----------- ------------------------
<C> <S> <C>
Steve A. Garban (59)+............ Director Retired, formerly Senior Vice-
The Pennsylvania State University President Finance and Operations and
208 Old Main Treasurer, The Pennsylvania State
University Park, PA 16802 University
Jeffrey J. Hodgman (53)(*)+...... Chairman of the Board, Executive Vice President,
President, Metropolitan Life Insurance Company
Chief Executive ("Metropolitan Life,") since 1996;
Officer and Director prior thereto, Senior Vice-
President, Metropolitan Life
Malcolm T. Hopkins (68)+......... Director Private Investor, formerly Vice-
14 Brookside Road Chairman of the Board and Chief
Biltmore Forest Financial Officer, St. Regis Corp.
Asheville, NC 28803 (forest and paper products)
Robert A. Lawrence (69)+......... Director Partner, Saltonstall & Co. (private
50 Congress Street investment firm)
Boston, MA 02109
Dean O. Morton (64)+............. Director Retired, formerly Executive Vice-
3200 Hillview Avenue President, Chief Operating Officer
Palo Alto, CA 94304 and Director, Hewlett--Packard
Company
Michael S. Scott Morton (59)+.... Director Jay W. Forrester Professor of
Massachusetts Institute of Management at Sloan School of
Technology ("MIT") Management, MIT
77 Massachusetts Avenue
Cambridge, MA 02139
John H. Tweedie (51)(*)+......... Director Executive Vice-President,
Metropolitan Life since 1993;
President and Chief Executive
Officer of Metropolitan Life's
Canadian Operations 1990-1993; prior
thereto, Senior Vice-President and
Chief Actuary
Brad White (30)+................. Controller Senior Technical Consultant--
Pensions, Metropolitan Life since
1993; Senior Financial Analyst--
Retirement Savings Center, 1992-
1993; prior thereto, Financial
Analyst
Christopher P. Nicholas (47)+.... Vice-President, Associate General Counsel,
Secretary and Metropolitan Life since 1990; prior
Chief Operating Officer thereto, Assistant General Counsel
Joseph M. Panetta (60)........... Treasurer Vice-President, Metropolitan Life
Elaine Stevenson (38)+........... Vice-President Vice-President, Metropolitan Life
since 1996; Assistant Vice-
President, Metropolitan Life 1993-
1996; prior thereto, Director--
Retirement and Savings Center
Lawrence A. Vranka (56).......... Vice-President Vice-President, Metropolitan Life
since 1991
Robin Wagner (36)+............... Assistant Secretary Counsel, Metropolitan Life since
1995; prior thereto, Associate
Counsel
Patricia S. Worthington (40)+.... Assistant Secretary Associate Counsel, Metropolitan Life
since 1992; prior thereto, Attorney
</TABLE>
- -------
(*) 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 an advisory or
distribution 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-23
<PAGE>
...............................................
During the last fiscal year of the Fund, the Directors were compensated as
follows:
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
(5)
(3) TOTAL
PENSION OR COMPENSATION
RETIREMENT (4) FROM THE
BENEFITS ESTIMATED FUND
(2) ACCRUED AS ANNUAL AND FUND
(1) AGGREGATE PART OF BENEFITS COMPLEX PAID
NAME OF COMPENSATION FUND UPON TO DIRECTORS
DIRECTOR(B) FROM FUND EXPENSE RETIREMENT (A)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jeffrey J. Hodgman............. 0 0 0 0
Steve A. Garban................ $ 0 0 $
Malcolm T. Hopkins............. $ 0 0 $
Robert A. Lawrence............. $ 0 0 $
Dean O. Morton................. $ 0 0 $
Michael S. Scott Morton........ $ 0 0 $
John H. Tweedie................ 0 0 0 0
</TABLE>
- -------
(a) Complex is comprised of 10 trusts and two corporations with a total of 30
funds and/or series.
(b) Directors and officers who are affiliated with Metropolitan Life or State
Street Research or their affiliates ("interested persons" as defined under
the Investment Company Act of 1940) do not receive any compensation for
services rendered to the Fund in addition to their compensation for services
rendered to Metropolitan Life or such affiliated companies. As of January 1,
1996, the Directors who are not affiliated with Metropolitan Life or State
Street Research or their affiliates are paid a fee of $10,000 for each full
calendar year during which services are rendered to the Fund. In addition,
they are paid a fee of $2,500 for attending each of the directors' meetings,
$500 for attending each audit committee meeting and are reimbursed for out-
of-pocket expenses. Messrs. Garban and Hopkins also are paid $1,500 for
attending each 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.
- -------
A separate charge is not made against the Fund for any compensation paid to
officers and directors that are interested persons of the Fund. Such
compensation is being paid by Metropolitan Life pursuant to the Investment
Management Agreements between the Fund and Metropolitan Life discussed below.
None of the above officers and directors of the Fund owns any stock of the
Fund.
INVESTMENT MANAGEMENT ARRANGEMENTS
...............................................................................
INVESTMENT MANAGEMENT AGREEMENTS AND SUB-INVESTMENT MANAGEMENT AGREEMENTS
The Fund has entered into a separate Investment Management Agreement with
Metropolitan Life with respect to each Portfolio, a separate Sub-Investment
Management Agreement with Metropolitan Life and State Street Research with
respect to each of the Growth, Income, Diversified, and Aggressive Growth
Portfolios, a separate Sub-Investment Management Agreement with Metropolitan
Life and GFM with respect to the GFM International Stock Portfolio, a separate
Sub-Investment Management Agreement with Metropolitan Life and Loomis Sayles
with respect to the Loomis Sayles High Yield Bond Portfolio, a separate Sub-
Investment Management Agreement with Metropolitan Life and T. Rowe Price with
respect to the T. Rowe Price Small Cap Growth Portfolio, a separate Sub-
Investment Management Agreement with Metropolitan Life and Janus with respect
to the Janus Mid Cap Portfolio, and a separate Sub-Investment Management
Agreement with Metropolitan Life and Scudder with respect to the Scudder
Global Equity Portfolio. In addition to the other functions described in the
Prospectus, the manager and the sub-investment managers, as applicable,
provide the portfolio managers for the Portfolios. The portfolio managers
consider analyses from various sources, make the necessary investment
decisions and effect transactions accordingly. In addition, the manager and
sub-investment managers are obligated to provide all the office space,
facilities, equipment and personnel necessary to perform their respective
duties under the Agreements. They also utilize their securities and economic
research facilities to perform their duties under the Agreements.
Securities held by any Portfolio may also be held by other accounts managed
by the manager or a sub-investment manager, including Metropolitan Life's own
general and separate accounts, the other Fund Portfolios, and advisory clients
of the manager or a sub-investment manager. When selecting securities for
purchase or sale for a Portfolio, the manager and the sub-investment managers,
as applicable, may at the same time be purchasing or selling the same
securities for one or more of such other accounts. It is the policy of the
manager and sub-investment managers not to favor any one account over the
other, and any purchase or sale orders executed contemporaneously are
allocated at the average price and as nearly as practicable on a pro-rata
basis in proportion to the
B-24
<PAGE>
................................................................
amounts desired to be purchased or sold by each account. While it is
conceivable that in certain instances this procedure could adversely affect
the price or number of shares involved in the Portfolio's transaction, it is
believed that the procedure generally contributes to better overall execution
of the Fund's portfolio transactions. The Board of Directors has adopted
guidelines governing the procedure and will monitor the procedure to determine
that the guidelines are being followed and that the procedure continues to be
in the best interests of the Fund and its shareholders. For providing
investment management services to the Fund, the manager and sub-investment
managers receive compensation that is described in the Prospectus under
"Management of the Fund."
The Investment Management Agreements relating to the State Street Research
Growth, State Street Research Income, State Street Research Diversified and
MetLife Money Market Portfolios and the Sub-Investment Management Agreements
relating to the State Street Research Growth, State Street Research Income and
State Street Research Diversified Portfolios were approved by the shareholders
of the appropriate Portfolio at the annual meeting of Fund shareholders held
on April 29, 1987. The Investment Management Agreement and the Sub-Investment
Management Agreement relating to the State Street Research Aggressive Growth
Portfolio was approved by the holders of the shares of the State Street
Research Aggressive Growth Portfolio at a special meeting of the shareholders
of such Portfolio held on November 29, 1988. The Investment Management
Agreement relating to the MetLife Stock Index Portfolio was approved by the
holders of the shares of that Portfolio at a special meeting of the
shareholders of such Portfolio held on April 2, 1991. The Investment
Management Agreement and the Sub-Investment Management Agreement relating to
the GFM International Stock Portfolio were approved by the holders of the
shares of that Portfolio at a special meeting of the shareholders of such
Portfolio held on June 11, 1992. The Investment Manager Agreements and Sub-
Investment Management Agreements relating to the Loomis Sayles High Yield Bond
Portfolio, the T. Rowe Price Small Cap Growth Portfolio, the Janus Mid Cap
Portfolio and the Scudder Global Equity Portfolio were approved at a special
meeting of shareholders on March , 1997. Unless earlier terminated, each
Agreement will continue in effect from year to year with respect to each
Portfolio, if approved annually (a) by the Board of Directors of the Fund or
by a majority of the outstanding shares of that Portfolio (as determined
pursuant to the 1940 Act), and (b) by a majority of the Board of Directors who
are not "interested persons" (within the meaning of the 1940 Act) of any party
of such Agreement. The Agreements may not be "assigned" as defined in the 1940
Act and may be terminated without penalty on 60 days' written notice at the
option of either party or, with respect to any Portfolio, by the requisite
vote of the shareholders of that Portfolio. (See "General Information About
the Fund and its Shares" in the Prospectus.)
PAYMENT OF EXPENSES
The Investment Management Agreements obligate Metropolitan Life to provide
investment management services to the Fund and to pay the organization costs
of the Fund. Prior to May 16, 1993, pursuant to those Agreements, Metropolitan
Life was also obligated to pay all expenses of the Fund, including but not
limited to, furnishing the facilities, equipment and office space for carrying
out its obligations under the Investment Management Agreements and paying the
compensation of officers of the Fund, the fees and expenses of all directors
of the Fund, custodian and transfer agent fees, and audit and attorney's fees;
provided, however, the following expenses of the Fund were borne by the Fund:
the investment management fee payable to Metropolitan Life, brokerage
commissions on portfolio transactions (including any other direct costs
related to the acquisition, disposition, lending or borrowing of portfolio
investments), taxes payable by the Fund, interest and any other costs related
to borrowings by the Fund, and any extraordinary or non-recurring expenses
(such as legal claims and liabilities and litigation costs and any
indemnification related thereto). Certain other expenses were and are assumed
by Metropolitan Life pursuant to a distribution agreement with the Fund (see
"Sale and Redemption of Shares").
As of May 16, 1993, pursuant to an amendment to each of the Investment
Management Agreements for each of the then existing Portfolios, Metropolitan
Life is no longer obligated to pay the expenses of the Fund as described
above. The amendment was approved in each case by the shareholders of each
such Portfolio at the annual meeting of Fund shareholders held on April 28,
1993. Thus, as of May 16, 1993, the Fund is responsible for paying its own
expenses. However, Metropolitan Life reserves the right, in its sole
discretion, to pay all or a portion of the expenses of the Fund or any of its
Portfolios, and to terminate such voluntary payment at any time upon notice to
the Board of Directors and shareholders of the Fund.
ALLOCATION OF PORTFOLIO BROKERAGE
Under the Investment Management Agreements, Metropolitan Life has ultimate
responsibility for selecting broker-dealers through which investments are to
be purchased and sold for the Fund and day-to-day responsibility for making
such determinations for the MetLife Money Market Portfolio and the MetLife
Stock Index Portfolio. Under the Sub-Investment Management
B-25
<PAGE>
................................................................
Agreements, State Street Research has day-to-day responsibility for selecting
broker-dealers through which securities or other investments are to be
purchased and sold for the State Street Research Growth, State Street Research
Income, State Street Research Diversified and State Street Research Aggressive
Growth Portfolios, GFM has day-to-day responsibility for selecting broker-
dealers through which securities or other investments are to be purchased and
sold for the GFM International Stock Portfolio, Loomis Sayles has day-to-day
responsibility for selecting broker-dealers through which securities or other
investments are to be purchased and sold for the Loomis Sayles High Yield Bond
Portfolio, T. Rowe Price has day-to-day responsibility for selecting broker-
dealers through which securities or other investments are to be purchased and
sold for the T. Rowe Price Small Cap Growth Portfolio, Janus has day-to-day
responsibility for selecting broker-dealers through which securities or other
investments are to be purchased and sold for the Janus Mid Cap Portfolio and
Scudder has day-to-day responsibility for selecting broker-dealers through
which securities or other investments are to be purchased and sold for the
Scudder Global Equity Portfolio.
With respect to portfolio transactions for the Money Market and MetLife
Stock Index Portfolios, Metropolitan Life's policy is to endeavor to obtain
the most favorable overall prices and executions of orders. The MetLife Money
Market Portfolio's investments usually will be purchased on a principal basis
directly from issuers, underwriters or dealers. Accordingly, minimal brokerage
charges are expected to be paid on such transactions. Purchases from an
underwriter generally include a commission or concession paid by the issuer,
and transactions with a dealer usually include the dealer's mark-up. In
selecting broker-dealers to execute portfolio transactions, Metropolitan Life
considers such factors as the price of the instrument or security, the size of
the broker-dealer's "spread" or rate of commission, the size and difficulty of
the order, the nature of the market for the instrument or security, the
willingness of the broker-dealer to position and the reliability, financial
condition and general execution and operational capabilities of the broker-
dealer and the research, statistical and other services furnished by the
broker-dealer to Metropolitan Life. Such research and statistical information
may be used by Metropolitan Life in connection with the other investment
accounts managed by it. Conversely, research and statistical information
received from the placement of brokerage business for such other accounts, the
aggregate assets of which substantially exceed the assets of the Fund, may be
used by Metropolitan Life in managing the investments of the Fund.
State Street Research's policy is to seek for its clients, including the
State Street Research Growth, State Street Research Income, State Street
Research Diversified and State Street Research Aggressive Growth Portfolios,
what in its judgment will be the best overall execution of purchase or sale
orders and the most favorable net prices in securities transactions consistent
with its judgment as to the business qualifications of the various broker or
dealer firms with whom State Street Research may do business, and it may not
necessarily choose the broker offering the lowest available commission rate.
Decisions with respect to the market where the transaction is to be completed,
to the form of transaction (whether principal or agency), and to the
allocation of orders among brokers or dealers are made in accordance with this
policy. In selecting brokers or dealers to effect portfolio transactions,
consideration is given to their proven integrity and financial responsibility,
their demonstrated execution experience and capabilities both generally and
with respect to particular markets or securities, the competitiveness of their
commission rates in agency transactions (and their net prices in principal
transactions), their willingness to commit capital, and their clearance and
settlement capability. State Street Research makes every effort to keep
informed of commission rate structures and prevalent bid/ask spread
characteristics of the markets and securities in which transactions for the
Portfolios occur. Against this background, State Street Research evaluates the
reasonableness of a commission or a net price with respect to a particular
transaction by considering such factors as difficulty of execution or security
positioning by the executing firm. State Street Research may or may not
solicit competitive bids based on its judgment of the expected benefit or harm
to the execution process for that transaction.
When it appears that a number of firms could satisfy the required standards
in respect of a particular transaction, consideration may also be given to
services other than execution services which certain of such firms have
provided in the past or may provide in the future. Negotiated commission rates
and prices, however, are based upon State Street Research's judgment of the
rate which reflects the execution requirements of the transaction without
regard to whether the broker provides services in addition to execution. Among
such other services are the supplying of supplemental investment research;
general economic, political and business information; analytical and
statistical data; relevant market information, quotation equipment and
services; reports and information about specific companies, industries and
securities; purchase and sale recommendations for stocks and bonds; portfolio
strategy services; historical statistical information; market data services
providing information on specific issues and prices; financial publications;
proxy voting data and analysis services; technical analysis of various aspects
of the securities markets, including technical
B-26
<PAGE>
................................................................
charts; computer hardware used for brokerage and research purposes; computer
software and databases, including those used for portfolio analysis and
modelling; and portfolio evaluation services and relative performance of
accounts.
Certain nonexecution services provided by broker-dealers may in turn be
obtained by the broker-dealers from third parties who are paid for such
services by the broker-dealers. State Street Research has an investment of less
than ten percent of the outstanding equity of one such third party which
provides portfolio analysis and modelling and other research and investment
decision-making services integrated into a trading system developed and
licensed by the third party to others. State Street Research could be said to
benefit indirectly if in the future it allocates brokerage to a broker-dealer
who in turn pays this third party for services to be provided to State Street
Research.
State Street Research regularly reviews and evaluates the services furnished
by broker-dealers. Some services may be used for research and investment
decision-making purposes, and also for marketing or administrative purposes.
Under these circumstances, State Street Research allocates the cost of such
services to determine the appropriate proportion of the cost which is allocable
to purposes other than research or investment decision-making and is therefore
paid directly by State Street Research. Some research and execution services
may benefit State Street Research's clients as a whole, while others may
benefit a specific segment of clients. Not all such services will necessarily
be used exclusively in connection with the accounts which pay the commissions
to the broker-dealer producing the services.
State Street Research has no fixed agreements or understandings with any
broker-dealer as to the amount of brokerage business which that firm may expect
to receive for services supplied to State Street Research or otherwise. There
may be, however, understandings with certain firms that in order for such firms
to be 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.
It is not State Street Research's policy to intentionally pay a firm a
brokerage commission higher than that which another firm would charge for
handling the same transaction in a recognition of services (other than
execution services) provided. However, State Street Research is aware that this
is an area where differences of opinion as to fact and circumstances may exist,
and in such circumstances, if any, relies on the provisions of Section 28(e) of
the Securities Exchange Act of 1934, to the extent applicable.
In the case of the purchase of fixed income securities in underwriting
transactions, State Street Research follows any instructions received from its
clients as to the allocation of new issue discounts, selling concessions and
designations to brokers or dealers which provide the client with research,
performance evaluation, master trustee and other services. In the absence of
instructions from the client, State Street Research may make such allocations
to broker-dealers which have provided it with research and brokerage services.
When more than one client of State Street Research is seeking to buy or sell
the same security, the sale or purchase is carried out in a manner which is
considered fair and equitable to all accounts. In allocating investments among
various clients (including in what sequence orders for trades are placed),
State Street Research will use its best business judgment and will take into
account such factors as the investment objectives of the clients, the amount of
investment funds available to each, the amount already committed for each
client to a specific investment and the relative risks of the investments, all
in order to provide on balance a fair and equitable result to each client over
time. Although sharing in large transactions may sometimes affect price or
volume of shares acquired or sold, overall it is believed there may be an
advantage in execution. State Street Research may follow the practice of
grouping orders of various clients for execution to get the benefit of lower
prices or commission rates. In certain cases where the aggregate order may be
executed in a series of transactions at various prices, the transactions are
allocated as to amount and price in a manner considered equitable to each so
that each receives, to the extent practicable, the average price of such
transactions. Exceptions may be made based on such factors as the size of the
account and the size of the trade. For example, State Street Research may not
aggregate trades where it believes that it is in the best interests of clients
not to do so, including situations where aggregation might result in a large
number of small transactions with consequent increased custodial and other
transactional costs which may disproportionately impact smaller accounts. Such
disaggregation, depending on the circumstances, may or may not result in such
accounts receiving more or less favorable execution relative to other clients.
In selecting brokers or dealers to effect portfolio transactions for the GFM
International Stock Portfolio, GFM seeks the best available combination of
execution and over-all price (which includes the cost of the transaction). GFM
will utilize brokers which provide it solely with brokerage services, as well
as brokers which provide GFM with such research services as economic, political
and social trend analysis and reports on the
B-27
<PAGE>
................................................................
equity and credit markets and analyses of industries and individual companies.
GFM is authorized, pursuant to the Sub-Investment Management Agreement with
respect to the GFM International Stock Portfolio, to cause the Fund on behalf
of the GFM International Stock Portfolio to pay to the brokers that furnish
brokerage and research services (as such services are defined under Section
28(e) of the 1934 Act) a brokerage commission in excess of that which another
broker might have charged for effecting the same transaction, in recognition
of the value of research services provided by the broker. However, such higher
commissions must be deemed by GFM as reasonable in relation to the brokerage
and research services provided by the broker-dealer, viewed in terms of either
that particular transaction or the overall decision-making responsibilities of
GFM with respect to the Fund or other accounts, if any, as to which it
exercises investment discretion (as such term is defined under Section
3(a)(35) of the 1934 Act).
In all transactions, GFM seeks on behalf of the GFM International Stock
Portfolio brokerage commissions at least as reasonable as those generally
secured by those advisers that generate annually comparable amounts of
commissions paid to brokers that provide brokerage and research services to
those advisers.
Research services rendered to GFM by brokers selected to execute
transactions for the GFM International Stock Portfolio may be used in
providing service to all of GFM's clients. Also all research services may not
be utilized by GFM in connection with the client accounts which paid
commissions to the broker providing such services.
On the basis of the best service provided for the benefit of the GFM
International Stock Portfolio in terms of execution capability, execution
cost, and research, GFM will allocate business proportionally among a number
of brokers and will regularly review such allocations.
With respect to portfolio transactions for T. Rowe Price Small Cap Growth
Portfolio, it is T. Rowe Price's policy to obtain quality execution at the
most favorable prices through responsible brokers and dealers and, in the case
of agency transactions, at competitive commission rates. However, under
certain conditions, the Fund may pay higher brokerage commissions in return
for brokerage and research services. As a general practice, over-the-counter
orders are executed with market-makers. In selecting among market-makers, T.
Rowe Price generally seeks to select those it believes to be actively and
effectively trading the security being purchased or sold. In selecting broker-
dealers to execute the Portfolio's transactions, consideration is given to
such factors as the price of the security, the rate of the commission, the
size and difficulty of the order, the reliability, integrity, financial
condition, general execution and operational capabilities of competing brokers
and dealers, and brokerage and research services provided by them. It is not
the policy of T. Rowe Price to seek the lowest available commission rate where
it is believed that a broker or dealer charging a higher commission rate would
offer greater reliability or provide better price or execution.
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 being paid by the client although the price usually
includes an undisclosed compensation. Transactions placed through dealers
serving as primary market-makers reflect the spread between the bid and asked
prices. Securities may also be purchased from underwriters at prices which
include underwriting fees.
With respect to equity and fixed income securities, T. Rowe Price may effect
principal transactions on behalf of the Portfolio with a broker or dealer who
furnishes brokerage and/or research service, designate any such broker or
dealer to receive selling concessions, discounts or other allowances, or
otherwise deal with any such broker or dealer in connection with the
acquisition of securities in underwritings. T. Rowe Price may receive research
services in connection with brokerage transactions, including designations in
fixed price offerings.
On a continuing basis, T. Rowe Price seeks to determine what levels of
commission rates are reasonable in the marketplace for transactions executed
on behalf of the Fund. In evaluating the reasonableness of commission rates,
T. Rowe Price considers: (a) historical commission rates, both before and
since rates have been fully negotiable; (b) rates which other institutional
investors are paying, based on available public information; (c) rates quoted
by brokers and dealers; (d) the size of a particular transaction, in terms of
the number of shares, dollar amount, and number of clients involved; (e) the
complexity of a particular transaction in terms of both execution and
settlement; (f) the level and type of business done with a particular firm
over a period of time; and (g) the extent to which the broker or dealer has
capital at risk in the transaction.
T. Rowe Price receives a wide range of research services from brokers and
dealers. These services include information on the economy, industries, groups
of securities, individual companies, statistical information, accounting and
tax law interpretations, political developments, legal developments affecting
portfolio securities, technical market action, pricing and appraisal services,
credit analysis, risk measurement
B-28
<PAGE>
analysis, performance analysis and analysis of corporate responsibility
issues. These services provide both domestic and international perspective.
Research services are received primarily in the form of written reports,
computer generated services, telephone contacts and personal meetings with
security analysts. In addition, such services may be provided in the form of
meetings arranged with corporate and industry spokespersons, economists,
academicians and government representatives. In some cases, research services
are generated by third parties but are provided to T. Rowe Price by or through
broker-dealers.
Research services received from brokers and dealers are supplemental to T.
Rowe Prices's own research effort and, when utilized, are subject to internal
analysis before being incorporated by T. Rowe Price into its investment
process. As a practical matter, it would not be possible for T. Rowe Price's
Equity Research Division to generate all of the information presently provided
by brokers and dealers. T. Rowe Price pays cash for certain research services
received from external sources. T. Rowe Price also allocates brokerage for
research services which are available for cash. While receipt of research
services from brokerage firms has not reduced T. Rowe Price's normal research
activities, the expenses of T. Rowe Price could be materially increased if it
attempted to generate such additional information through its own staff. To
the extent that research services of value are provided by brokers or dealers,
T. Rowe Price may be relieved of expenses which it might otherwise bear.
T. Rowe Price has a policy of not allocating brokerage business in return
for products or services other than brokerage or research services. In
accordance with the provisions of Section 28(e) of the Securities Exchange Act
of 1934, T. Rowe Price may from time to time receive services and products
which serve both research and non-research functions. In such event, T. Rowe
Price makes a good faith determination of the anticipated research and non-
research use of the product or service and allocates brokerage only with
respect to the research component.
Certain brokers and dealers who provide quality brokerage and execution
services also furnish research services to T. Rowe Price. With regard to the
payment of brokerage commissions, T. Rowe Price has adopted a brokerage
allocation policy embodying the concepts of Section 28(e) of the Securities
Exchange Act of 1934, which permits an investment adviser to cause an account
to pay commission rates in excess of those another broker or dealer would have
charged for effecting the same transaction, if the adviser determines in good
faith that the commission paid is reasonable in relation to the value of the
brokerage and research services provided. The determination may be viewed in
terms of either the particular transaction involved or the overall
responsibilities of the adviser with respect to the accounts over which it
exercises investment discretion. Accordingly, while T. Rowe Price cannot
readily determine the extent to which commission rates or net prices charged
by broker-dealers reflect the value of their research services, T. Rowe Price
would expect to assess the reasonableness of commissions in light of the total
brokerage and research services provided by each particular broker. T. Rowe
Price may receive research, as defined in Section 28(e), in connection with
selling concessions and designations in fixed price offerings in which the
Funds participate.
T. Rowe Price has a policy of not precommitting a specific amount of
business to any broker or dealer over any specific time period. Historically,
the majority of brokerage placement has been determined by the needs of a
specific transaction such as market-making, availability of a buyer or seller
of a particular security, or specialized execution skills. However, T. Rowe
Price does have an internal brokerage allocation procedure for that portion of
its discretionary client brokerage business where special needs do not exist,
or where the business may be allocated among several brokers or dealers which
are able to meet the needs of the transaction.
Each year, T. Rowe Price assesses the contribution of the brokerage and
research services provided by brokers or dealers, and attempts to allocate a
portion of its brokerage business in response to these assessments. Research
analysts, counselors, various investment committees, and the Trading
Department each seek to evaluate the brokerage and research services they
receive from brokers or dealers and make judgments as to the level of business
which would recognize such services. In addition, brokers or dealers sometimes
suggest a level of business they would like to receive in return for the
various brokerage and research services they provide. Actual brokerage
received by any firm may be less than the suggested allocations but can, and
often does, exceed the suggestions, because the total business is allocated on
the basis of all the considerations described above. In no case is a broker or
dealer excluded from receiving business from T. Rowe Price because it has not
been identified as providing research services.
T. Rowe Price's brokerage allocation policy is consistently applied to all
its fully discretionary accounts, which represent a substantial majority of
all assets under management. Research services furnished by brokers or dealers
through which T. Rowe Price effects securities transactions may be used in
servicing all accounts managed by T. Rowe Price. Conversely, research services
received from brokers or dealers which execute
B-29
<PAGE>
transactions for the Portfolio are not necessarily used by T. Rowe Price
exclusively in connection with the management of the Portfolio.
From time to time, orders for clients may be placed through a computerized
transaction network.
Some of T. Rowe Price's other clients have investment objectives and programs
similar to those of the Portfolio. T. Rowe Price may occasionally make
recommendations to other clients which result in their purchasing or selling
securities simultaneously with the Portfolio. As a result, the demand for
securities being purchased or the supply of securities being sold may increase,
and this could have an adverse effect on the price of those securities. It is
T. Rowe Price's policy not to favor one client over another in making
recommendations or in placing orders. T. Rowe Price frequently follows the
practice of grouping orders of various clients for execution which generally
results in lower commission rates being attained. In certain cases, where the
aggregate order is executed in a series of transactions at various prices on a
given day, each participating client's proportionate share of such order
reflects the average price paid or received with respect to the total order. T.
Rowe Price has established a general investment policy that it will ordinarily
not make additional purchases of a common stock of a company for its clients
if, as a result of such purchases, 10% or more of the outstanding common stock
of such company would be held by its clients in the aggregate.
T. Rowe Price has developed written trade allocation guidelines for its
Equity, Municipal, and Taxable Fixed Income Trading Desks. Generally, when the
amount of securities available in a public offering or the secondary market is
insufficient to satisfy the volume or price requirements for the participating
client portfolios, the guidelines require a pro rata allocation based upon the
amounts initially requested by each portfolio manager. In allocating trades
made on combined basis, the Trading Desks seek to achieve the same net unit
price of the securities for each participating client. Because a pro rata
allocation may not always adequately accommodate all facts and circumstances,
the guidelines provide for exceptions to allocate trades on an adjusted, pro
rata basis. Examples of where adjustments may be made include:
(i) reallocations to recognize the efforts of a portfolio manager in
negotiating a transaction or a private placement; (ii) reallocations to
eliminate deminimis positions; (iii) priority for accounts with specialized
investment policies and objectives; and (iv) reallocations in light of a
participating portfolio's characteristics (e.g., industry or issuer
concentration, duration, and credit exposure).
It is expected that T. Rowe Price may place orders for the Portfolio's
transactions with broker-dealers through the same trading desk T. Rowe Price
uses for portfolio transactions in domestic securities. The trading desk
accesses brokers and dealers in various markets in which the Portfolio's
foreign securities are located. These brokers and dealers may include certain
affiliates of Robert Fleming Holdings Limited ("Robert Fleming Holdings") and
Jardine Fleming Group Limited ("JFG"), persons indirectly related to T. Rowe
Price. Robert Fleming Holdings, through Copthall Overseas Limited, a wholly-
owned subsidiary, owns 25% of the common stock of Rowe Price-Fleming
International, Inc. ("RPFI"), an investment adviser registered under the
Investment Advisers Act of 1940. Fifty percent of the common stock of RPFI is
owned by TRP Finance, Inc., a wholly-owned subsidiary of T. Rowe Price, and the
remaining 25% is owned by Jardine Fleming Holdings Limited, a subsidiary of
JFG. JFG is 50% owned by Robert Fleming Holdings and 50% owned by Jardine
Matheson Holdings Limited. Orders for the Portfolios transactions placed with
affiliates of Robert Fleming Holdings and JFG will result in commissions being
received by such affiliates.
The Board of Directors of the Fund has authorized T. Rowe Price to utilize
certain affiliates of Robert Fleming and JFG in the capacity of broker in
connection with the execution of the Fund's portfolio transactions. These
affiliates include, but are not limited to, Jardine Fleming Securities Limited
("JFS"), a wholly-owned subsidiary of JFG, Robert Fleming & Co. Limited
("RF&Co."), Jardine Fleming Australia Securities Limited, and Robert Fleming,
Inc. (a New York brokerage firm). Other affiliates of Robert Fleming Holdings
and JFG also may be used. Although it does not believe that the Fund's use of
these brokers would be subject to Section 17(e) of the Investment Company Act
of 1940, the Board of Directors of the Fund has agreed that the procedures set
forth in Rule 17e-1 under that Act will be followed when using such brokers.
With respect to portfolio transactions for Loomis Sayles High Yield Bond
Portfolio, Loomis Sayles always seeks the best price and execution.
Transactions in unlisted securities are carried out through broker-dealers who
make the primary market for such securities unless, in the judgment of Loomis
Sayles, a more favorable price can be obtained by carrying out such
transactions through other brokers or dealers.
Loomis Sayles selects only brokers or dealers which it believes are
financially responsible, will provide efficient and effective services in
executing, clearing and settling an order and will charge commission rates
which, when combined with the quality of the foregoing services, will produce
best price and execution for the transaction. This does not necessarily mean
that the
B-30
<PAGE>
...............................................................
lowest available brokerage commission will be paid. However, the commissions
are believed to be competitive with generally prevailing rates. Loomis Sayles
will use its best efforts to obtain information as to the general level of
commission rates being charged by the brokerage community from time to time
and will evaluate the overall reasonableness of brokerage commissions paid on
transactions by reference to such data. In making such evaluation, all factors
affecting liquidity and execution of the order, as well as the amount of the
capital commitment by the broker in connection with the order, are taken into
account. The Portfolio will not pay a broker a commission at a higher rate
than otherwise available for the same transaction in recognition of the value
of research services provided by the broker or in recognition of the value of
any other services provided by the broker which do not contribute to the best
price and execution of the transaction.
Receipt of research services from brokers may sometimes be a factor in
selecting a broker which Loomis Sayles believes will provide best price and
execution for a transaction. These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and projections,
asset allocation and portfolio structure, but also meetings with management
representatives of issuers and with other analysts and specialists. Although
it is not possible to assign an exact dollar value to these services, they
may, to the extent used, tend to reduce Loomis Sayles's expenses. Such
services may be used by Loomis Sayles in servicing other client accounts and
in some cases may not be used with respect to the Funds. Receipt of services
or products other than research from brokers is not a factor in the selection
of brokers.
With respect to the portfolio transactions for Janus Mid Cap Portfolio,
decisions as to the assignment of portfolio business and negotiation of its
commission rates are made by Janus whose policy is to obtain the "best
execution" (prompt and reliable execution at the most favorable security
price) of all portfolio transactions. The Portfolio may trade foreign
securities in foreign countries because the best available market for these
securities is often on foreign exchanges. In transactions on foreign stock
exchanges, brokers' commissions are frequently fixed and are often higher than
in the United States, where commissions are negotiated.
In selecting brokers and dealers and in negotiating commissions, Janus
considers a number of factors, including but not limited to: Janus's knowledge
of currently available negotiated commission rates or prices of securities
currently available and other current transaction costs; the nature of the
security being traded; the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the desired
timing of the trade; the activity existing and expected in the market for the
particular security; confidentiality; the quality of the execution, clearance
and settlement services; financial stability of the broker or dealer; the
existence of actual or apparent operational problems of any broker or dealer;
rebates of commissions by a broker to the Portfolio or to a third party
service provider to the Portfolio to pay Portfolio expenses; and research
products or services provided. In recognition of the value of the foregoing
factors, Janus may place portfolio transactions with a broker or dealer with
whom it has negotiated a commission that is in excess of the commission
another broker or dealer would have charged for effecting that transaction if
Janus determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research provided by such broker
or dealer viewed in terms of either that particular transaction or of the
overall responsibilities of Janus. Research may include furnishing advice,
either directly or through publications or writings, as to the value of
securities, the advisability of purchasing or selling specific securities and
the availability of securities or purchasers or sellers of securities;
furnishing seminars, information, analyses and reports concerning issuers,
industries, securities, trading markets and methods, legislative developments,
changes in accounting practices, economic factors and trends and portfolio
strategy; access to research analysts, corporate management personnel,
industry experts, economists and government officials; comparative performance
evaluation and technical measurement services and quotation services, and
products and other services (such as third party publications, reports and
analyses, and computer and electronic access, equipment, software, information
and accessories that deliver, process or otherwise utilize information,
including the research described above) that assist Janus in carrying out its
responsibilities.
Janus may use research products and services in servicing other accounts in
addition to the Portfolio. If Janus determines that any research product or
service has a mixed use, such that it also serves functions that do not assist
in the investment decision-making process. Janus may allocate the costs of
such service or product accordingly. Only that portion of the product or
service that Janus determines will assist it in the investment decision-making
process may be paid for in brokerage commission dollars. Such allocation may
create a conflict of interest for Janus.
B-31
<PAGE>
Janus does not enter into agreements with any brokers regarding the
placement of securities transactions because of the research services they
provide. It does, however, have an internal procedure for allocating
transactions in a manner consistent with its execution policy to brokers that
it has identified as providing superior executions and research, research-
related products or services which benefit its advisory clients, including the
Portfolio. Research products and services incidental to effecting securities
transactions furnished by brokers or dealers may be used in servicing any or
all of Janus's clients and such research may not necessarily be used by Janus
in connection with the accounts which paid commissions to the broker-dealer
providing such research products and services.
Janus may consider payments made by brokers effecting transactions for the
Portfolio i) to the Portfolio or ii) to other persons on behalf of the
Portfolio for services provided to the Portfolio for which it would be
obligated to pay. In placing portfolio business with such broker-dealers,
Janus will seek the best execution of each transaction.
When the Portfolio purchases or sells a security in the over-the-counter
market, the transaction takes place directly with a principal market-maker,
without the use of a broker, except in those circumstances where in the
opinion of Janus better prices and executions will be achieved through the use
of a broker.
With respect to portfolio transactions for Scudder Global Equity Portfolio,
it is Scudder's primary objective to obtain the most favorable net results,
taking into account such factors as price, commission, where applicable,
(which is negotiable in the case of U.S. national securities exchange
transactions but which is generally fixed in the case of foreign exchange
transactions), size of order, difficulty of execution and skill required of
the executing broker/dealer. Scudder seeks to evaluate the overall
reasonableness of brokerage commissions paid through the familiarity with
commissions charged on comparable transactions, as well as by comparing
commissions paid by a Portfolio to reported commissions paid by others, if
available. Scudder reviews on a routine basis commission rates, execution and
settlement services performed, making internal and external comparisons.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is Scudder's practice to place such orders with
brokers and dealers who supply research, market and statistical information to
the Portfolio or Scudder. The term "research, market and statistical
information" includes advice as to the value of securities, the advisability
of investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities, and furnishing analyses and
reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy and the performance of accounts. Scudder is
authorized when placing portfolio transactions for a Portfolio to pay a
brokerage commission in excess of that which another broker might have charged
for executing the same transaction solely on account of the receipt of
research, market or statistical information. In effecting transactions in
over-the-counter securities, orders are placed with the principal market
makers for the security being traded unless, after exercising care, it appears
that more favorable results are available otherwise.
Although certain research, market and statistical information from brokers
and dealers can be useful to a Portfolio and to Scudder, it is the opinion of
Scudder that such information is only supplementary to its own research effort
since the information must still be analyzed, weighed, and reviewed by
Scudder's staff. Such information may be useful to Scudder in providing
services to clients other than the Portfolio, and not all such information is
used by Scudder in connection with the Portfolio. Conversely, such information
provided to Scudder by brokers and dealers through whom other clients of
Scudder effect securities transactions may be useful to Scudder in providing
services to the Funds.
The total dollar amounts of brokerage commissions paid by the Fund in 1993,
1994 and 1995 were $2,805,521, $4,567,000 and $6,329,000. Substantially all
commissions were paid to firms which provided research and statistical
services either to Metropolitan Life, State Street Research or GFM.
SALE AND REDEMPTION OF SHARES
The shares of each Portfolio, when issued, will be fully paid and non-
assessable, will have no preference, pre-emptive, conversion, exchange or
similar rights, and will be freely transferable. Shares do not have cumulative
voting rights.
Under the terms of the Distribution Agreement entered into by Metropolitan
Life and the Fund, Metropolitan Life is not obligated to sell any specific
number of shares of the Fund. Further, under such agreement, Metropolitan Life
will pay the distribution expenses and costs of the Fund (that is, those
arising from any activity which is primarily intended to result in the sale of
shares issued by the Fund).
B-32
<PAGE>
................................................................
As of May 16, 1993, pursuant to an amendment to the Distribution Agreement,
Metropolitan Life is no longer be obligated to pay the expenses and costs
attributable to the Fund which are related to the printing and mailing of its
prospectuses, proxy material and periodic reports to shareholders. The
amendment was approved by the Board of Directors at a meeting held on April
28, 1993. Thus, as of May 16, 1993, such expenses are paid by the Fund.
Redemptions are normally made in cash, but the Fund has authority, at its
discretion, to make full or partial payment by assignment to the appropriate
separate account of portfolio securities at their value used in determining
the redemption price. The Fund, nevertheless, pursuant to Rule 18f-1 under the
1940 Act, has filed a notification of election on Form N-18f-1, by which the
Fund has committed itself to pay to any separate account in cash, all such
separate account's requests for redemption made during any 90-day period, up
to the lesser of $250,000 or 1% of the applicable Portfolio's net asset value
at the beginning of such period. The securities to be paid in-kind to any
separate account will be selected in such manner as the Board of Directors
deems fair and equitable. In such cases, the separate account would incur
brokerage costs should it wish to liquidate these portfolio securities.
The right to redeem shares or to receive payment with respect to any
redemption of shares of any Portfolio may only be suspended (a) for any period
during which trading on the New York Stock Exchange is restricted or such
Exchange is closed (other than customary weekend and holiday closing), (b) for
any period during which an emergency exists as a result of which disposal of
portfolio securities or determination of the net asset value of that Portfolio
is not reasonably practicable or (c) for such other periods as the Securities
and Exchange Commission may by order permit for the protection of shareholders
of that Portfolio.
If, in the sole determination of the Board of Directors, the continued
offering of shares in any one or more Portfolios is no longer in the best
interests of the Fund (e.g., because market conditions have changed,
regulatory problems have developed or participation in such Portfolio is low),
the Fund may cease offering such shares and may, by majority vote of the Board
of Directors, require the redemption (at net asset value) of all outstanding
shares in such Portfolio or Portfolios upon 30 days' prior written notice to
the holders of such shares.
In the future, assuming appropriate regulatory clearances, it may be
possible that shares of the Fund will be offered for purchase by separate
accounts of life insurance companies not affiliated with Metropolitan Life,
which separate accounts are used to support insurance contracts issued by such
companies.
The net asset value per share of each Portfolio is computed by dividing the
sum of the value of the securities held by that Portfolio plus any cash or
other assets minus all liabilities by the total number of outstanding shares
of that Portfolio at such time. Any expenses borne by the Fund, including the
investment management fee payable to Metropolitan Life, are accrued daily
except for extraordinary or non-recurring expenses. (See "Payment of
Expenses.")
Securities held by each Portfolio will be valued as follows. Portfolio
securities which are traded on domestic stock exchanges are valued at the last
sale price as of the close of business on the day the securities are being
valued, or, lacking any sales, at the mean between closing bid and asked
prices, except for the Loomis Sayles High Yield Bond Portfolio, which in the
latter case, would value such security at the last bid price. Each portfolio
security which is primarily traded on non-domestic securities exchanges is
generally valued at the preceding closing (or in the case of the Loomis Sayles
High Yield Bond and Scudder Global Equity Portfolios, the last sale) value of
such security on the exchange where it is primarily traded. A security that is
listed or traded on more than one exchange is valued at the quotation on the
exchange determined to be the primary market for such security by the Board of
Directors or its delegates. If no closing price is available, then such
security is valued first by using the mean between the last current bid and
asked prices or, second, by using the last available closing price. Domestic
securities traded in the over-the-counter market are valued at the mean
between the bid and asked prices or yield equivalent as obtained from two or
more dealers which make markets in the securities except for the Loomis Sayles
High Yield Bond Portfolio, which, in the latter case, would value such
security at the last bid price. All non-U.S. securities traded in the over-
the-counter securities market are valued at the last sale quote, if market
quotations are available, or the last closing bid price, if there is no active
trading in a particular security for a given day. Where market quotations are
not readily available for such non-domestic over-the-counter securities, then
such securities will be valued in good faith by a method that the Board of
Directors, or its delegates, believe accurately reflects fair value. Portfolio
securities which are traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative market,
and it is expected that for debt securities this ordinarily will be the over-
the-counter market. Securities and assets for which market quotations are not
readily available, e.g. certain long-term bonds and notes, are valued at fair
value as
B-33
<PAGE>
................................................................
determined in good faith by or under the direction of the Board of Directors
of the Fund, including valuations furnished by a pricing service retained for
this purpose and typically utilized by other institutional-sized trading
organizations. Short-term instruments with a remaining maturity of sixty days
or less are valued utilizing the amortized cost method of valuation described
below. If for any reason the fair value of any security is not fairly
reflected by such method, such security will be valued by the same methods as
securities having a maturity of more than sixty days.
Options, whether on securities, indices, or futures contracts, are valued at
the last sales price available as of the close of business on the day of
valuation or, if no sale, at the mean between the bid and asked prices.
Options on currencies are valued at the spot price each day. As a general
matter, futures contracts are marked-to-market daily. The value of futures
contracts will be the sum of the margin deposit plus or minus the difference
between the value of the futures contract on each day the net asset value is
calculated and the value on the date the futures contract originated, value
being that established on a recognized commodity exchange, or by reference to
other customary sources, with gain or loss being recognized when the futures
contract closes or expires.
The Fund will value all debt instruments held by the MetLife Money Market
Portfolio, and has the authority to value all debt instruments with a
remaining maturity of not more than one year held by the short-term money
market instruments portion of the State Street Research Diversified Portfolio,
utilizing the amortized cost method of valuation. However, at the present
time, the State Street Research Diversified Portfolio is not using the
amortized cost method for securities with a remaining maturity of greater than
60 days. All other securities and assets of the Money Market and Diversified
Portfolios will be valued in accordance with the preceding paragraphs.
Under the amortized cost method of valuation, the security is initially
valued at cost on the date of purchase (or in the case of short-term debt
securities purchased with more than 60 days remaining to maturity, the market
value on the 61st day prior to maturity), and thereafter a constant
proportionate amortization in value is assumed until maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the
market value of the security. For purposes of this method of valuation, the
maturity of a variable rate instrument is deemed to be the next date on which
the interest rate is to be adjusted.
The use of the amortized cost method of valuation can cause a Portfolio's
yield and net asset value to differ somewhat from what they would be if only
market valuation methods were used. However, the conditions outlined above are
designed to minimize these effects and any possible shareholder dilution which
might result.
TAXES
...............................................................................
All realized long or short-term capital gains of the Fund, if any, are
declared and distributed at least annually either during or after the close of
the Fund's fiscal year to the shareholders of the Portfolio or Portfolios to
which such gains are attributable and are reinvested in additional full and
fractional shares of the Portfolio.
Tax attributes of the Fund are allocated among the Portfolios as if they are
separate corporations. Therefore, if a Portfolio has a net capital loss for a
taxable year, including any allocated net capital loss carryforwards, such
loss or losses will offset the net capital gains of that Portfolio only.
Furthermore, each Portfolio will stand alone for purposes of determining that
Portfolio's net ordinary income or loss.
Each individual Portfolio must qualify for treatment as a regulated
investment company. To so qualify, each Portfolio must, among other things,
derive at least 90% of its gross income from dividends, interest, payments
with respect to security loans, and gains from the sale or other disposition
of stock or securities or foreign currencies, or other income (including gains
from options, futures or forward contracts) derived with respect to each
Portfolio's business of investing in such stocks, securities or foreign
currencies. In addition, each Portfolio must derive less than 30% of its gross
income in each taxable year from gains from the sale or other disposition of
instruments held for less than three months.
Dividends paid by each Portfolio from its ordinary income, and distributions
of each Portfolio's net realized short-term capital gains, are taxable to the
shareholder as ordinary income. Generally, to the extent that income of a
Portfolio represents dividends on common or preferred stock of a domestic
corporation, rather than interest income, its distributions to the Insurance
Companies will be eligible for a dividend received deduction to the extent
applicable in the case of a life insurance company under the Code.
Under the Code, any distributions made from the Fund's net realized long-
term capital gains are taxable to the Insurance Companies as long-term capital
gains, regardless of the holding period of such shareholder in
B-34
<PAGE>
...............................................................
the stock of the Portfolio. 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.
In addition, a nondeductible excise tax applies to any regulated investment
company equal to 4% of the excess, if any, of the required distribution for the
calendar year over the amount actually distributed. The required distribution
basically is the sum of 98% of the regulated investment company's ordinary
income plus 98% of its capital gain net income. The Fund does not anticipate
that, under current law, any excise tax liability will generally be incurred.
The Fund intends to comply with section 817(h) of the Code and the
regulations issued thereunder. Pursuant to that section, the only shareholders
of the Fund and its Portfolios will be life insurance company segregated asset
accounts (also referred to in the Prospectus as separate accounts) that fund
variable life insurance or annuity contracts ("variable insurance contracts")
and the general account of Metropolitan Life which provided the initial capital
for the Portfolios of the Fund. See the prospectus or other material which is
attached at the front of the Prospectus for the Contracts for additional
discussion of the taxation of segregated asset accounts and of the owner of the
particular Contract described therein.
In addition, section 817(h) of the Code and the regulations thereunder impose
certain diversification requirements on the segregated asset accounts investing
in the Portfolios of the Fund. These requirements, which are in addition to the
diversification requirements applicable to the Fund under the Investment
Company Act of 1940, may affect the securities in which the Portfolios may
invest. The consequences of failure to meet the requirements of section 817(h)
could have adverse tax consequences to the insurance company offering the
variable insurance contract and immediate taxation of the owner of the contract
to the extent of appreciation on the investment under the contract.
There is a possibility that regulations may be proposed or a revenue ruling
may be issued in the future relating to the circumstances in which a contract
owner's control of the investments of a segregated asset account may cause the
contract owner, rather than the insurance company, to be treated as the owner
of the assets of a segregated asset account.
The Fund may therefore find it necessary to take action to assure that a
Contract continues to qualify as a Contract under federal tax laws. The Fund,
for example, may be required to alter the investment objectives of a Portfolio
or substitute the shares of one Portfolio for those of another. No such change
of investment objectives or substitution of securities will take place without
notice to the shareholders of the affected Portfolio and the approval of a
majority of such shareholders and without prior approval of the Securities and
Exchange Commission, to the extent legally required.
In connection with the operation of the Portfolios that may invest in foreign
securities, there are several unique tax considerations. The Portfolio may be
subject to foreign taxes that could reduce its investment performance. The use
of currency options, futures, and forward contracts will be monitored carefully
to assure compliance with the rule that the Portfolio must derive less than 30%
of its gross income in each taxable year from gains from the sale or other
disposition of instruments held for less than three months. Dividends of the
Portfolio paid with respect to dividends of non-United States companies will
not be eligible for the dividends received deduction.
The preceding is a brief summary of some of the relevant tax considerations.
It is not intended as a complete explanation or a substitute for careful tax
planning and consultation with individual tax advisers.
GENERAL INFORMATION
................................................................................
EXPERTS
Deloitte & Touche LLP has been selected as the independent auditor of the
Fund, which selection is subject to annual approval by the Fund's Board of
Directors. The financial statements of the Fund included in this Statement of
Additional Information have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and are included in
reliance upon the report of such firm as experts in accounting and auditing.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company acts as custodian of the Fund's assets
and as its transfer agent. State Street Research is not affiliated with State
Street Bank and Trust Company.
[FINANCIALS TO BE ADDED BY AMENDMENT]
B-35
<PAGE>
METROPOLITAN SERIES FUND, INC.
---------------------
Principal Office of the Fund
1 Madison Avenue
New York, New York 10010
(212) 578-2674
---------------------
Investment Manager
Metropolitan Life Insurance Company
1 Madison Avenue
New York, New York 10010
(Principal Business Address)
(212) 578-5364
Sub-Investment Managers
State Street Research &
Management Company
One Financial Center
Boston, Massachusetts 02111
(Principal Business Address)
GFM International Investors Limited
5 Upper St. Martins Lane
London, England WC2H 9EA
(Mailing 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, Stevens & Clark, Inc.
345 Park Avenue
New York, New York 10154
(Principal Executive Offices)
Custodian and Transfer 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, GFM,
METROPOLITAN TOWER, LOOMIS SAYLES, T. ROWE PRICE, JANUS OR SCUDDER. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
[TO BE FILED BY AMENDMENT]
(A) FINANCIAL STATEMENTS:
Included in Prospectus:
Financial Highlights for the Period June 24, 1984 to December 31,
1995
Included in Part B:
INDEPENDENT AUDITORS' REPORT
Schedule of Investments as of December 31, 1995--State Street
Research Growth Portfolio
Schedule of Investments as of December 31, 1995--State Street
Research Income Portfolio
Schedule of Investments as of December 31, 1995--MetLife Money
Market Portfolio
Schedule of Investments as of December 31, 1995--Discretionary
(now known as State Street Research Diversified) Portfolio
Schedule of Investments as of December 31, 1995--State Street
Research Aggressive Growth Portfolio
Schedule of Investments as of December 31, 1995--MetLife Stock
Index Portfolio
Schedule of Investments as of December 31, 1995--GFM International
Stock Portfolio
Statements of Assets and Liabilities, December 31, 1995
Statements of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the year ended December
31, 1995 and the year ended December 31, 1994
Financial Highlights for the Period January 1, 1989 to December
31, 1995
NOTES TO FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS
(B) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1. --Articles of Incorporation of Registrant, as amended May 23, 1983*
1(b). --Articles Supplementary of Registrant*
1(c). --Articles Supplementary of Registrant*
1(d). --Articles Supplementary of Registrant*
1(e). --Articles Supplementary of Registrant*
1(f). --Articles Supplementary of Registrant*
1(g). --Articles Supplementary of Registrant*
1(h). --Articles Supplementary of Registrant+
2. --By-Laws of Registrant, as amended January 27, 1988*
3. --None
4. --Specimen certificates for shares of common stock of Registrant*
5(a). --Investment Management Agreements, as amended, relating to State
Street Research Growth, State Street Research Income, MetLife Money
Market, State Street Research Diversified, State Street Research Ag-
gressive Growth, MetLife Stock Index and GFM International Stock
Portfolios*
5(b). --Form of Investment Management Agreements relating to Loomis Sayles
High Yield Bond, Janus Mid Cap, T. Rowe Price Small Cap Growth and
Scudder Global Equity Portfolios+
5(c). --Sub-Investment Management Agreements relating to State Street Re-
search Growth, State Street Research Income and State Street Research
Diversified Portfolios*
5(d). --Sub-Investment Management Agreement relating to State Street Re-
search Aggressive Growth Portfolio*
5(e). --Sub-Investment Management Agreement relating to GFM International
Stock Portfolio*
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
5(f). --Amended Sub-Investment Management Agreement relating to GFM Interna-
tional Stock Portfolio*
5(g) --Sub-Investment Management Agreements relating to Loomis Sayles High
Yield Bond, Janus Mid Cap, T. Rowe Price Small Cap Growth and Scudder
Global
Equity Portfolios.+++
6(a). --Distribution Agreement*
6(b). --Addendum to Distribution Agreement*
6(c). --Second Addendum to Distribution Agreement*
7. --None
8(a). --Custodian Agreement with State Street Bank & Trust Company*
8(b). --Revised schedule of remuneration*
8(c). --Amendment to Custodian Agreement*
8(d). --Amendments to Custodian Agreement*
9(a). --Transfer Agency Agreement*
9(b). --Agreement relating to the use of the "Metropolitan" name and service
marks*
10(a). --Opinion and Consent of Counsel with respect to the shares of the
State Street Research Growth, State Street Research Income and
MetLife Money Market Portfolios*
10(b). --Opinion and Consent of Counsel with respect to the shares of the
State Street Research Diversified and GNMA Portfolios*
10(c). --Opinion and Consent of Counsel with respect to the shares of the
State Street Research Aggressive Growth and Equity Income Portfolios*
10(d). --Opinion and Consent of Counsel with respect to the shares of the
MetLife Stock Index Portfolio*
10(e). --Opinion and Consent of Counsel with respect to the shares of the GFM
International Stock Portfolio*
10(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+++
11(a). --Consent of Independent Public Accountants+++
11(b). --Consent of Freedman, Levy, Kroll & Simonds*
12. --None
13(a). --Stock Purchase Agreement*
13(b). --Supplementary Stock Purchase Agreement*
13(c). --Second Supplementary Stock Purchase Agreement*
13(d). --Third Supplementary Stock Purchase Agreement*
13(e). --Fourth Supplementary Stock Purchase Agreement*
13(f). --Fifth Supplementary Stock Purchase Agreement*
13(g). --Form of Sixth Supplementary Stock Purchase Agreement+
14. --None
15. --None
16(a). --Powers of Attorney++
17. --Specimen Price Make-Up Sheet**
27. --Financial Data Schedule+
</TABLE>
- --------
* Incorporated by reference to the filing of Post-Effective Amendment No. 16
to this Registration Statement on April 28, 1995.
** Incorporated by reference to the filing of Post-Effective Amendment No. 17
to this Registration Statement on April 30, 1996.
+ Filed herewith.
++ Powers of Attorney for all signatories except for Messrs. Hodgman, Tweedie
and White are incorporated by reference to the filing of Post-Effective
Amendment No. 16 to this Registration Statement on April 28, 1995. The
Powers of Attorney for Messrs. Hodgman and Tweedie are incorporated by
reference to the filing of Post-Effective Amendment No. 17 on April 30,
1996. The Power of Attorney for Mr. White is filed herewith.
+++ To be filed by amendment.
C-2
<PAGE>
ORGANIZATIONAL STRUCTURE OF METROPOLITAN AND SUBSIDIARIES
AS OF AUGUST 30, 1996
The following is a list of subsidiaries of Metropolitan Life Insurance
Company ("Metropolitan") as of August 30, 1996. 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 (Delaware)
a. Metropolitan Group Property and Casualty Insurance Company (Delaware)
i. Metropolitan Reinsurance Company (U.K.) Limited (Great Britain)
b. Metropolitan Casualty Insurance Company (Delaware)
c. Metropolitan General Insurance Company (Delaware)
d. First General 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)
4. Metropolitan Asset Management Corporation (Delaware)
a. MetLife Capital Holdings, Inc. (Delaware)
i. MetLife Capital Corporation (Delaware)
(1) Searles Cogeneration, Inc. (Delaware)
(2) MLYC Cogen, Inc. (Delaware)
(3) MCC Yerkes Inc. (Washington)
C-3
<PAGE>
(4) MetLife Capital, Limited Partnership (Delaware). Partnership
interests in MetLife Capital, Limited Partnership are held by
Metropolitan (90%) and MetLife Capital Corporation (10%).
(5) CLJ Finco, Inc. (Delaware)
(a) MetLife Capital Credit L.P. (Delaware). Partnership
interests in MetLife Capital Credit L.P. are held by
Metropolitan (90%) and CLJ Finco, Inc. (10%).
(6) MetLife Capital Portfolio Investments, Inc. (Nevada)
(a) MetLife Capital Funding Corp. (Delaware)
(7) MetLife Capital Funding Corp. II (Delaware)
ii.MetLife Capital Financial Corporation (Delaware)
iii. 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.
b.MetLife Investment Management Corporation (Delaware)
i. MetLife Investments Limited (United Kingdom). 23rd Street
Investments, Inc. holds one share of MetLife Investments Limited.
c. GFM International Investors Limited (United Kingdom). The common stock
of GFM International Investors Limited ("GFM") is held by Metropolitan
(99.5%) and by a former employee of GFM (.5%). GFM is a sub-investment
manager for the International Stock Portfolio of Metropolitan Series
Fund, Inc.
i.GFM Investments Limited (United Kingdom)
5. SSRM Holdings, Inc. (Delaware)
a. MetLife Realty Group, Inc. (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 Energy, Inc. (Massachusetts)
ii. State Street Research Investment Services, Inc. (Massachusetts)
iii. SSRM Management Company (Luxembourg)
c.Metric Holdings, Inc. (Delaware)
i.Metric Management Inc. (Delaware)
ii.Metric Realty Corp. (Delaware)
iii. Metric Realty (Illinois). Metric Realty Corp. and Metric Holdings,
Inc. each hold 50% of the common stock of Metric Realty.
(1) Metric Capital Corporation (California)
(2) Metric Assignor, Inc. (California)
(3) Metric Institutional Realty Advisors, Inc. (California)
(4) Metric Institutional Realty Advisors, L.P. (California).
Metric Realty holds a 99% Limited partnership interest and
Metric Institutional Realty Advisors, Inc. holds a 1% interest
as general partner in Metric Institutional Realty Advisors, L.P.
(5) Metric Realty Services, Inc. (Delaware) Metric Holdings Inc.
and Metric Realty Corp. each hold 50% of the common stock of
Metric Realty Services, Inc.
(a) Metric Colorado, Inc. (Colorado). Metric Realty Services
Inc. owns 80% of the common stock and an employee owns the
other 20%.
(6) 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.
6. MetLife Holdings, Inc. (Delaware)
a. MetLife Funding, Inc. (Delaware)
b. MetLife Credit Corp. (Delaware)
C-4
<PAGE>
7. Metropolitan Tower Realty Company, Inc. (Delaware)
8. MetLife Real Estate Advisors, Inc. (California)
9. MetLife HealthCare 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. Metropolitan Life Holdings Limited (Ontario, Canada)
1. Metropolitan Life Financial Services Limited (Ontario, Canada)
2. Metropolitan Life Financial Management Limited (Ontario, Canada)
a. Metropolitan Life Insurance Company of Canada (Canada)
3. Morguard Investments Limited (Ontario, Canada) Shares of Morguard
Investments Limited ("Morguard") are held by Metropolitan Life Holdings
Limited (80%) and by employees of Morguard (20%).
4.Services La Metropolitaine Quebec, Inc. (Quebec, Canada)
5.167080 Canada, Inc. (Canada)
a.445068 B.C. Ltd. (British Columbia, Canada)
H.MetLife (UK) Limited (Great Britain)
1.Albany Life Assurance Company Limited (Great Britain)
a.Albany Pension Managers and Trustees Limited (Great Britain)
2.Albany Home Loans Limited (Great Britain)
3.ACFC Corporate Finance Limited (Great Britain)
4.Metropolitan Unit Trust Managers Limited (Great Britain)
5.Albany International Assurance Limited (Isle of Man)
6.MetLife Group Services Limited (Great Britain)
I. 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)
J. Kolon-Met Life Insurance Company (Korea), Shares of Kolon-MetLife Insurance
Company are held by Metropolitan (51%) and by an entity (49%) unaffiliated
with Metropolitan.
K. Metropolitan Life Seguros de Vida S.A. (Argentina)
L. Metropolitan Life Seguros de Retiro S.A. (Argentina)
M. 2945835 Canada Tnc. (Canada)
C-5
<PAGE>
N. Metropolitan Marine Way Investments Limited (British Columbia, Canada)
O. Met Life Holdings Luxembourg (Luxembourg)
P. Metropolitan Life Holdings, Netherlands BV (Netherlands)
Q. MetLife International Holdings, Inc. (Delaware)
R. Metropolitan Life Insurance Company of Hong Kong Limited (Hong Kong)
S. Metropolitan Realty Management, Inc. (Delaware)
1.Edison Supply and Distribution, Inc. (Delaware)
2.Cross & Brown Company (New York)
a. Cross & Brown Associates of New York, Inc. (New York)
b. Subrown Corp. (New York)
c. Cross & Brown Construction Corp. (New York)
d. CBNJ, Inc. (New Jersey)
T. MetPark Funding, Inc. (Delaware)
U. 2154 Trading Corporation (New York)
V. Transmountain Land & Livestock Company (Montana)
W. Met West Agribusiness, Inc. (Delaware)
X. Farmers National Company (Nebraska)
1. Farmers National Commodities, Inc. (Nebraska)
Z.Nebraska Farms, Inc. (Nebraska)
AA.Met Farm and Ranch Properties, Inc. (Delaware)
AB. MetLife Trust Company, National Association (United States)
AC. PESCO Plus, L.C. (Florida). Metropolitan owns a 50% interest in PESCO
Plus, L.C. An entity unaffiliated with Metropolitan owns the other 50%
interest.
1. Public Employees Equities Services Company. (Florida)
AD.Boylston Capital Advisors, Inc. (MA)
1. New England Portfolio Advisors, Inc. (MA) (investment adviser to insurance
company Separate Account investors)
AE. COAC Co., Inc. (MA) (holding company for approximately 70 nonoperating sub-
sidiaries with interests in real estate joint ventures and partnerships)
AF. CRB Co. Inc. (MA) (real estate investment holding corporation)
AG. CRH Companies, Inc. (MA) (limited partner of general partner of publicly
offered limited partnership)
1. South Sarasota Retail Corp. (FL) (real estate investment holding
corporation (inactive))
AH. DPA Holding Corporation (MA) (real estate investment holding corporation)
AI. GA Holdings Companies, Inc. (MA) (corporate partner for real estate invest-
ment (inactive))
AJ. L/C Development Corporation (CA) (corporate partner for real estate invest-
ment)
AK. LC Park Place Corporation (CA) (corporate partner for real estate
investment (inactive))
AL. Lyon/Copley Development Corporation (CA) (general partner in general
account joint ventures)
AM. Mercadian Capital L.P. (DE) (dealer in interest rate and currency swaps)
The Depositor owns 95% of the limited partnership interest.
AN. Mercadian Funding L.P. (DE) (party to investment and repurchase agreements
with tax-exempt bond issuers) The Depositor owns 95% of the limited
partnership interest.
AO. NEL Partnership Investments I, Inc. (MA) (general partner of private
limited partnership)
C-6
<PAGE>
AP. NELRECO Troy, Inc. (MA) (real estate investment holding, developing, leasing
corp. (inactive))
AQ. New England Life Mortgage Funding Corporation (MA) (issuer of commercial
mortgage-backed securities)
AR. TNE Funding Corporation (DE) (issuer of commercial mortgage-backed
securities)
AS. TNE-Y, Inc. (DE) (corporate partner for real estate investment (inactive))
AT. MetLife New England Holdings, Inc. (DE) (holding company)
1. New England Life Insurance Company (MA) (insurance)
a. Exeter Reassurance (Bermuda) (reinsurance)
b. New England Pension and Annuity Company (DE) (insurance)
c. New England Securities Corporation (MA) (broker-dealer)
i. Hereford Insurance Agency, Inc. (MA) (insurance agency)
ii. Hereford Insurance Agency of Alabama, Inc. (AL) (insurance agency)
iii. Hereford Insurance Agency of Minnesota (MN) (insurance agency)
d. Newbury Insurance Companies, Limited (Bermuda) (Issuer of life insurance
agent's professional liability insurance)
e. Omega Reinsurance Corporation (AZ) (insurance)
f. TNE Advisers, Inc. (MA) (investment adviser to the New England Zenith
Fund)
g. TNE Information Services, Inc. (MA) (software)
2. New England Investment Companies, Inc. (MA) (general partner of New England
Investment Companies, L.P.)
<TABLE>
<CAPTION>
PERCENTAGE
OF VOTING
SECURITIES
STATE OF OWNED BY
SUBSIDIARY ORGANIZATION DEPOSITOR PRINCIPAL BUSINESS
---------- ------------ ----------- ------------------
<S> <C> <C> <C>
New England Investment DE 55.3% investment adviser and holding co. for
Companies, L.P. (NEIC, the Insurance co.'s investment related
L.P.) operating affiliates
Back Bay Advisors, Inc. MA 55.3% general partner of investment adviser
Back Bay Advisors, L.P. DE 55.3% investment adviser
BBC Investment Advisors, MA 55.3% general partner of investment adviser
Inc.
BBC Investment Advisors, DE 55.3% investment adviser
L.P.
Capital Growth MA NEIC, L.P. investment adviser
Management Limited owns 50%
Partnership limited
partnership
interest
Copley Investment Group, MA 55.3% general partner of private limited
Inc. partnerships
Copley Management and DE 55.3% investment adviser
Advisors, L.P.
Copley Public DE 55.3% manage units and other interests in
Partnership Holding, limited partnerships
L.P.
Copley Real Estate MA 55.3% real estate manager and adviser
Advisors, Inc.
--Copley Advisors, Inc. MA 55.3% investment adviser
--Copley Properties MA 55.3% general partner of publicly offered
Company, Inc. limited partnership
--Copley Properties MA 55.3% general partner of publicly offered
Company II, Inc. limited partnership
--Copley Properties MA 55.3% managing general partner of publicly
Company III, Inc. offered limited partnership
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
OF VOTING
SECURITIES
STATE OF OWNED BY
SUBSIDIARY ORGANIZATION DEPOSITOR PRINCIPAL BUSINESS
---------- ------------ ---------- ------------------
<S> <C> <C> <C>
--Copley Securities MA 55.3% Massachusetts securities corporation
Corporation (buys, sells, holds, securities
exclusively for own account)
--CTR Corporation MA 55.3% real estate investment
--Eighth Copley MA 55.3% real estate investment holding,
Corporation developing and leasing corporation
--Fifth Copley MA 55.3% general partner of publicly offered
Corporation limited partnership
--Fifth Singleton MA 55.3% general partner of private limited
Corporation partnership
--First Income MA 55.3% general partner of publicly offered
Corporation limited partnership
--Fourth Copley MA 55.3% general partner of publicly offered
Corporation limited partnership
--Fourth Income MA 55.3% general partner of publicly offered
Corporation limited partnership
--Fourth Singleton MA 55.3% (inactive) organized for use in
Corporation connection with limited partnership
--New England Investment DE 55.3% insurance agent and marketer of
Associates, Inc. financial products and services to
institutional investors
--Second Income MA 55.3% general partner of publicly offered
Corporation limited partnership
--Seventh Copley MA 55.3% general partner of publicly offered
Corporation limited partnership
--Sixth Copley MA 55.3% general partner of publicly offered
Corporation limited partnership
--Sixth Singleton MA 55.3% general partner of private limited
Corporation partnership
--Third Income MA 55.3% general partner of publicly offered
Corporation limited partnership
--Third Singleton MA 55.3% general partner of private limited
Corporation partnership
CREA Limited Partnership MA 55.3% real estate manager and adviser
Graystone Partners, Inc. MA 55.3% general partner of consulting
marketing agent
Graystone Partners, L.P. DE 55.3% consulting and marketing agent for
asset management services
Harris Associates, Inc. DE 55.3% general partner of investment adviser
Harris Associates, L.P. DE 55.3% investment adviser
--Harris Associates DE broker-dealer
Securities, L.P.
--Harris Partners, Inc. DE member of Harris Partners L.L.C.
--Harris Partners L.L.C. DE general partner of limited
partnerships
Loomis, Sayles & MA 55.3% general partner of investment adviser
Company, Inc.
Loomis, Sayles & DE 55.3% investment adviser
Company, L.P.
MC Management, Inc. MA 55.3% general partner of MC Management, L.P.
MC Management, L.P. DE 55.3% general and limited partner of limited
partnership that serves as general
partner of private investment
partnership
NEF Corporation MA 55.3% general partner of mutual fund
wholesale broker-dealer, transfer
agent and of investment adviser
NEIC Holdings, Inc. MA 55.3% holding company
New England Funds, L.P. DE 55.3% mutual fund wholesale broker-dealer
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
OF VOTING
SECURITIES
STATE OF OWNED BY
SUBSIDIARY ORGANIZATION DEPOSITOR PRINCIPAL BUSINESS
---------- ------------ ---------- ------------------
<S> <C> <C> <C>
New England Funds DE 55.3% investment adviser
Management, L.P.
R & T Asset Management, MA 55.3% general partner investment advisers
Inc.
Reich & Tang Asset DE 55.3% investment adviser
Management, L.P.
Reich & Tang DE 55.3% mutual fund wholesale broker-dealer
Distributors, L.P. and transfer agent
Reich & Tang Services DE 55.3% broker-dealer, transfer agent
L.P.
VNSM, Inc. DE 55.3% general partner to investment adviser
Vaughan, Nelson, DE 55.3% investment adviser
Scarborough &
McConnell, L.P.
Westpeak Investment MA 55.3% general partner of investment adviser
Advisors, Inc.
Westpeak Investment DE 55.3% investment adviser
Advisors, L.P.
</TABLE>
C-9
<PAGE>
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. Metropolitan Structures owns 100% of the common
stock of Cicero/Cermak Corporation, an Illinois corporation, which owns
and manages a shopping center in Illinois. Metropolitan Structures,
Inc., an Illinois corporation, is a property manager. Metropolitan
Structures, Inc. is wholly-owned by Metropolitan Structures.
5) Seguros Genesis, S.A. (Mexico), is a Mexican insurer in which
Metropolitan and two of its subsidiaries collectively own a 24.5%
interest and have the right to designate 2 of the 9 members of the
Board of Directors.
6) Interbroker, Correduria de Reaseguros, S.A., is a Spanish insurance
brokerage company in which Santander Met, S.A., a subsidiary of
Metropolitan in which Metropolitan owns a 50% interest, owns a
50%interest and has the right to designate 2 of the 4 members of the
Board of Directors.
7) 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.
8) 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, serves as the attorney-in-fact and manages
the association.
9) 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 therein.
The MILPs have various ownership interests in certain companies. The
various MILPs own, directly or indirectly, more than 50% of the voting
stock of the following companies: Coating Technologies International,
Inc., Dan River, Inc.; Igloo Holdings, Inc. and its subsidiary, Igloo
Products Corporation; Blodgett Holdings, Inc., and its subsidiaries, GS
Blodgett Corporation, GS Blodgett International Ltd., GS Blodgett Inc.,
Pitco Frialator, Inc., Frialator International Limited, Magikitch'n,
Inc., and Cloverleaf Properties, Inc.; and Briggs Holdings, Inc., and
its subsidiary, Briggs Plumbing Products, 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.
C-10
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF
RECORD HOLDERS
AT FEBRUARY 1,
TITLE OF CLASS 1996
-------------- --------------
<S> <C>
Common stock, par value $0.01 per share................ 6
</TABLE>
ITEM 27. 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,
C-11
<PAGE>
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.
(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 28. 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, 1995 it had
total life insurance in force of approximately $1.3 trillion and total assets
under management of over $179 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.
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<C> <C> <S>
Theodossios Athanassiades. Vice-Chairman of the Metropolitan Life Insurance Company,
Board and Director, New York, NY
since 12/95; prior
thereto, President and
Chief Operating Officer
Director/Officer Certain wholly-owned subsidiaries of
Metropolitan Life Insurance Co.,
New York, NY
Chairman of the Board GFM International Investors Limited,
and Director London, England
Director HABA Advisory Board,
New York, NY
Curtis H. Barnette........ Chairman of the Board Bethlehem Steel Corporation
and Chief Executive Bethlehem, PA
Officer
Vice-Chairman and International Iron and Steel
Director Institute,
Brussels, Belgium
Chairman Pennsylvania Business Roundtable,
Harrisburg, PA
Vice-Chairman and American Iron and Steel Institute,
Director Washington, DC
Director and former West Virginia University Foundation,
Chairman Morgantown, WV
Trustee Lehigh University
Bethlehem, PA
</TABLE>
C-12
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<C> <C> <S>
Joan Ganz Cooney..... Chairman, Executive Com- Children's Television Workshop,
mittee New York, NY
Director Johnson & Johnson,
New Brunswick, NJ
Director (until 1995) Xerox Corporation, Stamford, CT
Director (until 1995) Chase Manhattan Bank, N.A., New
York, NY
Trustee National Child Labor Committee, New
York, NY
Director (until 1995) Chase Manhattan Corporation, New
York, NY
Trustee Children's Television Workshop,
New York, NY
Trustee WNET/13, New York, NY
Burton A. Dole, Jr. . Chairman of the Board Nellcor Puritan Bennett,
Pleasanton, CA
Director Anesthesia Patient Safety
Foundation
Director Health Industries Manufacturer's
Association
James R. Houghton.... Retired Director, Chair- Corning Incorporated, Corning, NY
man of the Board and
Chief Executive Officer
(until 4/96)
Director Dow Corning Corporation, Midland,
MI
Director J.P. Morgan & Co., Inc., New York,
NY
Director Morgan Guaranty Trust Co., New
York, NY
Director Exxon Corp., Dallas, TX
Harry Paul Kamen..... Chairman of the Board, Metropolitan Life Insurance
President and Chief Company, New York, NY
Executive Officer,
since 12/95; prior
thereto, Chairman of
the Board and Chief
Executive Officer
Director Bethlehem Steel Corporation,
Bethlehem, PA
Director/Officer Certain wholly-owned subsidiaries
of Metropolitan Life Insurance
Company, New York, NY
Director Banco Santander, Madrid, Spain
Director and Treasurer New York City Partnership, New
York, NY
Member of the Board New York Chamber of Commerce and
Industry, New York, NY
Director American Council of Life Insurance,
Washington, DC
Director (until 1995) The MetraHealth Companies, Inc.
McLean, VA
Director ACLI Life, Washington, DC
Director Health Medical Research Fund,
New York, NY
</TABLE>
C-13
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<C> <C> <S>
Helene L. Kaplan........ Counsel Skadden, Arps, Slate,
Meagher & Flom,
New York, NY
Director Chemical Banking
Corporation,
New York, NY
Director Chemical Bank, New York, NY
Director May Department Stores Co.,
New York, NY
Chairman, Board of Barnard College, New York,
Trustees NY
Director (until 1994) MITRE Corp., Bedford, MA
Director Mobil Corp., New York, NY
Director NYNEX Corporation, New York,
NY
Director Council on Foreign
Relations,
Washington, DC
Charles M. Leighton, 61. Chairman and Chief CML Group, Inc., Acton, MA
Executive Officer
Director CML Group, Inc., New England
Investment Companies
Richard J. Mahoney...... Chairman of the Monsanto Company, St. Louis,
Executive Committee and MO
Director since 4/95;
prior thereto, Retired
Chairman of the Board
and Chief Executive
Officer; prior thereto,
Chairman of the Board
and Chief Executive
Officer
Director (until 1995) G. D. Searle & Co., Skokie,
IL
Director (until 1995) U.S.--U.S.S.R. Business
Council, New York, NY
Director (until 1995) The NutraSweet Co., Skokie,
IL
Director Union Pacific Corporation,
Bethlehem, PA
Allen E. Murray......... Retired Chairman of the Mobil Corporation, New York,
Board, Director and NY
Chief Executive Offi-
cer, since 3/94; prior
thereto, Chairman of
the Board and Chief
Executive Officer
Director Morgan Stanley Group Inc.,
New York NY
Director Minnesota Mining and
Manufacturing Co.,
St. Paul, MN
Director (until 3/94) Mobil Oil Corporation, New
York, NY
Director American Petroleum
Institute,
Washington, DC
Director Lockheed Martin Corporation,
Bethesda, MD
</TABLE>
C-14
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<C> <C> <S>
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
John B.M. Place...... Former Chairman of the Crocker National Corporation,
Board San Francisco, CA
Director (until 3/96) Pacific Gas and Electric Company,
San Francisco, CA
Director (until 3/96) Pacific Gas and Electric
Enterprises, San Francisco, CA
Trustee University of Santa Clara, Santa
Clara, CA
Trustee World Affairs Council of Northern
California, San Francisco, CA
Hugh B. Price........ President and Chief National Urban League, Inc., New
Executive Officer York, NY
Director Cooper Union, New York, NY
Director NYNEX, New York, NY
Director The Urban Institute, New York, NY
Robert G. Schwartz... Retired Chairman of the Metropolitan Life Insurance
Board, President and Company,
Chief Executive Officer New York, NY
Director Lowe's Companies, Inc., North
Wilkesboro, NC
Director Potlatch Corporation, San
Francisco, CA
Director ComSat Corporation, Washington, DC
Director ComSat Entertainment Group, Inc.,
Washington, DC
Director Mobil Corporation, New York, NY
Trustee Committee for Economic Development,
Washington, DC
Director Consolidated Edison Company of New
York, Inc., New York, NY
Director CS--First Boston, Inc., New York,
NY
Director The Reader's Digest Association,
Inc., Pleasantville, NY
Director Lone Star Industries, Inc.,
Stamford, CT
Ruth Simmons......... President, since 6/95 Smith College, Northampton, MA
Vice President (until Princeton University, Princeton, NJ
5/95)
Trustee Institute for Advanced Study
Trustee The Woodrow Wilson National
Fellowship
William S. Sneath.... Retired Chairman of the Union Carbide Corporation,
Board Riverside, CT
Director (until 1994) Tesoro Petroleum Corp., San
Antonio, TX
Director Rockwell International Corp.,
Pittsburgh, PA
Director Union Carbide Corporation,
Riverside, CT
</TABLE>
C-15
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<C> <C> <S>
John R. Stafford. Chairman, President and American Home Products Corp.,
Chief Executive Officer Madison, NJ
Trustee Central Park Conservancy, New York, NY
Director Pharmaceutical Research and
Manufacturers Association, Washington,
DC
Director Project HOPE, Millwood, VA
Director NYNEX Corporation, New York, NY
Director Chemical Banking Corporation,
New York, NY
Director Allied Signal, Inc., Morristown, NJ
Director Grocery Manufacturers of America, Inc.,
Washington, DC
</TABLE>
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.
<TABLE>
<CAPTION>
NAME OF OFFICER POSITION
--------------- --------
<S> <C>
Harry P. Kamen.................. Chairman of the Board, President
and Chief Executive Officer
Theodossios Athanassiades....... Vice-Chairman of the Board
Gerald Clark.................... Senior Executive Vice-President
and Chief Investment Officer
Stewart G. Nagler............... Senior Executive Vice-President
and Chief Financial Officer
Gary A. Beller.................. Executive Vice-President and General Counsel
Robert H. Benmosche............. Executive Vice-President
C. Robert Henrikson............. Executive Vice-President
Jeffrey J. Hodgman.............. Executive Vice-President
David A. Levene................. Executive Vice-President
John D. Moynahan, Jr. .......... Executive Vice-President
Catherine A. Rein............... Executive Vice-President
William J. Toppeta.............. Executive Vice-President
John H. Tweedie................. Executive Vice-President
Richard M. Blackwell............ Senior Vice-President
James B. Digney................. Senior Vice-President
William T. Friedewald, M.D. .... Senior Vice-President
Frederick P. Hauser............. Senior Vice-President & Controller
Anne E. Hayden.................. Senior Vice-President
Leland C. Launer, Jr. .......... Senior Vice-President
Terence I. Lennon............... Senior Vice-President
James L. Lipscomb............... Senior Vice-President
James M. Logan.................. Senior Vice-President
Francis P. Lynch................ Senior Vice-President
John C. Morrison Jr. ........... Senior Vice-President
Dominick A. Prezzano............ Senior Vice-President
Leo T. Rasmussen................ Senior Vice-President
Vincent P. Reusing.............. Senior Vice-President
Robert E. Sollmann, Jr. ........ Senior Vice-President
Thomas L. Stapleton............. Senior Vice-President & Tax Director
Arthur G. Typermass............. Senior Vice-President & Treasurer
James A. Valentino.............. Senior Vice-President
Judy E. Weiss................... Senior Vice-President & Chief Actuary
Richard F. Wiseman.............. Senior Vice-President
Louis J. Ragusa................. Vice-President and Secretary
</TABLE>
C-16
<PAGE>
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.
Set forth below is a 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.
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME & POSITION POSITION BUSINESS ADDRESS OF ORGANIZATION
--------------- -------- --------------------------------
<C> <C> <S>
Tanya Arpiarian............. None
Vice President
Linda Bangs................. None
Vice President
Michael E. Barton........... None
Vice President
Peter C. Bennett............ Director Boston Private Bank & Trust
Director and Co., Boston, MA
Executive Vice President President & Director Christian Camps &
Conferences, Inc., Boston,
MA
Chairman and Trustee Gordon College, Wenham, MA
Vice President State Street Research
Capital Trust, Boston, MA
Vice President State Street Research
Exchange Trust, Boston, MA
Vice President State Street Research Growth
Trust, Boston, MA
Vice President State Street Research Master
Investment Trust, Boston,
MA
Vice President State Street Research Equity
Trust, Boston, MA
Director State Street Research
Investment Services, Inc.,
Boston, MA
Kathleen Bochman............ None
Vice President
Michael J. Bray............. None
Vice President
Susan H. Brown.............. None
Vice President
John F. Burbank............. None
Senior Vice President
(Vice President until 7/96)
Jesus A. Cabrera............ Vice President State Street Research
Vice President Capital Trust, Boston, MA
Vice President (until First Chicago Investment
5/96) Management Co., Chicago, IL
</TABLE>
C-17
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME & POSITION POSITION BUSINESS ADDRESS OF ORGANIZATION
--------------- -------- --------------------------------
<C> <C> <S>
Joseph W. Canavan...... Assistant Treasurer State Street Research Equity
Vice President Trust, Boston, MA
Assistant Treasurer State Street Research Financial
Trust, Boston, MA
Assistant Treasurer State Street Research Income
Trust, Boston, MA
Assistant Treasurer State Street Research Money
Market Trust, Boston, MA
Assistant Treasurer State Street Research Tax-Exempt
Trust, Boston, MA
Assistant Treasurer State Street Research Capital
Trust, Boston, MA
Assistant Treasurer State Street Research Exchange
Trust, Boston, MA
Assistant Treasurer State Street Research Growth
Trust, Boston, MA
Assistant Treasurer State Street Research Master
Investment Trust, Boston, MA
Assistant Treasurer State Street Research Securities
Trust,
Boston, MA
Assistant Controller State Street Research Portfolios,
Inc., New York, NY
Linda C. Carstons...... None
Vice President
Paul J. Clifford, Jr. . Vice President State Street Research Tax-Exempt
Vice President Trust, Boston, MA
Director Avalon, Inc., Boston, MA
Ronald D'Vari.......... None
Vice President
Donald DeVeuve......... None
Vice President
Susan M.W. Di Fazio.... Senior Vice President State Street Research Investment
Vice President Services, Inc., Boston, MA
Thomas J. Dillman...... Director of Research Bank of New York, New York, NY
Senior Vice President (until 6/95)
Susan W. Drake......... Vice President State Street Research Tax-Exempt
Vice President (until 2/96) Trust, Boston, MA
Peter J. Duggan........ None
Senior Vice President
Gordon Evans........... Senior Vice President State Street Research Investment
Vice President (Vice President Services, Inc., Boston, MA
until 3/96)
Alex G. Federoff....... None
Vice President
Rosalina Feliciano..... None
Vice President
</TABLE>
C-18
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME & POSITION POSITION BUSINESS ADDRESS OF ORGANIZATION
--------------- -------- --------------------------------
<C> <C> <S>
Michael D. Gardner.......... Partner Prism Group, Seattle, WA
Senior Vice President
(Vice President until 6/95)
Bartlett R. Geer............ Vice President State Street Research Income
Senior Vice President Trust, Boston, MA
Vice President State Street Research Equity
Trust, Boston, MA
Vice President State Street Research
Securities Trust, Boston,
MA
Electra Giovoni............. None
Vice President
Allison Granger............. None
Vice President
William A. Hamilton, Jr..... Director and Treasurer Nautical and Aviation
Senior Vice President Publishing Company, Inc.,
Baltimore, MD
Director and Treasurer Ellis Memorial and Eldredge
House, Boston, MA
Director and Treasurer North Conway Institute,
Boston, MA
Phyllis Hanson.............. None
Vice President
Lawrence J. Haverty, Jr..... None
Senior Vice President
George R. Heineke........... None
Vice President
F. Gardner Jackson, Jr. .... Trustee and Chairman of Vincent Memorial Hospital,
Senior Vice President the Board Boston, MA
Trustee Certain trusts of related
and non-related individuals
Frederick H. Jamieson....... Vice President and Asst. State Street Research
Senior Vice President Treasurer Investment Services, Inc.,
Boston, MA
(Vice President until 6/95) Vice President and Asst. SSRM Holdings, Inc., Boston,
Treasurer MA
Vice President and Con- MetLife Securities, Inc.,
troller New York, NY
Assistant Treasurer State Street Research
Energy, Inc., Boston, MA
John H. Kallis.............. Vice President State Street Research
Senior Vice President Financial Trust, Boston, MA
Vice President State Street Research Income
Trust, Boston, MA
Vice President State Street Research Tax-
Exempt Trust, Boston, MA
Vice President State Street Research
Securities Trust, Boston,
MA
Trustee 705 Realty Trust,
Washington, D.C.
Director and President K&G Enterprises,
Washington, D.C.
</TABLE>
C-19
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME & POSITION POSITION BUSINESS ADDRESS OF ORGANIZATION
--------------- -------- --------------------------------
<C> <C> <S>
M. Katherine Kasper................ None
Vice President
Rudolph K. Kluiber................. Vice President State Street Research
Vice President Capital Trust, Boston,
MA
Frederick R. Kobrick............... Vice President State Street Research
Senior Vice President Equity Trust, Boston,
MA
Vice President State Street Research
Capital Trust, Boston,
MA
Vice President State Street Research
Growth Trust, Boston,
MA
Member National Alumni Council,
Boston University,
Boston, MA
Member Harvard Business School
Association, Cambridge,
MA
Karen Koski........................ None
Vice President
Knut Langholm...................... None
Vice President
Eileen M. Leary.................... None
Vice President
Francis J. McNamara, III........... Senior Vice President, State Street Research
Executive Vice President Clerk & General Counsel Investment Services,
Secretary & General Counsel Inc., Boston, MA
(Senior Vice President until 7/96) Secy & General Counsel State Street Research
Capital Trust, Boston,
MA
Secy & General Counsel State Street Research
Exchange Trust, Boston,
MA
Secy & General Counsel State Street Research
Growth Trust, Boston,
MA
Secy & General Counsel State Street Research
Master Investment
Trust, Boston, MA
Secy & General Counsel State Street Research
Equity Trust, Boston,
MA
Secy & General Counsel State Street Research
Financial Trust,
Boston, MA
Secy & General Counsel State Street Research
Income Trust, Boston,
MA
Secy & General Counsel State Street Research
Money Market Trust,
Boston, MA
Secy & General Counsel State Street Tax-Exempt
Trust, Boston, MA
Secy & General Counsel State Street Research
Securities Trust,
Boston, MA
Secy & General Counsel SSRM Holdings, Inc.,
Boston, MA
Director and Clerk State Street Research
Energy, Inc., Boston,
MA
</TABLE>
C-20
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME & POSITION POSITION BUSINESS ADDRESS OF ORGANIZATION
--------------- -------- --------------------------------
<C> <C> <S>
Senior Vice President The Boston Company, Inc.,
and Boston, MA
General Counsel
(until 5/95)
Senior Vice President Boston Safe Deposit and Trust
and Company, Boston, MA
General Counsel
(until 5/95)
Senior Vice President The Boston Company
and Advisors, Inc., Boston, MA
General Counsel
(until 5/95)
Gerard P. Maus.......... Treasurer State Street Research Equity
Director, Executive Trust, Boston, MA
Vice President, Treasurer State Street Research Financial
Treasurer, Chief Trust,
Boston, MA
Financial Officer Treasurer State Street Research Income
and Chief Administrative Trust,
Boston, MA
Officer Treasurer State Street Research Money
Market
Trust, Boston, MA
Treasurer State Street Research Tax-
Exempt
Trust, Boston, MA
Treasurer State Street Research Capital
Trust,
Boston, MA
Treasurer State Street Research Exchange
Trust, Boston, MA
Treasurer State Street Research Growth
Trust,
Boston, MA
Treasurer State Street Research Master
Investment Trust, Boston, MA
Director, Executive Vice State Street Research
President, Treasurer Investment
and Chief Financial Services, Inc., Boston, MA
Officer
Treasurer State Street Research
Securities
Trust, Boston, MA
Director and Treasurer State Street Research Energy,
Inc., Boston, MA
Director Metric Holdings, Inc., San
Francisco,
CA
Director Certain wholly-owned
subsidiaries of
Metric Holdings, Inc.
Treasurer and Chief SSRM Holdings, Inc., Boston, MA
Financial Officer
Treasurer MetLife Securities, Inc.,
Boston, MA
Judith J. Milder........ None
Senior Vice President
(Vice President
until 6/95)
Joan D. Miller.......... Senior Vice President State Street Research
Senior Vice President Investment Services, Inc.,
(Vice President Boston, MA
until 7/96)
</TABLE>
C-21
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME & POSITION POSITION BUSINESS ADDRESS OF ORGANIZATION
--------------- -------- --------------------------------
<C> <C> <S>
Thomas P. Moore, Jr. ... Director Hibernia Savings Bank, Quincy,
Senior Vice President MA
Vice President State Street Research Capital
(until 11/96) Trust, Boston, MA
Vice President State Street Research Exchange
Trust, Boston, MA
Vice President State Street Research Growth
Trust, Boston, MA
Vice President State Street Research Master
Investment Trust, Boston, MA
Vice President State Street Research Equity
Trust, Boston, MA
Vice President State Street Research Energy,
Inc. Boston, MA
Governor on the Association for Investment
Board of Governors Management and Research,
Charlottesville, VA
JoAnne C. Mulligan...... Vice President State Street Research Money
Senior Vice President Market
(Vice President Trust, Boston, MA
until 7/96)
Stephen C. Orr.......... Member Electro-Science Analysts (of
Vice President NYC),
New York, NY
Member Technology Analysts of Boston,
Boston, MA
James C. Pannell........ None
Vice President
Kim M. Peters........... Vice President State Street Research
Senior Vice President Securities Trust, Boston, MA
E. K. Easton Ragsdale... None
Senior Vice President
(Vice President
until 7/96)
Jeffrey A. Rawlins...... None
Senior Vice President
(Vice President
until 7/96)
Daniel Joseph Rice III.. Vice President State Street Research Equity
Senior Vice President Trust, Boston, MA
Scott Richards.......... None
Vice President
</TABLE>
C-22
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME & POSITION POSITION BUSINESS ADDRESS OF ORGANIZATION
--------------- -------- --------------------------------
<C> <C> <S>
Douglas A. Romich........ Assistant Treasurer State Street Research Equity
Vice President Trust, Boston MA
Assistant Treasurer State Street Research
Financial Trust, Boston, MA
Assistant Treasurer State Street Research Income
Trust, Boston, MA
Assistant Treasurer State Street Research Money
Market Trust, Boston, MA
Assistant Treasurer State Street Research Tax-
Exempt Trust, Boston, MA
Assistant Treasurer State Street Research Capital
Trust, Boston, MA
Assistant Treasurer State Street Research Exchange
Trust, Boston, MA
Assistant Treasurer State Street Research Growth
Trust, Boston, MA
Assistant Treasurer State Street Research Master
Investment Trust, Boston, MA
Assistant Treasurer State Street Research
Securities Trust, Boston, MA
Assistant Controller State Street Research
Portfolios, Inc., New York,
NY
Paul Saperstone.......... None
Vice President
Michael Schrage.......... None
Vice President
David C. Schultz......... Director and Treasurer Mafraq Hospital Association,
Executive Vice President Mafraq, Jordan
Member Association of Investment
Management
Sales Executives, Atlanta, GA
Member, Investment Lexington Christian Academy
Committee
C. Troy Shaver, Jr. ..... President and State Street Research
Executive Vice President Chief Executive Officer Investment Services Inc.,
Boston, MA
President and John Hancock Funds, Inc.,
Chief Executive Officer Boston, MA
(until 1/96)
William G. Shean......... None
Vice President
Thomas A. Shively........ Vice President State Street Research
Director and Financial Trust, Boston, MA
Executive Vice President Vice President State Street Research Money
Market Trust, Boston, MA
Vice President State Street Research Tax-
Exempt Trust, Boston, MA
Director State Street Research
Investment Services, Inc.,
Boston, MA
Vice President State Street Research
Securities Trust,
Boston, MA
Richard D. Shoemaker..... None
Senior Vice President
</TABLE>
C-23
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME & POSITION POSITION BUSINESS ADDRESS OF ORGANIZATION
--------------- -------- --------------------------------
<C> <C> <S>
Dan R. Strelow.......... None
Senior Vice President
Paul Stuka ............. U.S. Portfolio Consul- Teton Partners, Boston, MA
Senior Vice President tant (until 4/95)
Amy McDermott Swanson... None
Senior Vice President
Anne M. Trebino......... Vice President SSRM Holdings, Inc., Boston, MA
Senior Vice President
(Vice President
until 6/95)
Ralph F. Verni.......... Chairman, President, State Street Research Capital
Chairman of the Board, Chief Executive Officer Trust,
President, Chief and Trustee Boston, MA
Executive Officer Chairman, President, State Street Research Exchange
and Director Chief Executive Officer Trust, Boston, MA
and Trustee
Chairman, President, State Street Research Growth
Chief Executive Officer Trust,
and Trustee Boston, MA
Chairman, President, State Street Research Master
Chief Executive Officer Investment Trust, Boston, MA
and Trustee
Chairman, President, State Street Research Equity
Chief Executive Officer Trust,
and Trustee Boston, MA
Chairman, President, State Street Research Financial
Chief Executive Officer Trust, Boston, MA
and Trustee
Chairman, President, State Street Research Income
Chief Executive Officer Trust,
and Trustee Boston, MA
Chairman, President, State Street Research Money
Chief Executive Officer Market
and Trustee Trust, Boston, MA
Chairman, President, State Street Research Tax-
Chief Executive Officer Exempt Trust, Boston, MA
and Trustee
Chairman, President, State Street Research
Chief Executive Officer Securities Trust, Boston, MA
and Trustee
Chairman and Director State Street Research
(President and Chief Investment
Executive Officer until Services, Inc., Boston, MA
2/96)
President and Director State Street Research Energy,
Inc.,
Boston, MA
Chairman and Director Metric Holdings, Inc.,
San Francisco, CA
Director and Officer Certain wholly-owned
subsidiaries of
Metric Holdings, Inc.
Chairman and Director MetLife Securities, Inc.,
New York, NY
President, Chief SSRM Holdings, Inc., Boston, MA
Executive Officer
and Director
Director CML Group, Inc., Boston, MA
Director Colgate University, Hamilton,
NY
</TABLE>
C-24
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME & POSITION POSITION BUSINESS ADDRESS OF ORGANIZATION
--------------- -------- --------------------------------
<S> <C> <C>
Dudley F. Wade.......... Vice President State Street Research Master Investment
Senior Vice President Trust, Boston, MA
Vice President State Street Research Growth Trust,
Boston, MA
Julie K. Wallace........ None
Vice President
Geoffrey Ward........... None
Senior Vice President
James M. Weiss.......... Vice President State Street Research Capital Trust,
Senior Vice President Boston, MA
Vice President State Street Research Equity Trust,
Boston, MA
Vice President State Street Research Master
Investment Trust, Boston, MA
Chief Investment Officer IDS Equity Advisors, Minneapolis, MN
(until 12/95)
Elizabeth McCombs State Street Research Securities Trust,
Westvold............... Vice President Boston, MA
Senior Vice President
(Vice President until
7/96)
John T. Wilson.......... Vice President State Street Research Equity Trust,
Vice President Boston, MA
Vice President State Street Research Master Investment
Trust, Boston, MA
Vice President Phoenix Investment Counsel, Inc.,
(until 6/96) Hartford, CT
Darman A. Wing.......... Senior Vice President, State Street Research Investment
Vice President, Assistant Clerk and Services Inc., Boston, MA
Assistant Secretary and Assistant General
Assistant General Counsel (Vice President
Counsel until 6/95)
Assistant Secretary State Street Research Capital Trust,
Boston, MA
Assistant Secretary State Street Research Exchange Trust,
Boston, MA
Assistant Secretary State Street Research Master Investment
Trust, Boston, MA
Assistant Secretary State Street Research Securities Trust,
Boston, MA
Assistant Secretary State Street Research Growth Trust,
Boston, MA
Assistant Secretary State Street Research Equity Trust,
Boston, MA
Assistant Secretary State Street Research Financial Trust,
Boston, MA
Assistant Secretary State Street Research Income Trust,
Boston, MA
Assistant Secretary State Street Research Money Market
Trust, Boston, MA
Assistant Secretary State Street Research Tax-Exempt Trust,
Boston, MA
Assistant Secretary SSRM Holdings, Inc., Boston, MA
</TABLE>
C-25
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME & POSITION POSITION BUSINESS ADDRESS OF ORGANIZATION
--------------- -------- --------------------------------
<S> <C> <C>
Robert S. Woodbury...... Employee Metropolitan Life Insurance
Vice President Company, New York, NY
Kennard Woodworth, Jr. . Vice President State Street Research Exchange Trust,
Senior Vice President Boston, MA
Vice President State Street Research Growth Trust,
(until 2/96) Boston, MA
Norman N. Wu............ Partner Atlantic-Action Realty, Framingham, MA
Senior Vice President
Director Bond Analysts Society of Boston,
Boston, MA
</TABLE>
The business of GFM International Investors Limited since December 31, 1989
is summarized under "Management of the Fund", in the prospectus constituting
Part A of this Registration Statement, which summarization is incorporated
herein by reference.
Set forth below is a list of each director and certain officers of GFM
International Investors Limited 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.
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<S> <C> <C>
Theodossios Vice-Chairman of the Metropolitan Life Insurance Company,
Athanassiades.......... Board and Director since New York, NY
Chairman of the Board 12/95; prior thereto,
and Director President and Chief
Operating Officer.
Director/Officer Certain wholly-owned subsidiaries of
Metropolitan Life Insurance Co., New
York, NY
Director HABA Advisory Board,
New York, NY
Gerald Clark ........... Senior Executive Vice- Metropolitan Life Insurance Company,
Director President and Chief New York, NY
Investment Officer since
1995; prior thereto,
Executive Vice-
President, Chief
Investment Officer
Advisory Board AIG Asian Infrastructure Fund, L.P.,
New York, NY
Director The New York Police and Fire Widows'
and Children's Benefit Fund
New York, NY
Director Community Preservation Corporation,
New York, NY
Director Century 21 Real Estate Corporation
(until 1995) Irvine, CA
Director, Chief Metropolitan Asset Management
Executive Officer, Corporation
President New York, NY
</TABLE>
C-26
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<S> <C> <C>
Director MetFirst Insurance Agency, Inc.
(until 8/95) Overland Park, KS
Director, since 2/96, MetLife Investment Management
prior thereto, Chairman Corporation
of the Board, Director White Plains, NY
Chairman of the Board, MetLife Capital Holdings, Inc.
Director New York, NY
Director Metropolitan Life Financial
Services Limited
Ottawa, Ontario, Canada
Director Metropolitan Life Holdings
(until 1/95) Limited Ottawa, Ontario, Canada
Director MetLife International Holdings,
Inc.
New York, NY
Chairman of the Board, MetLife Realty Group, Inc.
Director White Plains, NY
Director MetLife Securities, Inc.
(until 10/95) New York, NY
Chairman of the Board, Metmor Financial, Inc.
Director (until 8/95) Overland Park, KS
Director SSRM Holdings, Inc.
Boston, MA
C. Robert Henrikson......... Executive Vice-President Metropolitan Life Insurance
Director Company, New York, NY
Director MetLife Investment Management
Corporation
White Plains, NY
Chairman of the Board, MetLife Security Insurance
Director, President, Company of Louisiana
Chief Executive Officer Baton Rouge, LA
Director Metropolitan Property & Casualty
Insurance Company
Warwick, R.I.
Director MetLife Realty Group
White Plains, NY
Vice-Chairman Life Insurance Companies Guaranty
of New York
New York, NY
John C. Morrison, Jr........ Senior Vice-President Metropolitan Life Insurance
Director Company, New York, NY
Director MetLife Investment Management
Corporation
White Plains, NY
Director MetLife Realty Group, Inc.
White Plains, NY
</TABLE>
C-27
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<S> <C> <C>
Vice-President and MetLife Securities, Inc.
Treasurer (until 4/95) New York, NY
President, Director MetLife Capital Holdings, Inc.
New York, NY
Chairman of the Board, MetLife Capital Corporation
Director Bellevue, WA
Director Metmor Financial, Inc.
(until 1995) Overland Park, KS
Director MetFirst Insurance Agency, Inc.
(until 1995) Overland Park, KS
Chairman of the Board, MetLife Capital Financial
Director Corporation
Bellevue, WA
Director CLJ Finco, Inc.
Bellevue, WA
Director MLYC Cogen, Inc.
Wilmington, DE
Director Searles Cogeneration, Inc.
Bellevue, WA
Director MCC Yerkes, Inc.
Bellevue, WA
Director Cross & Brown Company
New York, NY
Director Cross & Brown Associates
of New Jersey, Inc.
New York, NY
Director Cross & Brown Associates
of New York, Inc.
New York, NY
Director Cross & Brown Construction Corp.
New York, NY
Director Cross & Brown of Connecticut,
Inc.
Westport, CT
Director Cross & Brown Company
of Florida, Inc.
Jacksonville, FL
Director Cross & Brown Residentials, Inc.
New York, NY
Director Subrown Corp.
New York, NY
Director CBNJ, Inc.
Springfield, NJ
Vice-President Metropolitan Asset Management
Corporation
</TABLE> New York, NY
C-28
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<C> <C> <S>
Chairman of the Board, MetPark Funding, Inc.
Director, President New York, NY
Director Cross & Brown Company
of Georgia, Inc.
Atlanta, GA
Director Cross & Brown Company
of Maryland, Inc.
Rockville, MD
Director Cross & Brown Company
of Missouri, Inc.
New York, NY
John H. Tweedie............. Executive Vice-President Metropolitan Life Insurance
Director Company, New York, NY
Director State Street Research Portfolios,
Inc.
New York, NY
Director Metropolitan Series Fund, Inc.
New York, NY
Director MetLife International Holdings,
Inc.
New York, NY
Chairman of the Board, Texas Life Insurance Company
Director Waco, TX
Director Metropolitan Property and
Casualty
Insurance Company
Warwick, RI
Director Metropolitan Group Property and
Casualty Insurance Company
Warwick, RI
Arthur Typermass............ Senior Vice-President, Metropolitan Life Insurance
Director Treasurer Company, New York, NY
Director Furr's Supermarkets, Inc.
Albuquerque, NM
Director MetLife Realty Group
White Plains, NY
Director, Treasurer Metropolitan Life Foundation
New York, NY
Treasurer Century 21 Real Estate
(until 1995) Corporation
Irvine, CA
Treasurer Metropolitan Insurance and
Annuity Company
New York, NY
Treasurer, 23rd Street Investments, Inc.
Vice-President New York, NY
Treasurer Metropolitan Tower Corp.
New York, NY
Treasurer MetLife Texas Holdings, Inc.
New York, NY
</TABLE>
C-29
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<S> <C> <C>
Chairman of the Board, MetLife Credit Corp.
President, Chief Houston, TX
Executive Officer,
Treasurer
Chairman of the Board, MetLife Funding, Inc.
President, Chief New York, NY
Executive Officer,
Treasurer
Chairman, President, MetLife Holdings, Inc.
Chief Executive Officer, Houston, TX
Treasurer
Treasurer Metropolitan Asset Management
Corporation
New York, NY
Treasurer Metropolitan Tower Life
Insurance Company
New York, NY
Treasurer, Controller Metropolitan Tower Realty
Company, Inc.
New York, NY
Treasurer, Controller 2154 Trading Corporation
New York, NY
Treasurer Centennial Equities Corporation
New York, NY
Treasurer MetLife Capital Holdings, Inc.
Newark, DE
Director MetFirst Insurance
Agency, Inc.
Overland Park, KS
Treasurer MetLife International Real Estate
Equity Shares, Inc.
Newark, DE
Director, Vice- Park Avenue Funding Corporation
President, New York, NY
Treasurer
Ian Vose.................... None
Director, Chief Executive
Officer, and Chief
Investment Officer
</TABLE>
Set forth below is a list of each director and certain officers of Scudder,
Stevens & Clark, 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.
Scudder, Stevens & Clark, Inc. has stockholders and employees who are
denominated officers but do not as such have corporation-wide
responsibilities, and therefore are not considered officers.
C-30
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION ORGANIZATION
---- -------- ------------
<C> <C> <S>
Stephen R. Beckwith. Director, Vice Presi- Scudder, Stevens & Clark, Inc.
dent, Assistant Trea- (investment adviser)**
surer, Chief Operating
Officer & Chief Finan-
cial
Officer
Lynn S. Birdsong.... Director Scudder, Stevens & Clark, Inc.
(investment adviser)**
Supervisory Director The Latin America Income and
Appreciation Fund N.V.
(investment company)+
Supervisory Director The Venezuela High Income Fund
N.V. (investment company)xx
Supervisory Director Scudder Mortgage Fund
(investment company)+
Supervisory Director Scudder Floating Rate Funds for
Fannie Mae Mortgage Securities
I & II (investment company)+
Director Scudder, Stevens & Clark
(Luxembourg) S.A. (investment
manager)#
Trustee Scudder Funds Trust (investment
company)*
President and Director The Latin America Dollar Income
Fund, Inc. (investment
company)**
President and Director Scudder World Income
Opportunities Fund, Inc.
(investment company)**
Director Canadian High Income Fund
(investment company)#
Director Hot Growth Companies Fund
(investment company)#
President The Japan Fund, Inc. (investment
company)**
Director Sovereign High Yield Investment
Company (investment company)+
Nicholas Bratt...... Director Scudder, Stevens & Clark, Inc.
(investment adviser)**
President and Director Scudder New Europe Fund, Inc.
(investment company)**
President and Director The Brazil Fund, Inc.
(investment company)**
President and Director The First Iberian Fund, Inc.
(investment company)**
President and Director Scudder International Fund, Inc.
(investment company)**
President and Director Scudder Global Fund, Inc.
(President on all series except
Scudder Global Fund)
(investment company)**
President and Director The Korea Fund, Inc. (investment
company)**
President and Director Scudder New Asia Fund, Inc.
(investment company)**
President The Argentina Fund, Inc.
(investment company)**
Vice President Scudder, Stevens & Clark
Corporation (Delaware)
(investment adviser)**
Vice President Scudder, Stevens & Clark Japan,
Inc. (investment adviser)###
Vice President Scudder, Stevens & Clark of
Canada Ltd. (Canadian
investment adviser), Toronto,
Ontario, Canada
Vice President Scudder, Stevens & Clark
Overseas
Corporation(degrees)(degrees)
</TABLE>
C-31
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION ORGANIZATION
---- -------- ------------
<C> <C> <S>
E. Michael Brown.... Director Scudder, Stevens & Clark, Inc.
(investment adviser)**
Trustee Scudder GNMA Fund (investment
company)*
Trustee Scudder U.S. Treasury Fund
(investment company)*
Trustee Scudder Tax Free Money Fund
(investment company)*
Assistant Treasurer Scudder Investor Services, Inc.
(broker/dealer)*
Director & President Scudder Realty Holding
Corporation (a real estate
holding company)*
Director & President Scudder Trust Company (a trust
company)+++
Director Scudder Trust (Cayman) Ltd.
Mark S. Casady...... Director Scudder, Stevens & Clark, Inc.
(investment adviser)**
Director & Vice Scudder Investor Services, Inc.
President (broker/dealer)*
Vice President Scudder Service Corporation
(in-house transfer agent)*
Director SFA, Inc. (advertising agency)*
Linda C. Coughlin... Director Scudder, Stevens & Clark, Inc.
(investment adviser)**
Director & Senior Vice Scudder Investor Services, Inc.
President (broker/dealer)*
President & Trustee AARP Cash Investment Funds
(investment company)**
President & Trustee AARP Growth Trust (investment
company)**
President & Trustee AARP Income Trust (investment
company)**
President & Trustee AARP Tax Free Income Trust
(investment company)**
Director SFA, Inc. (advertising agency)*
Margaret D. Hadzima. Director Scudder, Stevens & Clark, Inc.
(investment adviser)**
Assistant Treasurer Scudder Investor Services, Inc.
(broker/dealer)*
Jerard K. Hartman... Director Scudder, Stevens & Clark, Inc.
(investment adviser)**
Vice President Scudder California Tax Free
Trust (investment company)*
Vice President Scudder Equity Trust
(investment company)**
Vice President Scudder Cash Investment Trust
(investment company)*
Vice President Scudder Fund, Inc. (investment
company)**
Vice President Scudder Global Fund, Inc.
(investment company)**
Vice President Scudder GNMA Fund (investment
company)*
Vice President Scudder Portfolio Trust
(investment company)*
Vice President Scudder Institutional Fund,
Inc. (investment company)**
Vice President Scudder International Fund,
Inc. (investment company)**
</TABLE>
C-32
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION ORGANIZATION
---- -------- ------------
<C> <C> <S>
Vice President Scudder Investment Trust
(investment company)*
Vice President Scudder Municipal Trust
(investment company)*
Vice President Scudder Mutual Funds, Inc.
(investment company)**
Vice President Scudder New Asia Fund, Inc.
(investment company)**
Vice President Scudder New Europe Fund, Inc.
(investment company)**
Vice President Scudder Securities Trust
(investment company)*
Vice President Scudder State Tax Free Trust
(investment company)*
Vice President Scudder Funds Trust (investment
company)**
Vice President Scudder Tax Free Money Fund
(investment company)*
Vice President Scudder Tax Free Trust (investment
company)*
Vice President Scudder U.S. Treasury Money Fund
(investment company)*
Vice President Scudder Variable Life Investment
Fund (investment company)*
Vice President The Brazil Fund, Inc. (investment
company)**
Vice President The Korea Fund, Inc. (investment
company)**
Vice President The Argentina Fund, Inc.
(investment company)**
Vice President & Scudder, Stevens & Clark of
Director Canada, Ltd. (Canadian investment
adviser), Toronto, Ontario,
Canada
Vice President The First Iberian Fund, Inc.
(investment company)**
Vice President The Latin America Dollar Income
Fund, Inc. (investment company)**
Vice President Scudder World Income Opportunities
Fund, Inc. (investment company)**
Richard A. Holt. Director Scudder, Stevens & Clark, Inc.
(investment adviser)**
Vice President Scudder Variable Life Investment
Fund (investment company)*
Dudley H. Ladd.. Director Scudder, Stevens & Clark, Inc.
(investment adviser)**
Director Scudder Global Fund, Inc.
(investment company)**
Director Scudder International Fund, Inc.
(investment company)**
Senior Vice President & Scudder Investor Services, Inc.
Director (broker/dealer)*
President & Director SFA, Inc. (advertising agency)*
Vice President & Trustee Scudder Cash Investment Trust
(investment company)*
Trustee Scudder Investment Trust
(investment company)*
</TABLE>
C-33
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION ORGANIZATION
---- -------- ------------
<C> <C> <S>
Trustee Scudder Portfolio Trust (investment
company)*
Trustee Scudder Municipal Trust (investment
company)*
Trustee Scudder Securities Trust (investment
company)*
Trustee Scudder State Tax Free Trust
(investment company)*
Trustee Scudder Equity Trust (investment
company)**
Vice President Scudder U.S. Treasury Money Fund
(investment company)*
John T. Packard. Director Scudder, Stevens & Clark, Inc.
(investment adviser)**
President Montgomery Street Income Securities,
Inc. (investment company)(degrees)
Director Scudder Realty Advisors, Inc.
(realty investment adviser)x
Daniel Pierce... Chairman & Director Scudder, Stevens & Clark, Inc.
(investment adviser)**
Chairman & Director Scudder New Europe Fund, Inc.
(investment company)**
Trustee Scudder California Tax Free Trust
(investment company)*
President & Trustee Scudder Equity Trust (investment
company)**
Director The First Iberian Fund, Inc.
(investment company)**
President & Trustee Scudder GNMA Fund (investment
company)*
President & Trustee Scudder Portfolio Trust (investment
company)*
President & Trustee Scudder Funds Trust (investment
company)**
President & Director Scudder Institutional Fund, Inc.
(investment company)**
President & Director Scudder Fund, Inc. (investment
company)**
Chairman & Director Scudder International Fund, Inc.
(investment company)**
President & Trustee Scudder Investment Trust (investment
company)*
Vice President & Trustee Scudder Municipal Trust (investment
company)*
President & Director Scudder Mutual Funds, Inc.
(investment company)**
Director Scudder New Asia Fund, Inc.
(investment company)**
President & Trustee Scudder Securities Trust (investment
company)*
Trustee Scudder State Tax Free Trust
(investment company)*
Vice President & Trustee Scudder Variable Life Investment
Fund (investment company)*
Director The Brazil Fund, Inc. (until 7/94)
(investment company)**
Vice President & Montgomery Street Income Securities,
Assistant Treasurer Inc. (investment company)(degrees)
Chairman, Vice President Scudder Global Fund, Inc.
& Director (investment company)**
Vice President, Director Scudder Investor Services, Inc.
& Assistant Treasurer (broker/dealer)*
President & Director Scudder Service Corporation (in-
house transfer agent)*
</TABLE>
C-34
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION ORGANIZATION
---- -------- ------------
<C> <C> <S>
Chairman & President Scudder, Stevens & Clark of Canada,
Ltd. (Canadian investment
adviser), Toronto, Ontario, Canada
President & Director Scudder Precious Metals, Inc. xxx
Chairman & Director Scudder Global Opportunities Funds
(investment company), Luxembourg
Chairman Scudder, Stevens & Clark, Ltd.
(investment adviser), London,
England
Director Scudder Fund Accounting Corporation
(in-house fund accounting agent)*
Director, Vice President Scudder Realty Holdings Corporation
& Assistant Secretary (a real estate holding company)*
Director Scudder Latin America Investment
Trust PLC (investment Company)@
Incorporator Scudder Trust Company (a trust
company)+++
Director Fiduciary Trust Company (banking &
trust company), Boston, MA
Director Fiduciary Company Incorporated
(banking & trust company), Boston,
MA
Trustee New England Aquarium, Boston, MA
Kathryn L. Quirk. Director & Secretary Scudder, Stevens & Clark, Inc.
(investment adviser)**
Vice President Scudder Fund, Inc. (investment
company)**
Vice President Scudder Institutional Fund, Inc.
(investment company)**
Vice President & Scudder World Income Opportunities
Assistant Secretary Fund, Inc. (investment company)**
Vice President & The Korea Fund, Inc. (investment
Assistant Secretary company)**
Vice President & The Argentina Fund, Inc.
Assistant Secretary (investment company)**
Vice President & The Brazil Fund, Inc. (investment
Assistant Secretary company)**
Vice President & Scudder International Fund, Inc.
Assistant Secretary (investment company)**
Vice President & Scudder Equity Trust (investment
Assistant Secretary company)**
Vice President & Scudder Securities Trust
Assistant Secretary (investment company)*
Vice President & Scudder Funds Trust (investment
Assistant Secretary company)**
Vice President & Scudder Global Fund, Inc.
Assistant Secretary (investment company)**
Vice President & Montgomery Street Income
Assistant Secretary Securities, Inc. (investment
company)(degrees)
Vice President & Scudder Mutual Funds, Inc.
Assistant Secretary (investment company)**
Vice President & Scudder New Europe Fund, Inc.
Assistant Secretary (investment company)**
Vice President & Scudder Variable Life Investment
Assistant Secretary Fund (investment company)*
Vice President & The First Iberian Fund, Inc.
Assistant Secretary (investment company)**
</TABLE>
C-35
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION ORGANIZATION
---- -------- ------------
<C> <C> <S>
Vice President & The Latin American Dollar Income
Assistant Secretary Fund, Inc. (investment company)**
Vice President & AARP Growth Trust (investment
Secretary company)**
Vice President & AARP Income Trust (investment
Secretary company)**
Vice President & AARP Tax Free Income Trust
Secretary (investment company)**
Vice President & AARP Cash Investment Funds
Secretary (investment company)**
Vice President Scudder GNMA Fund (investment
company)*
Vice President & The Japan Fund, Inc. (investment
Secretary company)**
Director Vice President & Secretary Scudder
Fund Accounting Corporation (in-
house fund accounting agent)*
Senior Vice President Scudder Investor Services, Inc.
(broker/dealer)*
Director, Vice President Scudder Realty Holdings
& Secretary Corporation (a real estate
holding company)*
Vice President & Scudder Precious Metals, Inc. xxx
Assistant Secretary
Cornelia M. Small. Director Scudder, Stevens & Clark, Inc.
(investment adviser)**
Vice President Scudder Global Fund, Inc.
(investment company)**
Vice President AARP Cash Investment Funds
(investment company)**
Vice President AARP Growth Trust (investment
company)**
Vice President AARP Income Trust (investment
company)**
Vice President AARP Tax Free Income Trust
(investment company)**
Edmond D. Villani. Director, President & Scudder, Stevens & Clark, Inc.
Chief Executive (investment adviser)**
Officer
Chairman & Director Scudder New Asia Fund, Inc.
(investment company)**
Chairman & Director The Argentina Fund, Inc.
(investment company)**
Director Scudder Realty Advisors, Inc.
(realty investment adviser)x
Supervisory Director Scudder Mortgage Fund (investment
company)+
Chairman & Director The Latin America Dollar Income
Fund, Inc. (investment company)**
Director Scudder, Stevens & Clark Japan,
Inc. (investment adviser)###
Chairman & Director Scudder World Income Opportunities
Fund, Inc. (investment company)**
Supervisory Director Scudder Floating Rate Funds for
Fannie Mae Mortgage Securities I
& II (investment company)+
Director The Brazil Fund, Inc. (investment
company)**
Director Indosuez High Yield Bond Fund
(investment company), Luxembourg
</TABLE>
C-36
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION ORGANIZATION
---- -------- ------------
<C> <C> <S>
President & Director Scudder, Stevens & Clark Overseas
Corporation(degrees)(degrees)
President & Director Scudder, Stevens & Clark
Corporation (Delaware)
(investment adviser)**
Director IBJ Global Investment Management
S.A. (Luxembourg investment
management company), Luxembourg,
Grand-Duchy of Luxembourg
Stephen A. Wohler. Director Scudder, Stevens & Clark, Inc.
(investment adviser)**
Vice President Montgomery Street Income
Securities, Inc. (investment
company)(degrees)
</TABLE>
- --------
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
++ Two Prudential Plaza, 180 N. Stetson Avenue, Chicago, IL
+++ 5 Industrial Way, Salem, NH
(degrees) 101 California Street, San Francisco, CA
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B
34.564
+ John B. Gorsiraweg 6, Willemstad, Curacao, Netherlands Antilles
xx De Ruyterkade 62, P.O. Box 812, Willemstad, Curacao, Netherlands Antilles
## 2 Boulevard Royal, Luxembourg
*** BI 2F3F 248 Section 3, Nan King East Road, Taipei, Taiwan
xxx Grand Cayman, Cayman Islands, British West Indies
(degrees)(degrees) 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
@ c/o Sinclair Hendersen Limited, 23 Cathedral Yard, Exeter, Devon
Set forth below is a 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.
<TABLE>
<CAPTION>
NAME POSITION ORGANIZATION
---- -------- ------------
<C> <C> <S>
Tomas H. Bailey....... Trustee, Chairman and Janus Aspen Series
100 Fillmore Street President
Denver, CO 80206-4923 Chairman, Director and Janus Capital Corporation
President
Chairman and Director IDEX Management, Inc.,
Largo, Florida (50%
subsidiary of Janus
Capital and investment
adviser to a group of
mutual funds) ("IDEX")
James P. Craig, III... Trustee and Executive Janus Aspen Series
100 Fillmore Street Vice President
Denver, CO 80206-4923 Chief Investment Janus Capital Corporation
Officer, Vice President
and Director
Executive Vice President Janus Fund Series of the
and Portfolio Manager Trust
</TABLE>
C-37
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION ORGANIZATION
---- -------- ------------
<C> <C> <S>
Steven R. Goodbarn*.............. Vice President and Chief Janus Aspen Series
100 Fillmore Street Financial Officer
Denver, CO 80206-4923 Vice President of Janus Service, Janus
Finance and Chief Distributors and Janus
Financial Officer Capital Corporation
Director IDEX and Janus
Distributors
Director, Treasurer and Janus Capital
Vice President of International Ltd.
Finance
Formerly (1979 to 1992),
with the accounting
firm of Price
Waterhouse LLP, Denver,
Colorado, and Kansas
City, Missouri
Michael E. Herman................ Director Janus Capital
Corporation
Chairman Finance Committee (1990
to present) of Ewing
Marion Kauffman
Foundation, 4900 Oak,
Kansas City, Missouri
64112
Kelley Abbott Howes*............. Secretary Janus Aspen Series
100 Fillmore Street Associate Counsel Janus Capital
Denver, CO 80206-4923 Formerly (1990 to 1994),
with The Boston Company
Advisors, Inc.
Gary O. Loo...................... Trustee Janus Aspen Series
102 N. Cascade Avenue, Suite 500 President and Director High Valley Group, Inc.,
Colorado Springs, CO 80903 Colorado Springs,
Colorado (investments)
since 1987.
Thomas A. McDonnell.............. Director Janus Capital
Corporation
President, Chief DST Systems, Inc., 1004
Executive Officer and Baltimore Avenue,
Director Kansas City, Missouri
64105, provider of data
processing and
recordkeeping services
for various mutual
funds
Executive Vice President Kansas City Southern
and Director Industries, Inc., 114
W. 11th Street, Kansas
City, Missouri 64105, a
publicly traded holding
company whose primary
subsidiaries are
engaged in
transportation,
information processing
and financial services.
Dennis B. Mullen................. Trustee Janus Aspen Series
1601 114th Avenue, SE President and Chief BC Northwest, L.P., a
Alderwood Building, Suite 130 Executive Officer franchise of Boston
Bellevue, WA 98004 Chicken, Inc.,
Bellevue, Washington
(restaurant chain)
Formerly (1982 to 1992), Famous Restaurants,
Chairman, President and Inc., Scottsdale,
Chief Executive Officer Arizona (restaurant
chain)
</TABLE>
C-38
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION ORGANIZATION
---- -------- ------------
<C> <C> <S>
Glenn P. O'Flaherty*....... Treasurer and Chief Janus Aspen Series
100 Fillmore Street Accounting Officer
Denver, CO 80206-4923 Director of Fund Janus Capital
Accounting
Formerly (1990-1991),
with The Boston Company
Advisors, Inc., Boston,
Massachusetts (mutual
fund administration
services).
Sharon S. Pichler*......... Executive Vice President Janus Money Market Fund,
100 Fillmore Street Janus Tax-Exempt Money
Denver, CO 80206-4923 Market Fund and Janus
Government Money Market
Fund series of the
Trust
Vice President Janus Capital
Formerly, Assistant Vice USAA Investment
President and Portfolio Management Co. (1990-
Manager 1994)
teaching associate The University of Texas
at San Antonio (1984-
1990)
John W. Shepardson#........ Trustee Janus Aspen Series
910 16th Street, Suite 222 Historian
Denver, CO 80202
William D. Stewart#........ Trustee Janus Aspen Series
5330 Sterling Drive President HPS Corporation,
Boulder, CO 80302 Boulder, Colorado
(manufacturer of vacuum
fittings and valves).
Michael N. Stolper......... Director Janus Capital
Corporation
President Stolper & Company, Inc.,
525 "B" Street, Suite
1080, San Diego,
California 92101, an
investment performance
consultant.
David C. Tucker*........... Vice President and Janus Aspen Series
100 Fillmore Street General Counsel
Denver, CO 80206-4923 Vice President, Janus Capital
Secretary and General
Counsel
Vice President, General Janus Service and Janus
Counsel and Director Distributors
Director, Vice President Janus Capital
and Secretary International Ltd.
Martin H. Waldinger........ Trustee Janus Aspen Series
4940 Sandshore Court Private Consultant and Run Technologies, Inc.,
San Diego, CA 92130 Director a software development
firm, San Carlos,
California.
Formerly (1989 to 1993), Bridgecliff Management
President and Chief Services, Campbell,
Executive Officer California (a
condominium association
management company).
</TABLE>
C-39
<PAGE>
Set forth below is a 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.
<TABLE>
<CAPTION>
NAME POSITION ORGANIZATION
---- -------- ------------
<C> <C> <S>
Robert P. Campbell....................... Vice President T. Rowe Price
Vice President Price-Fleming
George J. Collins........................ Chief Executive Officer, T. Rowe Price
President and Managing
Director
Director Price-Fleming
Michael J. Conelius...................... Assistant Vice President T. Rowe Price
Vice President Price-Fleming
Roger L. Fiery, III...................... Vice President T. Rowe Price
Vice President Price-Fleming
R. Aran Gordon........................... Employee T. Rowe Price
Vice President Price-Fleming
Kimberly A. Haker........................ Employee T. Rowe Price
Assistant Vice President Price-Fleming
and Controller
James E. Halbkat, Jr. ................... Director T. Rowe Price
P.O. Box 23109, President U.S. Monitor
Hilton Head Island, South Carolina 29925 Corporation, a provider
of public response
systems.
Todd J. Henry............................ Employee T. Rowe Price
Assistant Vice President Price-Fleming
Carter O. Hoffman........................ Managing Director T. Rowe Price
Director TRP Finance, Inc.
Leah P. Holmes........................... Assistant Vice President T. Rowe Price
Vice President Price-Fleming
Henry H. Hopkins......................... Managing Director T. Rowe Price
Vice President Price-Fleming
Robert C. Howe........................... Vice President T. Rowe Price
Vice President Price-Fleming
Veena A. Kutler.......................... Vice President T. Rowe Price
Vice President Price-Fleming
Heather R. Landon........................ Vice President T. Rowe Price
Vice President Price-Fleming
Richard L. Menschel...................... Director T. Rowe Price
85 Broad Street, 2nd Floor Limited Partner The Goldman Sachs Group,
New York, New York 10004 L.P.
Nancy M. Morris.......................... Vice President T. Rowe Price
Vice President Price-Fleming
George A. Murnaghan...................... Vice President T. Rowe Price
Vice President Price-Fleming
</TABLE>
C-40
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION ORGANIZATION
---- -------- ------------
<C> <C> <S>
Nolan L. North...................... Vice President and T. Rowe Price
Assistant Treasurer
Assistant Treasurer Price-Fleming
Kathleen G. Polk.................... Employee T. Rowe Price
Assistant Vice President Price-Fleming
George A. Roche..................... Chief Financial Officer T. Rowe Price
and Managing Director
Vice President and Price-Fleming
Director
John W. Rosenblum................... Director T. Rowe Price
P.O. Box 6550 Tayloe Murphy Professor The Darden Graduate
Charlottesville, Virginia 22906 School of Business
Administration,
University of Virginia
Director Chesapeake Corporation,
a manufacturer of paper
products
Director Cadmus Communications
Corps., a provider of
printing and
communication services
Director Comdial Corporation, a
manufacturer of
telephone systems for
businesses
Director Cone Mills Corporation,
a textiles producer
Charles P. Smith.................... Managing Director T. Rowe Price
Vice President Price-Fleming
Robert W. Smith..................... Vice President T. Rowe Price
Vice President Price-Fleming
Robert L. Strickland................ Director T. Rowe Price
604 Two Piedmont Plaza Building, Chairman Lowe's Companies, Inc.,
Winston-Salem, North Carolina 27104 a retailer of specialty
home supplies
Director Hannaford Bros. Cos., a
food retailer
M. David Testa...................... Managing Director T. Rowe Price
Chairman of the Board Price-Fleming
Peter Van Dyke...................... Managing Director T. Rowe Price
Vice President Price-Fleming
Barbara A. Van Horn................. Assistant Secretary T. Rowe Price
Assistant Secretary Price-Fleming
Philip C. Walsh..................... Director T. Rowe Price
200 East 66th Street, Apt. A-1005, Consultant Cyprus Amax Minerals
New York, New York 10021 Company, Englewood,
Colorado
William F. Wendler, II.............. Vice President T. Rowe Price
Vice President Price-Fleming
</TABLE>
C-41
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION ORGANIZATION
---- -------- ------------
<C> <C> <S>
Anne Marie Whittemore.... Director T. Rowe Price
One James Center Partner McGuire, Woods, Battle &
Richmond, Virginia 23219 Boothe
Director Owens & Minor, Inc.
Director USF&G Corporation
Director James River Corporation
Edward A. Wiese.......... Vice President T. Rowe Price
Vice President Price-Fleming
Alvin M. Younger, Jr. ... Managing Director and T. Rowe Price
Secretary and Treasurer
Secretary and Treasurer Price-Fleming
</TABLE>
Loomis Sayles, the sub-adviser of the Loomis Sayles High Yield Bond
Portfolio, provides investment advice to the eleven series of Loomis Sayles'
Investment Trust, six series of New England Funds Trust I, one series of New
England Funds Trust III, and three series of New England Zenith Funds, all of
which are registered investment companies, and to other organizations and
individuals.
The sole general partner of Loomis Sayles is Loomis, Sayles & Company,
Incorporated, One Financial Center, Boston, Massachusetts 02111.
C-42
<PAGE>
ITEM 30. 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 and of 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 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
C-43
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940 AND TO RULE 485(A)(2) UNDER THE SECURITIES ACT
OF 1933 THE REGISTRANT 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 18TH DAY OF DECEMBER, 1996.
METROPOLITAN SERIES FUND, INC.
(REGISTRANT)
/s/ Jeffrey J. Hodgman
By: .................................
JEFFREY J. HODGMAN 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
*
.....................................
JEFFREY J. HODGMAN
Chairman of the Board, President
(Principal Executive Officer and
Director)
*
.....................................
STEVE A. GARBAN
Director
*
.....................................
MALCOLM T. HOPKINS
Director
*
.....................................
ROBERT A. LAWRENCE
Director
*
.....................................
DEAN O. MORTON
Director
*
.....................................
MICHAEL S. SCOTT MORTON
Director
*
.....................................
JOHN H. TWEEDIE
Director
*
.....................................
BRADFORD W. WHITE
Controller (Principal Financial and
Accounting Officer)
/s/ Christopher P. Nicholas, Esq.
*By: ................................ December 18, 1996
CHRISTOPHER P. NICHOLAS, ESQ.
Attorney-in-Fact
C-44
<PAGE>
EXHIBIT 1(h)
METROPOLITAN SERIES FUND, INC.
------------------------------
ARTICLES SUPPLEMENTARY
----------------------
TO
--
ARTICLES OF INCORPORATION
-------------------------
METROPOLITAN SERIES FUND, INC., a Maryland corporation having its principal
office in this State c/o United Corporate Services, Inc., 20 South Charles
Street, Suite 1200, Baltimore, Maryland 21201 (hereinafter called the
Corporation), hereby certifies to the State Department of Assessments and
Taxation of Maryland, that:
FIRST: The Board of Directors of the Corporation, at a meeting duly
convened and held on December 16, 1996, adopted resolutions increasing the total
number of shares of capital stock of the Corporation from one billion
(1,000,000,000) shares of the par value of one cent ($0.01) per share and of the
aggregate par value of ten million dollars ($10,000,000) to two billion
(2,000,000,000) shares of the par value of one cent ($0.01) per share and of the
aggregate par value of twenty million dollars ($20,000,000), classifying or
reclassifying four hundred million (400,000,000) unissued shares of capital
stock of the Corporation of the par value of $0.01 per share by establishing
four (4) new classes of capital stock of the Corporation of the par value of
$0.01 per share designated respectively as Scudder Global Equity Portfolio
Capital Stock, T. Rowe Price Small Cap Growth Portfolio Capital Stock, Janus Mid
Cap Portfolio Capital Stock and Loomis Sayles High Yield Bond Portfolio Capital
Stock and by allocating or reallocating such four hundred million shares so that
the total number of shares of authorized capital stock of the Corporation shall
be divided among the following classes of capital stock, each class comprising
the number of shares and
<PAGE>
having the designations, preferences, rights, voting powers and such
qualifications, limitations and restrictions as are hereinafter set forth:
<TABLE>
<CAPTION>
Original Increased and Reclassified
Shares of Shares of
Class Authorized Authorized
- -----
Stock Stock
----------- -----------
<S> <C> <C>
MetLife Money Market Portfolio 100,000,000 100,000,000
State Street Research Income Portfolio 100,000,000 100,000,000
State Street Research Growth Portfolio 100,000,000 100,000,000
State Street Research Diversified Portfolio 100,000,000 100,000,000
GNMA Portfolio 100,000,000 100,000,000
GFM International Stock Portfolio 100,000,000 100,000,000
State Street Research Aggressive Growth Portfolio 100,000,000 100,000,000
MetLife Stock Index Portfolio 100,000,000 100,000,000
Equity Income Portfolio 100,000,000 100,000,000
Scudder Global Equity Portfolio ----- 100,000,000
T. Rowe Price Small Cap Growth Portfolio ----- 100,000,000
Janus Mid Cap Portfolio ----- 100,000,000
Loomis Sayles High Yield Bond Portfolio ----- 100,000,000
Unclassified 100,000,000 700,000,000
----------- -----------
Total 1,000,000,000 2,000,000,000
</TABLE>
The holders of each share of stock of the Corporation shall be entitled to
one vote for each full share, and a fractional vote for each fractional share of
stock, irrespective of the class, then standing in his name on the books of the
Corporation. On any matter submitted to a vote of the stockholders, all shares
of the Corporation then issued and outstanding and entitled to vote shall be
voted in the aggregate and not by class except (1) when otherwise required by
law and (2) if the Board of Directors, in its sole discretion, determines that
any matter concerns only one or more particular class or classes, it may direct
that only holders of that class or those classes may vote on the matter.
<PAGE>
Except as the Board of Directors may provide in classifying or
reclassifying any unissued shares of stock, each class of stock of the
Corporation shall have the following powers, preferences or other special
rights, and the qualifications, restrictions, and limitations thereof shall be
as follows:
(1) Except as may be otherwise provided herein, all consideration received
by the Corporation for the issue or sale of shares of stock of a particular
class, together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds in whatever
form, shall constitute assets of that class, as opposed to other classes of the
Corporation, subject only to the rights of creditors, and are herein referred to
as assets "belonging to" that class. Any assets, income, earnings, profits, and
proceeds thereof, funds or payments which are not readily identifiable as
belonging to any particular class, shall be allocated by or under the
supervision of the Board of Directors to and among any one or more of the
classes established and designated from time to time, in such manner and on such
basis as the Board of Directors, in its sole discretion, deems fair and
equitable.
(2) The Board of Directors may from time to time declare and pay dividends
or distributions, in stock or in cash, on any or all classes of stock, the
amount of such dividends and distributions and the payment of them being wholly
in the discretion of the Board of Directors, giving due consideration to the
interests of each class and to the interests of the Corporation as a whole.
Pursuant to the foregoing:
(i) Dividends or distributions on shares of any class of stock shall
be paid only out of surplus or other lawfully available
<PAGE>
assets determined by the Board of Directors as belonging to such
class.
(ii) Inasmuch as the Corporation intends to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as
amended, or any successor or statute comparable thereto, and
regulations promulgated thereunder, and inasmuch as the computation of
net income and gains for Federal income tax purposes may vary from the
computation thereof on the books of the Corporation, the Board of
Directors shall have the power in its discretion to distribute in any
fiscal years as dividends, including dividends designated in whole or
in part as capital gains distributions, amounts sufficient in the
opinion of the Board of Directors, to enable the Corporation to
qualify as a regulated investment company and to avoid liability for
the Corporation for Federal income tax in respect to that year. In
furtherance, and not in limitation of the foregoing, in the event that
a class of shares has a net capital loss for a fiscal year, and to the
extent that a net capital loss for a fiscal year offsets net capital
gains from one or more of the other classes, the amount to be deemed
available for distribution to the class or classes with the net
capital gain may be reduced by the amount offset.
<PAGE>
(3) The assets belonging to any class of stock shall be charged with the
liabilities in respect to such class, and shall also be charged with its share
of the general liabilities of the Corporation in proportion to the net asset
value of the respective classes before allocation of general liabilities.
However the decision of the Board of Directors as to the amount of assets and
liabilities belonging to the Corporation, and their allocation to a given class
or classes shall be final and conclusive.
(4) In the event of the liquidation of the Corporation the stockholders of
each class that has been established and designated shall be entitled to
receive, as a class, the excess of the assets belonging to that class over the
liabilities belonging to that class. The assets so distributable to the
stockholders of any particular class shall be distributed among such
stockholders in proportion to the number of shares of that class held by them
and recorded on the books of the Corporation. Any assets not readily
identifiable as belonging to any particular class shall be allocated by or under
the supervision of the Board of Directors to and among any one or more of the
classes established and designated, as provided herein. Any such allocation by
the Board of Directors shall be conclusive and binding for all purposes.
(5) Each holder of shares of capital stock of the Corporation shall be
entitled to require the Corporation to redeem all or any part of the shares of
capital stock of the Corporation standing in the name of such holder on the
books of the Corporation, at the redemption price of such shares as in effect
from time to time, subject to the right of the Board of Directors of the
Corporation to suspend the right of redemption of shares of capital stock of the
Corporation or postpone the time of payment of such redemption price in
accordance with provisions of applicable law. The redemption price of shares of
capital
<PAGE>
stock of the Corporation shall be the net asset value thereof as determined by,
or pursuant to the discretion of the Board of Directors of the Corporation from
time to time in accordance with the provisions of applicable law, less such
redemption fee or other charge, if any, as may be fixed by resolution of the
Board of Directors of the Corporation. Redemption shall be conditional upon the
Corporation having funds legally available therefor. Payment of the redemption
price shall be made in cash or by check or current funds, or in assets other
than cash, by the Corporation at such time and in such manner as may be
determined from time to time by the Board of Directors of the Corporation.
(6) The Corporation's shares of stock are issued and sold, and all persons
who shall acquire stock of the Corporation shall acquire the same, subject to
the condition and understanding that the provisions of the Articles of
Incorporation of the Corporation, as from time to time amended, shall be binding
upon them.
SECOND: The shares aforesaid have been duly classified or reclassified by
the Board of Directors pursuant to the authority and power contained in Article
V of the Articles of Incorporation of the Corporation.
<PAGE>
IN WITNESS WHEREOF, METROPOLITAN SERIES FUND, INC. has caused these
presents to be signed in its name and on its behalf by its President and Chief
Executive Officer and its corporate seal to be hereunto affixed and attested by
its Secretary, on December 17, 1996.
METROPOLITAN SERIES FUND, INC.
By /s/ Jeffrey J. Hodgman
______________________________________
Jeffrey J. Hodgman
President and Chief Executive Officer
Attest:
/s/ Christopher P. Nicholas
____________________________
Christopher P. Nicholas
Secretary
THE UNDERSIGNED, President of METROPOLITAN SERIES FUND, INC., who executed
on behalf of said Corporation the foregoing Articles Supplementary to the
Articles of Incorporation, of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said Corporation, the foregoing
Articles Supplementary to the Articles of Incorporation to be the corporate act
of said Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
/s/ Jeffrey J. Hodgman
---------------------------------
Jeffrey J. Hodgman
<PAGE>
EXHIBIT 5(b)
SCUDDER GLOBAL EQUITY PORTFOLIO INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 1st day of March, 1997, by and between Metropolitan
Series Fund, Inc., a Maryland corporation (the "Fund"), and Metropolitan Life
Insurance Company, a New York corporation (the "Investment Manager");
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as a diversified open-end
management investment company and is registered as such under the Investment
Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Fund, a series type of investment company, issues separate
classes (or series) of stock, each of which represents a separate portfolio of
investments;
WHEREAS, the Fund is currently comprised of thirteen portfolios which are
the State Street Research Growth Portfolio, the State Street Research Income
Portfolio, the MetLife Money Market Portfolio, the State Street Research
Diversified Portfolio, the GNMA Portfolio, the State Street Research Aggressive
Growth Portfolio, the Equity Income Portfolio, the MetLife Stock Index
Portfolio, the GFM International Stock Portfolio, the Scudder Global Equity
Portfolio, the T. Rowe Price Small Cap Growth Portfolio, the Janus Mid Cap
Portfolio, and the Loomis Sayles High Yield Bond Portfolio, each of which
pursues its investment objectives through separate investment policies, and the
Fund may add or delete portfolios from time to time;
<PAGE>
WHEREAS, the Investment Manager is engaged principally in the business of
insurance and also in rendering advisory services and is registered as an
investment adviser under the Investment Advisers Act of 1940;
WHEREAS, the Investment Manager currently provides investment management
and corporate administrative services to each of the Portfolios pursuant to
separate investment management agreements between the Fund and the Investment
Manager; and
WHEREAS, the Fund desires to enter into a separate investment management
agreement with respect to the Scudder Global Equity Portfolio of the Fund with
the Investment Manager;
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Investment Manager hereby agree as
follows:
ARTICLE 1.
Duties of the Investment Manager.
--------------------------------
The Fund hereby employs the Investment Manager to act as the investment
adviser to and investment manager of the Scudder Global Equity Portfolio (the
"Portfolio") and to manage the investment and reinvestment of the assets of the
Portfolio and to administer its affairs, subject to the supervision of the Board
of Directors of the Fund, for the period and on the terms and conditions set
forth in this Agreement. The Investment Manager hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations herein set forth for the compensation provided for
<PAGE>
herein. The Investment Manager shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise provided or authorized, have
no authority to act for or represent the Fund in any way or otherwise be deemed
an agent of the Fund other than in furtherance of its duties and
responsibilities as set forth in this Agreement.
(a) Investment Management Services. In acting as investment manager to the
------------------------------
Portfolio, the Investment Manager shall regularly provide the Portfolio with
such investment research, advice and management as the Fund may from time to
time consider necessary for the proper management of the Portfolio and shall
furnish continuously an investment program and shall determine which securities
shall be purchased, sold or exchanged and what portion of the assets of the
Portfolio shall be held in the various securities or other assets, subject
always to any restrictions of the Fund's Articles of Incorporation and By-Laws,
as amended or supplemented from time to time, the provisions of applicable laws
and regulations including the Investment Company Act, and the statements
relating to the Portfolio's investment objectives, policies and restrictions as
the same are set forth in the prospectus of the Fund then-currently effective
under the Securities Act of 1933 (the "Prospectus"). Should the Board of
Directors of the Fund at any time, however, make any definite determination as
to investment policy and notify the Investment Manager thereof, the Investment
Manager shall be bound by such determination for the period, if any, specified
in such notice or until similarly notified that such determination has been
<PAGE>
revoked. The Investment Manager shall take, on behalf of the Fund, all actions
which it deems necessary to implement the investment policies of the Portfolio,
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Portfolio with brokers or
dealers selected by the Investment Manager.
In connection with the selection of such brokers or dealers and the
placing of such orders, the Investment Manager is directed at all times to
follow the policies of the Fund as set forth in the Prospectus. Nothing herein
shall preclude the "bunching" of orders for the sale or purchase of portfolio
securities with the other Portfolios or with other accounts managed by the
Investment Manager or the Investment Manager's general account and separate
accounts. The Investment Manager shall not favor any account over any other and
any purchase or sale orders executed contemporaneously shall be allocated in a
manner it deems equitable among the accounts involved and at a price which is
approximately averaged.
(b) Administrative Services. In addition to the performance of investment
-----------------------
advisory services, the Investment Manager shall perform administrative services
in connection with the management of the Portfolio. In this connection, the
Investment Manager agrees (i) to assist in managing all aspects of the Fund's
operations relating to the Portfolio, including the coordination of all matters
relating to the functions of the custodian, transfer agent, other shareholder
service agents, accountants, attorneys and other parties performing services or
<PAGE>
operational functions for the Fund, (ii) to provide the Fund, at the Investment
Manager's expense, with services of persons competent to perform such
professional, administrative and clerical functions as are necessary in order to
provide effective administration of the Portfolio, including duties in
connection with shareholder relations, reports, redemption requests and account
adjustments and the maintenance of the books and records required of the Fund,
and (iii) to provide the Fund, at the Investment Manager's expense, with
adequate office space and related services necessary for its operations as
contemplated in this Agreement. In performing such administrative services, the
Investment Manager shall comply with all provisions of the Fund's Articles of
Incorporation and By-Laws, with all laws and regulations to which the Fund may
be subject and with all directions of the Fund's Board of Directors.
The Investment Manager shall supply the Board of Directors and officers of
the Fund with all statistical information regarding investments which is
reasonably required by them and reasonably available to the Investment Manager.
(c) Sub-Investment Manager. Notwithstanding any other provision of this
----------------------
Agreement, the Fund and the Investment Manager may agree to the employment of
Scudder, Stevens & Clark, Inc. as the Sub-Investment Manager to the Fund for the
purpose of providing investment management services with respect to the
Portfolio, provided that the compensation to be paid to such Sub-Investment
Manager shall be the sole responsibility of the Investment Manager and the
duties and responsibilities of the
<PAGE>
Sub-Investment Manager shall be as set forth in a sub-investment management
agreement among the Investment Manager, the Sub-Investment Manager and the Fund
on behalf of the Portfolio.
ARTICLE 2.
Allocation of Charges and Expenses.
----------------------------------
(a) The Investment Manager. In addition to the compensation paid to any
----------------------
Sub-Investment Manager as set forth in Article 1 above, the Investment Manager
shall pay the organization costs of the Fund relating to the Portfolio. The
Investment Manager also assumes expenses of the Fund relating to maintaining the
staff and personnel, and providing the equipment, office space and facilities,
necessary to perform its obligations under this Agreement.
(b) The Fund. The Fund assumes and shall pay (or cause to be paid) all
--------
other Fund expenses, including but not limited to the following expenses: the
fee referred to in Article 3 below; interest and any other costs related to
borrowings by the Fund attributable to the Portfolio; taxes payable by the Fund
and attributable to the Portfolio; brokerage costs and other direct costs of
effecting portfolio transactions (including any costs directly related to the
acquisition, disposition, lending or borrowing of portfolio investments) on
behalf of the Portfolio; the compensation of the directors and officers of the
Fund who are not actively employed by the Investment Manager; custodian,
registration and transfer agent fees; fees of outside counsel to and of
independent auditors of the Fund selected by the Board of Directors; expenses of
printing and mailing to existing
<PAGE>
shareholders of registration statements, prospectuses, reports, notices and
proxy solicitation materials of the Fund; all other expenses incidental to
holding meetings of the Fund's shareholders; insurance premiums for fidelity
coverage and errors and omissions insurance; and extraordinary or non-recurring
expenses (such as legal claims and liabilities and litigation costs and any
indemnification related thereto) attributable to the Portfolio. The Fund shall
allocate the appropriate portion of the foregoing expenses to the Portfolio.
All expenses of any activity which is primarily intended to result in the
sale of the Fund's shares, and certain other expenses as detailed in the Fund's
Distribution Agreement with Metropolitan Life Insurance Company, are assumed by
the distributor of the Fund's shares.
ARTICLE 3.
Compensation of the Investment Manager.
--------------------------------------
For the services rendered, the facilities furnished and expenses assumed
by the Investment Manager, the Fund shall pay to the Investment Manager at the
end of each calendar month the fee at the annual rate specified by the schedule
of fees in the Appendix to this Agreement. The average daily value of the net
assets of the Portfolio shall be determined and computed in accordance with the
description of the method of determination of net asset value contained in the
Prospectus.
ARTICLE 4.
Limitation of Liability of the Investment Manager.
-------------------------------------------------
(a) In the performance of advisory services as provided in
<PAGE>
Article 1(a), the Investment Manager shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with any investment policy or the purchase, sale or redemption of any securities
on the recommendation of the Investment Manager. Nothing herein contained shall
be construed to protect the Investment Manager against any liability to the Fund
or its shareholders to which the Investment Manager shall otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence in the performance
of its duties on behalf of the Fund, reckless disregard of the Investment
Manager's obligations and duties under this Agreement or the violation of any
applicable law.
(b) In the performance of administrative services as provided in Article
1(b) and which the Investment Manager is obligated to perform hereunder, the
Investment Manager shall be liable to the Fund or its shareholders for any
willful or negligent act or omission in the performance of such administrative
services.
ARTICLE 5.
Activities of the Investment Manager.
------------------------------------
The services of the Investment Manager under this Agreement are not to be
deemed exclusive, and the Investment Manager shall be free to render similar
services to others so long as its services hereunder are not impaired thereby.
It is understood that directors, officers, employees and shareholders of the
Fund are or may become interested in the Investment Manager, as directors,
officers, employees or policyholders or
<PAGE>
otherwise and that directors, officers, employees or policyholders of the
Investment Manager are or may become similarly interested in the Fund, and that
the Investment Manager is or may become interested in the Fund as shareholder or
otherwise.
ARTICLE 6.
Duration and Termination of this Agreement.
------------------------------------------
This Agreement shall become effective as of the date first above written
and shall remain in force until May 16, 1998 and thereafter shall continue in
effect, but only so long as such continuance is specifically approved at least
annually by (i) the Board of Directors of the Fund, or by the vote of a majority
of the outstanding shares of the Portfolio, and (ii) a majority of those
directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval.
This Agreement may be terminated with respect to the Portfolio at any
time, without the payment of any penalty, by the Board of Directors of the Fund,
or by vote of a majority of the outstanding shares of the Portfolio, on sixty
days' written notice to the Investment Manager, or by the Investment Manager on
sixty days' written notice to the Fund. This Agreement shall automatically
terminate in the event of its assignment.
ARTICLE 7.
Definitions.
-----------
The terms "assignment," "interested person," and "majority of the
outstanding shares," when used in this Agreement, shall
<PAGE>
have the respective meanings specified under the Investment Company Act.
ARTICLE 8.
Amendments of this Agreement.
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the Board of Directors of the Fund, to the extent
permitted by the Investment Company Act, or by the vote of a majority of the
outstanding shares of the Portfolio, and (ii) by the vote of a majority of those
directors of the Fund who are not parties to this Agreement or interested
persons of any such party cast in person at a meeting called for the purpose of
voting on such approval.
ARTICLE 9.
Governing Law.
-------------
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the Investment Company Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.
METROPOLITAN SERIES FUND, INC.
By_____________________________
President
Attest:
<PAGE>
- ----------------------
Secretary
METROPOLITAN LIFE INSURANCE COMPANY
By_________________________________
Executive Vice-President
Attest:
- -------------------
Assistant Secretary
<PAGE>
APPENDIX
Metropolitan Series Fund Fee Schedule
-------------------------------------
Scudder Global Equity Portfolio
-------------------------------
1st $50M .90%
next $50M .55%
next $400M .50%
above $500M .475% of the average daily value of the net
assets of the Portfolio.
<PAGE>
T. ROWE PRICE SMALL CAP GROWTH PORTFOLIO INVESTMENT MANAGEMENT
AGREEMENT
AGREEMENT made this 1st day of March, 1997, by and between Metropolitan
Series Fund, Inc., a Maryland corporation (the "Fund"), and Metropolitan Life
Insurance Company, a New York corporation (the "Investment Manager");
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as a diversified open-end
management investment company and is registered as such under the Investment
Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Fund, a series type of investment company, issues separate
classes (or series) of stock, each of which represents a separate portfolio of
investments;
WHEREAS, the Fund is currently comprised of thirteen portfolios which are
the State Street Research Growth Portfolio, the State Street Research Income
Portfolio, the MetLife Money Market Portfolio, the State Street Research
Diversified Portfolio, the GNMA Portfolio, the State Street Research Aggressive
Growth Portfolio, the Equity Income Portfolio, the MetLife Stock Index
Portfolio, the GFM International Stock Portfolio, the Scudder Global Equity
Portfolio, the T. Rowe Price Small Cap Growth Portfolio, the Janus Mid Cap
Portfolio, and the Loomis Sayles High Yield Bond Portfolio, each of which
pursues its investment objectives through separate investment policies,
<PAGE>
and the Fund may add or delete portfolios from time to time;
WHEREAS, the Investment Manager is engaged principally in the business of
insurance and also in rendering advisory services and is registered as an
investment adviser under the Investment Advisers Act of 1940;
WHEREAS, the Investment Manager currently provides investment management
and corporate administrative services to each of the Portfolios pursuant to
separate investment management agreements between the Fund and the Investment
Manager; and
WHEREAS, the Fund desires to enter into a separate investment management
agreement with respect to the T. Rowe Price Small Cap Growth Portfolio of the
Fund with the Investment Manager;
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Investment Manager hereby agree as
follows:
ARTICLE 1.
Duties of the Investment Manager.
--------------------------------
The Fund hereby employs the Investment Manager to act as the investment
adviser to and investment manager of the T. Rowe Price Small Cap Growth
Portfolio (the "Portfolio") and to manage the investment and reinvestment of the
assets of the Portfolio and to administer its affairs, subject to the
supervision of the Board of Directors of the Fund, for the period and on the
terms and conditions set forth in this Agreement. The Investment Manager hereby
accepts such employment and agrees during such
<PAGE>
period, at its own expense, to render the services and to assume the obligations
herein set forth for the compensation provided for herein. The Investment
Manager shall for all purposes herein be deemed to be an independent contractor
and shall, unless otherwise provided or authorized, have no authority to act for
or represent the Fund in any way or otherwise be deemed an agent of the Fund
other than in furtherance of its duties and responsibilities as set forth in
this Agreement.
(a) Investment Management Services. In acting as investment manager to the
------------------------------
Portfolio, the Investment Manager shall regularly provide the Portfolio with
such investment research, advice and management as the Fund may from time to
time consider necessary for the proper management of the Portfolio and shall
furnish continuously an investment program and shall determine which securities
shall be purchased, sold or exchanged and what portion of the assets of the
Portfolio shall be held in the various securities or other assets, subject
always to any restrictions of the Fund's Articles of Incorporation and By-Laws,
as amended or supplemented from time to time, the provisions of applicable laws
and regulations including the Investment Company Act, and the statements
relating to the Portfolio's investment objectives, policies and restrictions as
the same are set forth in the prospectus of the Fund then-currently effective
under the Securities Act of 1933 (the "Prospectus"). Should the Board of
Directors of the Fund at any time, however, make any definite determination as
to investment policy and notify the Investment Manager thereof, the Investment
Manager shall be bound by such
<PAGE>
determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked. The Investment
Manager shall take, on behalf of the Fund, all actions which it deems necessary
to implement the investment policies of the Portfolio, determined as provided
above, and in particular to place all orders for the purchase or sale of
portfolio securities for the Portfolio with brokers or dealers selected by the
Investment Manager.
In connection with the selection of such brokers or dealers and the
placing of such orders, the Investment Manager is directed at all times to
follow the policies of the Fund as set forth in the Prospectus. Nothing herein
shall preclude the "bunching" of orders for the sale or purchase of portfolio
securities with the other Portfolios or with other accounts managed by the
Investment Manager or the Investment Manager's general account and separate
accounts. The Investment Manager shall not favor any account over any other and
any purchase or sale orders executed contemporaneously shall be allocated in a
manner it deems equitable among the accounts involved and at a price which is
approximately averaged.
(b) Administrative Services. In addition to the performance of investment
-----------------------
advisory services, the Investment Manager shall perform administrative services
in connection with the management of the Portfolio. In this connection, the
Investment Manager agrees (i) to assist in managing all aspects of the Fund's
operations relating to the Portfolio, including the coordination of all matters
relating to the functions of the
<PAGE>
custodian, transfer agent, other shareholder service agents, accountants,
attorneys and other parties performing services or operational functions for the
Fund, (ii) to provide the Fund, at the Investment Manager's expense, with
services of persons competent to perform such professional, administrative and
clerical functions as are necessary in order to provide effective administration
of the Portfolio, including duties in connection with shareholder relations,
reports, redemption requests and account adjustments and the maintenance of the
books and records required of the Fund, and (iii) to provide the Fund, at the
Investment Manager's expense, with adequate office space and related services
necessary for its operations as contemplated in this Agreement. In performing
such administrative services, the Investment Manager shall comply with all
provisions of the Fund's Articles of Incorporation and By-Laws, with all laws
and regulations to which the Fund may be subject and with all directions of the
Fund's Board of Directors.
The Investment Manager shall supply the Board of Directors and officers of
the Fund with all statistical information regarding investments which is
reasonably required by them and reasonably available to the Investment Manager.
(c) Sub-Investment Manager. Notwithstanding any other provision of this
----------------------
Agreement, the Fund and the Investment Manager may agree to the employment of T.
Rowe Price Associates, Inc. as the Sub-Investment Manager to the Fund for the
purpose of providing investment management services with respect to the
Portfolio, provided that the compensation to be paid to such
<PAGE>
Sub-Investment Manager shall be the sole responsibility of the Investment
Manager and the duties and responsibilities of the Sub-Investment Manager shall
be as set forth in a sub-investment management agreement among the Investment
Manager, the Sub-Investment Manager and the Fund on behalf of the Portfolio.
ARTICLE 2.
Allocation of Charges and Expenses.
----------------------------------
(a) The Investment Manager. In addition to the compensation paid to any
----------------------
Sub-Investment Manager as set forth in Article 1 above, the Investment Manager
shall pay the organization costs of the Fund relating to the Portfolio. The
Investment Manager also assumes expenses of the Fund relating to maintaining the
staff and personnel, and providing the equipment, office space and facilities,
necessary to perform its obligations under this Agreement.
(b) The Fund. The Fund assumes and shall pay (or cause to be paid) all
--------
other Fund expenses, including but not limited to the following expenses: the
fee referred to in Article 3 below; interest and any other costs related to
borrowings by the Fund attributable to the Portfolio; taxes payable by the Fund
and attributable to the Portfolio; brokerage costs and other direct costs of
effecting portfolio transactions (including any costs directly related to the
acquisition, disposition, lending or borrowing of portfolio investments) on
behalf of the Portfolio; the compensation of the directors and officers of the
Fund who are not actively employed by the Investment Manager; custodian,
registration and transfer agent fees; fees of outside counsel to
<PAGE>
and of independent auditors of the Fund selected by the Board of Directors;
expenses of printing and mailing to existing shareholders of registration
statements, prospectuses, reports, notices and proxy solicitation materials of
the Fund; all other expenses incidental to holding meetings of the Fund's
shareholders; insurance premiums for fidelity coverage and errors and omissions
insurance; and extraordinary or non-recurring expenses (such as legal claims and
liabilities and litigation costs and any indemnification related thereto)
attributable to the Portfolio. The Fund shall allocate the appropriate portion
of the foregoing expenses to the Portfolio.
All expenses of any activity which is primarily intended to result in the
sale of the Fund's shares, and certain other expenses as detailed in the Fund's
Distribution Agreement with Metropolitan Life Insurance Company, are assumed by
the distributor of the Fund's shares.
ARTICLE 3.
Compensation of the Investment Manager.
--------------------------------------
For the services rendered, the facilities furnished and expenses assumed
by the Investment Manager, the Fund shall pay to the Investment Manager at the
end of each calendar month the fee at the annual rate specified by the schedule
of fees in the Appendix to this Agreement. The average daily value of the net
assets of the Portfolio shall be determined and computed in accordance with the
description of the method of determination of net asset value contained in the
Prospectus.
ARTICLE 4.
<PAGE>
Limitation of Liability of the Investment Manager.
-------------------------------------------------
(a) In the performance of advisory services as provided in Article 1(a),
the Investment Manager shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Fund in connection with any investment
policy or the purchase, sale or redemption of any securities on the
recommendation of the Investment Manager. Nothing herein contained shall be
construed to protect the Investment Manager against any liability to the Fund or
its shareholders to which the Investment Manager shall otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence in the performance of
its duties on behalf of the Fund, reckless disregard of the Investment Manager's
obligations and duties under this Agreement or the violation of any applicable
law.
(b) In the performance of administrative services as provided in Article
1(b) and which the Investment Manager is obligated to perform hereunder, the
Investment Manager shall be liable to the Fund or its shareholders for any
willful or negligent act or omission in the performance of such administrative
services.
ARTICLE 5.
Activities of the Investment Manager.
------------------------------------
The services of the Investment Manager under this Agreement are not to be
deemed exclusive, and the Investment Manager shall be free to render similar
services to others so long as its services hereunder are not impaired thereby.
It is understood that directors, officers, employees and shareholders
<PAGE>
of the Fund are or may become interested in the Investment Manager, as
directors, officers, employees or policyholders or otherwise and that directors,
officers, employees or policyholders of the Investment Manager are or may become
similarly interested in the Fund, and that the Investment Manager is or may
become interested in the Fund as shareholder or otherwise.
ARTICLE 6.
Duration and Termination of this Agreement.
------------------------------------------
This Agreement shall become effective as of the date first above written
and shall remain in force until May 16, 1998 and thereafter shall continue in
effect, but only so long as such continuance is specifically approved at least
annually by (i) the Board of Directors of the Fund, or by the vote of a majority
of the outstanding shares of the Portfolio, and (ii) a majority of those
directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval.
This Agreement may be terminated with respect to the Portfolio at any
time, without the payment of any penalty, by the Board of Directors of the Fund,
or by vote of a majority of the outstanding shares of the Portfolio, on sixty
days' written notice to the Investment Manager, or by the Investment Manager on
sixty days' written notice to the Fund. This Agreement shall automatically
terminate in the event of its assignment.
ARTICLE 7.
Definitions.
-----------
<PAGE>
The terms "assignment," "interested person," and "majority of the
outstanding shares," when used in this Agreement, shall have the respective
meanings specified under the Investment Company Act.
ARTICLE 8.
Amendments of this Agreement.
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the Board of Directors of the Fund, to the extent
permitted by the Investment Company Act, or by the vote of a majority of the
outstanding shares of the Portfolio, and (ii) by the vote of a majority of those
directors of the Fund who are not parties to this Agreement or interested
persons of any such party cast in person at a meeting called for the purpose of
voting on such approval.
ARTICLE 9.
Governing Law.
-------------
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the Investment Company Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.
<PAGE>
METROPOLITAN SERIES FUND, INC.
By_____________________________
President
Attest:
- ----------------------
Secretary
METROPOLITAN LIFE INSURANCE COMPANY
By_________________________________
Executive Vice-President
Attest:
- -------------------
Assistant Secretary
<PAGE>
APPENDIX
Metropolitan Series Fund Fee Schedule
-------------------------------------
T. Rowe Price Small Cap Growth Portfolio
----------------------------------------
1st $100M .55%
next $300M .50%
above $400M .45% of the average daily value of the net
assets of the Portfolio.
<PAGE>
JANUS MID CAP PORTFOLIO INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 1st day of March, 1997, by and between Metropolitan
Series Fund, Inc., a Maryland corporation (the "Fund"), and Metropolitan Life
Insurance Company, a New York corporation (the "Investment Manager");
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as a diversified open-end
management investment company and is registered as such under the Investment
Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Fund, a series type of investment company, issues separate
classes (or series) of stock, each of which represents a separate portfolio of
investments;
WHEREAS, the Fund is currently comprised of thirteen portfolios which are
the State Street Research Growth Portfolio, the State Street Research Income
Portfolio, the MetLife Money Market Portfolio, the State Street Research
Diversified Portfolio, the GNMA Portfolio, the State Street Research Aggressive
Growth Portfolio, the Equity Income Portfolio, the MetLife Stock Index
Portfolio, the GFM International Stock Portfolio, the Scudder Global Equity
Portfolio, the T. Rowe Price Small Cap Growth Portfolio, the Janus Mid Cap
Portfolio, and the Loomis Sayles High Yield Bond Portfolio, each of which
pursues its investment objectives through separate investment policies, and the
Fund may add or delete portfolios from time to time;
<PAGE>
WHEREAS, the Investment Manager is engaged principally in the business of
insurance and also in rendering advisory services and is registered as an
investment adviser under the Investment Advisers Act of 1940;
WHEREAS, the Investment Manager currently provides investment management
and corporate administrative services to each of the Portfolios pursuant to
separate investment management agreements between the Fund and the Investment
Manager; and
WHEREAS, the Fund desires to enter into a separate investment management
agreement with respect to the Janus Mid Cap Portfolio, of the Fund with the
Investment Manager;
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Investment Manager hereby agree as
follows:
ARTICLE 1.
Duties of the Investment Manager.
--------------------------------
The Fund hereby employs the Investment Manager to act as the investment
adviser to and investment manager of the Janus Mid Cap Portfolio (the
"Portfolio") and to manage the investment and reinvestment of the assets of the
Portfolio and to administer its affairs, subject to the supervision of the Board
of Directors of the Fund, for the period and on the terms and conditions set
forth in this Agreement. The Investment Manager hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations herein set forth for the compensation provided for
herein. The
<PAGE>
Investment Manager shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise provided or authorized, have no authority
to act for or represent the Fund in any way or otherwise be deemed an agent of
the Fund other than in furtherance of its duties and responsibilities as set
forth in this Agreement.
(a) Investment Management Services. In acting as investment manager to the
------------------------------
Portfolio, the Investment Manager shall regularly provide the Portfolio with
such investment research, advice and management as the Fund may from time to
time consider necessary for the proper management of the Portfolio and shall
furnish continuously an investment program and shall determine which securities
shall be purchased, sold or exchanged and what portion of the assets of the
Portfolio shall be held in the various securities or other assets, subject
always to any restrictions of the Fund's Articles of Incorporation and By-Laws,
as amended or supplemented from time to time, the provisions of applicable laws
and regulations including the Investment Company Act, and the statements
relating to the Portfolio's investment objectives, policies and restrictions as
the same are set forth in the prospectus of the Fund then-currently effective
under the Securities Act of 1933 (the "Prospectus"). Should the Board of
Directors of the Fund at any time, however, make any definite determination as
to investment policy and notify the Investment Manager thereof, the Investment
Manager shall be bound by such determination for the period, if any, specified
in such notice or until similarly notified that such determination has been
<PAGE>
revoked. The Investment Manager shall take, on behalf of the Fund, all actions
which it deems necessary to implement the investment policies of the Portfolio,
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Portfolio with brokers or
dealers selected by the Investment Manager.
In connection with the selection of such brokers or dealers and the
placing of such orders, the Investment Manager is directed at all times to
follow the policies of the Fund as set forth in the Prospectus. Nothing herein
shall preclude the "bunching" of orders for the sale or purchase of portfolio
securities with the other Portfolios or with other accounts managed by the
Investment Manager or the Investment Manager's general account and separate
accounts. The Investment Manager shall not favor any account over any other and
any purchase or sale orders executed contemporaneously shall be allocated in a
manner it deems equitable among the accounts involved and at a price which is
approximately averaged.
(b) Administrative Services. In addition to the performance of investment
-----------------------
advisory services, the Investment Manager shall perform administrative services
in connection with the management of the Portfolio. In this connection, the
Investment Manager agrees (i) to assist in managing all aspects of the Fund's
operations relating to the Portfolio, including the coordination of all matters
relating to the functions of the custodian, transfer agent, other shareholder
service agents, accountants, attorneys and other parties performing services or
<PAGE>
operational functions for the Fund, (ii) to provide the Fund, at the Investment
Manager's expense, with services of persons competent to perform such
professional, administrative and clerical functions as are necessary in order to
provide effective administration of the Portfolio, including duties in
connection with shareholder relations, reports, redemption requests and account
adjustments and the maintenance of the books and records required of the Fund,
and (iii) to provide the Fund, at the Investment Manager's expense, with
adequate office space and related services necessary for its operations as
contemplated in this Agreement. In performing such administrative services, the
Investment Manager shall comply with all provisions of the Fund's Articles of
Incorporation and By-Laws, with all laws and regulations to which the Fund may
be subject and with all directions of the Fund's Board of Directors.
The Investment Manager shall supply the Board of Directors and officers of
the Fund with all statistical information regarding investments which is
reasonably required by them and reasonably available to the Investment Manager.
(c) Sub-Investment Manager. Notwithstanding any other provision of this
----------------------
Agreement, the Fund and the Investment Manager may agree to the employment of
Janus Capital Corporation as the Sub-Investment Manager to the Fund for the
purpose of providing investment management services with respect to the
Portfolio, provided that the compensation to be paid to such Sub-Investment
Manager shall be the sole responsibility of the Investment Manager and the
duties and responsibilities of the Sub-Investment
<PAGE>
Manager shall be as set forth in a sub-investment management agreement among the
Investment Manager, the Sub-Investment Manager and the Fund on behalf of the
Portfolio.
ARTICLE 2.
Allocation of Charges and Expenses.
----------------------------------
(a) The Investment Manager. In addition to the compensation paid to any
----------------------
Sub-Investment Manager as set forth in Article 1 above, the Investment Manager
shall pay the organization costs of the Fund relating to the Portfolio. The
Investment Manager also assumes expenses of the Fund relating to maintaining the
staff and personnel, and providing the equipment, office space and facilities,
necessary to perform its obligations under this Agreement.
(b) The Fund. The Fund assumes and shall pay (or cause to be paid) all
--------
other Fund expenses, including but not limited to the following expenses: the
fee referred to in Article 3 below; interest and any other costs related to
borrowings by the Fund attributable to the Portfolio; taxes payable by the Fund
and attributable to the Portfolio; brokerage costs and other direct costs of
effecting portfolio transactions (including any costs directly related to the
acquisition, disposition, lending or borrowing of portfolio investments) on
behalf of the Portfolio; the compensation of the directors and officers of the
Fund who are not actively employed by the Investment Manager; custodian,
registration and transfer agent fees; fees of outside counsel to and of
independent auditors of the Fund selected by the Board of Directors; expenses of
printing and mailing to existing
<PAGE>
shareholders of registration statements, prospectuses, reports, notices and
proxy solicitation materials of the Fund; all other expenses incidental to
holding meetings of the Fund's shareholders; insurance premiums for fidelity
coverage and errors and omissions insurance; and extraordinary or non-recurring
expenses (such as legal claims and liabilities and litigation costs and any
indemnification related thereto) attributable to the Portfolio. The Fund shall
allocate the appropriate portion of the foregoing expenses to the Portfolio.
All expenses of any activity which is primarily intended to result in the
sale of the Fund's shares, and certain other expenses as detailed in the Fund's
Distribution Agreement with Metropolitan Life Insurance Company, are assumed by
the distributor of the Fund's shares.
ARTICLE 3.
Compensation of the Investment Manager.
--------------------------------------
For the services rendered, the facilities furnished and expenses assumed
by the Investment Manager, the Fund shall pay to the Investment Manager at the
end of each calendar month the fee at the annual rate specified by the schedule
of fees in the Appendix to this Agreement. The average daily value of the net
assets of the Portfolio shall be determined and computed in accordance with the
description of the method of determination of net asset value contained in the
Prospectus.
ARTICLE 4.
Limitation of Liability of the Investment Manager.
-------------------------------------------------
(a) In the performance of advisory services as provided in
<PAGE>
Article 1(a), the Investment Manager shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with any investment policy or the purchase, sale or redemption of any securities
on the recommendation of the Investment Manager. Nothing herein contained shall
be construed to protect the Investment Manager against any liability to the Fund
or its shareholders to which the Investment Manager shall otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence in the performance
of its duties on behalf of the Fund, reckless disregard of the Investment
Manager's obligations and duties under this Agreement or the violation of any
applicable law.
(b) In the performance of administrative services as provided in Article
1(b) and which the Investment Manager is obligated to perform hereunder, the
Investment Manager shall be liable to the Fund or its shareholders for any
willful or negligent act or omission in the performance of such administrative
services.
ARTICLE 5.
Activities of the Investment Manager.
------------------------------------
The services of the Investment Manager under this Agreement are not to be
deemed exclusive, and the Investment Manager shall be free to render similar
services to others so long as its services hereunder are not impaired thereby.
It is understood that directors, officers, employees and shareholders of the
Fund are or may become interested in the Investment Manager, as directors,
officers, employees or policyholders or
<PAGE>
otherwise and that directors, officers, employees or policyholders of the
Investment Manager are or may become similarly interested in the Fund, and that
the Investment Manager is or may become interested in the Fund as shareholder or
otherwise.
ARTICLE 6.
Duration and Termination of this Agreement.
------------------------------------------
This Agreement shall become effective as of the date first above written
and shall remain in force until May 16, 1998 and thereafter shall continue in
effect, but only so long as such continuance is specifically approved at least
annually by (i) the Board of Directors of the Fund, or by the vote of a majority
of the outstanding shares of the Portfolio, and (ii) a majority of those
directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval.
This Agreement may be terminated with respect to the Portfolio at any
time, without the payment of any penalty, by the Board of Directors of the Fund,
or by vote of a majority of the outstanding shares of the Portfolio, on sixty
days' written notice to the Investment Manager, or by the Investment Manager on
sixty days' written notice to the Fund. This Agreement shall automatically
terminate in the event of its assignment.
ARTICLE 7.
Definitions.
-----------
The terms "assignment," "interested person," and "majority of the
outstanding shares," when used in this Agreement, shall
<PAGE>
have the respective meanings specified under the Investment Company Act.
ARTICLE 8.
Amendments of this Agreement.
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the Board of Directors of the Fund, to the extent
permitted by the Investment Company Act, or by the vote of a majority of the
outstanding shares of the Portfolio, and (ii) by the vote of a majority of those
directors of the Fund who are not parties to this Agreement or interested
persons of any such party cast in person at a meeting called for the purpose of
voting on such approval.
ARTICLE 9.
Governing Law.
-------------
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the Investment Company Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.
<PAGE>
METROPOLITAN SERIES FUND, INC.
By_____________________________
President
Attest:
- ----------------------
Secretary
METROPOLITAN LIFE INSURANCE COMPANY
By_________________________________
Executive Vice-President
Attest:
- -------------------
Assistant Secretary
<PAGE>
APPENDIX
Metropolitan Series Fund Fee Schedule
-------------------------------------
Janus Mid Cap Portfolio
-----------------------
1st $100M .75%
next $400M .70%
above $500M .65% of the average daily value of the net
assets of the Portfolio.
<PAGE>
LOOMIS SAYLES HIGH YIELD BOND PORTFOLIO INVESTMENT MANAGEMENT
AGREEMENT
AGREEMENT made this 1st day of March, 1997, by and between Metropolitan
Series Fund, Inc., a Maryland corporation (the "Fund"), and Metropolitan Life
Insurance Company, a New York corporation (the "Investment Manager");
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as a diversified open-end
management investment company and is registered as such under the Investment
Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Fund, a series type of investment company, issues separate
classes (or series) of stock, each of which represents a separate portfolio of
investments;
WHEREAS, the Fund is currently comprised of thirteen portfolios which are
the State Street Research Growth Portfolio, the State Street Research Income
Portfolio, the MetLife Money Market Portfolio, the State Street Research
Diversified Portfolio, the GNMA Portfolio, the State Street Research Aggressive
Growth Portfolio, the Equity Income Portfolio, the MetLife Stock Index
Portfolio, the GFM International Stock Portfolio, the Scudder Global Equity
Portfolio, the T. Rowe Price Small Cap Growth Portfolio, the Janus Mid Cap
Portfolio, and the Loomis Sayles High Yield Bond Portfolio, each of which
pursues its investment objectives through separate investment policies,
<PAGE>
and the Fund may add or delete portfolios from time to time;
WHEREAS, the Investment Manager is engaged principally in the business of
insurance and also in rendering advisory services and is registered as an
investment adviser under the Investment Advisers Act of 1940;
WHEREAS, the Investment Manager currently provides investment management
and corporate administrative services to each of the Portfolios pursuant to
separate investment management agreements between the Fund and the Investment
Manager; and
WHEREAS, the Fund desires to enter into a separate investment management
agreement with respect to the Loomis Sayles High Yield Bond Portfolio of the
Fund with the Investment Manager;
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Investment Manager hereby agree as
follows:
ARTICLE 1.
Duties of the Investment Manager.
--------------------------------
The Fund hereby employs the Investment Manager to act as the investment
adviser to and investment manager of the Loomis Sayles High Yield Bond Portfolio
(the "Portfolio") and to manage the investment and reinvestment of the assets of
the Portfolio and to administer its affairs, subject to the supervision of the
Board of Directors of the Fund, for the period and on the terms and conditions
set forth in this Agreement. The Investment Manager hereby accepts such
employment and agrees during such
<PAGE>
period, at its own expense, to render the services and to assume the obligations
herein set forth for the compensation provided for herein. The Investment
Manager shall for all purposes herein be deemed to be an independent contractor
and shall, unless otherwise provided or authorized, have no authority to act for
or represent the Fund in any way or otherwise be deemed an agent of the Fund
other than in furtherance of its duties and responsibilities as set forth in
this Agreement.
(a) Investment Management Services. In acting as investment manager to the
------------------------------
Portfolio, the Investment Manager shall regularly provide the Portfolio with
such investment research, advice and management as the Fund may from time to
time consider necessary for the proper management of the Portfolio and shall
furnish continuously an investment program and shall determine which securities
shall be purchased, sold or exchanged and what portion of the assets of the
Portfolio shall be held in the various securities or other assets, subject
always to any restrictions of the Fund's Articles of Incorporation and By-Laws,
as amended or supplemented from time to time, the provisions of applicable laws
and regulations including the Investment Company Act, and the statements
relating to the Portfolio's investment objectives, policies and restrictions as
the same are set forth in the prospectus of the Fund then-currently effective
under the Securities Act of 1933 (the "Prospectus"). Should the Board of
Directors of the Fund at any time, however, make any definite determination as
to investment policy and notify the Investment Manager thereof, the Investment
Manager shall be bound by such
<PAGE>
determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked. The Investment
Manager shall take, on behalf of the Fund, all actions which it deems necessary
to implement the investment policies of the Portfolio, determined as provided
above, and in particular to place all orders for the purchase or sale of
portfolio securities for the Portfolio with brokers or dealers selected by the
Investment Manager.
In connection with the selection of such brokers or dealers and the
placing of such orders, the Investment Manager is directed at all times to
follow the policies of the Fund as set forth in the Prospectus. Nothing herein
shall preclude the "bunching" of orders for the sale or purchase of portfolio
securities with the other Portfolios or with other accounts managed by the
Investment Manager or the Investment Manager's general account and separate
accounts. The Investment Manager shall not favor any account over any other and
any purchase or sale orders executed contemporaneously shall be allocated in a
manner it deems equitable among the accounts involved and at a price which is
approximately averaged.
(b) Administrative Services. In addition to the performance of investment
-----------------------
advisory services, the Investment Manager shall perform administrative services
in connection with the management of the Portfolio. In this connection, the
Investment Manager agrees (i) to assist in managing all aspects of the Fund's
operations relating to the Portfolio, including the coordination of all matters
relating to the functions of the
<PAGE>
custodian, transfer agent, other shareholder service agents, accountants,
attorneys and other parties performing services or operational functions for the
Fund, (ii) to provide the Fund, at the Investment Manager's expense, with
services of persons competent to perform such professional, administrative and
clerical functions as are necessary in order to provide effective administration
of the Portfolio, including duties in connection with shareholder relations,
reports, redemption requests and account adjustments and the maintenance of the
books and records required of the Fund, and (iii) to provide the Fund, at the
Investment Manager's expense, with adequate office space and related services
necessary for its operations as contemplated in this Agreement. In performing
such administrative services, the Investment Manager shall comply with all
provisions of the Fund's Articles of Incorporation and By-Laws, with all laws
and regulations to which the Fund may be subject and with all directions of the
Fund's Board of Directors.
The Investment Manager shall supply the Board of Directors and officers of
the Fund with all statistical information regarding investments which is
reasonably required by them and reasonably available to the Investment Manager.
(c) Sub-Investment Manager. Notwithstanding any other provision of this
----------------------
Agreement, the Fund and the Investment Manager may agree to the employment of
Loomis, Sayles & Company, L.P. as the Sub-Investment Manager to the Fund for the
purpose of providing investment management services with respect to the
Portfolio, provided that the compensation to be paid to such
<PAGE>
Sub-Investment Manager shall be the sole responsibility of the Investment
Manager and the duties and responsibilities of the Sub-Investment Manager shall
be as set forth in a sub-investment management agreement among the Investment
Manager, the Sub-Investment Manager and the Fund on behalf of the Portfolio.
ARTICLE 2.
Allocation of Charges and Expenses.
----------------------------------
(a) The Investment Manager. In addition to the compensation paid to any
----------------------
Sub-Investment Manager as set forth in Article 1 above, the Investment Manager
shall pay the organization costs of the Fund relating to the Portfolio. The
Investment Manager also assumes expenses of the Fund relating to maintaining the
staff and personnel, and providing the equipment, office space and facilities,
necessary to perform its obligations under this Agreement.
(b) The Fund. The Fund assumes and shall pay (or cause to be paid) all
--------
other Fund expenses, including but not limited to the following expenses: the
fee referred to in Article 3 below; interest and any other costs related to
borrowings by the Fund attributable to the Portfolio; taxes payable by the Fund
and attributable to the Portfolio; brokerage costs and other direct costs of
effecting portfolio transactions (including any costs directly related to the
acquisition, disposition, lending or borrowing of portfolio investments) on
behalf of the Portfolio; the compensation of the directors and officers of the
Fund who are not actively employed by the Investment Manager; custodian,
registration and transfer agent fees; fees of outside counsel to
<PAGE>
and of independent auditors of the Fund selected by the Board of Directors;
expenses of printing and mailing to existing shareholders of registration
statements, prospectuses, reports, notices and proxy solicitation materials of
the Fund; all other expenses incidental to holding meetings of the Fund's
shareholders; insurance premiums for fidelity coverage and errors and omissions
insurance; and extraordinary or non-recurring expenses (such as legal claims and
liabilities and litigation costs and any indemnification related thereto)
attributable to the Portfolio. The Fund shall allocate the appropriate portion
of the foregoing expenses to the Portfolio.
All expenses of any activity which is primarily intended to result in the
sale of the Fund's shares, and certain other expenses as detailed in the Fund's
Distribution Agreement with Metropolitan Life Insurance Company, are assumed by
the distributor of the Fund's shares.
ARTICLE 3.
Compensation of the Investment Manager.
--------------------------------------
For the services rendered, the facilities furnished and expenses assumed
by the Investment Manager, the Fund shall pay to the Investment Manager at the
end of each calendar month the fee at the annual rate specified by the schedule
of fees in the Appendix to this Agreement. The average daily value of the net
assets of the Portfolio shall be determined and computed in accordance with the
description of the method of determination of net asset value contained in the
Prospectus.
ARTICLE 4.
<PAGE>
Limitation of Liability of the Investment Manager.
-------------------------------------------------
(a) In the performance of advisory services as provided in Article 1(a),
the Investment Manager shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Fund in connection with any investment
policy or the purchase, sale or redemption of any securities on the
recommendation of the Investment Manager. Nothing herein contained shall be
construed to protect the Investment Manager against any liability to the Fund or
its shareholders to which the Investment Manager shall otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence in the performance of
its duties on behalf of the Fund, reckless disregard of the Investment Manager's
obligations and duties under this Agreement or the violation of any applicable
law.
(b) In the performance of administrative services as provided in Article
1(b) and which the Investment Manager is obligated to perform hereunder, the
Investment Manager shall be liable to the Fund or its shareholders for any
willful or negligent act or omission in the performance of such administrative
services.
ARTICLE 5.
Activities of the Investment Manager.
------------------------------------
The services of the Investment Manager under this Agreement are not to be
deemed exclusive, and the Investment Manager shall be free to render similar
services to others so long as its services hereunder are not impaired thereby.
It is understood that directors, officers, employees and shareholders
<PAGE>
of the Fund are or may become interested in the Investment Manager, as
directors, officers, employees or policyholders or otherwise and that directors,
officers, employees or policyholders of the Investment Manager are or may become
similarly interested in the Fund, and that the Investment Manager is or may
become interested in the Fund as shareholder or otherwise.
ARTICLE 6.
Duration and Termination of this Agreement.
------------------------------------------
This Agreement shall become effective as of the date first above written
and shall remain in force until May 16, 1994 and thereafter shall continue in
effect, but only so long as such continuance is specifically approved at least
annually by (i) the Board of Directors of the Fund, or by the vote of a majority
of the outstanding shares of the Portfolio, and (ii) a majority of those
directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval.
This Agreement may be terminated with respect to the Portfolio at any
time, without the payment of any penalty, by the Board of Directors of the Fund,
or by vote of a majority of the outstanding shares of the Portfolio, on sixty
days' written notice to the Investment Manager, or by the Investment Manager on
sixty days' written notice to the Fund. This Agreement shall automatically
terminate in the event of its assignment.
ARTICLE 7.
Definitions.
-----------
<PAGE>
The terms "assignment," "interested person," and "majority of the
outstanding shares," when used in this Agreement, shall have the respective
meanings specified under the Investment Company Act.
ARTICLE 8.
Amendments of this Agreement.
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the Board of Directors of the Fund, to the extent
permitted by the Investment Company Act, or by the vote of a majority of the
outstanding shares of the Portfolio, and (ii) by the vote of a majority of those
directors of the Fund who are not parties to this Agreement or interested
persons of any such party cast in person at a meeting called for the purpose of
voting on such approval.
ARTICLE 9.
Governing Law.
-------------
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the Investment Company Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.
<PAGE>
METROPOLITAN SERIES FUND, INC.
By_____________________________
President
Attest:
- ----------------------
Secretary
METROPOLITAN LIFE INSURANCE COMPANY
By_________________________________
Executive Vice-President
Attest:
- -------------------
Assistant Secretary
<PAGE>
APPENDIX
Metropolitan Series Fund Fee Schedule
-------------------------------------
Loomis Sayles High Yield Bond Portfolio
---------------------------------------
.70% of the average daily value of the net
assets of the Portfolio.
<PAGE>
EXHIBIT 13(g)
Sixth Supplementary Stock Purchase Agreement
--------------------------------------------
Agreement between Metropolitan Life Insurance Company (hereinafter
"Metropolitan"), a mutual life insurance company existing under and by virtue of
the laws of the State of New York and Metropolitan Series Fund, Inc.
(hereinafter the "Fund"), a corporation organized and existing under and by
virtue of the laws of the State of Maryland.
In consideration of the mutual promises set forth herein, the parties agree
as follows:
1. The Fund agrees to sell to Metropolitan and Metropolitan agrees to
purchase for the aggregate amount of $__________________, ________________
shares of Common Stock, $.01 Par Value, of the Fund (hereinafter the "Stock") as
follows:
________ Shares of Stock of the Scudder Global Equity Portfolio
________ Shares of Stock of the T. Rowe Price Small Cap Growth Portfolio
________ Shares of Stock of the Janus Mid Cap Portfolio
________ Shares of Stock of the Loomis Sayles High Yield Bond Portfolio
2. Metropolitan acknowledges that the Stock has not been registered under
any state or federal securities laws and that, therefore, the Fund is relying on
certain exemptions therein from such registration requirements, including
exemptions dependent on the intent of the undersigned in acquiring the Stock.
Metropolitan also understands that any resale of the Stock, or any part thereof,
may be subject to restrictions under state and federal securities laws, and that
Metropolitan may be required to bear the economic risk of an investment in the
Stock for an indefinite period of time.
<PAGE>
3. Metropolitan represents and warrants that it is acquiring the Stock
solely for its own account and solely for investment purposes and not with a
view to the resale or disposition of all or any part thereof, and that it has no
present plan or intention to sell or otherwise dispose of the Stock or any part
thereof; and
4. Metropolitan agrees that it will not sell or dispose of the Stock or
any part thereof unless registration statements with respect to such Stock are
then in effect under the Securities Act of 1933 and under any applicable state
securities laws or unless the undersigned shall have delivered to the Fund an
opinion of counsel acceptable to the Fund, in form and substance acceptable to
the Fund, that no such registration is necessary.
IN WITNESS THEREOF, the parties hereto have executed this Agreement by
their duly authorized representatives this ____ day of March, 1997.
Metropolitan Life Insurance Metropolitan Series Fund, Company Inc.
By ________________________ By___________________________________
Title ____________________ Title________________________________
<PAGE>
EXHIBIT 16(a)
POWER OF ATTORNEY
Metropolitan Series Fund, Inc.
------------------------------
KNOW ALL MEN BY THESE PRESENTS, that I, an officer of Metropolitan Series
Fund, Inc. (the "Corporation"), do hereby appoint Jeffrey J. Hodgman,
Christopher P. Nicholas, Robin Wagner and Patricia S. Worthington and each of
them severally, my true and lawful attorney-in-fact, for me and in my name,
place and stead to execute and file any instrument or document to be filed as
part of or in connection with or in any way related to the Registration
Statements and any and all amendments thereto, filed by the Corporation under
the Securities Act of 1933, as amended, and/or the Investment Company Act of
1940, as amended, and to have full power and authority to do or cause to be done
in my name, place and stead each and every act and thing necessary or
appropriate in order to effectuate the same, as fully to all intents and
purposes as I might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact, or any of them, may do or cause to be done by
virtue hereof. Each of said attorneys-in-fact shall have power to act hereunder
with or without the others.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of December,
------
1996.
/s/ Bradford W. White
-----------------------
Bradford W. White
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NAME> GROWTH
<NUMBER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 867783969
<INVESTMENTS-AT-VALUE> 1096327264
<RECEIVABLES> 3065310
<ASSETS-OTHER> 950
<OTHER-ITEMS-ASSETS> 202
<TOTAL-ASSETS> 1099393726
<PAYABLE-FOR-SECURITIES> 4348881
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 294248
<TOTAL-LIABILITIES> 4643129
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 863848660
<SHARES-COMMON-STOCK> 39717503
<SHARES-COMMON-PRIOR> 34222071
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (108976)
<ACCUMULATED-NET-GAINS> 2467618
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 228543295
<NET-ASSETS> 1094750597
<DIVIDEND-INCOME> 14557479
<INTEREST-INCOME> 1581723
<OTHER-INCOME> 0
<EXPENSES-NET> 2783767
<NET-INVESTMENT-INCOME> 13355435
<REALIZED-GAINS-CURRENT> 35869486
<APPREC-INCREASE-CURRENT> 206859454
<NET-CHANGE-FROM-OPS> 256084375
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (13305066)
<DISTRIBUTIONS-OF-GAINS> (40353389)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3995252
<NUMBER-OF-SHARES-REDEEMED> 492914
<SHARES-REINVESTED> 1993094
<NET-CHANGE-IN-ASSETS> 348317479
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 6951521
<OVERDISTRIB-NII-PRIOR> (159345)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2282444
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2783767
<AVERAGE-NET-ASSETS> 911996473
<PER-SHARE-NAV-BEGIN> 21.81
<PER-SHARE-NII> 0.35
<PER-SHARE-GAIN-APPREC> 6.83
<PER-SHARE-DIVIDEND> (0.35)
<PER-SHARE-DISTRIBUTIONS> (1.08)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 27.56
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NAME> INCOME
<NUMBER> 2
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 331561431
<INVESTMENTS-AT-VALUE> 345910339
<RECEIVABLES> 9017119
<ASSETS-OTHER> 182261
<OTHER-ITEMS-ASSETS> 88859
<TOTAL-ASSETS> 355198578
<PAYABLE-FOR-SECURITIES> 5164682
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 120868
<TOTAL-LIABILITIES> 5285550
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 341054464
<SHARES-COMMON-STOCK> 27489851
<SHARES-COMMON-PRIOR> 24354792
<ACCUMULATED-NII-CURRENT> 1648141
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (7314639)
<ACCUM-APPREC-OR-DEPREC> 14525062
<NET-ASSETS> 349913028
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22553470
<OTHER-INCOME> 0
<EXPENSES-NET> 1047612
<NET-INVESTMENT-INCOME> 21505858
<REALIZED-GAINS-CURRENT> 5614353
<APPREC-INCREASE-CURRENT> 27263679
<NET-CHANGE-FROM-OPS> 54383890
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (20532059)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3424849
<NUMBER-OF-SHARES-REDEEMED> 2039460
<SHARES-REINVESTED> 1749670
<NET-CHANGE-IN-ASSETS> 74254353
<ACCUMULATED-NII-PRIOR> 674342
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (12928992)
<GROSS-ADVISORY-FEES> 767157
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1047612
<AVERAGE-NET-ASSETS> 307149881
<PER-SHARE-NAV-BEGIN> 11.32
<PER-SHARE-NII> 0.83
<PER-SHARE-GAIN-APPREC> 1.38
<PER-SHARE-DIVIDEND> (0.80)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.73
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NAME> MONEY MARKET
<NUMBER> 3
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 40219899
<INVESTMENTS-AT-VALUE> 40219899
<RECEIVABLES> 176194
<ASSETS-OTHER> 79322
<OTHER-ITEMS-ASSETS> 16
<TOTAL-ASSETS> 40475431
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 19156
<TOTAL-LIABILITIES> 19156
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40447254
<SHARES-COMMON-STOCK> 3873237
<SHARES-COMMON-PRIOR> 3813066
<ACCUMULATED-NII-CURRENT> 6496
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2525
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 40456275
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2455880
<OTHER-INCOME> 0
<EXPENSES-NET> 204190
<NET-INVESTMENT-INCOME> 2251690
<REALIZED-GAINS-CURRENT> 161
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2251851
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2251639)
<DISTRIBUTIONS-OF-GAINS> (289)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2020415
<NUMBER-OF-SHARES-REDEEMED> 2175933
<SHARES-REINVESTED> 215689
<NET-CHANGE-IN-ASSETS> 494977
<ACCUMULATED-NII-PRIOR> 6445
<ACCUMULATED-GAINS-PRIOR> 2653
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 104346
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 204190
<AVERAGE-NET-ASSETS> 41769000
<PER-SHARE-NAV-BEGIN> 10.48
<PER-SHARE-NII> 0.59
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.62)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.45
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NAME> DIVERSIFIED
<NUMBER> 4
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 968287170
<INVESTMENTS-AT-VALUE> 1110947646
<RECEIVABLES> 14063485
<ASSETS-OTHER> 228192
<OTHER-ITEMS-ASSETS> 113091
<TOTAL-ASSETS> 1125352414
<PAYABLE-FOR-SECURITIES> 10194862
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 323955
<TOTAL-LIABILITIES> 10518817
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 967471372
<SHARES-COMMON-STOCK> 69897402
<SHARES-COMMON-PRIOR> 66633553
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (4529347)
<ACCUMULATED-NET-GAINS> 9009793
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 142881779
<NET-ASSETS> 1114833597
<DIVIDEND-INCOME> 8774313
<INTEREST-INCOME> 32460473
<OTHER-INCOME> 0
<EXPENSES-NET> 3052804
<NET-INVESTMENT-INCOME> 38181982
<REALIZED-GAINS-CURRENT> 35700814
<APPREC-INCREASE-CURRENT> 155959563
<NET-CHANGE-FROM-OPS> 229842359
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (38212420)
<DISTRIBUTIONS-OF-GAINS> (31703894)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4105431
<NUMBER-OF-SHARES-REDEEMED> 5238484
<SHARES-REINVESTED> 4396902
<NET-CHANGE-IN-ASSETS> 222007869
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 5012873
<OVERDISTRIB-NII-PRIOR> (4498909)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2431711
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3052804
<AVERAGE-NET-ASSETS> 974606031
<PER-SHARE-NAV-BEGIN> 13.40
<PER-SHARE-NII> 0.59
<PER-SHARE-GAIN-APPREC> 3.02
<PER-SHARE-DIVIDEND> (0.58)
<PER-SHARE-DISTRIBUTIONS> (0.48)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.95
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NAME> AGGRESSIVE GROWTH
<NUMBER> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 789430230
<INVESTMENTS-AT-VALUE> 930656825
<RECEIVABLES> 50880742
<ASSETS-OTHER> 827
<OTHER-ITEMS-ASSETS> 11570
<TOTAL-ASSETS> 981549964
<PAYABLE-FOR-SECURITIES> 21967194
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 667537
<TOTAL-LIABILITIES> 22634731
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 822003215
<SHARES-COMMON-STOCK> 37072220
<SHARES-COMMON-PRIOR> 26754085
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (899023)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (3415554)
<ACCUM-APPREC-OR-DEPREC> 141226595
<NET-ASSETS> 958915233
<DIVIDEND-INCOME> 3163544
<INTEREST-INCOME> 2660653
<OTHER-INCOME> 0
<EXPENSES-NET> 6289594
<NET-INVESTMENT-INCOME> (465397)
<REALIZED-GAINS-CURRENT> 96911708
<APPREC-INCREASE-CURRENT> 87034785
<NET-CHANGE-FROM-OPS> 183481096
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (89053728)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7831991
<NUMBER-OF-SHARES-REDEEMED> 996028
<SHARES-REINVESTED> 3482172
<NET-CHANGE-IN-ASSETS> 368868384
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (433626)
<OVERDIST-NET-GAINS-PRIOR> (11273534)
<GROSS-ADVISORY-FEES> 5824030
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6289594
<AVERAGE-NET-ASSETS> 775421670
<PER-SHARE-NAV-BEGIN> 22.05
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 6.50
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.67)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 25.87
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NAME> STOCK INDEX
<NUMBER> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 490507254
<INVESTMENTS-AT-VALUE> 637922157
<RECEIVABLES> 3137098
<ASSETS-OTHER> 55596
<OTHER-ITEMS-ASSETS> 1964
<TOTAL-ASSETS> 641116815
<PAYABLE-FOR-SECURITIES> 5114386
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 179190
<TOTAL-LIABILITIES> 5293576
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 487663404
<SHARES-COMMON-STOCK> 34253993
<SHARES-COMMON-PRIOR> 26168411
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (22936)
<ACCUMULATED-NET-GAINS> 767868
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 147414903
<NET-ASSETS> 635823239
<DIVIDEND-INCOME> 12034799
<INTEREST-INCOME> 228617
<OTHER-INCOME> 0
<EXPENSES-NET> 1546399
<NET-INVESTMENT-INCOME> 10717017
<REALIZED-GAINS-CURRENT> 3287091
<APPREC-INCREASE-CURRENT> 132857546
<NET-CHANGE-FROM-OPS> 146861654
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10707245)
<DISTRIBUTIONS-OF-GAINS> (3203702)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7780504
<NUMBER-OF-SHARES-REDEEMED> 452967
<SHARES-REINVESTED> 758045
<NET-CHANGE-IN-ASSETS> 272822285
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 684479
<OVERDISTRIB-NII-PRIOR> (32708)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1202788
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1546399
<AVERAGE-NET-ASSETS> 481714481
<PER-SHARE-NAV-BEGIN> 13.87
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> 4.79
<PER-SHARE-DIVIDEND> (0.32)
<PER-SHARE-DISTRIBUTIONS> (0.10)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 18.56
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NAME> INTERNATIONAL STOCK
<NUMBER> 7
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 223982910
<INVESTMENTS-AT-VALUE> 221783014
<RECEIVABLES> 1140637
<ASSETS-OTHER> 78325548
<OTHER-ITEMS-ASSETS> 349271
<TOTAL-ASSETS> 301598470
<PAYABLE-FOR-SECURITIES> 3831521
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 305908
<TOTAL-LIABILITIES> 4137429
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 301157412
<SHARES-COMMON-STOCK> 24201993
<SHARES-COMMON-PRIOR> 22191716
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1444824)
<ACCUMULATED-NET-GAINS> 4175033
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (6426580)
<NET-ASSETS> 297461041
<DIVIDEND-INCOME> 2976332
<INTEREST-INCOME> 331446
<OTHER-INCOME> 0
<EXPENSES-NET> 2742985
<NET-INVESTMENT-INCOME> 564793
<REALIZED-GAINS-CURRENT> 4503585
<APPREC-INCREASE-CURRENT> (2185396)
<NET-CHANGE-FROM-OPS> 2882982
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (931206)
<DISTRIBUTIONS-OF-GAINS> (1728334)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3922512
<NUMBER-OF-SHARES-REDEEMED> 2129704
<SHARES-REINVESTED> 217469
<NET-CHANGE-IN-ASSETS> 24508662
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1399782
<OVERDISTRIB-NII-PRIOR> (1078411)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2035593
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2742985
<AVERAGE-NET-ASSETS> 272501229
<PER-SHARE-NAV-BEGIN> 12.30
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.07
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> (0.07)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.29
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
