<PAGE>
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 [_]
[X]
Post-Effective Amendment No. 19
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[_]
[X]
Amendment No. 21
(CHECK APPROPRIATE BOX OR BOXES)
----------------
METROPOLITAN SERIES FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
One Madison Avenue 10010
New York, York (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICE)
Registrant's Telephone Number, Including Area Code: 212-578-2674
----------------
GARY A. BELLER, ESQ.
One Madison Avenue
New York, New York 10010
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copy to:
GARY O. COHEN, ESQ.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
IT IS PROPOSED THAT THE FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
[_] immediately upon filing pursuant to paragraph (b) of Rule 485.
[X] on March 3, 1997 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.
[_] 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, 1996 WAS FILED
WITH THE COMMISSION ON OR ABOUT FEBRUARY 28, 1997.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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. 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. Scudder, Stevens & Clark, Inc. ("Scudder") is the sub-investment
manager for the Scudder Global Equity Portfolio.
The investment objectives of the eleven currently available 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 capitalization 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 BOND PORTFOLIO 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....................................... 7
Investment Objectives and General Investment Policies.............. 7
State Street Research Growth Portfolio............................ 7
State Street Research Income Portfolio............................ 8
MetLife Money Market Portfolio.................................... 8
State Street Research Diversified Portfolio....................... 9
State Street Research Aggressive Growth Portfolio................. 10
MetLife Stock Index Portfolio..................................... 10
GFM International Stock Portfolio................................. 11
Loomis Sayles High Yield Bond Portfolio........................... 12
T. Rowe Price Small Cap Growth Portfolio.......................... 13
Janus Mid Cap Portfolio........................................... 14
Scudder Global Equity Portfolio .................................. 15
Fundamental Investment Policies.................................... 16
Other Investment Practices......................................... 17
Management of the Fund.............................................. 23
General Information About the Fund and its Shares................... 27
Dividends, Distributions and Taxes.................................. 28
Sale and Redemption of Shares....................................... 29
</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
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 3, 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, 1996 31, 1995 31, 1994 31, 1993 31, 1992 31, 1991 31, 1990 31, 1989 31, 1988 31, 1987
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<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... $ 27.56 $ 21.81 $ 23.27 $ 21.72 $ 21.56 $ 17.20 $ 19.34 $ 14.64 $ 13.89 $ 13.72
----------- ---------- --------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net investment income. .36 .35 .30 .28 .34 .41 .51 .54 .71 .37
Net realized and
unrealized
gain (loss).......... 5.78 6.83 (1.06) 3.24 2.13 5.39 (2.15) 4.81 .78 .63
----------- ---------- --------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations............ 6.14 7.18 (.76) 3.52 2.47 5.80 (1.64) 5.35 1.49 1.00
----------- ---------- --------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
Dividends from net
investment income.... (.36) (.35) (.30) (.28) (.29) (.42) (.50) (.52) (.74) (.35)
Dividends from net
realized capital
gains................ (2.83) (1.08) (.40) (1.69) (2.02) (1.02) -- (.13) -- (.48)
----------- ---------- --------- -------- -------- -------- -------- -------- -------- --------
Total Distributions.... (3.19) (1.43) (.70) (1.97) (2.31) (1.44) (.50) (.65) (.74) (.83)
----------- ---------- --------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE: End of
period................ $ 30.51 $ 27.56 $ 21.81 $ 23.27 $ 21.72 $ 21.56 $ 17.20 $ 19.34 $ 14.64 $ 13.89
=========== ========== ========= ======== ======== ======== ======== ======== ======== ========
Total Return.......... 22.18% 33.14% (3.25)% 14.40% 11.56% 33.09% (8.50)% 36.64% 10.69% 7.19%
Net assets at end of
period............... $ 1,597,728 $1,094,751 $ 746,433 $640,413 $351,028 $232,160 $153,255 $140,279 $ 99,982 $ 96,177
(In Thousands)
SIGNIFICANT RATIOS:
Operating expenses to
average net assets... 0.29% 0.31% 0.32% 0.28% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Net investment income
to average net
assets............... 1.29% 1.46% 1.40% 1.19% 1.52% 2.04% 2.83% 2.98% 4.83% 2.30%
Portfolio turnover
(Note 1)............. 93.05% 42.52% 57.27% 66.27% 63.74% 62.29% 39.86% 58.01% 51.21% 45.36%
Average broker
commisson rate (Note
2)................... $ 0.0578 -- -- -- -- -- -- -- -- --
<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, 1996 31, 1995 31, 1994 31, 1993 31, 1992 31, 1991 31, 1990 31, 1989 31, 1988 31, 1987
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<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... $12.73 $11.32 $12.59 $12.22 $12.32 $11.16 $11.10 $10.58 $10.47 $13.74
----------- ---------- --------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net investment income. 0.82 .83 .91 .83 .90 .94 1.16 .99 .95 .97
Net realized and
unrealized gain
(loss)............... (0.36) 1.38 (1.31) .86 (.05) 1.14 (.05) .41 .02 (1.27)
----------- ---------- --------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations............ 0.46 2.21 (.40) 1.69 .85 2.08 1.11 1.40 .97 (.30)
----------- ---------- --------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
Dividends from net
investment income.... (0.81) (.80) (.87) (.88) ( .71) (.92) (1.05) (.88) (.86) (1.76)
Dividends from net
realized capital
gains................ (0.02) -- -- (.44) (.24) -- -- -- -- (1.21)
----------- ---------- --------- -------- -------- -------- -------- -------- -------- --------
Total Distributions.... (0.83) (.80) (.87) (1.32) (.95) (.92) (1.05) (.88) (.86) (2.97)
----------- ---------- --------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE: End of
period................ $12.36 $12.73 $11.32 $12.59 $12.22 $12.32 $11.16 $11.10 $10.58 $10.47
=========== ========== ========= ======== ======== ======== ======== ======== ======== ========
Total Return.......... 3.60% 19.55% (3.15)% 11.36% 6.91% 17.31% 10.03% 13.35% 9.28% (1.87%)
Net assets at end of
period............... $ 383,395 $ 349,913 $ 275,659 $299,976 $156,245 $ 87,412 $ 54,531 $ 48,629 $ 35,670 $ 27,800
(In Thousands)
SIGNIFICANT RATIOS:
Operating expenses to
average net assets... 0.32 0.34% 0.35% 0.32% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Net investment income
to average net assets
..................... 6.64% 7.01% 7.02% 6.39% 7.16% 7.61% 9.80% 8.81% 8.26% 8.34%
Portfolio turnover
(Note 1)............. 92.90% 102.88% 141.15% 136.98% 151.74% 78.87% 82.93% 51.03% 74.10% 79.59%
</TABLE>
- ----------------
* Footnotes appear on Page 6.
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, 1996 31, 1995 31, 1994 31, 1993 31, 1992 31, 1991 31, 1990 31, 1989 31, 1988 31, 1987
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<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.... $10.45 $10.48 $10.49 $10.52 $10.59 $10.67 $10.49 $10.32 $10.18 $10.78
-------- ------- -------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net investment income... .53 .59 .40 .28 .39 .57 .86 .95 .76 .64
-------- ------- -------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations............. .53 .59 .40 .28 .39 .57 .86 .95 .76 .64
-------- ------- -------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
Dividends from net
investment income...... (.54) (.62) (.41) (.31) (.46) (.65) (.68) (.78) (.62) (1.24)
-------- ------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions..... (.54) (.62) (.41) (.31) (.46) (.65) (.68) (.78) (.62) (1.24)
-------- ------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE: End of
period................. $10.44 $10.45 $10.48 $10.49 $10.52 $10.59 $10.67 $10.49 $10.32 $10.18
======== ======= ======== ======== ======== ======== ======== ======== ======== ========
Total Return............ 5.01% 5.59% 3.85% 2.90% 3.73% 6.10% 8.23% 9.28% 7.55% 6.22%
Net assets at end of
period................. $41,637 $40,456 $39,961 $44,321 $55,412 $70,946 $78,014 $41,779 $26,907 $17,147
(In Thousands)
SIGNIFICANT RATIOS:
Operating expenses to
average net assets..... 0.43% 0.49% 0.44% 0.38% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Net investment income to
average net assets..... 4.92% 5.39% 3.76% 2.85% 3.68% 5.93% 7.68% 8.82% 7.33% 6.06%
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 YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
31, 1996 31, 1995 31, 1994 31, 1993 31, 1992 31, 1991 31, 1990 31, 1989 31, 1988 31, 1987
---------- ---------- -------- -------- -------- -------- -------- -------- -------- --------
<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.... $15.95 $13.40 $14.41 $13.58 $13.61 $11.47 $12.16 $10.58 $10.34 $10.34
---------- ---------- -------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net investment income.. .55 .59 .51 .46 .53 .62 .68 .75 .73 .56
Net realized and
unrealized gain
(loss)................ 1.77 3.02 (.95) 1.58 .74 2.23 (.68) 1.54 .23 (.18)
---------- ---------- -------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations............. 2.32 3.61 (.44) 2.04 1.27 2.85 .00 2.29 .96 .38
---------- ---------- -------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
Dividends from net
investment income..... (.53) (.58) (.50) (.54) (.55) (.62) (.69) (.71) (.72) (.38)
Dividends from net
realized capital
gains................. (1.07) (.48) (.07) (.67) (.75) (.09) -- -- -- --
---------- ---------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions..... (1.60) (1.06) (.57) (1.21) (1.30) (.71) (.69) (.71) (.72) (.38)
---------- ---------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE: End of
period................. $16.67 $15.95 $13.40 $14.41 $13.58 $13.61 $11.47 $12.16 $10.58 $10.34
========== ========== ======== ======== ======== ======== ======== ======== ======== ========
Total Return........... 14.52% 27.03% (3.06)% 12.75% 9.48% 24.84% 0.00% 21.76% 9.25% 3.63%
Net assets at end of
period................ $1,448,841 $1,114,834 $892,826 $743,798 $334,480 $232,276 $184,879 $172,968 $134,303 $112,867
(In Thousands)
SIGNIFICANT RATIOS:
Operating expenses to
average net assets.... 0.29% 0.31% 0.32% 0.29% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Net investment income
to average net
assets................ 3.38%* 3.92% 3.66% 3.16% 3.85% 4.94% 5.74% 6.30% 6.64% 5.27%
Portfolio turnover
(Note 1).............. 91.07% 79.29% 96.49% 95.84% 114.67% 70.56% 62.51% 50.61% 70.14% 61.30%
Average broker
commission rate (Note
2).................... $0.0578 -- -- -- -- -- -- -- -- --
</TABLE>
- -------
* Footnotes appear on Page 6.
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 YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
31, 1996 31, 1995 31, 1994 31, 1993 31, 1992 31, 1991 31, 1990 31, 1989
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<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.......... $25.87 $22.05 $22.54 $19.52 $18.11 $10.95 $12.41 $10.42
---------- -------- -------- -------- -------- -------- -------- --------
Income From
Investment
Operations
Net investment
income......... (0.02) (.01) .05 .04 .08 .06 .15 .20
Net realized and
unrealized gain
(loss)......... 2.01 6.50 (.48) 5.06 1.77 7.25 (1.43) 3.00
---------- -------- -------- -------- -------- -------- -------- --------
Total From
Investment
Operations...... 1.99 6.49 (.43) 5.10 1.85 7.31 (1.28) 3.20
---------- -------- -------- -------- -------- -------- -------- --------
Less
Distributions
Dividends from
net investment
income......... -- -- (.05) (.06) (.10) (.07) (.14) (.14)
Dividends from
net realized
capital gains.. (0.75) (2.67) (.01) (2.02) (.34) (.08) (.04) (1.07)
---------- -------- -------- -------- -------- -------- -------- --------
Total
Distributions... (0.75) (2.67) (.06) (2.08) (.44) (.15) (.18) (1.21)
---------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE:
End of period... $27.11 $25.87 $22.05 $22.54 $19.52 $18.11 $10.95 $12.41
========== ======== ======== ======== ======== ======== ======== ========
Total Return.... 7.72% 29.50% (1.88)% 22.63% 10.39% 66.41% (10.34)% 30.94%
Net assets at
end of period.. $1,321,849 $958,915 $590,047 $387,949 $129,249 $ 45,858 $ 15,409 $ 11,280
(In Thousands)
SIGNIFICANT
RATIOS:
Operating
expenses to
average net
assets......... 0.79% 0.81% 0.82% 0.79% 0.75% 0.75% 0.75% 0.75%
Net investment
income to
average net
assets......... (0.11)% (0.06%) 0.24% 0.18% 0.46% 0.45% 1.41% 1.41%
Portfolio
turnover (Note
1) ............ 221.23% 255.83% 186.52% 120.82% 100.95% 146.12% 271.31% 226.39%
Average broker
commission rate
(Note 2)....... $0.0576 -- -- -- -- -- -- --
<CAPTION>
STATE STREET RESEARCH AGGRESSIVE GROWTH PORTFOLIO
---------------
FOR THE PERIOD
APRIL 29, 1988
TO DECEMBER
31, 1988
--------------
<S> <C>
SELECTED DATA FOR
A SHARE OF
CAPITAL STOCK
OUTSTANDING
THROUGHOUT THE
PERIOD:
NET ASSET VALUE:
Beginning of
period.......... $10.00
------
Income From
Investment
Operations
Net investment
income......... .16
Net realized and
unrealized gain
(loss)......... .36
------
Total From
Investment
Operations...... .52
------
Less
Distributions
Dividends from
net investment
income......... (.10)
Dividends from
net realized
capital gains.. --
------
Total
Distributions... (.10)
------
NET ASSET VALUE:
End of period... $10.42
======
Total Return.... 5.21%
Net assets at
end of period.. $4,738
(In Thousands)
SIGNIFICANT
RATIOS:
Operating
expenses to
average net
assets......... 0.75%*
Net investment
income to
average net
assets......... 2.06%*
Portfolio
turnover (Note
1) ............ 94.35%
Average broker
commission rate
(Note 2)....... --
</TABLE>
<TABLE>
<CAPTION>
METLIFE STOCK INDEX PORTFOLIO
-------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED MAY 1, 1990
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER TO DECEMBER
31, 1996 31, 1995 31, 1994 31, 1993 31, 1992 31, 1991 31, 1990
---------- -------- -------- -------- -------- -------- -----------
<S> <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..... $18.56 $13.87 $14.25 $13.27 $12.76 $9.96 $10.00
---------- -------- -------- -------- -------- ------- ------
Income From Investment
Operations
Net investment income... 0.33 .32 .33 .35 .36 .35 .23
Net realized and
unrealized gain (loss). 3.88 4.79 (.17) .98 .60 2.82 (.05)
---------- -------- -------- -------- -------- ------- ------
Total From Investment
Operations.............. 4.21 5.11 .16 1.33 .96 3.17 10.18
---------- -------- -------- -------- -------- ------- ------
Less Distributions
Dividends from net
investment income...... (0.33) (.32) (.32) (.35) (.26) (.37) (.22)
Dividends from net
realized capital gains. (0.21) (.10) (.22) -- (.19) -- --
---------- -------- -------- -------- -------- ------- ------
Total Distributions...... (0.54) (.42) (.54) (.35) (.45) (.37) (.22)
---------- -------- -------- -------- -------- ------- ------
NET ASSET VALUE: End of
period.................. $22.23 $18.56 $13.87 $14.25 $13.27 $12.76 $9.96
========== ======== ======== ======== ======== ======= ======
Total Return............ 22.66% 36.87% 1.18% 9.54% 7.44% 29.76% 1.95%
Net assets at end of
period................. $1,122,297 $635,823 $363,001 $282,700 $144,692 $54,183 $6,956
(In Thousands)
SIGNIFICANT RATIOS:
Operating expenses to
average net assets..... 0.30% 0.32% 0.33% 0.32% 0.25% 0.24% 0.25%*
Net investment income to
average net assets..... 1.91% 2.22% 2.51% 2.51% 2.74% 2.98% 4.12%*
Portfolio turnover (Note
1)..................... 11.48% 6.35% 6.55% 13.99% 17.54% 1.18% 3.50%
Average broker
commission rate (Note
2)..................... $0.0204 -- -- -- -- -- --
</TABLE>
- -------
*Footnotes appear on page 6
PROSPECTUS 5
<PAGE>
<TABLE>
<CAPTION>
GFM INTERNATIONAL STOCK 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, 1991
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER TO DECEMBER
31, 1996 31, 1995 31, 1994 31, 1993 31, 1992 31, 1991
-------- -------- -------- -------- -------- -----------
<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..... $12.29 $12.30 $12.33 $8.63 $9.71 $10.00
-------- -------- -------- -------- ------- -------
Income From Investment
Operations
Net investment income... 0.07 .03 .08 .02 .05 .05
Net realized and
unrealized gain (loss). (0.28) .07 .54 4.52 (1.04) (.20)
-------- -------- -------- -------- ------- -------
Total From Investment
Operations.............. (0.21) .10 .62 4.54 (.99) 9.85
-------- -------- -------- -------- ------- -------
Less Distributions
Dividends from net
investment income...... -- (.04) -- (.26) (.09) (.14)
Dividends from net
realized capital gains. (0.13) (.07) (.65) (.58) -- --
-------- -------- -------- -------- ------- -------
Total Distributions...... (0.13) (.11) (.65) (.84) (.09) (.14)
-------- -------- -------- -------- ------- -------
NET ASSET VALUE: End of
period.................. $11.95 $12.29 $12.30 $12.33 $8.63 $9.71
======== ======== ======== ======== ======= =======
Total Return............ (1.77)% 0.84% 5.08% 47.76% (10.21)% (1.55)%
Net assets at end of
period................. $303,826 $297,461 $272,952 $120,781 $18,998 $10,809
(In Thousands)
SIGNIFICANT RATIOS:
Net expenses to average
net assets............. 0.97% 1.01% 1.04% 1.14% 0.97% 0.97%*
Operating expenses to
average net assets
before voluntary
expense reimbursements. N/A N/A N/A 1.15% N/A N/A
Net investment income to
average net assets..... 0.56% 0.21% 0.08% 0.15% 0.80% 1.01%*
Net investment income to
average net assets
before voluntary
expense reimbursements. N/A N/A N/A 0.15% N/A N/A
Portfolio turnover (Note
1) .................... 116.67% 86.24% 65.84% 88.90% 65.00% 29.41%
Average broker
commission rate (Note
2)..................... $ 0.0037 -- -- -- -- --
</TABLE>
- -------
Notes:
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.
* Ratios have been determined based on annualized operating results for the
period. Twelve months results may be different.
(1) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio
securities owned during the period. Securities with a maturity or
expiration date at the time of acquisition of one year or less are
excluded from the calculation. Purchases and sales of securities
(excluding short-term securities) for the year ended December 31, 1996
are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES OF SECURITIES
-------------- -------------------
<S> <C> <C>
State Street Research Growth Portfo-
lio................................. $1,348,105,796 $1,208,264,280
State Street Research Income Portfo-
lio................................. 332,786,481 293,974,932
State Street Research Diversified
Portfolio........................... 1,224,380,985 1,081,252,639
State Street Research Aggressive
Growth
Portfolio........................... 2,668,086,800 2,444,822,359
MetLife Stock Index Portfolio........ 424,005,842 98,565,577
GFM International Stock Portfolio.... 418,140,220 342,539,121
</TABLE>
(2) Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related shares
purchased and sold.
See Notes to Financial Statements.
PROSPECTUS 6
<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, is not expected to exceed 100% 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 7
<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."
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 a nationally recognized statistical rating organization
("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, 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
PROSPECTUS 8
<PAGE>
...............................................................
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 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.
PROSPECTUS 9
<PAGE>
...............................................................
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 472 stocks included 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
PROSPECTUS 10
<PAGE>
...............................................................
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 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.
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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, mortgage-related securities, 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 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
PROSPECTUS 12
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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 capitalization
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' prospects, 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.
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
PROSPECTUS 13
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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 30, 1996, the S&P MidCap
included companies with capitalizations between approximately $192 million to
$6.5 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 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
PROSPECTUS 14
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risks and transaction costs. (See "Writing Covered Put and Call Options and
Purchasing Put and Call Options," "Forward 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
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
PROSPECTUS 15
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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
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 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
PROSPECTUS 16
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...............................................................
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 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
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,
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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. 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 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
PROSPECTUS 18
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and sell currency futures contracts as a hedge to protect against anticipated
changes in currency rates or as an efficient means to adjust their 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, the T. Rowe Price Small Cap Growth, the Loomis Sayles
High Yield Bond, the Janus Mid Cap and the Scudder Global 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, GDRs 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, 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
PROSPECTUS 19
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...............................................................
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 or traded in a 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 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
PROSPECTUS 20
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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, the GFM International Stock Portfolio
expects to have investments in at least three different countries outside the
U.S. and the Scudder Global Equity Portfolio expects to have investments in
three countries, one of which may be 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, Japan, the United Kingdom, or Germany
and, for temporary defensive purposes, the Scudder Global Equity Portfolio may
be invested 100% in U.S. securities. Each Portfolio has no other set limits
related to the geography of its investments and expects to invest in companies
located in 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, Collateralized Mortgage Obligations ("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 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
PROSPECTUS 21
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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 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
PROSPECTUS 22
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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 December 31, 1996, it had total
life insurance in force of approximately $1.6 trillion and total assets under
management of approximately $298 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, 1996, State Street Research and its subsidiaries had
investment arrangements in effect for about $41.7 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, 1996, GFM had investment management arrangements
in effect for over $1.518 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.
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 $95 billion for over four 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.
PROSPECTUS 23
<PAGE>
...............................................................
Janus is the sub-investment manager of the Janus Mid Cap Portfolio. Janus, a
Colorado corporation, 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. As of December 31, 1996, Janus had
approximately $46 billion under management. 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, a Delaware Corporation, was founded in 1919. As of
December 31, 1996, Scudder managed in excess of $115 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 during the first
six months of the Portfolio's operations equal to .35% of the average daily
value of the aggregate net assets of the Portfolio up to $50 million, .175% of
such assets on the next $50 million, .15% of such assets on the next $400
million and .1375% of such assets on amounts in excess of $500 million. During
the second six months of the Portfolio's operations, the waiver of the
investment management fee will be equal to .175% of such Portfolio's assets up
to $50 million, .0875% of such assets on the next $50 million, .075% of such
assets on the next $400 million and .06875% of such assets in excess of $500
million.
During 1994, 1995 and 1996, such fees aggregated $11,024,956, $14,648,069
and $20,845,048, respectively, 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 Metropolitan Life an annual
percentage fee, calculated on the month ending value of the aggregate net
assets
PROSPECTUS 24
<PAGE>
...............................................................................
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 1994, 1995 and 1996, 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 $7,652,865, $10,412,735 and
$14,979,746, 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 1994, 1995 and 1996, sub-
investment management fees for the GFM International Stock Portfolio
aggregated $1,389,924, $1,634,069 and $1,868,362, 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 1994, 1995 and 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 during the first six
months of the Portfolio's operations equal to .35% of the average daily value
of the aggregate net assets of the Portfolio up to $50 million, .175% of such
assets on the next $50 million, .15% of such assets on the next $400 million
and .1375% of such assets on amounts in excess of $500 million. During the
second six months of the Portfolio's operations, the waiver of the investment
management fee will be equal to .175% of such Portfolio's assets up to $50
million, .0875% of such assets on the next $50 million, .075% of such assets
on the next $400 million and .06875% of such assets in excess of $500 million.
During 1994, 1995 and 1996 no sub-investment management 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 Investment Counsel, Inc. 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, was named Vice
President in 1993 and became Senior Vice President in 1994. Mr. Peters
previously served as
PROSPECTUS 25
<PAGE>
...............................................................
Registration and Compliance Specialist at the State 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, Ian R. Vose, and Justin Donegan of GFM. Mrs. Price's,
Mr. Brunnock's and Mr. Donegan's principal occupation is portfolio manager
with GFM. Mrs. Price and Mr. Brunnock have managed the Portfolio since its
inception in January 1992 and have been with GFM since its formation in 1990.
Mr. Donegan has been with GFM since October 1996. 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. For the five years prior to joining GFM, Mr. Donegan was
self- employed as a financial consultant, a Japanese Portfolio Manager at
Pictet Asset Management and a Far Eastern Portfolio Manager at Johnson Capital
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. 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 William E. Holzer 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. 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 Manager with Morgan, Grenfell & Co., Ltd. in
London. His current
PROSPECTUS 26
<PAGE>
...............................................................
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 that was in operation at the time. 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 the Portfolios, and to terminate such voluntary
payment at any time upon notice to the Board of Directors and affected
shareholders of the Fund.
Subject to receiving New York State Insurance Department approval,
Metropolitan Life has agreed to subsidize all expenses, excluding those listed
below, (the "expenses") in excess of .20% of the net assets of each portfolio
for each of the Loomis Sayles High Yield Bond, T. Rowe Price Small Cap Growth,
Janus Mid Cap and Scudder Global Equity Portfolios until such Portfolio's
total net assets are at least $100 million, or March 2, 1999, whichever is
earlier. Expenses exclude 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
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).
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 State Street Research 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 19, 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
PROSPECTUS 27
<PAGE>
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, 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, $2,000,000 worth of shares for the Loomis
Sayles High Yield Bond Portfolio on March 3, 1997, $5,000,000 worth of shares
for the T. Rowe Price Small Cap Growth Portfolio on March 3, 1997, $5,000,000
worth of shares for the Janus Mid Cap Portfolio on March 3, 1997 and
$10,000,000 worth of shares for the Scudder Global Equity Portfolio on March
3, 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 February 21, 1997, Metropolitan Life owned in its
general account and in the separate account not registered as a unit
investment trust approximately 3.62%, 3.55%, 3.77%, 32.35%, 4.60%, 2.83% and
4.34%, 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 as of March 3, 1997 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
PROSPECTUS 28
<PAGE>
...............................................................
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.
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 29
<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-24
Investment Management Arrangements...................................... B-25
Investment Management Agreements and Sub-Investment Management Agree-
ments................................................................. B-25
Payment of Expenses.................................................... B-26
Allocation of Portfolio Brokerage...................................... B-26
Sale and Redemption of Shares........................................... B-33
Taxes................................................................... B-35
General Information..................................................... B-36
Experts................................................................ B-36
Custodian and Transfer Agent........................................... B-36
Financial Statements.................................................... B-37
</TABLE>
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<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
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<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.
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................................................................
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
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<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 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 Bond, 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 major
rating category 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 issuer's ability to service its debt obligations may also
be adversely affected by specific corporate developments,
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................................................................
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
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
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<PAGE>
................................................................
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.
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................................................................
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.
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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
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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 enure 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
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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
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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
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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
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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, Loomis Sayles High Yield Bond, 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 traded in a
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 traded) 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 and State
Street Research Aggressive Growth Portfolios are invested in a given industry,
the following industry classifications are currently used. Securities issued or
guaranteed as to principal or interest by the U.S. Government or its agencies
or instrumentalities or mixed-ownership Government corporations or sponsored
enterprises (including repurchase agreements involving U.S. Government
securities to the extent excludable under relevant regulatory interpretations)
are excluded. Securities issued by foreign governments are also excluded.
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 and credit card receivables. "Asset-backed--Mortgages"
includes private pools of non-government-backed mortgages.
BASIC INDUSTRIES CONSUMER STAPLE SCIENCE & TECHNOLOGY
Chemical Business Service Aerospace
Diversified Container Computer Software &
Electrical Equipment Drug Service
Forest Products Food & Beverage Electronic
Machinery Hospital Supply Components
Metal & Mining Personal Care Electronic Equipment
Railroad Printing & Publishing Office Equipment
Truckers Tobacco
UTILITY ENERGY CONSUMER CYCLICAL
Electric Oil Refining and Marketing Airline
Gas Oil Production Automotive
Gas Transmission Oil Service Building
Telephone Hotel & Restaurant
FINANCE Photography
Recreation
OTHER Bank Retail Trade
Financial Service Textile & Apparel
Trust Certificates--
Government Related Lending Insurance
Asset-backed--Mortgages
Asset-backed--Credit Card Receivables
In determining how much of each of the State Street Research Income and the
State Street Research Diversified Portfolios are invested in a given industry,
the following industry classifications are currently used. Securities issued or
guaranteed as to principal or interest by the U.S. Government or its agencies
or instrumentalities or mixed-ownership Government corporations or sponsored
enterprises (including repurchase agreements involving U.S. Government
securities to the extent excludable under relevant regulatory interpretations)
are excluded. Securities issued by foreign governments are also excluded.
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. "Asset-backed--Mortgages"
includes private pools of non-government-backed mortgages.
Aerospace Electronic Components Oil Service
Airline Electronic Equipment Paper Products
Asset-backed--Mortgages Entertainment Personal Care
Asset-backed--Credit Card Receivables
Financial Service Photography
Food & Beverage Plastics
B-20
<PAGE>
Automotive Forest Products Printing &
Publishing
Automotive Parts Gaming & Lodging
Railroad
Bank Gas
Real Estate &
Building Gas Transmission Building
Business Service Grocery
Recreation
Cable
Healthcare & Hospital Management
Capital Goods & Equipment Retail Trade
Hospital Supply
Chemical Hotel & Restaurant Savings & Loan
Computer Software & Service Shipping &
Transportation
Insurance
Conglomerate
Machinery
Consumer Goods & Services Technology &
Communications
Media
Container
Metal & Mining
Cosmetics Office Equipment Telephone
Diversified Oil Production Textile & Apparel
Drug Oil Refining & Marketing
Electric Tobacco
Electric Equipment Truckers
Trust Certificates--
Government Related
Lending
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.
ENERGY RESOURCES
MATERIALS CAPITAL EQUIPMENT
Energy Resources (includes all oils)
Building Materials and Components
Utilities Electrical, Gas, Water Aerospace and
Chemicals Military Technology
CONSUMER GOODS Forest Products and Paper Construction and
Housing
Metals--Non ferrous
Appliances and Household Durables Data Processing and
Metals--Steel Reproduction
Automobiles
Misc. Materials and Commodities
Electrical and
Electronics
Beverages and Tobacco
Food and Household Products SERVICES
Electrical
Components and
Instruments
Health and Personal Care
Broadcasting and Publishing
Recreation, Other Consumer Goods
Textiles and Apparel Business and Public Services
Leisure and Tourism Energy Equipment and
Services
MULTI-INDUSTRY Merchandising
Industrial
Components
Telecommunications
Multi-Industry Transportation--Airlines
Machinery and
Engineering
Transportation--Road and Rail
MINING Transportation--Shipping
Wholesale and International Trade
Gold Mines FINANCE
Banking
Financial Services
Insurance
Real Estate
Collective
Investment Programs
B-21
<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.
GOVERNMENTS FINANCE
UTILITIES Banks
Captive & Independents
Gas Other
Electric
INDUSTRIAL
TELEPHONE
Consumer
Cyclical
Energy
MORTGAGE-RELATED (CMO) Manufacturing
Service
Transportation
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-22
<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.
CONSUMER DISCRETIONARY MEDIA ENERGY
Advertising Engineering
Apparel & Shoes Broadcasting & Entertainment Oil & Gas Production
Department & Chain Cable Television Oil Companies
Stores Print Media Oil/Gas Transmission
Home Furnishings Miscellaneous Oilfield
Hotels & Casinos Services/Equipment
Recreational Products SERVICE INDUSTRIES Miscellaneous
Restaurants
Specialty Retail METALS & MINERALS
Miscellaneous Asset Management
EDP Services Coal Mining
CONSUMER STAPLES Environmental Services Precious Metals
Investment Steel & Metals
Alcohol & Tobacco Miscellaneous Commercial Services
Miscellaneous
Consumer Electronic &
Photographic Products
Miscellaneous Consumer Services
Printing/Publishing CONSTRUCTION
Consumer Specialties Miscellaneous
Farming Building Materials
Food & Beverage DURABLES Building Products
Package Goods/Cosmetics Forest Products
Textiles Aerospace Homebuilding
Miscellaneous Automobiles Miscellaneous
Construction/Agricultural Equipment
HEALTH Leasing Companies TRANSPORTATION
Telecommunications Equipment Air Freight
Biotechnology Tires Airlines
Generic Drugs Miscellaneous Marine
Health Industry Services Transportation
Hospital Management MANUFACTURING Railroads
Medical Supply & Trucking
Specialty Chemicals Miscellaneous
Pharmaceuticals
Containers & Paper
Miscellaneous Diversified Manufacturing UTILITIES
Electrical Products Electric Utilities
COMMUNICATIONS Hand Tools Natural Gas
Industrial Specialty Distribution
Cellular Telephone Machinery/Components/ControlsWater Supply
Telephone/Communications Office Equipment/Supplies Miscellaneous
Miscellaneous
Specialty Chemicals
Wholesale Distributors MISCELLANEOUS
Miscellaneous
FINANCIAL
Miscellaneous
CREDIT CARD
Banks TECHNOLOGY RECEIVABLES
Insurance
Business Finance Computer Software
Consumer Finance Diverse Electronic Products Miscellaneous
Other Financial EDP Peripherals
Companies AUTOMOBILE
Real Estate RECEIVABLES
Electronic Components/Distributors
Electronic Data Processing
Miscellaneous Military Electronics
Office/Plant Automation Miscellaneous
Precision Instruments
Semiconductors HOME EQUITY LOANS
Miscellaneous
Miscellaneous
MANUFACTURED HOUSING
RECEIVABLES
Miscellaneous
B-23
<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
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 (70)+......... 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
Bradford W. White (30)+.......... Controller Senior Technical Consultant--
Pensions, Metropolitan Life since
1993; Senior Financial Analyst--
Retirement and Savings Center, 1992-
1993; prior thereto, Financial
Analyst
Christopher P. Nicholas (47)+.... Vice-President, Associate General Counsel,
Secretary and Metropolitan Life
Chief Operating Officer
Joseph M. Panetta (60)*.......... Treasurer Vice-President, Metropolitan Life
Elaine Stevenson (37)+........... Vice-President Vice-President, Metropolitan Life
since 1996; Assistant Vice-
President, 1993-1996; prior thereto,
Director--Retirement and Savings
Center
Lawrence A. Vranka (56)*......... Vice-President Vice-President, Metropolitan Life
Robin Wagner (36)+............... Assistant Secretary Assistant General Counsel,
Metropolitan Life
since 1997, Counsel, 1995-1997;
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-24
<PAGE>
...............................................
The Directors have been compensated as follows:
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
(5)
(3) TOTAL
PENSION OR COMPENSATION
RETIREMENT (4) FROM THE
(2) BENEFITS ESTIMATED FUND
AGGREGATE ACCRUED AS ANNUAL AND FUND
(1) COMPENSATION PART OF BENEFITS COMPLEX PAID
NAME OF FROM FUND UPON TO DIRECTORS
DIRECTOR(B) FUND(A)(C) EXPENSE RETIREMENT (B)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jeffrey J. Hodgman............. 0 0 0 0
Steve A. Garban................ $28,500 0 0 $ 34,750
Malcolm T. Hopkins............. $27,000 0 0 $ 34,750
Robert A. Lawrence............. $24,000 0 0 $ 92,125
Dean O. Morton................. $24,000 0 0 $ 96,125
Michael S. Scott Morton........ $18,500 0 0 $100,325
John H. Tweedie................ 0 0 0 0
</TABLE>
- -------
(a) For the fiscal year ended December 31, 1996.
(b) Complex is comprised of 10 trusts and two corporations with a total of 31
funds and/or series. "Total Compensation from the Fund and Fund Complex Paid
to Directors" is for the 12 months ended December 31, 1996.
(c) 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 each 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 State Street Research Growth, State Street Research
Income, State Street Research Diversified, and State Street Research
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 amounts desired to be purchased or sold by each
B-25
<PAGE>
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 were 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 by the
unanimous written consent of shareholders on March 3, 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 for each of
the then existing Portfolios, 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.
Subject to receiving New York State Insurance Department approval,
Metropolitan Life has agreed to subsidize all expenses (excluding management
fees, brokerage commission, taxes, interest and extraordinary or non-recurring
expenses, as described in the Prospectus) in excess of .20% for each of the
Loomis Sayles High Yield Bond, T. Rowe Price Small Cap Growth, Janus Mid Cap
and Scudder Global Equity Portfolios until such Portfolio's total net assets
are at least $100 million, or March 3, 1999, whichever is earlier.
ALLOCATION OF PORTFOLIO BROKERAGE
Under the Investment Management Agreements, Metropolitan Life has ultimate
responsibility for selecting broker-dealers through which investments are to
be
B-26
<PAGE>
................................................................
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 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 MetLife 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-27
<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-28
<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 Portfolio 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-29
<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-30
<PAGE>
transactions for the Portfolio are not necessarily used by T. Rowe Price
exclusively in connection with the management of the Portfolio.
A significant portion of the Portfolio's transactions 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).
With respect to portfolio transactions for the 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 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 Portfolio. 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
B-31
<PAGE>
................................................................
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.
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
B-32
<PAGE>
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 the 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 the 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 Portfolios.
The total dollar amounts of brokerage commissions paid by the Fund in 1994,
1995 and 1996 were $4,567,000, $6,329,000 and $10,728,775. Substantially all
commissions were paid to firms which provided research and statistical
services either to Metropolitan Life, State Street Research or GFM.
The State Street Research Growth Portfolio experienced a higher portfolio
turnover rate in 1996 than in 1995 as a result of increased market volatility
and the portfolio manager's efforts to take advantage of the resulting
opportunities to purchase certain securities at attractive prices and to sell
certain securities in order to realize gains. The GFM International Stock
Portfolio experienced a higher portfolio turnover rate in 1996 than in 1995 as
a result of some portfolio restructuring effected in the Portfolio during
1996.
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).
As of May 16, 1993, pursuant to an amendment to the Distribution Agreement,
Metropolitan Life is no longer obligated under such Agreement 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. Such expenses are currently paid by the Fund
with respect to all of the Portfolios except for the Loomis Sayles High Yield
Bond, T. Rowe Price Small Cap Growth, Janus Mid Cap and Scudder Global Equity
Portfolios. Subject to receiving New York State Insurance Department approval,
Metropolitan Life has agreed to subsidize all expenses (excluding management
fees, brokerage commissions, taxes, interest and extraordinary or non-
recurring expenses, as described in the Prospectus) in excess of .20% of each
Portfolio's net assets for each of the Loomis Sayles High Yield Bond, T. Rowe
Price Small Cap Growth, Janus Mid Cap and Scudder Global Equity Portfolios
until such Portfolio's total net assets are at least $100 million, or for two
years from the date the Portfolio commences operations, whichever is earlier.
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
B-33
<PAGE>
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, except for
the Scudder Global Equity Portfolio which second values such security at the
last current bid and third 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, or in the case of the Scudder Global Equity
Portfolio for domestic equities, such securities would be valued first at the
last sale, second 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 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
B-34
<PAGE>
..........................................................
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 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
B-35
<PAGE>
................................................................
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.
B-36
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders,
Metropolitan Series Fund, Inc.
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Growth, Income, Money Market,
Diversified, Aggressive Growth, Stock Index, and International Stock Portfolios
of the Metropolitan Series Fund, Inc. (the "Fund") as of December 31, 1996, the
related statements of operations for the year then ended, the statements of
changes in net assets for the years ended December 31, 1996 and 1995, and the
financial highlights for the applicable periods ended December 31, 1996, 1995,
1994, 1993, and 1992. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at
December 31, 1996 by correspondence with the custodian and brokers: where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Growth, Income,
Money Market, Diversified, Aggressive Growth, Stock Index, and International
Stock Portfolios of the Metropolitan Series Fund, Inc. at December 31, 1996 and
the results of their operations, the changes in their net assets, and the
financial highlights for the respective stated periods, in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Denver, Colorado
February 14, 1997
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<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- --------------------------------------------------------------------------------
COMMON STOCK: 91.9%
- --------------------------------------------------------------------------------
<C> <S> <C>
Aerospace: 0.9%
305,400 Raytheon Co. $ 14,697,375
- --------------------------------------------------------------------------------
Automotive: 2.4%
325,000 General Motors Corp. 18,118,750
360,000 Magna International, Inc. Cl. A 20,070,000
------------
38,188,750
- --------------------------------------------------------------------------------
Banking: 9.8%
513,900 BankAmerica Corp. 51,261,526
356,600 *Chase Manhattan Corp. 31,826,550
455,700 Citicorp 46,937,101
279,100 NationsBank, Inc. 27,282,025
------------
157,307,202
- --------------------------------------------------------------------------------
Broadcasting: 1.2%
526,100 Time Warner, Inc. 19,728,750
- --------------------------------------------------------------------------------
Business Services: 1.9%
452,600 First Data Corp. 16,519,900
245,200 HBO & Co. 14,558,750
------------
31,078,650
- --------------------------------------------------------------------------------
Chemicals: 6.6%
351,300 Du Pont (E.I.) de Nemours & Co. 33,153,937
1,001,000 Monsanto Co. 38,913,876
404,200 Rohm & Haas Co. 32,992,825
------------
105,060,638
- --------------------------------------------------------------------------------
Cosmetics: 1.3%
366,300 Avon Products, Inc. 20,924,887
- --------------------------------------------------------------------------------
Drugs & Health Care: 4.1%
135,500 *Amgen, Inc. 7,376,281
233,420 Lilly (Eli) & Co. 17,039,660
309,545 *Novartis AG ADR 17,670,516
281,700 Pfizer, Inc. 23,345,887
------------
65,432,344
- --------------------------------------------------------------------------------
Electrical Equipment: 2.5%
403,500 General Electric Co. 39,896,063
- --------------------------------------------------------------------------------
Electronics: 9.3%
664,270 *Ericsson (L.M.) Telephone Co.
Cl. B ADR 20,052,651
191,600 *Intel Corp. 25,087,625
572,900 *Lucent Technologies, Inc. 26,496,625
287,100 Motorola, Inc. 17,620,762
435,800 Perkin-Elmer Corp. 25,657,725
678,300 *Teradyne, Inc. 16,533,562
259,100 Texas Instruments, Inc. 16,517,625
------------
147,966,575
- --------------------------------------------------------------------------------
Financial Services: 2.1%
254,300 Federal National Mortgage Assoc. 9,472,675
544,867 Travelers Group, Inc. 24,723,325
------------
34,196,000
- --------------------------------------------------------------------------------
Food & Beverages: 3.5%
742,300 Anheuser-Busch Cos., Inc. 29,692,000
493,800 Coca-Cola Co. 25,986,225
------------
55,678,225
- --------------------------------------------------------------------------------
Hospital Management: 1.7%
661,200 Columbia/HCA Healthcare Corp. 26,943,900
- --------------------------------------------------------------------------------
Hospital Supply: 4.0%
390,400 Baxter International, Inc. 16,006,400
628,000 Johnson & Johnson 31,243,000
248,400 Medtronic, Inc. 16,891,200
------------
64,140,600
- --------------------------------------------------------------------------------
Hotel & Restaurant: 2.2%
570,000 Hilton Hotels Corp. 14,891,250
908,700 *Mirage Resorts, Inc. 19,650,637
------------
34,541,887
- --------------------------------------------------------------------------------
Household Products: 1.7%
258,500 Procter & Gamble Co. 27,788,750
- --------------------------------------------------------------------------------
Insurance: 3.7%
445,400 ACE Ltd. 26,779,675
161,800 Aetna, Inc. 12,944,000
15,600 General Re Corp. 2,460,900
286,700 St. Paul Cos., Inc. 16,807,787
------------
58,992,362
- --------------------------------------------------------------------------------
Leisure: 2.4%
311,241 Disney (Walt) Co. 21,670,154
346,700 Harley Davidson, Inc. 16,294,900
------------
37,965,054
- --------------------------------------------------------------------------------
</TABLE>
B-38
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- ---------------------------------------------------------------
COMMON STOCK: (CONTINUED)
- ---------------------------------------------------------------
<S> <C> <C>
Machinery: 1.5%
441,700 Case Corp. $ 24,072,650
- ---------------------------------------------------------------
Metals-Aluminum: 2.9%
478,200 Aluminum Co. of America 30,485,250
273,200 Reynolds Metals Co. 15,401,650
--------------
45,886,900
- ---------------------------------------------------------------
Miscellaneous: 1.1%
311,000 Guidant Corp. 17,727,000
- ---------------------------------------------------------------
Office & Business Equipment: 6.6%
417,400 *Cisco Systems, Inc. 26,583,162
468,700 *COMPAQ Computer Corp. 34,800,975
74,400 Diebold, Inc. 4,677,900
256,300 International Business Machines
Corp. 38,701,301
--------------
104,763,338
- ---------------------------------------------------------------
Oil: 1.7%
687,640 TOTAL Cl. B ADR 27,677,510
- ---------------------------------------------------------------
Oil-Domestic: 0.5%
295,700 Oryx Energy Co. 7,318,575
- ---------------------------------------------------------------
Oil-International: 2.0%
189,600 Royal Dutch Petroleum Co. 32,374,200
- ---------------------------------------------------------------
Oil-Services: 2.9%
468,800 Schlumberger Ltd. 46,821,401
- ---------------------------------------------------------------
Retail Grocery: 1.4%
495,500 *Kroger Co. 23,040,750
- ---------------------------------------------------------------
Retail Trade: 4.7%
169,300 Gucci Group NV 10,814,037
611,166 Home Depot, Inc. 30,634,696
209,600 Rite-Aid Corp. 8,331,600
530,300 Sears, Roebuck & Co. 24,460,087
--------------
74,240,420
- ---------------------------------------------------------------
Software: 1.3%
461,600 Electronic Data Systems Corp. 19,964,200
- ---------------------------------------------------------------
Tobacco: 1.4%
198,500 Philip Morris Cos., Inc. 22,356,062
- ---------------------------------------------------------------
Transportation-Railroad: 0.5%
213,600 Canadian National Railway Co. 8,116,800
- ---------------------------------------------------------------
Utilities-Gas Distribution & Pipelines: 2.1%
659,300 Burlington Resources, Inc. $ 33,212,237
--------------
TOTAL COMMON STOCK
(Cost: $1,224,351,179) 1,468,100,055
--------------
<CAPTION>
- ---------------------------------------------------------------
Face Interest Maturity Value
Amount Issue Rate Date (Note 1A)
- ---------------------------------------------------------------
SHORT TERM OBLIGATIONS: 7.9%
- ---------------------------------------------------------------
<C> <S> <C> <C> <C>
$5,348,000 American Express
Credit Corp. 5.800% 1/06/97 $ 5,348,000
20,751,000 American Express
Credit Corp. 5.750% 1/06/97 20,751,000
32,939,000 Chevron Oil
Finance Co. 6.150% 1/07/97 32,939,000
3,296,000 Ford Motor Credit
Co. 5.720% 1/03/97 3,296,000
18,485,000 Ford Motor Credit
Co. 5.910% 1/03/97 18,485,000
25,000,000 Household Finance
Corp. 5.600% 1/02/97 25,000,000
20,000,000 Philip Morris
Cos., Inc. 5.587% 1/08/97 19,978,417
--------------
TOTAL SHORT TERM OBLIGATIONS
(Cost: $125,797,417)............. 125,797,417
--------------
- ---------------------------------------------------------------
TOTAL INVESTMENTS: 99.8%
(Cost: $1,350,148,596) .......... 1,593,897,472
OTHER ASSETS LESS LIABILITIES:
0.2%............................. 3,831,003
--------------
TOTAL NET ASSETS: 100.0%......... $1,597,728,475
==============
- ----------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
*Non-income producing security.
ADR (American depository receipt) represents ownership of foreign securities.
B-39
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
INCOME PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Face Interest Maturity Value
Amount Issue Rate Date (Note 1A)
- -----------------------------------------------------------------------------
CORPORATE BONDS: 28.4%
- -----------------------------------------------------------------------------
Banking: 4.5%
<S> <C> <C> <C> <C>
$ 2,775,000 American Express Master
Trust 96-1 A 6.800% 5/15/01 $ 2,814,877
3,950,000 **Bank of New York 144A 7.780% 12/01/06-26 3,854,331
2,500,000 **BankAmerica Institutional
Capital 144A 7.700% 12/31/06-26 2,458,875
3,800,000 Capital One Bank Sr. 7.080% 10/31/01 3,831,578
1,000,000 NationsBank Master
Trust 1995-1 6.450% 8/15/00 1,003,750
3,200,000 Standard Credit Card
Master Trust 1991-3A 8.875% 9/07/98 3,328,000
------------
17,291,411
- -----------------------------------------------------------------------------
Collateralized Mortgage Obligations: 2.3%
1,757,489 Countrywide Series 1993-E
A-1 PAC 6.500% 1/25/96-24 1,756,391
3,650,000 **DeBartolo Cap.
Partnership A-2 144A 7.480% 5/01/04 3,781,172
1,815,499 Prudential Home Loan
Mortgage Ser. 93-29 A-6
PAC 6.750% 8/25/98-08 1,819,457
1,328,210 Residential Funding
Corp. 93-S25 A1 PAC 6.500% 7/25/98-08 1,327,374
------------
8,684,394
- -----------------------------------------------------------------------------
Financial Services: 9.6%
2,575,000 Allmerica Financial
Corp. Sr. 7.625% 10/15/25 2,554,349
1,800,000 Associates Corp. of North
America 6.750% 7/15/01 1,812,924
2,800,000 Associates Corp. of North
America 6.375% 10/15/02 2,746,240
1,200,000 Beneficial Corp. 9.125% 2/15/98 1,239,912
1,800,000 CIT Group Holdings, Inc. 6.700% 5/28/01 1,833,750
1,225,000 Commercial Credit
Group, Inc. 6.750% 5/15/00 1,235,682
3,800,000 Fleet Mortgage Group,
Inc. 7.060% 7/26/02 3,807,942
3,800,000 Ford Credit Auto Loan
Master Trust 95-1 6.500% 8/15/02 3,811,856
3,350,000 GE Global Insurance
Holding Corp. 7.000% 2/15/26 3,226,184
1,800,000 General Motors
Acceptance Corp. 7.050% 2/02/98 1,822,446
1,600,000 General Motors
Acceptance Corp. Deb. 7.850% 11/17/97 1,627,280
1,700,000 Household Finance Co. 6.750% 6/01/00 1,714,008
1,500,000 PennCorp Financial
Group Sr. Sub. 9.250% 12/15/98-03 1,560,000
2,000,000 Sears Credit Account
Master Trust II 1994-1 8.100% 6/15/00-04 2,098,740
3,800,000 Sears Roebuck
Acceptance Corp. 7.010% 9/19/02 3,839,900
1,850,000 Travelers Aetna Property
& Cas. Sr. Note 7.750% 4/15/26 1,903,502
------------
36,834,715
- -----------------------------------------------------------------------------
Government Sponsored: Federally Chartered: 1.5%
1,500,000 Big Rivers Electric
Cooperative Trust 10.700% 9/15/97-17 1,623,945
825,000 Cajun Electric Power
Cooperative Trust 9.520% 3/15/98-19 892,502
2,900,000 Deseret Generation
Cooperative Trust 10.110% 12/15/97-17 3,140,323
------------
5,656,770
- -----------------------------------------------------------------------------
Industrials: 7.0%
1,225,000 360 Communications Co. 7.125% 3/01/03 1,210,190
2,100,000 Case Credit Corp. 6.125% 2/15/03 2,022,825
1,000,000 Chevron Corp. Profit
Sharing Amort. Note 8.110% 12/01/01-04 1,061,590
2,600,000 Columbia/HCA
Healthcare Corp. 6.870% 9/15/03 2,617,368
2,300,000 **Electronic Data Systems
Corp. 144A 6.850% 5/15/00 2,328,980
1,000,000 HealthSouth Sr. Sub. 9.500% 4/01/98-01 1,060,000
1,500,000 **K-III Communications
144A Sr. Note 8.500% 2/01/01-06 1,473,750
2,000,000 Koppers Industries Sr. 8.500% 2/01/99-04 1,940,000
1,000,000 Lear Seating Corp. Sr.
Sub. 11.250% 7/15/97-00 1,026,250
1,500,000 Lear Seating Corp. Sub. 8.250% 2/01/98-02 1,511,250
1,925,000 Loews Corp. Sr. 7.000% 10/15/03-23 1,748,093
1,400,000 Oryx Energy Co. 8.125% 10/15/05 1,421,868
</TABLE>
B-40
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
INCOME PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Face Interest Maturity Value
Amount Issue Rate Date (Note 1A)
- --------------------------------------------------------------------------------
CORPORATE BONDS: (CONTINUED)
- --------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Industrials: (Continued)
$ 1,000,000 Paging Network Sr. Sub. 8.875% 2/01/99-06 $ 952,500
2,700,000 Union Pacific Resources
Deb. 7.500% 10/15/26 2,742,525
3,800,000 Viacom, Inc. Sr. 7.750% 6/01/05 3,741,746
-----------
26,858,935
- --------------------------------------------------------------------------------
Miscellaneous: 1.6%
3,500,000 Darden Restaurants, Inc. 7.125% 2/01/16 3,157,595
3,100,000 Tele-Communications, Inc. 8.250% 1/15/03 3,130,473
-----------
6,288,068
- --------------------------------------------------------------------------------
Utilities-Electric: 1.9%
3,500,000 Arizona Public Service
Sr. Note 6.750% 11/15/06 3,427,795
3,900,000 Southern California
Edison Co. 6.500% 6/01/01 3,877,263
-----------
7,305,058
-----------
TOTAL CORPORATE BONDS
(Cost: $109,539,384) .............................. 108,919,351
-----------
- --------------------------------------------------------------------------------
FEDERAL AGENCY OBLIGATIONS: 5.1%
- --------------------------------------------------------------------------------
4,228,078 Federal Home Loan
Mortage Corp. 7.500% 11/01/11 4,288,836
765,400 Federal Home Loan
Mortgage Corp. 9.000% 12/01/09 812,020
2,600,000 Federal Home Loan
Mortgage Corp. 7.240% 5/15/98-02 2,613,000
68,340 Federal National
Mortgage Assoc. 7.750% 4/01/08 70,193
135,592 Federal National
Mortgage Assoc. 8.000% 6/01/08 141,047
156,899 Federal National
Mortgage Assoc. 9.000% 4/01/16 166,607
300,666 Federal National
Mortgage Assoc. 9.000% 5/01/09 319,269
398,745 Federal National
Mortgage Assoc. 8.500% 9/01/09 417,311
525,901 Federal National
Mortgage Assoc. 7.750% 9/01/06 539,711
707,296 Federal National
Mortgage Assoc. 7.750% 3/01/08 726,478
1,016,841 Federal National
Mortgage Assoc. 8.500% 2/01/09 1,081,980
1,182,896 Federal National
Mortgage Assoc. 8.250% 7/01/08 1,230,543
2,224,298 Federal National
Mortgage Assoc. 7.000% 2/01/24 2,183,972
327,019 Government National
Mortgage Assoc. ARM 7.500% 5/15/07 331,578
4,825,036 Government National
Mortgage Assoc. ARM 6.500% 5/15/09 4,779,006
-----------
19,701,551
-----------
TOTAL FEDERAL AGENCY OBLIGATIONS
(Cost: $19,484,861) ............................... 19,701,551
-----------
- --------------------------------------------------------------------------------
FEDERAL TREASURY OBLIGATIONS: 52.6%
- --------------------------------------------------------------------------------
3,350,000 U.S. Treasury Bond 12.000% 8/15/08-13 4,792,075
12,850,000 U.S. Treasury Bond 6.250% 8/15/23 12,046,875
24,825,000 U.S. Treasury Bond 8.125% 8/15/21 28,820,335
4,500,000 U.S. Treasury Note 6.625% 7/31/01 4,571,730
5,850,000 U.S. Treasury Note 8.500% 5/15/97 5,915,813
6,875,000 U.S. Treasury Note 5.125% 6/30/98 6,812,713
10,200,000 U.S. Treasury Note 6.250% 8/31/00 10,238,250
10,350,000 U.S. Treasury Note 5.750% 8/15/03 10,039,500
11,325,000 U.S. Treasury Note 7.125% 9/30/99 11,638,250
12,675,000 U.S. Treasury Note 7.250% 5/15/04 13,336,507
21,550,000 U.S. Treasury Note 6.750% 5/31/99 21,916,996
27,475,000 U.S. Treasury Note 5.875% 10/31/98 27,470,603
40,225,000 U.S. Treasury Note 7.875% 11/15/04 43,895,530
-----------
201,495,177
-----------
TOTAL FEDERAL TREASURY OBLIGATIONS
(Cost: $201,969,944) .............................. 201,495,177
-----------
- --------------------------------------------------------------------------------
FOREIGN OBLIGATIONS: 3.8%
- --------------------------------------------------------------------------------
4,550,000AUD Australian Government 9.000% 4/09/15 3,975,581
2,775,000CAD Canadian Government 7.500% 12/01/03 2,190,675
</TABLE>
B-41
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
INCOME PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Face Interest Maturity Value
Amount Issue Rate Date (Note 1A)
- ------------------------------------------------------------------
FOREIGN OBLIGATIONS: (CONTINUED)
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 8,700,000 DKK Danish Government 8.000% 5/15/03 $ 1,635,939
9,175,000 DKK Danish Government 8.000% 3/15/06 1,713,265
11,600,000 DKK Danish Government 8.000% 11/15/01 2,185,781
1,900,000 FRN French Government 8.000% 4/25/03 2,692,362
-----------
14,393,603
-----------
TOTAL FOREIGN OBLIGATIONS
(Cost: $14,113,484) ................... 14,393,603
-----------
- ------------------------------------------------------------------
YANKEE BONDS: 4.0%
- ------------------------------------------------------------------
2,000,000 City of Naples Note 7.520% 7/15/01-06 2,062,640
6,150,000 Hydro Quebec Deb.
Ser. HS 9.400% 2/01/21 7,416,408
1,500,000 Province of
Manitoba Deb. Ser. 9.250% 4/01/20 1,831,830
CD
1,500,000 Province of
Manitoba Global 6.750% 3/01/03 1,509,540
Notes
2,550,000 Talisman Energy
Deb. 7.125% 6/01/07 2,531,843
-----------
15,352,261
-----------
TOTAL YANKEE BONDS
(Cost: $15,320,158) ................ 15,352,261
-----------
- ------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 4.5%
- ------------------------------------------------------------------
2,063,000 American Express
Credit Corp. 5.500% 1/07/97 2,063,000
13,027,000 American Express
Credit Corp. 5.450% 1/03/97 13,027,000
2,303,000 Chevron Oil
Finance Co. 6.150% 1/07/97 2,303,000
-----------
17,393,000
-----------
TOTAL SHORT TERM OBLIGATIONS
(Cost: $17,393,000) ................ 17,393,000
-----------
- ------------------------------------------------------------------
TOTAL INVESTMENTS: 98.4%
(Cost: $377,820,831) ............... 377,254,943
OTHER ASSETS LESS LIABILITIES: 1.6%. 6,139,895
TOTAL NET ASSETS: 100.0%............ $383,394,838
============
- ------------------------------------------------------------------
</TABLE>
*Restricted Securities see note 2.
Additional information on restricted securities as follows:
<TABLE>
<CAPTION>
Valuation
as of
Acquisition Acquisition December
Issue Date Cost 31, 1996
----- ---- ---- --------
<S> <C> <C> <C>
Bank of New York 144A 12/24/96 $ 3,866,121 $ 3,854,331
BankAmerica
Institutional
Capital. 144A 11/26/96 2,473,850 2,458,875
DeBartolo Cap.
Partnership A-2 144A 11/16/95-11/20/96 3,835,383 3,781,172
Electronic Data
Systems Corp. 144A 5/19/95 3,297,393 2,328,980
K-III Communications
Corp. 144A Sr. Note 1/22/96 1,506,875 1,473,750
</TABLE>
The aggregate value of restricted securities at December 31, 1996 was
$13,897,108 or 3.62% of the Income Portfolio's net assets.
See Notes to Financial Statements.
B-42
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Face Interest Maturity Value
Amount Issue Rate Date (Note 1A)
- --------------------------------------------------------------------------------
COMMERCIAL PAPER: 62.3%
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$2,000,000 Albertsons, Inc. 5.370% 1/24/97 $1,993,138
2,000,000 Bell Atlantic Financial Services 5.310% 1/22/97 1,993,805
2,000,000 Bellsouth Capital Funding Corp. 5.280% 1/14/97 1,996,187
2,000,000 CIT Group Holdings, Inc. 5.370% 1/06/97 1,998,508
2,000,000 Coca-Cola Co. 5.300% 2/25/97 1,983,806
2,000,000 Ford Motor Credit Co. 5.320% 1/07/97 1,998,227
2,000,000 General Electric Capital Corp. 5.420% 1/15/97 1,995,784
2,000,000 General Electric Capital Services,
Inc. 5.390% 1/10/97 1,997,305
2,000,000 Heinz (H.J.) Co. 5.400% 2/03/97 1,990,100
2,000,000 Kellogg Co. 5.330% 1/21/97 1,994,078
2,000,000 Motorola, Inc. 5.300% 1/14/97 1,996,172
2,000,000 Paccar Financial Corp. 5.300% 1/17/97 1,995,289
2,000,000 Xerox Corp 5.290% 1/22/97 1,993,828
---------
TOTAL COMMERCIAL PAPER
(COST: $25,926,227) .................................. 25,926,227
----------
- --------------------------------------------------------------------------------
CORPORATE NOTE: 9.6
- --------------------------------------------------------------------------------
2,000,000 Bank of America IL-
Chicago State Bank Notes 5.700% 5/28/97 1,999,029
2,000,000 PHH Corp. 5.950% 6/10/97 1,999,746
---------
TOTAL CORPORATE NOTE
(COST: $3,998,775) ................................... 3,998,775
---------
- --------------------------------------------------------------------------------
FEDERAL AGENCY OBLIGATIONS: 28.0%
- --------------------------------------------------------------------------------
$2,200,000 Federal Home Loan Bank 5.250% 1/06/97 $2,198,396
2,300,000 Federal Home Loan Bank 5.250% 1/10/97 2,296,981
2,500,000 Federal Home Loan
Mortgage Corp. 5.290% 1/30/97 2,489,346
2,000,000 Federal National Mortgage
Assoc. 5.280% 1/13/97 1,996,480
2,700,000 Federal National Mortgage
Assoc. 5.310% 1/15/97 2,694,425
---------
TOTAL FEDERAL AGENCY OBLIGATIONS
(Cost: $11,675,628) .................................. 11,675,628
----------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS: 99.9%
(Cost: $41,600,630) .................................. 41,600,630
OTHER ASSETS LESS LIABILITIES: 0.1% .................. 36,001
----------
TOTAL NET ASSETS: 100.0% ............................. $41,636,631
==========
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
B-43
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
DIVERSIFIED PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- --------------------------------------------------------------------------------
COMMON STOCK: 56.6%
- --------------------------------------------------------------------------------
<S> <C> <C>
Aerospace: 0.6%
170,900 Raytheon Co. $ 8,224,562
- --------------------------------------------------------------------------------
Automotive: 1.5%
180,800 General Motors Corp. 10,079,600
201,100 Magna International, Inc. Cl. A 11,211,325
------------
21,290,925
- --------------------------------------------------------------------------------
Banking: 6.0%
287,100 BankAmerica Corp. 28,638,225
198,700 Chase Manhattan Corp. 17,733,975
253,300 Citicorp 26,089,900
155,200 NationsBank, Inc. 15,170,800
------------
87,632,900
- --------------------------------------------------------------------------------
Broadcasting: 0.8%
294,000 Time Warner, Inc. 11,025,000
- --------------------------------------------------------------------------------
Business Services: 1.2%
252,800 First Data Corp. 9,227,200
137,000 HBO & Co. 8,134,375
------------
17,361,575
- --------------------------------------------------------------------------------
Chemicals: 4.0%
195,800 Du Pont (E.I.) de Nemours & Co. 18,478,625
558,700 Monsanto Co. 21,719,462
224,800 Rohm & Haas Co. 18,349,300
------------
58,547,387
- --------------------------------------------------------------------------------
Cosmetics: 0.8%
205,500 Avon Products, Inc. 11,739,188
- --------------------------------------------------------------------------------
Drugs & Health Care: 2.5%
75,400 *Amgen, Inc. 4,104,588
131,246 Lilly (Eli) & Co. 9,580,958
173,119 Novartis AG ADR 9,882,580
156,700 Pfizer, Inc. 12,986,512
------------
36,554,638
- --------------------------------------------------------------------------------
Electrical Equipment: 1.5%
224,500 General Electric Co. 22,197,437
- --------------------------------------------------------------------------------
Electronics: 5.7%
369,720 Ericsson (L. M.) Telephone Co. ADR Cl. B 11,160,923
106,600 Intel Corp. 13,957,937
320,000 Lucent Technologies, Inc. 14,800,000
159,700 Motorola, Inc. 9,801,587
245,000 Perkin-Elmer Corp. 14,424,375
377,200 Teradyne, Inc. 9,194,250
145,200 Texas Instruments, Inc. 9,256,500
------------
82,595,572
- --------------------------------------------------------------------------------
Financial Services: 1.3%
141,300 Federal National Mortgage Assoc. 5,263,425
304,467 Travelers Group, Inc. 13,815,175
------------
19,078,600
- --------------------------------------------------------------------------------
Food & Beverages: 2.1%
415,900 Anheuser-Busch Co., Inc. 16,636,000
274,500 Coca-Cola Co. 14,445,563
------------
31,081,563
- --------------------------------------------------------------------------------
Hospital Management: 1.0%
371,550 Columbia/HCA Healthcare Corp. 15,140,663
- --------------------------------------------------------------------------------
Hospital Supply: 2.5%
217,400 Baxter International, Inc. 8,913,400
349,400 Johnson & Johnson 17,382,650
138,200 Medtronic, Inc. 9,397,600
------------
35,693,650
- --------------------------------------------------------------------------------
Hotel & Restaurant: 1.3%
317,900 Hilton Hotels Corp. 8,305,137
507,800 Mirage Resorts, Inc. 10,981,175
------------
19,286,312
- --------------------------------------------------------------------------------
Household Products: 1.1%
144,100 Procter & Gamble Co. 15,490,750
- --------------------------------------------------------------------------------
Insurance: 2.3%
249,600 ACE Ltd. 15,007,200
89,900 Aetna, Inc. 7,192,000
8,700 General Re Corp. 1,372,425
159,700 St. Paul Cos., Inc. 9,362,413
------------
32,934,038
- --------------------------------------------------------------------------------
Leisure: 1.5%
181,235 Disney (Walt) Co. 12,618,487
194,300 Harley Davidson, Inc. 9,132,100
------------
21,750,587
- --------------------------------------------------------------------------------
</TABLE>
B-44
<PAGE>
- ------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- ------------------------------------------------------------------------------
Schedule of Investments
- ------------------------------------------------------------------------------
DIVERSIFIED PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- ------------------------------------------------------------------------------
COMMON STOCK: (CONTINUED)
- ------------------------------------------------------------------------------
<S> <C> <C>
Machinery: 0.9%
245,600 Case Corp. $13,385,200
- ------------------------------------------------------------------------------
Metals-Aluminum: 1.8%
268,200 Aluminum Co. of America 17,097,750
151,900 Reynolds Metals Co. 8,563,363
------------
25,661,113
- ------------------------------------------------------------------------------
Miscellaneous: 0.7%
173,000 Guidant Corp. 9,861,000
- ------------------------------------------------------------------------------
Office & Business Equipment: 4.0%
232,200 Cisco Systems, Inc. 14,788,238
262,200 COMPAQ Computer Corp. 19,468,350
41,400 Diebold, Inc. 2,603,025
142,900 International Business Machines
Corp. 21,577,900
------------
58,437,513
- ------------------------------------------------------------------------------
Oil: 1.1%
388,745 Total SA Cl. B 15,646,986
- ------------------------------------------------------------------------------
Oil-Domestic: 0.3%
164,500 *Oryx Energy Co. 4,071,375
- ------------------------------------------------------------------------------
Oil-International: 1.2%
105,600 Royal Dutch Petroleum Co. 18,031,200
- ------------------------------------------------------------------------------
Oil-Services: 1.8%
261,900 Schlumberger Ltd. 26,157,263
- ------------------------------------------------------------------------------
Retail Grocery: 0.9%
582 Food 4 Less Holdings, Inc. (Wts.) 55,406
278,800 Kroger Co. 12,964,200
------------
13,019,606
- ------------------------------------------------------------------------------
Retail Trade: 2.9%
94,200 Gucci Group NV 6,017,025
340,000 Home Depot, Inc. 17,042,500
116,800 Rite-Aid Corp. 4,642,800
296,400 Sears, Roebuck & Co. 13,671,450
41,373,775
- ------------------------------------------------------------------------------
Software: 0.8%
5,887 Anacomp Inc. Delaware 49,304
1,495 Anacomp Inc. Delaware (Wts.) 4,111
257,800 Electronic Data Systems Corp. 11,149,850
------------
11,203,265
- ------------------------------------------------------------------------------
Tobacco: 0.9%
111,900 Philip Morris Cos., Inc. $12,602,737
- ------------------------------------------------------------------------------
Transportation-Railroad: 0.3%
119,700 Canadian National Railway Co. 4,548,600
- ------------------------------------------------------------------------------
Transportation-Trucking: 0.0%
500 Crown Packaging Holdings Ltd. (Wts.) 5
- -------------------------------------------------------------------------------
Utilities-Gas Distribution & Pipelines: 1.3%
367,600 Burlington Resources, Inc. 18,517,850
------------
TOTAL COMMON STOCK
(Cost: $681,520,120) ............................. 820,142,835
------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Face Interest Maturity Value
Amount Issue Rate Date (Note 1A)
- -------------------------------------------------------------------------------
CORPORATE BONDS: 10.0%
- -------------------------------------------------------------------------------
Banking: 0.9%
<S> <C> <C> <C> <C>
$2,850,000 **Bank of New York 144A 7.780% 12/01/06-26 $2,780,973
5,400,000 Capital One Bank Sr. 7.080% 10/31/01 5,444,874
2,800,000 NationsBank Master
Trust 1995-1 6.450% 4/15/03 2,810,500
2,100,000 Standard Credit Card
Master Trust 1991-3A 8.875% 9/07/99 2,184,000
------------
13,220,347
- -----------------------------------------------------------------------------
Collateralized Mortgage Obligations: 0.6%
1,745,368 Countrywide Series
1993-E A-1 PAC 6.500% 1/25/24 1,744,278
5,175,000 **DeBartolo Cap.
Partnership A-2 144A 7.480% 5/01/04 5,360,977
1,064,258 Prudential Home
Loan Mortgage Ser. 93-29
A-6 PAC 6.750% 8/25/98-08 1,066,578
981,721 Residential Funding
Corp. 93-S25 A1 PAC 6.500% 7/25/98-08 981,102
------------
9,152,935
- -----------------------------------------------------------------------------
Financial Services: 4.2%
3,600,000 Allmerica Financial
Corp. Sr. 7.625% 10/15/25 3,571,128
4,100,000 Associates Corp.
of North America 6.375% 10/15/02 4,021,280
2,550,000 Associates Corp.
of North America 6.750% 7/15/01 2,568,309
</TABLE>
B-45
<PAGE>
- ----------------------------------------------------------------
Metropolitan Series Fund, Inc.
- ----------------------------------------------------------------
Schedule of Investments
- ----------------------------------------------------------------
DIVERSIFIED PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Face Interest Maturity Value
Amount Issue Rate Date (Note 1A)
- ----------------------------------------------------------------
CORPORATE BONDS: (CONTINUED)
- ----------------------------------------------------------------
Financial Services: (Continued)
<S> <C> <C> <C> <C>
$3,500,000 ** BankAmerica
Institutional
Capital 144A 7.700% 12/31/06-26 $3,442,425
1,200,000 Beneficial Corp. 9.125% 2/15/98 1,239,912
2,700,000 Case Credit Corp. 6.125% 2/15/03 2,600,775
3,900,000 Chase Manhattan
Credit Card Master 7.040% 2/15/05 3,988,959
5,200,000 CIT Group
Holdings, Inc. 6.700% 5/28/01 5,297,500
4,400,000 Fleet Mortgage
Group, Inc. 7.060% 7/26/02 4,409,196
5,350,000 Ford Credit Auto
Loan Master Trust
95-1 6.500% 8/15/02 5,366,692
4,250,000 GE Global Insurance
Holding Corp. 7.000% 2/15/26 4,092,920
2,500,000 General Motors
Acceptance Corp. 7.050% 2/02/98 2,531,175
2,625,000 General Motors
Acceptance Corp.
Deb. 7.850% 11/17/97 2,669,756
2,400,000 Household Finance
Co. 6.750% 6/01/00 2,419,776
1,500,000 PennCorp
Financial Group
Sr. Sub. 9.250% 12/15/98-03 1,560,000
2,600,000 Sears Credit
Account Master
Trust II 1994-1 8.100% 6/15/00-04 2,728,362
5,400,000 Sears Roebuck
Acceptance Corp.
Mountain 6.930% 10/03/02 5,435,694
2,600,000 Travelers Aetna
Property &
Casualty Sr. 7.750% 4/15/26 2,675,192
------------
60,619,051
- ----------------------------------------------------------------
Government Sponsored: Federally Chartered: 0.5%
2,250,000 Big Rivers
Electric
Cooperative Trust 10.700% 9/15/17 2,435,918
3,750,000 Deseret
Generation
Cooperative Trust 10.110% 12/15/17 4,060,762
------------
6,496,680
- ----------------------------------------------------------------
Industrials: 2.3%
1,700,000 360 Communications
Co. 7.125% 3/01/03 1,679,447
1,500,000 Chevron Corp.
Profit Sharing
Amort. Note 8.110% 12/01/01-04 1,592,385
3,700,000 Columbia/HCA
Healthcare Corp. 6.870% 9/15/03 3,724,716
3,300,000 ** Electronic Data
Systems Corp. 144A 6.850% 5/15/00 3,341,580
2,000,000 HealthSouth Sr.
Sub. 9.500% 4/01/98-01 2,120,000
2,075,000 ** K-III
Communications
144A Sr. Note 8.500% 2/01/01-06 2,038,687
2,000,000 Koppers
Industries Sr. 8.500% 2/01/99-04 1,940,000
1,000,000 Lear Seating
Corp. Sr. Sub. 11.250% 7/15/97-00 1,026,250
1,550,000 Lear Seating
Corp. Sub. 8.250% 2/01/98-02 1,561,625
2,700,000 Loews Corp. Sr. 7.000% 10/15/03-23 2,451,870
2,000,000 Oryx Energy Co. 8.125% 10/15/05 2,031,240
1,000,000 Paging Network
Sr. Sub. 8.875% 2/01/99-06 952,500
3,800,000 Union Pacific
Resources Deb. 7.500% 10/15/26 3,859,850
5,400,000 Viacom, Inc. Sr. 7.750% 6/01/05 5,317,218
------------
33,637,368
- ----------------------------------------------------------------
Miscellaneous: 0.6%
500,000 Crown Packaging,
Inc. Sr. Sub. 1.000% 11/01/98-03 125,000
4,400,000 Darden
Restaurants, Inc. 7.125% 2/01/16 3,969,548
4,200,000 Tele-Communications,
Inc. 8.250% 1/15/03 4,241,286
------------
8,335,834
- ----------------------------------------------------------------
Utilities-Electric: 0.4%
5,350,000 Southern California
Edison Co. 6.500% 6/01/01 5,318,809
- ------------------------------------------------------------------
Utilities-Miscellaneous: 0.2%
2,800,000 ** State Street
Institutional
Capital A 144A 7.940% 12/30/06-26 2,838,920
- ------------------------------------------------------------------
Utilities-Telephone: 0.3%
5,000,000 Airtouch
Communications
Inc. 7.000% 1/01/03 5,040,000
------------
TOTAL CORPORATE BONDS
(Cost: $144,936,019) ............... 144,659,944
------------
- ----------------------------------------------------------------
</TABLE>
B-46
<PAGE>
- -----------------------------------------------------------------
Metropolitan Series Fund, Inc.
- -----------------------------------------------------------------
Schedule of Investments
- -----------------------------------------------------------------
DIVERSIFIED PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Face Interest Maturity Value
Amount Issue Rate Date (Note 1A)
- ----------------------------------------------------------------
FEDERAL AGENCY OBLIGATIONS: 2.1%
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
$5,187,386 Federal Home Loan
Mortgage Corp. 7.500% 4/01/26 $ 5,198,695
3,700,000 Federal Home Loan
Mortgage Corp. 7.240% 5/15/02 3,718,500
52,300 Federal National
Mortgage Assoc. 9.000% 4/01/16 55,536
1,601,524 Federal National
Mortgage Assoc. 8.500% 2/01/09 1,704,118
1,342,364 Federal National
Mortgage Assoc. 8.000% 6/01/08 1,396,368
583,383 Federal National
Mortgage Assoc. 9.000% 5/01/09 619,476
741,413 Federal National
Mortgage Assoc. 7.250% 9/01/07 754,491
3,545,497 Federal National
Mortgage Assoc. 7.000% 12/01/07 3,572,584
4,813,434 Federal National
Mortgage Assoc. 8.500% 8/01/22 5,037,547
2,296,171 Government National
Mortgage Assoc. 6.000% 2/15/09 2,229,421
328,345 Government
National Mortgage
Assoc. 8.000% 9/15/07 341,479
6,070,938 Government
National Mortgage
Assoc. ARM 6.500% 5/15/09 6,013,021
------------
30,641,236
------------
TOTAL FEDERAL AGENCY OBLIGATIONS
(Cost: $30,486,107) ................ 30,641,236
------------
<CAPTION>
- ----------------------------------------------------------------
FEDERAL TREASURY OBLIGATIONS: 21.9%
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
5,725,000 U.S. Treasury Bond 12.000% 8/15/08-13 8,189,441
44,950,000 U.S. Treasury Bond 8.125% 8/15/21 52,184,253
10,950,000 U.S. Treasury Bond 6.250% 8/15/23 10,265,625
9,875,000 U.S. Treasury Note 5.125% 6/30/98 9,785,533
19,550,000 U.S. Treasury Note 5.750% 8/15/03 18,963,500
22,675,000 U.S. Treasury Note 7.250% 5/15/04 23,858,408
25,150,000 U.S. Treasury Note 6.750% 5/31/99 25,578,305
33,025,000 U.S. Treasury Note 7.125% 9/30/99 33,938,471
53,975,000 U.S. Treasury Note 7.875% 11/15/04 58,900,219
7,975,000 U.S. Treasury Note 6.875% 3/31/00 8,154,438
39,225,000 U.S. Treasury Note 5.875% 10/31/98 39,218,724
16,250,000 U.S. Treasury Note 8.500% 5/15/97 16,432,813
11,950,000 U.S. Treasury Note 6.625% 7/31/01 12,140,483
------------
317,610,213
------------
TOTAL FEDERAL TREASURY OBLIGATIONS
(Cost: $317,289,011) .............. 317,610,213
------------
<CAPTION>
- ----------------------------------------------------------------
FOREIGN OBLIGATIONS: 1.4%
- ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6,275,000 AUD Australian
Government 9.000% 4/09/15 5,482,807
3,875,000 CAD Canadian
Government 7.500% 12/01/03 3,059,051
15,600,000 DKK Danish Government 8.000% 3/15/06 2,913,017
10,700,000 DKK Danish Government 8.000% 5/15/03 2,012,017
16,850,000 DKK Danish Government 8.000% 11/15/01 3,175,036
2,550,000 FRF French Government 8.000% 4/25/03 3,613,433
------------
20,255,361
------------
TOTAL FOREIGN OBLIGATIONS
(Cost: $19,822,204) ................ 20,255,361
------------
<CAPTION>
- ----------------------------------------------------------------
YANKEE BONDS: 1.5%
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
2,750,000 City of Naples 7.520% 7/15/01-06 2,836,130
Note
8,525,000 Hydro Quebec
Deb. Ser. HS 9.400% 2/01/21 10,280,468
1,650,000 Province of
Manitoba Deb.
Ser. CD 9.250% 4/01/20 2,015,013
2,300,000 Province of
Manitoba Global
Notes 6.750% 3/01/03 2,314,628
3,600,000 Talisman Energy
Deb. 7.125% 6/01/07 3,574,368
------------
21,020,607
------------
TOTAL YANKEE BONDS
(Cost: $20,854,140) ................ 21,020,607
------------
- ----------------------------------------------------------------
SHORT TERM OBLIGATIONS: 5.7%
- ----------------------------------------------------------------
31,303,000 American Express
Credit Corp. 5.450% 1/06/97 31,303,000
23,788,000 Chevron Oil
Finance Co. 6.150% 1/06/97 23,788,000
</TABLE>
B-47
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
DIVERSIFIED PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Face Interest Maturity Value
Amount Issue Rate Date (Note 1A)
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: (CONTINUED)
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$12,000,000 Ford Motor Credit Co. 5.910% 1/02/97 $ 12,000,000
2,263,000 Ford Motor Credit Co. 5.720% 1/02/97 2,263,000
13,635,000 Ford Motor Credit Co. 5.800% 1/07/97 13,635,000
--------------
82,989,000
--------------
TOTAL SHORT TERM OBLIGATIONS
(Cost: $82,989,000) ............... 82,989,000
--------------
- --------------------------------------------------------------------------
TOTAL INVESTMENTS: 99.2%
(Cost: $1,297,896,601) ............. 1,437,319,196
OTHER ASSETS LESS LIABILITIES: 0.8% 11,521,971
--------------
TOTAL NET ASSETS: 100.0%............ $1,448,841,167
==============
- --------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
**Restricted Securities see note 2.
ADR (American depository receipt) represents ownership of
foreign securities.
Additional information on restricted securities as follows:
<TABLE>
<CAPTION>
Valuation
as of
Acquisition Acquisition December 31,
Issue Date Cost 1996
----- ---- ---- ----
<S> <C> <C> <C>
Bank of New York 144A 12/20/96 $ 2,775,074 $ 2,780,973
BankAmerica Corp. 144A 11/26/96 3,463,390 3,442,425
DeBartolo Cap. Partnership
A-2 144A 11/16/95-11/20/96 5,427,320 5,360,977
Electronic Data Systems
Corp. 144A 5/19/95 3,297,393 3,341,580
K-III Communications
Corp. 144A Sr. Note 1/22/96 2,084,125 2,038,687
State Street Institutional
Capital A 144A 12/18/96 2,755,760 2,838,920
</TABLE>
The aggregate value of restricted securities at December 31, 1996 was
$19,803,562 or 1.37% of the Diversified Portfolio's net assets.
See Notes to Financial Statements.
B-48
<PAGE>
- ----------------------------------------------------------------
Metropolitan Series Fund, Inc.
- ----------------------------------------------------------------
Schedule of Investments
- ----------------------------------------------------------------
AGGRESSIVE GROWTH PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- ----------------------------------------------------------------
COMMON STOCK: 88.0%
- ----------------------------------------------------------------
<S> <C> <C>
Automotive: 0.6%
95,600 Danaher Corp. $ 4,457,350
236,500 *Team Rental Group, Inc. Cl. A 3,843,125
------------
8,300,475
- ----------------------------------------------------------------
Banking: 4.0%
201,900 Boatmen's Bancshares, Inc. 13,009,931
293,300 *Chase Manhattan Corp. 26,177,025
335,900 Green Tree Financial Corp. 12,974,137
------------
52,161,093
- ----------------------------------------------------------------
Broadcasting: 0.1%
76,850 Evergreen Media Corp. Cl. A 1,911,644
- ----------------------------------------------------------------
Business Services: 8.5%
97,400 *Apache Medical Systems, Inc. 1,028,787
26,100 *Caribiner International 1,311,525
107,400 *Education Management Corp. 2,228,550
97,050 *Outdoor Systems, Inc. 2,753,794
55,600 *Prime Service, Inc. 1,529,000
750,000 *Republic Industries, Inc. 22,349,742
1,395,800 *Republic Industries, Inc. 43,531,513
726,200 *Republic Industries, Inc. pvt. 22,648,363
59,300 *Teletech Holdings, Inc. 1,519,563
202,200 *U.S. Office Products Co. 6,862,163
256,700 *Universal Outdoor Holdings, Inc. 5,968,275
------------
111,731,275
- ----------------------------------------------------------------
Chemicals: 0.6%
237,200 *Rhone-Poulnec SA 8,035,150
- ----------------------------------------------------------------
Drugs & Health Care: 3.1%
348,000 *Cephalon, Inc. 7,068,750
176,200 *Entremed, Inc. 2,797,175
123,700 *Ligand Pharmaceuticals, Inc. 1,847,769
172,900 *Magainin Pharmaceuticals, Inc. 1,642,550
142,079 *Novartis AG ADR 8,110,657
2,505 *Perseptive Biosystems, Inc. Cl. G --
(Wts.)
254,200 Warner-Lambert Co. 19,065,000
------------
40,531,901
- ----------------------------------------------------------------
Electronics: 12.0%
10,100 *Advanced Fibre Communications, Inc. 562,444
10,000 *Affymetrix, Inc. 202,500
215,800 *Altera Corp. 15,685,962
206,200 *Applied Magnetics Corp. 6,160,225
375,200 *Applied Materials, Inc. 13,483,750
82,000 *CHS Electronics, Inc. 1,419,625
203,400 *Cymer, Inc. 9,801,337
344,000 *KLA Instruments Corp. 12,190,500
491,700 *Lucent Technologies, Inc. 22,741,125
91,000 Motorola, Inc. 5,585,125
90,200 *Novellus Systems, Inc. 4,887,713
39,900 *Octel Communications Corp. 693,263
296,600 *Pairgain Technologies, Inc. 9,027,763
216,300 *P Com., Inc. 6,434,925
596,800 *Sanmina Holdings, Inc. 33,719,200
129,800 *Tencor Instruments 3,431,588
204,500 Texas Instruments, Inc. 13,036,875
------------
159,063,920
- ----------------------------------------------------------------
Finance: 0.1%
71,000 *Bank United Corp. Cl. A 1,903,687
- ----------------------------------------------------------------
Financial Services: 2.8%
256,100 Allmerica Financial Corp. 8,579,350
221,800 Beacon Properties Corp. 8,123,425
175,300 *First USA Paymentech, Inc. 5,938,287
367,900 *Moneygram Payment Systems, Inc. 4,874,675
168,100 Starwood Lodging Trust 9,266,513
------------
36,782,250
- ----------------------------------------------------------------
Food & Beverages: 0.7%
245,300 *Boston Chicken, Inc. 8,800,137
- ----------------------------------------------------------------
Hospital Supply: 1.9%
738,486 *Medpartners, Inc. 15,508,206
203,400 *Neopath, Inc. 3,737,475
158,100 *Wellpoint Health Networks, Inc. 5,434,688
------------
24,680,369
- ----------------------------------------------------------------
Hotel & Restaurant: 11.2%
202,200 *Doubletree Corp. 9,048,450
1,506,400 *Extended Stay America, Inc. 30,316,300
</TABLE>
B-49
<PAGE>
- ----------------------------------------------------------------
Metropolitan Series Fund, Inc.
- ----------------------------------------------------------------
Schedule of Investments
- ----------------------------------------------------------------
AGGRESSIVE GROWTH PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- ----------------------------------------------------------------
COMMON STOCK: (CONTINUED)
- ----------------------------------------------------------------
<S> <C> <C>
Hotel & Restaurant: (Continued)
1,069,600 *HFS, Inc. $ 63,908,600
468,800 Hilton Hotels Corp. 12,247,400
468,500 *Interstate Hotels Co. 13,235,125
225,250 *Rainforest Cafe, Inc. 5,307,453
73,600 *Sun International Hotels Ltd. 2,686,400
926,300 *Trump Hotels & Casino Resorts, Inc. 11,115,600
--------------
147,865,328
- ----------------------------------------------------------------
Insurance: 1.8%
238,300 Everest Reinsurance Holdings 6,851,125
89,400 Progressive Corp. 6,023,325
249,500 TIG Holdings, Inc. 8,451,813
54,400 W.R. Berkley Corp. 2,777,800
--------------
24,104,063
- ----------------------------------------------------------------
Leisure: 1.7%
48,100 *Action Performance Co., Inc. 877,825
218,300 *Ascent Entertainment Group, Inc. 3,438,225
120,300 Coachmen Industries, Inc. 3,413,512
59,900 *Golden Bear Golf, Inc. Cl. A 670,131
171,200 *Lin Television Corp. 7,211,800
154,000 *Marker International, Inc. 856,625
102,400 *Petco Animal Supplies, Inc. 2,086,400
288,100 *Ticketmaster Group, Inc. 3,457,200
--------------
22,011,718
- ----------------------------------------------------------------
Machinery: 0.4%
113,300 *Thermo Fibergen, Inc. 1,189,650
126,000 *Thermo Fibergen, Inc. (Wts.) 315,000
119,700 *United States Filter Corp. 3,800,475
--------------
5,305,125
- ----------------------------------------------------------------
Office & Business Equipment: 3.5%
120,900 *3 Com Corp. 8,863,481
202,400 *BT Office Products International, 1,796,300
Inc.
243,800 *COMPAQ Computer Corp. 18,102,150
148,800 *Dell Computer Corp. 7,914,300
17,600 *Orckit Communications Ltd. 170,500
271,500 *Read Rite Corp. 6,821,438
190,800 *Stormedia, Inc. 3,088,575
--------------
46,756,744
- ----------------------------------------------------------------
Oil: 0.1%
147,300 *Titan Exploration, Inc. 1,795,219
- ----------------------------------------------------------------
Oil & Gas Exploration: 1.7%
32,800 *Chesapeake Energy Corp. 1,824,500
391,000 Eni SPA 20,185,375
--------------
22,009,875
- ----------------------------------------------------------------
Oil-Services: 8.7%
292,500 *BJ Services Co. 14,917,500
250,800 *Ensco International, Inc. 12,163,800
1,141,300 *Global Marine, Inc. 23,539,312
287,100 Helmerich & Payne, Inc. 14,965,087
251,200 *Marine Drilling Cos., Inc. 4,945,500
19,100 *National Oilwell, Inc. 587,325
74,000 *Newpark Resources, Inc. 2,756,500
981,500 *Noble Drilling Corp. 19,507,313
246,600 *Reading & Bates Corp. 6,534,900
577,600 *Rowan Cos., Inc. 13,068,200
111,400 *Varco International, Inc. 2,576,125
--------------
115,561,562
- ----------------------------------------------------------------
Personal Care: 0.2%
116,000 *Gargoyles, Inc. 964,250
121,300 *Polymer Group, Inc. 1,683,038
--------------
2,647,288
- ----------------------------------------------------------------
Printing & Publishing: 0.6%
9,000 *CKS Group, Inc. 252,562
669,100 *Hollinger International, Inc. 7,694,650
--------------
7,947,212
- ----------------------------------------------------------------
Retail Trade: 8.9%
73,000 *Abercrombie & Fitch Co. Cl. A 1,204,500
333,300 *Borders Group, Inc. 11,957,137
163,200 CVS Corp. 6,752,400
78,900 *Dollar Tree Stores, Inc. 3,008,062
599,600 Gucci Group NV 38,299,450
425,000 *Jones Apparel Group, Inc. 15,884,375
</TABLE>
B-50
<PAGE>
- ----------------------------------------------------------------
Metropolitan Series Fund, Inc.
- ----------------------------------------------------------------
Schedule of Investments
- ----------------------------------------------------------------
AGGRESSIVE GROWTH PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- ----------------------------------------------------------------
COMMON STOCK: (CONTINUED)
- ----------------------------------------------------------------
<S> <C> <C>
Retail Trade: (Continued)
223,600 *Just For Feet, Inc. $ 5,855,525
20,700 *Loehmann's, Inc. 476,100
440,475 *Men's Wearhouse, Inc. 10,709,048
169,400 Rite-Aid Corp. 6,733,650
282,150 *Staples, Inc. 5,096,334
1,353,300 *Sunglass Hut International, Inc. 9,896,006
29,250 *Williams Sonoma, Inc. 1,060,313
--------------
116,932,900
- ----------------------------------------------------------------
Software: 8.3%
365,000 *Ascend Communications, Inc. 22,675,625
61,400 *Check Point Software
Technologies Ltd. 1,343,125
70,100 *Datastream Systems, Inc. 1,261,800
225,900 *Excalibur Technologies Corp. Pvt. 2,653,195
93,700 *Excalibur Technologies Corp. 1,464,062
384,100 *Geoworks 9,362,437
111,900 *Ingram Micro, Inc. 2,573,700
161,400 *JDA Software Group, Inc. 4,549,463
8,900 *OpenVision Technologies, Inc. 102,906
269,400 *Parametric Technology Corp. 13,857,263
48,000 *Premiere Technologies, Inc. 1,212,000
70,500 *Puma Technology, Inc. 1,198,500
94,400 *Sabre Group Hldgs, Inc. Cl. A 2,631,400
14,200 *SS & C Technologies, Inc. 92,300
576,900 *Sybase, Inc. 9,627,019
169,900 *Synopsys, Inc. 7,815,400
78,600 *Ultratech Stepper, Inc. 1,856,925
506,300 *Westell Technologies, Inc. Cl. A 11,518,325
225,300 *Western Digital Corp. 12,813,938
28,400 *Wind River Systems, Inc. 1,340,125
24,500 *Xionics Document Technologies, Inc.
Cl. A 307,781
--------------
110,257,289
- ----------------------------------------------------------------
Textiles & Apparel: 2.9%
325,000 *Nautica Enterprises, Inc. 8,165,625
456,800 *The Timberland Co. 17,358,400
268,000 *Tommy Hilfiger Corp. $ 12,864,000
--------------
38,388,025
- ----------------------------------------------------------------
Tobacco: 0.1%
112,500 *Swisher International Group, Inc. 1,785,938
- ----------------------------------------------------------------
Transportation-Airlines: 1.4%
677,500 *Continental Airlines, Inc. Cl. B 19,139,375
- ----------------------------------------------------------------
Utilities-Miscellaneous: 0.6%
396,800 *Calpine Corp. 7,936,000
- ----------------------------------------------------------------
Utilities-Telephone: 1.5%
25,500 *Brooks Fiber Properties, Inc. 656,625
165,700 *Colt Telecom Group PLC ADS 3,210,437
138,000 *Larscom, Inc. 1,587,000
144,000 *Omnipoint Corp. 2,763,000
129,300 *Telecom Brasil ADR 9,891,450
59,000 *Vimpel Communications ADR 1,393,875
19,502,387
--------------
TOTAL COMMON STOCK
(Cost: $1,027,344,564) ........... 1,163,847,949
--------------
- ----------------------------------------------------------------
PREFERRED STOCK: 0.3%
- ----------------------------------------------------------------
Printing & Publishing: 0.3%
312,200 Hollinger International Cvt. Pfd. 3,590,300
--------------
TOTAL PREFERRED STOCK
(Cost: $3,043,950) ............... 3,590,300
--------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Face Interest Maturity Value
Amount Issue Rate Date (Note 1A)
- ----------------------------------------------------------------
CONVERTIBLE BONDS: 0.2%
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
2,500,000 *Theratx, Inc.
144A Cvt. Sub. 8.000% 2/01/02 2,312,500
------------
TOTAL CONVERTIBLE BONDS
(Cost: $2,500,000) ................. 2,312,500
------------
- ----------------------------------------------------------------
SHORT TERM OBLIGATIONS: 10.8%
- ----------------------------------------------------------------
6,994,000 American Express
Credit Corp. 5.800% 1/06/97 6,994,000
17,427,000 American Express
Credit Corp. 5.450% 1/03/97 17,427,000
34,918,000 Beneficial Corp. 5.800% 1/09/97 34,918,000
21,876,000 Ford Motor
Credit Co. 6.100% 1/06/97 21,876,000
</TABLE>
B-51
<PAGE>
- ----------------------------------------------------------------
Metropolitan Series Fund, Inc.
- ----------------------------------------------------------------
Schedule of Investments
- ----------------------------------------------------------------
AGGRESSIVE GROWTH PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Face Interest Monthly Value
Amount Issue Rate Date (Note 1A)
- ------------------------------------------------------------------
SHORT TERM OBLIGATIONS: (CONTINUED)
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
$16,967,000 General Electric
Capital Corp. 5.600% 1/07/97 $ 16,967,000
19,618,000 General Electric
Capital Corp. 5.750% 1/02/97 19,618,000
25,000,000 Philip Morris
Cos., Inc. 5.550% 1/08/97 24,973,021
--------------
TOTAL SHORT TERM OBLIGATIONS
(Cost: $142,773,021) ................ 142,773,021
--------------
- ------------------------------------------------------------------
TOTAL INVESTMENTS: 99.3%
(Cost: $1,175,661,535) .............. 1,312,523,770
OTHER ASSETS LESS LIABILITIES: 0.7%.. 9,325,594
--------------
TOTAL NET ASSETS: 100.0%............. $1,321,849,364
==============
- ------------------------------------------------------------------
</TABLE>
*Non-income producing security.
**Restricted Securities see note 2.
Additional information on restricted securities as follows:
<TABLE>
<CAPTION>
Valuation
as of
Acquisition Acquisition December 31,
Issue Date Cost 1996
----- ---- ---- ----
<S> <C> <C> <C>
Excalibur Technologies Corp. 12/04/96 $ 2,959,290 $ 2,653,195
Pvt.
Republic Industries, Inc. 11/07/96 22,125,000 22,349,742
Theratx, Inc. 144A Cvt. Sub. 2/09/95 2,500,000 2,312,500
</TABLE>
The aggregate value of restricted securities at December 31, 1996 was
$27,315,437 or 2.07% of the Aggressive Growth's Portfolio's net assets.
See Notes to Financial Statements.
B-52
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
STOCK INDEX PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- --------------------------------------------------------------------------------
COMMON STOCK: 100.0%
- --------------------------------------------------------------------------------
<S> <C> <C>
Aerospace: 2.6%
48,100 Allied-Signal, Inc. $ 3,222,700
72,162 Boeing Co. 7,676,233
8,600 *Computer Sciences Corp. 706,275
12,600 General Dynamics Corp. 888,300
36,313 Lockheed Martin Corp. 3,322,640
43,000 McDonnell-Douglas Corp. 2,752,000
12,400 Northrop Grumman Corp. 1,026,100
39,400 Raytheon Co. 1,896,125
38,400 Rockwell International Corp. 2,337,600
12,300 Textron, Inc. 1,159,275
56,800 United Technologies Corp. 3,748,800
------------
28,736,048
- --------------------------------------------------------------------------------
Automotive: 2.6%
157,300 Chrysler Corp. 5,190,900
32,500 Dana Corp. 1,060,312
21,400 Eaton Corp. 1,492,650
34,900 Echlin, Inc. 1,103,712
228,000 Ford Motor Co. 7,267,500
142,332 General Motors Corp. 7,935,009
11,850 Genuine Parts Co. 527,325
12,710 *Navistar International Corp. 115,979
5,865 PACCAR, Inc. 398,820
41,950 Snap-On, Inc. 1,494,469
9,200 Timken Co. 422,050
34,200 TRW, Inc. 1,692,900
------------
28,701,626
- --------------------------------------------------------------------------------
Banking: 8.4%
32,800 Ahmanson (H.F.) & Co. 1,066,000
87,795 Banc One Corp. 3,775,185
27,552 Bank of Boston Corp. 1,770,216
87,000 Bank of New York Co., Inc. 2,936,250
77,376 BankAmerica Corp. 7,718,256
17,700 Bankers Trust New York Corp. 1,526,625
27,800 Barnett Banks, Inc. 1,143,275
31,100 Boatmen's Bancshares, Inc. 2,004,006
82,434 Chase Manhattan Corp. 7,357,234
91,514 Citicorp 9,425,942
16,000 Comerica, Inc. 838,000
55,500 CoreStates Financial Corp. 2,879,062
14,700 Fifth Third Bancorp 923,344
30,100 First Bank Systems, Inc. 2,054,325
69,358 First Chicago NBD Corp. 3,727,992
54,285 First Union Corp. 4,017,090
61,415 Fleet Financial Group, Inc. 3,063,073
22,500 Golden West Financial Corp. 1,420,312
47,200 Great Western Financial Corp. 1,368,800
21,100 Green Tree Financial Corp. 814,987
56,103 KeyCorp 2,833,202
54,650 MBNA Corp. 2,267,975
27,000 Mellon Bank Corp. 1,917,000
34,199 Morgan (J.P.) & Co., Inc. 3,338,677
35,400 National City Corp. 1,588,575
63,422 NationsBank, Inc. 6,199,501
76,400 Norwest Corp. 3,323,400
57,900 PNC Bank Corp. 2,178,488
13,100 Republic New York Corp. 1,069,288
35,400 SunTrust Banks, Inc. 1,743,450
23,100 U.S. Bancorp 1,038,056
24,900 Wachovia Corp. 1,406,850
18,463 Wells Fargo & Co. 4,980,394
------------
93,714,830
- --------------------------------------------------------------------------------
Broadcasting: 1.0%
59,000 Comcast Corp. Cl. A Spl. 1,050,937
17,900 *King World Productions, Inc. 660,063
10,070 *TCI Satellite Entertainment, Inc. 99,441
100,700 *Tele-Communications, Inc. Cl. A 1,315,394
104,720 Time Warner, Inc. 3,927,000
120,400 *U.S. West, Inc.-Media Group 2,227,400
62,226 *Viacom, Inc. Cl. B 2,170,132
------------
11,450,367
- --------------------------------------------------------------------------------
</TABLE>
B-53
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
STOCK INDEX PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- ----------------------------------------------------------------
COMMON STOCK: (CONTINUED)
- ----------------------------------------------------------------
<S> <C> <C>
Building & Construction: 0.7%
7,500 Armstrong World Industries, Inc. $ 521,250
36,000 Crane Co. 1,044,000
16,400 Dover Corp. 824,100
17,700 Mallinckrodt Group, Inc. 781,013
21,300 Masco Corp. 766,800
17,300 Owens-Corning Fiberglas Corp. 737,413
13,600 Sherwin-Williams Co. 761,600
15,600 Stanley Works 421,200
24,000 Willamette Industries, Inc. 1,671,000
------------
7,528,376
- ----------------------------------------------------------------
Business Services: 1.3%
57,900 Automatic Data Processing, Inc. 2,482,462
37,000 Block (H & R), Inc. 1,073,000
66,450 *CUC International, Inc. 1,578,187
33,700 Deluxe Corp. 1,103,675
19,200 Ecolab, Inc. 722,400
79,400 First Data Corp. 2,898,100
56,700 Interpublic Group of Cos., Inc. 2,693,250
46,300 Laidlaw, Inc. Cl. B 532,450
17,600 Safety-Kleen Corp. 288,200
38,700 Service Corp. International 1,083,600
------------
14,455,324
- ----------------------------------------------------------------
Chemicals: 3.1%
20,100 Air Products & Chemicals, Inc. 1,389,412
41,300 Dow Chemical Co. 3,236,887
108,800 Du Pont (E.I.) de Nemours & Co. 10,268,000
14,675 Eastman Chemical Co. 810,794
18,700 *FMC Corp. 1,311,337
15,100 Grace (W.R.) & Co. 781,425
13,200 Great Lakes Chemical Corp. 617,100
13,400 Hercules, Inc. 579,550
110,500 Monsanto Co. 4,295,688
29,400 Morton International, Inc. 1,198,050
28,800 Nalco Chemical Co. 1,040,400
37,500 Pall Corp. 956,250
43,600 PPG Industries, Inc. 2,447,050
24,500 Praxair, Inc. 1,130,063
22,000 Rohm & Haas Co. 1,795,750
18,500 Sigma Aldrich Corp. 1,155,094
15,200 Union Carbide Corp. 621,300
23,100 Williams Cos., Inc. 866,250
------------
34,500,400
- ----------------------------------------------------------------
Containers & Glass: 0.2%
18,800 Bemis Co., Inc. 693,250
18,400 Crown Cork & Seal Co., Inc. 1,000,500
------------
1,693,750
- ----------------------------------------------------------------
Cosmetics: 0.3%
22,600 Alberto-Culver Co. Cl. B Cvt. 1,084,800
29,200 Avon Products, Inc. 1,668,050
13,500 International Flavors & Fragrances,
Inc. 607,500
------------
3,360,350
- ----------------------------------------------------------------
Drugs & Health Care: 6.5%
34,900 Allergan, Inc. 1,243,312
25,000 *ALZA Corp. 646,875
122,600 American Home Products Corp. 7,187,425
43,600 *Amgen, Inc. 2,373,475
49,000 Bausch & Lomb, Inc. 1,715,000
62,100 Biomet, Inc. 943,144
94,600 Bristol-Myers Squibb Co. 10,287,750
108,600 Lilly (Eli) & Co. 7,927,800
233,200 Merck & Co., Inc. 18,481,100
123,500 Pfizer, Inc. 10,235,063
87,015 Pharmacia & Upjohn, Inc. 3,447,969
69,700 Schering-Plough Corp. 4,513,075
48,200 Warner-Lambert Co. 3,615,000
------------
72,616,988
- ----------------------------------------------------------------
Electrical Equipment: 4.3%
29,200 AMP, Inc. 1,120,550
11,200 Black & Decker Corp. 337,400
10,200 Briggs & Stratton Corp. 448,800
</TABLE>
B-54
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
STOCK INDEX PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- ----------------------------------------------------------------
COMMON STOCK: (CONTINUED)
- ----------------------------------------------------------------
<S> <C> <C>
Electrical Equipment: (Continued)
41,600 Emerson Electric Co. $ 4,024,800
325,900 General Electric Co. 32,223,362
23,600 General Signal Corp. 1,008,900
13,600 Grainger (W.W.), Inc. 1,091,400
12,200 Johnson Controls, Inc. 1,011,075
29,000 National Service Industries, Inc. 1,083,875
18,600 Raychem Corp. 1,490,325
18,500 Tandy Corp. 814,000
25,100 Thomas & Betts Corp. 1,113,813
29,200 Tyco International Ltd. 1,543,950
55,100 Westinghouse Electric Corp. 1,095,113
------------
48,407,363
- ----------------------------------------------------------------
Electronics: 5.6%
44,800 *Advanced Micro Devices, Inc. 1,153,600
15,500 *Andrew Corp. 822,469
28,400 *Applied Materials, Inc. 1,020,625
87,300 *DSC Communications Corp. 1,565,944
27,400 *General Instrument 592,525
14,300 Harris Corp. 981,337
200,800 Hewlett-Packard Co. 10,090,200
22,500 Honeywell, Inc. 1,479,375
162,100 Intel Corp. 21,224,969
37,900 *LSI Logic Corp. 1,013,825
125,797 Lucent Technologies, Inc. 5,818,111
40,700 Micron Technology, Inc. 1,185,388
117,300 Motorola, Inc. 7,199,288
31,600 *National Semiconductor Corp. 770,250
48,700 Northern Telecom Ltd. 3,013,313
18,300 Perkin-Elmer Corp. 1,077,413
71,900 Scientific-Atlanta, Inc. 1,078,500
28,000 *Tellabs, Inc. 1,055,250
31,100 Texas Instruments, Inc. 1,982,625
------------
63,125,007
- ----------------------------------------------------------------
Financial Services: 3.1%
90,787 American Express Co. 5,129,465
17,000 Beneficial Corp. 1,077,375
35,013 Dean Witter Discover & Co. 2,319,611
30,900 Federal Home Loan Mortgage Corp. 3,402,862
207,900 Federal National Mortgage Assoc. 7,744,275
15,900 Household International, Inc. 1,466,775
22,300 Loews Corp. 2,101,775
28,800 Merrill Lynch & Co., Inc. 2,347,200
29,100 Morgan Stanley Group, Inc. 1,662,338
11,700 Salomon, Inc. 551,363
20,400 Transamerica Corp. 1,611,600
124,965 Travelers Group, Inc. 5,670,287
------------
35,084,926
- ----------------------------------------------------------------
Food & Beverages: 6.1%
90,200 Anheuser-Busch Co., Inc. 3,608,000
134,051 Archer-Daniels-Midland Co. 2,949,122
11,700 Brown-Forman Corp. Cl. B 535,275
42,200 Campbell Soup Co. 3,386,550
489,600 Coca-Cola Co. 25,765,200
49,850 ConAgra, Inc. 2,480,037
11,800 Coors (Adolph) Co. Cl. B 225,675
27,100 CPC International, Inc. 2,100,250
27,800 General Mills, Inc. 1,761,825
68,600 Heinz (H.J.) Co. 2,452,450
33,600 Hershey Foods Corp. 1,470,000
33,700 Kellogg Co. 2,211,563
298,200 PepsiCo, Inc. 8,722,350
19,400 Pioneer Hi Bred International, Inc. 1,358,000
23,300 Quaker Oats Co. 888,313
25,100 Ralston-Purina Group 1,841,713
88,800 Sara Lee Corp. 3,307,800
33,000 Sysco Corp. 1,076,625
32,700 Whitman Corp. 748,013
29,500 Wrigley (Wm.), Jr. Co. 1,659,375
------------
68,548,136
- ----------------------------------------------------------------
</TABLE>
B-55
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
STOCK INDEX PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- --------------------------------------------------------------------------------
COMMON STOCK: (CONTINUED)
- --------------------------------------------------------------------------------
<S> <C> <C>
Forest Products & Paper: 1.5%
18,900 Alco Standard Corp. $ 975,712
37,000 Boise Cascade Corp. 1,174,750
14,600 Champion International Corp. 631,450
14,700 Georgia-Pacific Corp. 1,058,400
55,900 International Paper Co. 2,256,963
25,700 James River Corp. 851,313
52,760 Kimberly-Clark Corp. 5,025,390
32,100 Louisiana-Pacific Corp. 678,113
10,354 Stone Container Corp. 154,016
16,200 Temple Inland, Inc. 876,825
17,100 Union Camp Corp. 816,525
18,300 Westvaco Corp. 526,125
30,200 Weyerhaeuser Co. 1,430,725
------------
16,456,307
- --------------------------------------------------------------------------------
Hospital Management: 0.9%
126,100 *Beverly Enterprises, Inc. 1,607,775
130,085 Columbia/HCA Healthcare Corp. 5,300,964
48,600 *Humana, Inc. 929,475
28,800 Manor Care, Inc. 777,600
40,200 *Tenet Healthcare Corp. 879,375
14,900 United Healthcare Corp. 670,500
------------
10,165,689
- --------------------------------------------------------------------------------
Hospital Supply: 2.7%
153,400 Abbott Laboratories, Inc. 7,785,050
48,400 Baxter International, Inc. 1,984,400
14,400 Becton, Dickinson & Co. 624,600
31,500 *Boston Scientific Corp. 1,890,000
255,000 Johnson & Johnson 12,686,250
43,800 Medtronic, Inc. 2,978,400
40,650 *St. Jude Medical, Inc. 1,732,706
23,000 United States Surgical Corp. 905,625
------------
30,587,031
- --------------------------------------------------------------------------------
Hotel & Restaurant: 0.9%
17,100 Darden Restaurants, Inc. 149,625
24,900 *Harrah's Entertainment, Inc. 494,887
21,500 *HFS, Inc. 1,284,625
31,200 Hilton Hotels Corp. 815,100
27,100 Marriott International 1,497,275
127,900 McDonald's Corp. 5,787,475
11,300 *Shoney's, Inc. 79,100
24,100 Wendy's International, Inc. 494,050
------------
10,602,137
- --------------------------------------------------------------------------------
Household Appliances & Home Furnishings: 0.2%
49,800 Maytag Corp. 983,550
19,400 Newell Co. 611,100
8,600 Whirlpool Corp. 400,975
------------
1,995,625
- --------------------------------------------------------------------------------
Household Products: 3.1%
9,600 Clorox Co. 963,600
29,300 Colgate-Palmolive Co. 2,702,925
45,600 Corning, Inc. 2,109,000
84,000 Gillette Co. 6,531,000
134,700 Procter & Gamble Co. 14,480,250
26,700 Rubbermaid, Inc. 607,425
30,200 Tupperware Corp. 1,619,475
31,700 Unilever NV 5,555,425
------------
34,569,100
- --------------------------------------------------------------------------------
Insurance: 3.5%
28,700 Aetna, Inc. 2,296,000
37,400 Alexander & Alexander Services, Inc. 649,825
83,099 Allstate Corp. 4,809,355
37,800 American General Corp. 1,545,075
92,750 American International Group, Inc. 10,040,187
17,100 Aon Corp. 1,062,337
32,600 Chubb Corp. 1,752,250
13,500 CIGNA Corp. 1,844,437
19,400 General Re Corp. 3,060,350
23,200 ITT Hartford Group, Inc. 1,566,000
9,000 Jefferson-Pilot Corp. 509,625
13,000 Lincoln National Corp. 682,500
</TABLE>
B-56
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
STOCK INDEX PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- --------------------------------------------------------------------------------
COMMON STOCK: (CONTINUED)
- --------------------------------------------------------------------------------
<S> <C> <C>
Insurance: (Continued)
11,700 Marsh & McLennan Cos., Inc. $ 1,216,800
21,800 Providian Corp. 1,119,975
37,900 SAFECO Corp. 1,494,681
21,700 St. Paul Cos., Inc. 1,272,163
24,500 Torchmark Corp. 1,237,250
21,100 UNUM Corp. 1,524,475
30,300 USF&G Corp. 632,513
20,300 USLIFE Corp. 674,975
------------
38,990,773
- --------------------------------------------------------------------------------
Leisure: 0.9%
43,600 Brunswick Corp. 1,046,400
126,999 Disney (Walt) Co. 8,842,305
------------
9,888,705
- --------------------------------------------------------------------------------
Liquor: 0.2%
65,200 Seagram Ltd. 2,526,500
- --------------------------------------------------------------------------------
Machinery: 1.3%
24,800 Browning-Ferris Industries, Inc. 651,000
13,200 Case Corp. 719,400
34,800 Caterpillar, Inc. 2,618,700
13,100 Cooper Industries, Inc. 551,837
18,900 Cummins Engine Co., Inc. 869,400
49,800 Deere & Co. 2,023,125
14,000 Fluor Corp. 878,500
6,000 Foster Wheeler Corp. 222,750
21,600 Illinois Tool Works, Inc. 1,725,300
24,100 Ingersoll-Rand Co. 1,072,450
13,800 Parker Hannifin Corp. 534,750
89,600 WMX Technologies, Inc. 2,923,200
------------
14,790,412
- --------------------------------------------------------------------------------
Metals-Aluminum: 0.4%
33,600 Alcan Aluminium Ltd. 1,129,800
28,700 Aluminum Co. of America 1,829,625
18,700 Reynolds Metals Co. 1,054,213
------------
4,013,638
- --------------------------------------------------------------------------------
Metals-Gold: 0.5%
79,100 Barrick Gold Corp. 2,274,125
42,100 Echo Bay Mines Ltd. 278,912
67,300 Homestake Mining Co. 959,025
14,190 Newmont Mining Corp. 635,003
32,900 Placer Dome, Inc. 715,575
50,707 Santa Fe Pacific Gold Corp. 779,620
------------
5,642,260
- --------------------------------------------------------------------------------
Metals-Non-Ferrous: 0.2%
12,600 ASARCO, Inc. 313,425
76,650 Engelhard Corp. 1,465,931
30,106 Inco Ltd. 959,629
------------
2,738,985
- --------------------------------------------------------------------------------
Metals-Steel & Iron: 0.2%
9,500 *Bethlehem Steel Corp. 85,500
10,400 Inland Steel Industries, Inc. 208,000
13,700 Nucor Corp. 698,700
46,600 Worthington Industries, Inc. 847,538
------------
1,839,738
- --------------------------------------------------------------------------------
Mining: 0.2%
25,300 Freeport-McMoRan Copper & Gold, Inc. 755,837
Cl. B
21,100 Phelps-Dodge Corp. 1,424,250
------------
2,180,087
- --------------------------------------------------------------------------------
Miscellaneous: 0.3%
43,700 Allegheny Teldyne, Inc. 1,005,100
29,300 *Cognizant Corp. 966,900
19,800 Guidant Corp. 1,128,600
5,220 *Newport News Shipbuilding, Inc. 78,300
------------
3,178,900
- --------------------------------------------------------------------------------
Multi-Industry: 0.9%
25,400 Harcourt General, Inc. 1,171,575
17,900 ITT Corp. 776,413
31,000 ITT Industries, Inc. 759,500
82,900 Minnesota Mining & Manufacturing Co. 6,870,338
------------
9,577,826
- --------------------------------------------------------------------------------
Newspapers: 0.5%
17,900 Dow Jones & Co., Inc. 606,362
</TABLE>
B-57
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
STOCK INDEX PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- --------------------------------------------------------------------------------
COMMON STOCK: (CONTINUED)
- --------------------------------------------------------------------------------
<S> <C> <C>
Newspapers: (Continued)
26,100 Gannett Co., Inc. $ 1,954,237
20,800 Knight-Ridder, Inc. 795,600
26,400 New York Times Co. Cl. A 1,003,200
18,900 Times Mirror Co. Cl. A 940,275
10,700 Tribune Co. 843,963
-----------
6,143,637
- --------------------------------------------------------------------------------
Office & Business Equipment: 4.3%
30,900 *3 Com Corp. 2,265,356
50,900 *Amdahl Corp. 617,162
31,200 *Apple Computer, Inc. 649,350
39,800 Avery Dennison Corp. 1,407,925
27,700 *Bay Networks 578,237
30,800 *Cabletron Systems, Inc. 1,024,100
13,100 *Ceridian Corp. 530,550
127,800 Cisco Systems, Inc. 8,139,262
52,400 COMPAQ Computer Corp. 3,890,700
38,400 *Data General Corp. 556,800
32,400 *Dell Computer Corp. 1,723,275
19,400 *Digital Equipment Corp. 705,675
34,500 *EMC Corp. 1,142,812
59,700 *Intergraph Corp. 619,388
103,000 International Business Machines Corp. 15,553,000
10,000 Moore Corp. Ltd. 203,750
27,200 Pitney Bowes, Inc. 1,482,400
37,400 Seagate Technology 1,477,300
58,000 *Sun Microsystems, Inc. 1,489,875
83,200 Tandem Computers, Inc. 1,144,000
61,800 *Unisys Corp. 417,150
55,500 Xerox Corp. 2,920,688
-----------
48,538,755
- --------------------------------------------------------------------------------
Oil & Gas Exploration: 0.2%
26,000 Louisiana Land & Exploration Co. 1,394,250
22,600 *Santa Fe Energy Resources, Inc. 313,575
37,350 Union Pacific Resources Group, Inc. 1,092,488
-----------
2,800,313
- --------------------------------------------------------------------------------
Oil-Domestic: 1.9%
12,800 Amerada Hess Corp. 740,800
93,100 Amoco Corp. 7,494,550
31,100 Ashland Oil, Inc. 1,364,512
28,000 Atlantic Richfield Co. 3,710,000
13,900 Kerr-McGee Corp. 1,000,800
50,000 Occidental Petroleum Corp. 1,168,750
23,500 *Oryx Energy Co. 581,625
41,700 Phillips Petroleum Co. 1,845,225
26,100 Tenneco, Inc. 1,177,763
44,472 Unocal Corp. 1,806,675
38,900 USX-Marathon Group 928,738
-----------
21,819,438
- --------------------------------------------------------------------------------
Oil-International: 5.8%
126,100 Chevron Corp. 8,196,500
246,100 Exxon Corp. 24,117,800
76,300 Mobil Corp. 9,327,675
109,200 Royal Dutch Petroleum Co. 18,645,900
48,700 Texaco, Inc. 4,778,688
-----------
65,066,563
- --------------------------------------------------------------------------------
Oil-Services: 1.0%
23,800 Baker Hughes, Inc. 821,100
12,100 Coastal Corp. 591,387
21,000 Dresser Industries, Inc. 651,000
17,500 Halliburton Co. 1,054,375
14,100 Helmerich & Payne, Inc. 734,962
21,300 McDermott International, Inc. 354,113
76,900 Rowan Cos., Inc. 1,739,863
45,900 Schlumberger Ltd. 4,584,263
14,500 *Western Atlas, Inc. 1,027,688
-----------
11,558,751
- --------------------------------------------------------------------------------
Photography: 0.5%
62,700 Eastman Kodak Co. 5,031,675
21,200 Polaroid Corp. 922,200
-----------
5,953,875
- --------------------------------------------------------------------------------
</TABLE>
B-58
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
STOCK INDEX PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- --------------------------------------------------------------------------------
COMMON STOCK: (CONTINUED)
- --------------------------------------------------------------------------------
<S> <C> <C>
Printing & Publishing: 0.3%
18,700 American Greetings Corp. Cl. A $ 531,781
25,100 Donnelley (R.R.) & Sons Co. 787,512
29,300 Dun & Bradstreet Corp. 695,875
16,000 McGraw-Hill Cos., Inc. 738,000
15,200 Meredith Corp. 801,800
------------
3,554,968
- --------------------------------------------------------------------------------
Retail Grocery: 0.5%
35,300 Albertson's, Inc. 1,257,562
25,100 American Stores Co. 1,025,962
50,595 Fleming Cos., Inc. 872,764
21,400 Giant Foods, Inc. Cl. A 738,300
29,400 Kroger Co. 1,367,100
19,800 Winn-Dixie Stores, Inc. 626,175
------------
5,887,863
- --------------------------------------------------------------------------------
Retail Trade: 3.8%
123,400 *Charming Shoppes, Inc. 620,856
35,300 Circuit City Stores, Inc. 1,063,412
31,400 CVS Corp. 1,299,175
40,800 Dayton-Hudson Corp. 1,601,400
20,600 Dillard Department Stores, Inc. Cl. A 636,025
26,500 *Federated Department Stores 904,312
91,233 Home Depot, Inc. 4,573,054
71,000 *K Mart Corp. 736,625
59,900 Limited, Inc. 1,100,663
100 Longs Drug Stores Corp. 4,913
30,100 Lowes Cos., Inc. 1,068,550
38,400 May Department Stores Co. 1,795,200
40,800 Nordstrom, Inc. 1,445,850
34,800 Penney (J.C.) Co., Inc. 1,696,500
38,600 Pep Boys-Manny, Moe & Jack 1,186,950
29,767 *Price/Costco, Inc. 749,756
38,300 Rite-Aid Corp. 1,522,425
72,600 Sears, Roebuck & Co. 3,348,675
22,200 SuperValu, Inc. 629,925
50,900 The Gap, Inc. 1,533,362
25,000 TJX Cos., Inc. 1,184,375
40,400 *Toys'R Us, Inc. 1,212,000
445,800 Wal-Mart Stores, Inc. 10,197,675
44,600 Walgreen Co. 1,784,000
27,200 *Woolworth Corp. 595,000
------------
42,490,678
- --------------------------------------------------------------------------------
Software: 2.7%
64,900 Autodesk, Inc. 1,825,312
73,900 Computer Associates International, 3,676,525
Inc.
235,200 *Microsoft Corp. 19,448,100
97,500 *Novell, Inc. 923,203
118,900 *Oracle Systems Corp. 4,956,644
------------
30,829,784
- --------------------------------------------------------------------------------
Textiles & Apparel: 0.6%
23,500 Liz Claiborne, Inc. 907,688
55,600 Nike, Inc. Cl. B 3,322,100
19,800 *Reebok International Ltd. 831,600
4,200 Russell Corp. 124,950
1,500 Springs Industries, Inc. 64,500
7,000 Stride Rite Corp. 70,000
23,100 VF Corp. 1,559,250
------------
6,880,088
- --------------------------------------------------------------------------------
Tires & Rubber: 0.3%
44,200 Cooper Tire & Rubber Co. 872,950
21,900 Goodrich (B.F.) Co. 886,950
26,400 Goodyear Tire And Rubber Co. 1,356,300
------------
3,116,200
- --------------------------------------------------------------------------------
Tobacco: 1.9%
25,500 American Brands, Inc. 1,265,437
165,700 Philip Morris Cos., Inc. 18,661,963
37,400 UST, Inc. 1,210,825
------------
21,138,225
- --------------------------------------------------------------------------------
Toys & Amusements: 0.2%
27,900 Hasbro, Inc. 1,084,612
49,213 Mattel, Inc. 1,365,661
------------
2,450,273
- --------------------------------------------------------------------------------
</TABLE>
B-59
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
STOCK INDEX PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- --------------------------------------------------------------------------------
COMMON STOCK: (CONTINUED)
- --------------------------------------------------------------------------------
<S> <C> <C>
Transportation-Airlines: 0.4%
14,800 *AMR Corp. $ 1,304,250
13,600 Delta Air Lines, Inc. 963,900
13,800 *Federal Express Corp. 614,100
15,400 Southwest Airlines Co. 340,725
53,600 *USAir Group, Inc. 1,252,900
------------
4,475,875
- --------------------------------------------------------------------------------
Transportation-Railroad: 1.0%
27,401 Burlington Northern Santa Fe Corp. 2,366,761
19,700 Conrail, Inc. 1,962,612
46,700 CSX Corp. 1,973,075
29,200 Norfolk Southern Corp. 2,555,000
44,100 Union Pacific Corp. 2,651,513
------------
11,508,961
- --------------------------------------------------------------------------------
Transportation-Trucking: 0.1%
35,800 Ryder Systems, Inc. 1,006,875
- --------------------------------------------------------------------------------
Utilities-Electric: 2.5%
27,400 American Electric Power Co., Inc. 1,126,825
28,700 Baltimore Gas & Electric Co. 767,725
18,800 Carolina Power & Light Co. 686,200
36,000 Central & South West Corp. 922,500
21,892 CINergy Corp. 730,645
32,200 Consolidated Edison Co. of New York, Inc. 941,850
22,600 Dominion Resources, Inc. 870,100
48,000 DTE Energy Co. 1,554,000
29,100 Duke Power Co. 1,345,875
61,000 Edison International 1,212,375
29,400 Entergy Corp. 815,850
27,900 FPL Group, Inc. 1,283,400
55,100 GPU, Inc. 1,852,737
28,400 Houston Industries, Inc. 642,550
96,000 *Niagara Mohawk Power Corp. 948,000
11,700 Northern States Power Co. 536,738
30,400 Ohio Edison Co. 691,600
66,800 Pacific Gas & Electric Co. 1,402,800
49,400 PacifiCorp 1,012,700
23,900 PECO Energy Corp. 603,475
29,800 PP&L Resources, Inc. 685,400
33,500 Public Service Enterprise Group, Inc. 912,875
123,200 Southern Co. 2,787,400
39,000 Texas Utilities Co. 1,589,250
42,900 Unicom Corp. 1,163,663
21,500 Union Electric Co. 827,750
------------
27,914,283
- --------------------------------------------------------------------------------
Utilities-Gas Distribution & Pipelines: 1.3%
32,200 Burlington Resources, Inc. 1,622,075
17,000 Columbia Gas Systems, Inc. 1,081,625
21,100 Consolidated Natural Gas Co. 1,165,775
2,427 El Paso Natural Gas Co. 122,579
39,900 Enron Corp. 1,720,687
64,200 ENSERCH Corp. 1,476,600
21,700 NICOR, Inc. 775,775
54,118 NorAm Energy Corp. 832,064
34,375 ONEOK, Inc. 1,031,250
44,500 Pacific Enterprises 1,351,688
23,300 Panenergy Corp. 1,048,500
24,900 Peoples Energy Corp. 843,488
27,800 Sonat, Inc. 1,431,700
------------
14,503,806
- --------------------------------------------------------------------------------
Utilities-Telephone: 6.5%
98,700 *AirTouch Communications, Inc. 2,492,175
42,300 ALLTEL Corp. 1,327,162
102,300 Ameritech Corp. 6,201,937
321,935 AT&T Corp. 14,004,172
93,600 Bell Atlantic Corp. 6,060,600
189,200 BellSouth Corp. 7,638,950
198,300 GTE Corp. 9,022,650
143,100 MCI Communications Corp. 4,677,581
</TABLE>
B-60
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
STOCK INDEX PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- --------------------------------------------------------------------------------
COMMON STOCK: (CONTINUED)
- --------------------------------------------------------------------------------
<S> <C> <C>
Utilities-Telephone: (Continued)
83,500 NYNEX Corp. $ 4,018,438
78,067 Pacific Telesis Group 2,868,962
115,300 SBC Communications, Inc. 5,966,775
93,800 Sprint Corp. 3,740,275
94,700 U.S. West, Inc.-Communications Group 3,054,075
58,800 *WorldCom, Inc. 1,532,475
72,606,227
--------------
TOTAL COMMON STOCK
(Cost: $818,260,380) .............................. 1,121,912,642
--------------
- --------------------------------------------------------------------------------
PREFERRED STOCK: 0.0%
- --------------------------------------------------------------------------------
Hospital Supply: 0.0%
15,100 *Fresenius National Medical Care, 1,774
Inc. Pfd. Cl. D
--------------
TOTAL PREFERRED STOCK
(Cost: $2,435) .................................... 1,774
--------------
<CAPTION>
- --------------------------------------------------------------------------------
Face Value
Amount Issue (Note 1A)
- --------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 0.5%
- --------------------------------------------------------------------------------
<S> <C> <C>
$6,150,000 U.S. Treasury Bills, 4.82% to 5.00%
with maturities to 2/13/97 $ 6,119,501
--------------
TOTAL SHORT TERM OBLIGATIONS
(Cost: $6,119,501) ................................ 6,119,501
--------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS: 100.5%
(Cost: $824,382,316) .............................. 1,128,033,917
OTHER ASSETS LESS LIABILITIES: (0.5)% (5,736,583)
--------------
TOTAL NET ASSETS: 100.0%........................... $1,122,297,334
==============
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
*Non-income producing security.
B-61
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
INTERNATIONAL STOCK PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Shares Issue (Note 1A)
- --------------------------------------------------------------------------------
COMMON STOCK: 88.9%
- --------------------------------------------------------------------------------
Argentina: 0.5%
<S> <C> <C>
70,000 Quilmes Industrial SA $ 638,750
32,000 YPF SA 808,000
-----------
Total Investments in Argentina 1,446,750
- --------------------------------------------------------------------------------
Australia: 3.9%
130,000 *Amcor Ltd. 835,943
500,000 *Burns, Philp & Co. Ltd 890,231
85,000 *Commonwealth Bank of Australia 813,449
240,000 *CSR Ltd. 839,361
50,000 *Lend Lease Corp. 969,716
1,000,000 MIM Holdings Ltd. 1,398,935
140,000 National Australia Bank 1,646,928
300,000 *News Corp. Ltd. 1,583,340
350,000 Resolute Samantha 728,877
340,000 Santos Ltd. 1,378,269
375,000 *Woolworths Ltd. 903,148
-----------
Total Investments in Australia 11,988,197
- --------------------------------------------------------------------------------
Austria: 1.3%
10,000 Bohler Uddeholm AG 715,704
6,000 EVN Energie-Versorgung AG 903,172
10,000 OMV Handels AG 1,127,580
30,000 VA Stahl AG 1,067,184
-----------
Total Investments in Austria 3,813,640
- --------------------------------------------------------------------------------
Belgium: 1.1%
6,000 *Arbed SA 652,296
7,400 *Dexia Credit Communal de Belgique 675,219
7,500 *GPE Bruxelles 965,645
3,500 *Petrofina SA 1,114,175
-----------
Total Investments in Belgium 3,407,335
- --------------------------------------------------------------------------------
Canada: 0.7%
173,000 *Akiko Gold Resources Ltd. 59,381
1,037,000 *Epicore Networks, Inc. 833,053
282,330 *Isleinvest Ltd. 1,237,114
-----------
Total Investments in Canada 2,129,548
- --------------------------------------------------------------------------------
China: 0.7%
595,000 *Advanced Material Resources Ltd. 1,325,312
210,000 China Merchants 145,258
1,456,000 China North Industries 596,960
-----------
Total Investments in China 2,067,530
- --------------------------------------------------------------------------------
Croatia: 0.4%
55,000 *Zagrebacka Banka GDR 1,120,625
-----------
Total Investments in Croatia 1,120,625
- --------------------------------------------------------------------------------
Czech Republic: 0.3%
32,000 *Komercni Banka GDR 867,200
-----------
Total Investments in Czech Republic 867,200
- --------------------------------------------------------------------------------
Denmark: 0.5%
8,280 *Novo Nordisk AS 1,560,196
-----------
Total Investments in Denmark 1,560,196
- --------------------------------------------------------------------------------
Finland: 0.4%
73,500 *Valmet Corp. 1,294,239
-----------
Total Investments in Finland 1,294,239
- --------------------------------------------------------------------------------
France: 8.0%
53,118 AXA 3,378,422
28,000 *Capital Gemini 1,353,994
13,000 *Cie Financiere Paribas 879,194
22,750 *Credit Local de France 1,981,883
19,000 *Eaux Cie Generale 2,354,630
20,230 *Elf Aquitaine SA 1,841,501
3,300 *Hermes International 915,872
30,000 Lafarge SA 1,799,942
5,500 *Peugeot SA 619,061
66,000 Rhone-Poulenc SA 2,250,246
7,000 Saint-Gobain 990,267
25,000 *SGS-Thomson Microelectronics NV 1,768,334
10,000 Synthelabo 1,081,237
20,000 Total SA B 1,626,674
50,000 Usinor Sacilor 727,571
15,000 Valeo SA 925,123
-----------
Total Investments in France 24,493,951
- --------------------------------------------------------------------------------
Germany: 7.6%
750 *Allianz AG Holdings 1,364,700
87,500 BASF AG 3,370,808
</TABLE>
B-62
<PAGE>
- -------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- -------------------------------------------------------------------------------
Schedule of Investments
- -------------------------------------------------------------------------------
INTERNATIONAL STOCK PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- -------------------------------------------------------------------------------
COMMON STOCK: (CONTINUED)
- -------------------------------------------------------------------------------
Germany: (Continued)
<C> <S> <C>
32,500 Bayer AC $ 1,326,358
2,300 Bayer Motoren Werk AG 1,603,782
80,000 * Commerzbank AG 2,032,753
57,500 * Daimler-Benz AG 3,960,879
50,000 Deutsche Telekom 1,054,393
3,000 Mannesmann AG 1,300,364
5,050 Preussag AG 1,143,700
40,000 RWE AG 1,694,827
6,000 Thyssen AG 1,064,466
17,500 Veba AG 1,021,152
5,200 Volkswagen AG 2,162,724
-----------
Total Investments in Germany 23,091,906
- ------------------------------------------------------------------------------
Hong Kong: 4.3%
160,000 * Cheung Kong Holdings 1,422,199
1,500,000 Cosco Pacific Ltd. 1,745,426
1,790,000 * Goldlion Holdings Ltd. 1,469,584
735,000 Hong Kong & China Gas Co. Ltd. 1,420,680
200,000 * Hutchison Whampoa 1,570,884
620,000 Johnson Electric Holdings Ltd. 1,715,431
500,000 * Kerry Properties 1,370,483
1,250,000 South China Morning Post Ltd. 1,034,327
120,000 * Swire Pacific Cl. A 1,144,224
200,000 * Swire Pacific Cl. B 302,541
-----------
Total Investments in Hong Kong 13,195,779
- ------------------------------------------------------------------------------
Indonesia: 0.3%
410,000 * Anglo-Eastern Plantations 776,169
-----------
Total Investments in Indonesia 776,169
- ------------------------------------------------------------------------------
Irelend: 1.0%
513,000 Bank of Ireland 4,684,410
190,000 Irish Life PLC 882,131
3,521,073 * World Fluids PLC 358,015
-----------
Total Investments in Ireland 5,924,556
- ------------------------------------------------------------------------------
Israel: 0.3%
50,000 Koors Industries Ltd. ADR 850,000
-----------
Total Investments in Israel 850,000
- ------------------------------------------------------------------------------
Italy: 2.5%
750,000 * Autostrade SPA 1,473,303
125,000 * Edison SPA 791,035
374,000 ENI SPA 1,919,308
11,100 Gucci Group NV 709,013
250,000 Italgas 1,044,001
345,000 * Stet 1,569,216
-----------
Total Investments in Italy 7,505,876
- ------------------------------------------------------------------------------
Japan: 21.3%
200,000 Canon, Inc. 4,421,034
330,000 * Chugai Pharmaceutical Co. Ltd. 2,764,010
480,000 * Clarion Co. 2,486,832
115,000 * Denso Corp. 2,770,486
250,000 * Fujikura 2,003,281
20,000 Keyence Corp. 2,469,562
495,000 * Mitubishi Estate 5,086,348
10,000 Mitusi & Co. Ltd. 81,167
240,000 * Nikon Corp. 2,984,198
532,000 Nippon Shinpan Co. 2,985,925
360,000 * Nomura Securities 5,408,859
150,000 Omron Corp. 2,823,590
90,000 * Ono Pharmaceutical 2,681,116
150,000 Pioneer Electronic Corp. 2,862,447
325,000 * Prospect Japan Fund 2,234,375
50,000 * Rohm Co. 3,281,237
70,000 * Sony Corp. 4,587,687
145,000 * Sumitomo Electric Industries 2,028,322
580,000 Sumitomo Realty & Development Co. Ltd. 3,655,988
145,000 * Takara Co. 976,600
57,000 TDK Corp. 3,716,000
49,000 Tokio Marine & Fire Insurance Co. Ltd. 461,186
145,000 * Tokyo Nissan Auto Sales Co. Ltd. 663,587
80,000 * Toyoda Automatic Loom 1,499,007
-----------
Total Investments in Japan 64,932,844
- ------------------------------------------------------------------------------
Malaysia: 0.9%
100,000 * Commerce Asset Holdings 752,326
</TABLE>
B-63
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments
- ---------------------------------------------------------------
INTERNATIONAL STOCK PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- ---------------------------------------------------------------
COMMON STOCK: (CONTINUED)
- ---------------------------------------------------------------
Malaysia: (Continued)
<S> <C> <C>
325,000 *Leader Universal Holdings $ 682,043
180,000 *Sime Darby Bhd. 709,167
80,000 *United Engineers Bhd. 722,233
-----------
Total Investments in Malaysia 2,865,769
- ---------------------------------------------------------------
Mexico: 0.5%
16,000 *Banco Latinoamericano de Exportaciones
SA Cl. E 812,000
145,000 Grupo Carso SA de CV 755,208
-----------
Total Investments in Mexico 1,567,208
- ---------------------------------------------------------------
Netherlands: 5.3%
25,000 ABN Amro Holdings NV 1,627,570
23,500 Ahold Kon NV 1,470,026
12,500 Akzo Nobel NV 1,708,659
27,500 *ASM Lithography Holdings NV 1,374,602
90,000 ING Groep NV 3,242,398
25,000 *Koninklijke PTT 954,243
23,000 Royal Dutch Petroleum 4,035,158
80,000 Ver Ned Uitgevers 1,672,748
-----------
Total Investments in Netherlands 16,085,404
- ---------------------------------------------------------------
New Zealand: 1.5%
800,000 *Brierley Investment Ltd. 740,898
280,000 Fletcher Challenge 861,082
320,000 *Lion Nathan Ltd. 766,914
420,000 Telecom Corp. of New Zealand 2,143,796
-----------
Total Investments in New Zealand 4,512,690
- ---------------------------------------------------------------
Norway: 0.8%
400,000 *Storebrand ASA 2,297,031
-----------
Total Investments in Norway 2,297,031
- ---------------------------------------------------------------
Philippines: 0.2%
645,000 *TVI Pacific, Inc. 598,225
-----------
Total Investments in Philippines 598,225
- ---------------------------------------------------------------
Poland: 0.3%
70,000 Bank Gdanski SA GDR 880,250
-----------
Total Investments in Poland 880,250
- ---------------------------------------------------------------
Russia: 0.3%
45,800 *Rao Gazprom ADR 812,950
-----------
Total Investments in Russia 812,950
- ---------------------------------------------------------------
Singapore: 2.5%
85,000 *Development Bank of Singapore Ltd. 1,148,074
185,000 Keppel Corp. 1,441,078
200,000 *Parkway Holdings 786,107
60,000 *Singapore Press Holdings Ltd. 1,183,449
375,000 *Straits Steamship Land 1,200,600
90,000 *United Overseas Bank Ltd. 1,003,359
280,000 *Want Want Holdings 736,400
-----------
Total Investments in Singapore 7,499,067
- ---------------------------------------------------------------
South Africa: 0.2%
600,000 *Sun International Hotels Ltd. 480,923
41 *Western Areas Gold Mining Ltd. ADR 561
-----------
Total Investments in South Africa 481,484
- ---------------------------------------------------------------
South Korea: 0.2%
113,505 *Yukong GDS 732,107
-----------
Total Investments in South Korea 732,107
- ---------------------------------------------------------------
Spain: 3.2%
11,500 Acerinox SA 1,661,776
56,250 *Autopistas Cesa 775,563
35,000 Banco Bilbao Vizcaya 1,889,852
5,300 *Banco Popular Espanol SA 1,041,017
102,375 Iberdrola SA 1,450,953
45,000 Repsol SA 1,726,170
50,000 *Telefonica de Espana 1,161,179
-----------
Total Investments in Spain 9,706,510
- ---------------------------------------------------------------
Sweden: 1.1%
10,000 ABB AB Ser. A 1,129,049
75,000 *Nordbanken AB 2,270,928
-----------
Total Investments in Sweden 3,399,977
- ---------------------------------------------------------------
Switzerland: 3.3%
10,000 *Credit Suisse Group 1,027,269
3,200 *Novartis AG 3,664,998
410 *Roche Holdings AG 3,190,250
5,500 *Schweiz Bankverein AG 1,045,760
1,750 *SMH Neuenburg AG 1,078,633
-----------
Total Investments in Switzerland 10,006,910
- ---------------------------------------------------------------
</TABLE>
B-64
<PAGE>
- ---------------------------------------------------------------
Metropolitan Series Fund, Inc.
- ---------------------------------------------------------------
Schedule of Investments
- ---------------------------------------------------------------
INTERNATIONAL STOCK PORTFOLIO
December 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Shares Issue (Note 1A)
- ---------------------------------------------------------------
COMMON STOCK: (CONTINUED)
- ---------------------------------------------------------------
<S> <C> <C>
Taiwan: 0.3%
82,500 *Tung Ho Steel Enterprise GDR $ 907,500
------------
Total Investments in Taiwan 907,500
- ---------------------------------------------------------------
Ukraine: 1.0%
4,254,800 *Ashurst Technology Ltd. 3,076,208
------------
Total Investments in Ukraine 3,076,208
- ---------------------------------------------------------------
United Kingdom: 11.3%
322,000 *Alexon Group PLC 976,426
265,000 Arjo Wiggins Appleton PLC 814,931
162,000 *Ascot Holdings PLC 777,112
290,000 *Bat Industries 2,404,660
210,000 *British Biotech PLC 732,140
367,500 British Petroleum Co. PLC 4,407,230
236,000 BTR PLC 1,152,304
1,000,000 *Electrophoretics 659,585
299,400 *Euro Sales Finance CLA 641,168
106,500 Glaxo Wellcome PLC 1,733,339
105,000 *Greenalls Group 1,057,735
246,000 Guardian Royal Exchange PLC 1,173,737
250,000 *J. Sainsbury PLC 1,657,530
615,000 *Kemgas International Ltd. 1,212,663
280,000 *Lasmo 1,127,291
130,000 Marks & Spencer PLC 1,095,768
126,000 *Morgan Crucible Co. 943,327
90,000 National Westminster Bank PLC 1,057,735
420,000 *Premium Underwriting 982,183
189,000 Racal Electronics 828,919
148,000 *Rank Organisation 1,110,571
122,000 Royal Bank Scotland Group 1,174,645
388,500 *Sun Life & Province 1,730,512
450,000 Tarmac PLC 759,380
1,653,979 *Turbo Genset, Inc. CL A 628,109
83,000 Unilever PLC 2,012,078
7,500,000 Upton & Southern Holdings PLC 513,963
750,000 *Upton & Southern Holdings PLC (Wts.) 17,668
890,400 *Waverley Mining Finance PLC 991,537
Total Investments in United Kingdom 34,374,246
------------
TOTAL COMMON STOCK
(Cost: $259,485,844).................. 270,269,877
------------
- ---------------------------------------------------------------
PREFERRED STOCK: 0.2%
- ---------------------------------------------------------------
United Kingdom: 0.2%
295,000 *Upton & Southern Holdings PLC Cum.
Cvt. Pfd. 518,032
------------
Total Investments in United Kingdom 518,032
------------
TOTAL PREFERRED STOCK
(Cost: $456,231) ..................... 518,032
------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
Face Interest Maturity Value
Amount Issue Rate Date (Note 1A)
- ---------------------------------------------------------------
CONVERTIBLE BONDS: 6.4%
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Hong
Kong 1,100,000 Hysan
Development 6.750% 6/01/00$ 1,479,500
Japan 340,000,000 Hankyu Corp. 1.250% 9/30/98 2,950,522
Japan 300,000,000 Matsushita 1.040% 3/31/04 3,108,540
Electric
Japan 305,000,000 Mitsui & Co. 1.050% 9/30/09 2,765,305
Japan 8,500,000 NEC Corp. 1.000% 3/31/99 8,366,642
Taiwan 750,000 Yageo Corp. 1.250% 7/24/03 828,750
------------
TOTAL CONVERTIBLE BONDS
(Cost: $19,324,899).................. 19,499,259
------------
- ---------------------------------------------------------------
TOTAL INVESTMENTS: 95.5%
(Cost: $279,266,974) ................ 290,287,168
OTHER ASSETS LESS LIABILITIES: 4.5%.. 13,538,315
------------
TOTAL NET ASSETS: 100.0%.............$303,825,483
============
- ----------------------------------------------------------------
See Notes to Financial Statements.
*Non-income producing security.
</TABLE>
B-65
<PAGE>
- ------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- ------------------------------------------------------------------------------
Industry Diversification
- ------------------------------------------------------------------------------
INTERNATIONAL STOCK PORTFOLIO
As a Percentage of Total Value of Investments
<TABLE>
<S> <C>
Automotive.............................................................. 4.14%
Banking................................................................. 9.82
Broadcasting............................................................ 0.55
Business Services....................................................... 0.47
Chemicals............................................................... 5.44
Construction Materials.................................................. 1.52
Consumer Non-Durables................................................... 0.37
Drugs & Health Care..................................................... 4.70
Electrical Equipment.................................................... 1.67
Electronics............................................................. 15.83
Financial Services...................................................... 5.64
Food & Beverages........................................................ 1.54
Forest Products & Paper................................................. 0.57
General Business........................................................ 0.98
Homebuilders............................................................ 0.80
Household Products...................................................... 0.56
Insurance............................................................... 4.22
Investment Companies.................................................... 0.77
Leisure................................................................. 0.97
Machinery............................................................... 1.75
Metals-Gold............................................................. 0.02
Metals-Non-Ferrous...................................................... 1.40
Metals-Steel & Iron..................................................... 2.34
Miscellaneous........................................................... 1.95
Multi-Industry.......................................................... 5.15
Oil & Gas Exploration................................................... 2.09
Oil-International....................................................... 5.17
Printing & Publishing................................................... 1.34
Real Estate............................................................. 5.93
Retail Trade............................................................ 2.93
Textiles & Apparel...................................................... 0.82
Toys & Amusements....................................................... 0.34
Transportation.......................................................... 0.60
Transportation-Railroad................................................. 1.02
Utilities-Electric...................................................... 1.57
Utilities-Gas Distribution & Pipelines.................................. 1.29
Utilities-Miscellaneous................................................. 1.08
Utilities-Telephone..................................................... 2.65
=====
100.0%
=====
</TABLE>
See Notes to Financial Statements.
B-66
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
B-67
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
Money
Growth Income Market
Portfolio Portfolio Portfolio
-------------- ------------ ------------
<S> <C> <C> <C> <C>
Assets: Investments, at value (Note 1A) (1) ...... $1,593,897,472 $377,254,943 $41,600,630
Cash ..................................... 1,132 153 --
Cash denominated in foreign currencies -- -- --
(2) ....................................
Receivable for investment securities sold 3,573,334 -- --
Receivable for fund shares sold .......... -- 217,234 --
Receivable for dividends and interest .... 1,478,207 5,832,980 134,923
Unrealized appreciation on forward
contacts (Note 7) ...................... -- 145,826 --
Other assets ............................. 140 68,078 3,359
-------------- ------------ ------------
TOTAL ASSETS ..................... 1,598,950,285 383,519,214 41,738,912
-------------- ------------ ------------
Liabilities: Payable for investment securities 840,094 -- --
purchased ..............................
Payable for capital stock repurchased .... 42,255 2,033 92,460
Accrued investment management fee 338,415 81,038 8,792
(Note 3) ...............................
Accrued and other liabilities ............ 1,046 41,305 1,029
-------------- ------------ ------------
TOTAL LIABILITIES ................ 1,221,810 124,376 102,281
-------------- ------------ ------------
Net Assets: $1,597,728,475 $383,394,838 $41,636,631
============== ============ ============
Composition
of Net Assets: Paid-in-capital .......................... 1,249,167,683 385,179,755 41,644,757
Undistributed (overdistributed) net
investment income (loss) ............... (109,396) 2,224,983 (10,491)
Net unrealized appreciation 243,748,890 (417,499) --
(depreciation) .........................
Accumulated net realized gain (loss) ..... 104,921,298 (3,592,401) 2,365
-------------- ------------ ------------
NET ASSETS ....................... $1,597,728,475 $383,394,838 $41,636,631
============== ============ ============
SHARES OUTSTANDING ............... 52,371,833 31,028,144 3,989,790
============== ============ ============
NET ASSET VALUE PER SHARE ........ $30.51 $12.36 $10.44
============== ============ ============
------------------------------------------------------------------------------------------------------------
Notes:
(1) Investments, at cost ................. $1,350,148,596 $377,820,831 $41,600,630
(2) Cost of foreign currency ............. -- -- --
See Notes to Financial Statements
</TABLE>
B-68
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Aggressive Stock International
Diversified Growth Index Stock
Portfolio Portfolio Portfolio Portfolio
-------------- -------------- -------------- ------------
<S> <C> <C> <C>
$1,437,319,196 $1,312,523,770 $1,128,033,917 $290,287,168
995 110,949 46,497 4,496,287
-- -- -- 13,258,084
1,944,827 13,409,697 -- 1,562,606
725,586 5,649,430 2,443 88,815
9,424,203 488,573 1,911,224 300,040
274,050 -- -- --
124 117,693 22,718 253,740
--------------- --------------- --------------- -------------
1,449,688,981 1,332,300,112 1,130,016,799 310,246,740
--------------- --------------- --------------- -------------
462,249 9,608,176 5,147,488 6,120,770
15,947 -- 2,335,595 --
306,703 842,572 236,382 211,941
62,915 -- -- 88,546
--------------- --------------- --------------- -------------
847,814 10,450,748 7,719,465 6,421,257
--------------- --------------- --------------- -------------
$1,448,841,167 $1,321,849,364 $1,122,297,334 $303,825,483
=============== =============== =============== =============
1,253,361,990 1,145,946,694 820,009,991 310,920,771
(3,725,106) (899,023) 245,308 --
139,692,509 136,862,235 303,651,601 11,038,872
59,511,774 39,939,458 (1,609,566) (18,134,10)
=============== =============== =============== =============
$1,448,841,167 $1,321,849,364 $1,122,297,334 $303,825,483
=============== =============== =============== =============
86,916,919 48,752,452 50,487,679 25,415,562
=============== =============== =============== =============
$16.67 $27.11 $22.23 $11.95
=============== =============== =============== =============
- -----------------------------------------------------------------------------------------------------------------------------------
$1,297,896,601 $1,175,661,535 $824,382,316 $279,266,974
-- -- -- 13,220,243
</TABLE>
B-69
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Money
Growth Income Market
Portfolio Portfolio Portfolio
------------ ------------ ----------
<S> <C> <C> <C>
Investment Interest (Note 1B) .......................... $ 2,555,287 $ 25,197,173 $2,207,574
Income: Dividends (Note 1B) ......................... 18,553,513 -- --
------------ ------------ ----------
Total investment income, net of
withholding taxes (1) ............. 21,108,800 25,197,173 2,207,574
------------ ------------ ----------
Expenses: Investment management fee ................... 3,351,614 911,476 102,785
Printing and distribution fees .............. 244,288 66,526 9,369
Custodian and transfer agent fees ........... 215,063 131,021 40,319
Directors fees .............................. 16,805 16,805 16,805
Other operating expenses .................... 41,709 20,314 9,836
------------ ------------ ----------
Total expenses ...................... 3,869,479 1,146,142 179,114
------------ ------------ ----------
NET INVESTMENT INCOME (LOSS) ........ 17,239,321 24,051,031 2,028,460
------------ ------------ ----------
Net Realized Investments (Note 4) ........................ 236,500,694 4,194,441 1,031
Gain (Loss) On: Foreign currency transactions (Note 4) ...... 449 225,514 --
------------ ------------ ----------
NET REALIZED GAIN (LOSS) ............ 236,501,143 4,419,955 1,031
------------ ------------ ----------
Net Unrealized Beginning of period investments and foreign
Appreciation currency holdings (Notes 4, 7) ............ 228,543,295 14,525,062 --
(Depreciation):
End of period investments and foreign
currency holdings (Notes 4, 7) ............ 243,748,890 (417,499) --
------------ ------------ ----------
NET UNREALIZED APPRECIATION
(DEPRECIATION) .................... 15,205,595 (14,942,561) --
------------ ------------ ----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS .. $268,946,059 $ 13,528,425 $2,029,491
============ ============ ==========
------------------------------------------------------------------------------------------------------------
Notes:
(1) Withholding taxes ....................... $351,457 $44,235 --
See Notes to Financial Statements.
</TABLE>
B-70
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aggressive Stock International
Diversified Growth Index Stock
Portfolio Portfolio Portfolio Portfolio
------------ ------------- ---------- --------------
<S> <C> <C> <C>
$35,997,579 $3,684,784 $ 294,044 $1,351,412
10,704,528 4,256,611 18,697,228 3,386,189
----------- ----------- ----------- ----------
46,702,107 7,941,395 18,991,272 4,737,601
---------- ----------- ----------- ----------
3,179,254 8,815,041 2,154,140 2,330,738
221,203 190,205 164,972 55,669
253,741 223,256 200,306 588,631
16,805 16,805 16,805 16,805
50,535 34,095 28,076 17,626
---------- ----------- ----------- ----------
3,721,538 9,279,402 2,564,299 3,009,469
---------- ----------- ----------- ----------
42,980,569 (1,338,007) 16,426,973 1,728,132
---------- ----------- ----------- ----------
135,162,664 78,458,844 7,811,922 (15,371,961)
90,115 -- -- (9,927,565)
---------- ----------- ----------- ----------
135,252,779 78,458,844 7,811,922 (25,299,526)
---------- ----------- ----------- ----------
142,881,779 141,226,595 147,414,903 (6,426,580)
139,692,509 136,862,235 303,651,601 11,038,872
---------- ----------- ----------- ----------
(3,189,27) (4,364,360) 156,236,698 17,465,452
---------- ----------- ----------- ----------
$175,044,078 $72,756,477 $180,475,593 $(6,105,942)
=========== =========== =========== ==========
- ------------------------------------------------------------------------------------------------------
$ 199,906 $ 115,804 $ 115,212 $ 466,833
</TABLE>
B-71
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Growth Income Money Market
Portfolio Portfolio Portfolio
----------------------------- --------------------------- --------------------------
Increase in Net Assets From: For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1996 1995 1996 1995 1996 1995
-------------- -------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operations: Net investment income
(loss) .................. $17,239,321 $13,355,435 $24,051,031 $21,505,858 $ 2,028,460 $ 2,251,690
Net realized gain (loss)
from investment and
foreign currency
transactions ............ 236,501,143 35,869,486 4,419,955 5,614,358 1,031 161
Unrealized appreciation
(depreciation) of
investments and foreign
currency holdings ....... 15,205,595 206,859,454 (14,942,561) 27,263,679 -- --
-------------- -------------- ------------ ------------ ----------- -----------
Net increase (decrease) in
net assets resulting from
operations .............. 268,946,059 256,084,375 13,528,425 54,383,895 2,029,491 2,251,851
-------------- -------------- ------------ ------------ ----------- -----------
Distributions Net investment income ..... (17,239,740) (13,305,066) (23,474,190) (20,532,059) (2,045,447) (2,251,639)
to
Shareholders: Net realized gain from
investment transactions (134,047,463) (40,353,389) (697,717) -- (1,192) (289)
-------------- -------------- ------------ ------------ ----------- -----------
Total Distributions
(Note 6) ................ (151,287,203) (53,658,455) (24,171,907) (20,532,059) (2,046,639) (2,251,928)
-------------- -------------- ------------ ------------ ----------- -----------
Capital Share Net proceeds from sale of
Transactions: shares .................. 246,392,853 103,922,730 46,724,830 44,596,378 19,329,406 21,703,650
Net asset value of shares
issued to shareholders
in reinvestment of
distributions ........... 151,287,203 53,658,455 24,171,907 20,532,059 2,046,639 2,251,928
Shares redeemed ........... (12,361,034) (11,689,626) (26,771,445) (24,725,915) (20,178,541) (23,460,524)
-------------- -------------- ------------ ------------ ----------- -----------
Net Capital Stock
Transactions (Note 5) ... 385,319,022 145,891,559 44,125,292 40,402,522 1,197,504 495,054
-------------- -------------- ------------ ------------ ----------- -----------
NET INCREASE IN NET ASSETS 502,977,878 348,317,479 33,481,810 74,254,353 1,180,356 494,977
NET ASSETS: Beginning of
period .................. 1,094,750,597 746,433,118 349,913,028 275,658,675 40,456,275 39,961,298
-------------- -------------- ------------ ------------ ----------- -----------
NET ASSETS: End of period . $1,597,728,475 $1,094,750,597 $383,394,838 $349,913,028 $41,636,631 $40,456,275
============== ============== ============ ============ =========== ===========
-------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
B-72
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Diversified Aggressive Growth Stock Index International Stock
Portfolio Portfolio Portfolio Portfolio
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the For the For the For the For the For the For the For the
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31,
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------ ------------- ------------ ------------- ------------ ------------ ------------
$ 42,980,569 $ 38,181,982 $ (1,338,007) $ (465,397) $ 16,426,973 $10,717,017 $ 1,728,132 $ 564,793
135,252,779 35,700,814 78,458,844 96,911,708 7,811,922 3,287,091 (25,299,526) 4,503,585
(3,189,270) 155,959,563 (4,364,360) 87,034,785 156,236,698 132,857,546 17,465,452 (2,185,396)
- -------------- -------------- -------------- ------------ -------------- ------------ ------------ ------------
175,044,078 229,842,359 72,756,477 183,481,096 180,475,593 146,861,654 (6,105,942) 2,882,982
- -------------- -------------- -------------- ------------ -------------- ------------ ------------ ------------
(42,176,327) (38,212,420) -- -- (16,158,730) (10,707,245) (16,086) (931,206)
(84,750,798) (31,703,894) (35,104,245) (89,053,728) (10,189,362) (3,203,702) (3,229,290) (1,728,334)
- -------------- -------------- -------------- ------------ -------------- ------------ ------------ ------------
(126,927,125) (69,916,314) (35,104,245) (89,053,728) (26,348,092) (13,910,947) (3,245,376) (2,659,540)
- -------------- -------------- -------------- ------------ -------------- ------------ ------------ ------------
171,456,907 65,067,419 318,837,326 211,278,782 330,175,386 132,769,445 43,194,283 47,009,355
126,927,125 69,916,314 35,104,245 89,053,728 26,348,092 13,910,947 3,245,376 2,659,540
(12,493,415) (72,901,909) (28,659,672) (25,891,494) (24,176,884) (6,808,814) (30,723,899) (25,383,675)
- -------------- -------------- -------------- ------------ -------------- ------------ ------------ ------------
285,890,617 62,081,824 325,281,899 274,441,016 332,346,594 139,871,578 15,715,760 24,285,220
- -------------- -------------- -------------- ------------ -------------- ------------ ------------ ------------
334,007,570 222,007,869 362,934,131 368,868,384 486,474,095 272,822,285 6,364,442 24,508,662
1,114,833,597 892,825,728 958,915,233 590,046,849 635,823,239 363,000,954 297,461,041 272,952,379
- -------------- -------------- -------------- ------------ -------------- ------------ ------------ ------------
$1,448,841,167 $1,114,833,597 $1,321,849,364 $958,915,233 $1,122,297,334 $635,823,239 $303,825,483 $297,461,041
============== ============== ============== ============ ============== ============ ============ ============
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-73
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Growth Portfolio
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
---- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: Beginning of period ............................. $27.56 $21.81 $23.27 $21.72 $21.56
- ----------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
---------------------
Net investment income ........................................... 0.36 0.35 0.30 0.28 0.34
Net realized and unrealized gain (loss) ......................... 5.78 6.83 (1.06) 3.24 2.13
--------- --------- --------- --------- ---------
Total From Investment Operations ........................... 6.14 7.18 (0.76) 3.52 2.47
--------- --------- --------- -------- ---------
Less Distributions:
------------------
Dividends from net investment income ............................ (0.36) (0.35) (0.30) (0.28) (0.29)
Distributions from net realized capital gains ................... (2.83) (1.08) (0.40) (1.69) (2.02)
--------- --------- --------- --------- ---------
Total Distributions ........................................ (3.19) (1.43) (0.70) (1.97) (2.31)
--------- --------- --------- --------- ---------
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: End of period ................................... $30.51 $27.56 $21.81 $23.27 $21.72
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return .................................................... 22.18% 33.14% (3.25)% 14.40% 11.56%
Supplemental Data/Significant Ratios:
------------------------------------
Net assets at end of period (000's) ............................. $1,597,728 $1,094,751 $746,433 $640,413 $351,028
Operating expenses to average net assets ....................... 0.29% 0.31% 0.32% 0.28% 0.25%
Net investment income to average net assets .................... 1.29% 1.46% 1.40% 1.19% 1.52%
Portfolio turnover (1) .......................................... 93.05% 45.52% 57.27% 66.27% 63.74%
Average broker commission rate (2) .............................. $0.0578 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
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. Purchases and sales of securities
(excluding short-term securities) for the year ended December 31, 1996
amounted to $1,348,105,796 and $1,208,264,280, respectively.
(2) Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related shares
purchased and sold.
See Notes to Financial Statements.
B-74
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Income Portfolio
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
---- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: Beginning of period ............................... $12.73 $11.32 $12.59 $12.22 $12.32
- ----------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
---------------------
Net investment income ............................................. 0.82 0.83 0.91 0.83 0.90
Net realized and unrealized gain (loss) ........................... (0.36) 1.38 (1.31) 0.86 (0.05)
--------- --------- --------- -------- ---------
Total From Investment Operations ............................. 0.46 2.21 (0.40) 1.69 0.85
--------- --------- --------- -------- ---------
Less Distributions:
------------------
Dividends from net investment income .............................. (0.81) (0.80) (0.87) (0.88) (0.71)
Distributions from net realized capital gains ..................... (0.02) -- -- (0.44) (0.24)
--------- --------- --------- -------- ---------
Total Distributions .......................................... (0.83) (0.80) (0.87) (1.32) (0.95)
--------- --------- --------- -------- ---------
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: End of period ..................................... $12.36 $12.73 $11.32 $12.59 $12.22
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return ...................................................... 3.60% 19.55% (3.15)% 11.36% 6.91%
Supplemental Data/Significant Ratios:
------------------------------------
Net assets at end of period (000's) ............................... $383,395 $349,913 $275,659 $299,976 $156,245
Operating expenses to average net assets ......................... 0.32% 0.34% 0.35% 0.32% 0.25%
Net investment income to average net assets ...................... 6.64% 7.01% 7.02% 6.39% 7.16%
Portfolio turnover (1) ............................................ 92.90% 102.88% 141.15% 136.98% 151.74%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
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. Purchases and sales of securities
(excluding short-term securities) for the year ended December 31, 1996
amounted to $332,786,481 and $293,974,932, respectively.
See Notes to Financial Statements.
B-75
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Money Market Portfolio
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ----- ----- ----
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: Beginning of period ..................... $10.45 $10.48 $10.49 $10.52 $10.59
- ----------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
---------------------
Net investment income ................................... 0.53 0.59 0.40 0.28 0.39
--------- --------- --------- -------- ---------
Total From Investment Operations ................... 0.53 0.59 0.40 0.28 0.39
--------- --------- --------- -------- ---------
Less Distributions:
------------------
Dividends from net investment income .................... (0.54) (0.62) (0.41) (0.31) (0.46)
--------- --------- --------- -------- ---------
Total Distributions ................................ (0.54) (0.62) (0.41) (0.31) (0.46)
--------- --------- --------- -------- ---------
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: End of period ........................... $10.44 $10.45 $10.48 $10.49 $10.52
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return ............................................ 5.01% 5.59% 3.85% 2.90% 3.73%
Supplemental Data/Significant Ratios:
------------------------------------
Net assets at end of period (000's) ..................... $ 41,637 $ 40,456 $ 39,961 $44,321 $ 55,412
Operating expenses to average net assets ............... 0.43% 0.49% 0.44% 0.38% 0.25%
Net investment income to average net assets ............ 4.92% 5.39% 3.76% 2.85% 3.68%
Portfolio turnover ...................................... N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
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.
See Notes to Financial Statements.
B-76
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Diversified Portfolio
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE: Beginning of period ............................. $15.95 $13.40 $14.41 $13.58 $13.61
- ----------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
----------------------
Net investment income ........................................... 0.55 0.59 0.51 0.46 0.53
Net realized and unrealized gain (loss) ......................... 1.77 3.02 (0.95) 1.58 0.74
--------- --------- --------- -------- ---------
Total From Investment Operations ........................... 2.32 3.61 (0.44) 2.04 1.27
--------- --------- --------- -------- ---------
Less Distributions:
-------------------
Dividends from net investment income ............................ (0.53) (0.58) (0.50) (0.54) (0.55)
Distributions from net realized capital gains ................... (1.07) (0.48) (0.07) (0.67) (0.75)
--------- --------- --------- -------- ---------
Total Distributions ........................................ (1.60) (1.06) (0.57) (1.21) (1.30)
--------- --------- --------- -------- ---------
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: End of period ................................... $16.67 $15.95 $13.40 $14.41 $13.58
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return .................................................... 14.52% 27.03% (3.06)% 12.75% 9.48%
Supplemental Data/Significant Ratios:
-------------------------------------
Net assets at end of period (000's) ............................. $1,448,841 $1,114,834 $892,826 $743,798 $334,480
Operating expenses to average net assets ....................... 0.29% 0.31% 0.32% 0.29% 0.25%
Net investment income to average net assets .................... 3.38% 3.92% 3.66% 3.16% 3.85%
Portfolio turnover (1)........................................... 91.07% 79.29% 96.49% 95.84% 114.67%
Average broker commission rate (2)............................... $0.0578 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
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. Purchases and sales of securities
(excluding short-term securities) for the year ended December 31, 1996
amounted to $1,224,380,985 and $1,081,252,639, respectively.
(2) Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related
shares purchased and sold.
See Notes to Financial Statements.
B-77
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Aggressive Growth Portfolio
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: Beginning of period ............................... $25.87 $22.05 $22.54 $19.52 $18.11
- ----------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
----------------------
Net investment income (loss) ...................................... (0.02) (0.01) 0.05 0.04 0.08
Net realized and unrealized gain (loss) ........................... 2.01 6.50 (0.48) 5.06 1.77
--------- --------- --------- -------- ---------
Total From Investment Operations ............................. 1.99 6.49 (0.43) 5.10 1.85
--------- --------- --------- -------- ---------
Less Distributions:
-------------------
Dividends from net investment income .............................. -- -- (0.05) (0.06) (0.10)
Distributions from net realized capital gains ..................... (0.75) (2.67) (0.01) (2.02) (0.34)
--------- --------- --------- -------- ---------
Total Distributions .......................................... (0.75) (2.67) (0.06) (2.08) (0.44)
--------- --------- --------- -------- ---------
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: End of period ..................................... $27.11 $25.87 $22.05 $22.54 $19.52
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return ...................................................... 7.72% 29.50% (1.88)% 22.63% 10.39%
Supplemental Data/Significant Ratios:
-------------------------------------
Net assets at end of period (000's) ............................... $1,321,849 $958,915 $590,047 $387,949 $129,249
Operating expenses to average net assets ......................... 0.79% 0.81% 0.82% 0.79% 0.75%
Net investment income (loss) to average net assets ............... (0.11)% (0.06)% 0.24% 0.18% 0.46%
Portfolio turnover (1) ............................................ 221.23% 255.83% 186.52% 120.82% 100.95%
Average broker commission rate (2) ................................ $0.0576 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
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. Purchases and sales of securities (excluding short-term
securities) for the year ended December 31, 1996 amounted to $2,668,086,800
and $2,444,822,359, respectively.
(2) Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related shares
purchased and sold.
See Notes to Financial Statements.
B-78
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Stock Index Portfolio
------------------------------------------------------
Year Ended December 31,
------------------------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: Beginning of period ............................... $18.56 $13.87 $14.25 $13.27 $12.76
- ----------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
---------------------
Net investment income ............................................. 0.33 0.32 0.33 0.35 0.36
Net realized and unrealized gain (loss) ........................... 3.88 4.79 (0.17) 0.98 0.60
--------- --------- --------- -------- ---------
Total From Investment Operations ............................. 4.21 5.11 0.16 1.33 0.96
--------- --------- --------- -------- ---------
Less Distributions:
------------------
Dividends from net investment income .............................. (0.33) (0.32) (0.32) (0.35) (0.26)
Distributions from net realized capital gains ..................... (0.21) (0.10) (0.22) -- (0.19)
--------- --------- --------- -------- ---------
Total Distributions .......................................... (0.54) (0.42) (0.54) (0.35) (0.45)
--------- --------- --------- -------- ---------
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: End of period ..................................... $22.23 $18.56 $13.87 $14.25 $13.27
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return ...................................................... 22.66% 36.87% 1.18% 9.54% 7.44%
Supplemental Data/Significant Ratios:
------------------------------------
Net assets at end of period (000's) ............................... $1,122,297 $635,823 $363,001 $282,700 $144,692
Operating expenses to average net assets .......................... 0.30% 0.32% 0.33% 0.32% 0.25%
Net investment income to average net assets ...................... 1.91% 2.22% 2.51% 2.51% 2.74%
Portfolio turnover (1)............................................. 11.48% 6.35% 6.66% 13.99% 17.54%
Average broker commission rate (2) ................................ $0.0204 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
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. Purchases and sales of securities
(excluding short-term securities) for the year ended December 31, 1996
amounted to $424,005,842 and $98,565,577, respectively.
(2) Total brokerage commissions paid on purchases and sales of portfolio
securites for the period divided by the total number of related shares
purchased and sold.
See Notes to Financial Statements.
B-79
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
International Stock Portfolio
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: Beginning of period ................. $12.29 $12.30 $12.33 $8.63 $9.71
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
---------------------
Net investment income ............................... 0.07 0.03 0.08 0.02 0.05
Net realized and unrealized gain (loss) ............. (0.28) 0.07 0.54 4.52 (1.04)
--------- ------- -------- --------- --------
Total From Investment Operations ............... (0.21) 0.10 0.62 4.54 (0.99)
--------- ------- -------- --------- --------
Less Distributions:
------------------
Dividends from net investment income ................ -- (0.04) -- (0.26) (0.09)
Distributions from net realized capital gains ....... (0.13) (0.07) (0.65) (0.58) --
--------- ------- -------- --------- --------
Total Distributions ............................ (0.13) (0.11) (0.65) (0.84) (0.09)
--------- ------- -------- --------- --------
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: End of period ....................... $11.95 $12.29 $12.30 $12.33 $8.63
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return ........................................ (1.77)% 0.84% 5.08% 47.76% (10.21)%
Supplemental Data/Significant Ratios:
------------------------------------
Net assets at end of period (000's) ................. $303,826 $297,461 $272,952 $120,781 $18,998
Net expenses to average net assets (Note 3) ......... 0.97% 1.01% 1.04% 1.14% 0.97%
Operating expenses to average net assets
before voluntary expense reimbursements (Note 3) N/A N/A N/A 1.15% N/A
Net investment income to average net assets ........ 0.56% 0.21% 0.80% 0.15% 0.89%
Net investment income to average net assets
before voluntary expense reimbursements (Note 3) N/A N/A N/A 0.15% N/A
Portfolio turnover (1) .............................. 116.67% 86.24% 65.84% 88.90% 65.09%
Average broker commission rate (2) .................. $0.0037 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
Total return information shown in the Financial Highlights tables does not
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. Purchases and sales of securities
(excluding short-term securities) for the year ended December 31, 1996
amounted to $418,140,220 and $342,539,121, respectively.
(2) Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related shares
purchased and sold.
See Notes to Financial Statements.
B-80
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements December 31, 1996
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Metropolitan Series Fund, Inc. ("Fund") is registered under the
Investment Company Act of 1940 as a diversified open end investment company.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
- --------------------------------------------------------------------------------
A. Investment Security Valuation: Portfolio securities that are traded on stock
exchanges are valued at the last 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. 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 that make markets in the
securities. Portfolio securities that are traded in both 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. The estimated fair value of
equity and debt investments are based on the quoted market price as of
December 31, 1996. Securities for which market quotations are not readily
available are valued at fair value as 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. The market values
of foreign securities are recorded after translation to U.S. dollars, based
on the exchange rate at the end of the period.
Short-term debt securities in all Portfolios, except the Money Market
Portfolio, with sixty days or less remaining to maturity are valued at
amortized cost, which approximates fair value. Short-term investments in
these Portfolios maturing more than sixty days from the valuation date are
valued at fair value based on the most recent bid price or yield equivalent
as obtained from dealers that make markets in such securities. Portfolio
securities in the Money Market Portfolio are valued at amortized cost, which
approximates fair value.
- --------------------------------------------------------------------------------
B. Investment Security Transactions: Security transactions are recorded on the
trade date. Securities denominated in foreign currencies are translated at
exchange rates prevailing on the respective dates traded. Dividend income is
recorded on the ex-dividend date or, for certain foreign securities, when
notified; interest income is accrued as earned. Transactions denominated in
foreign currencies are recorded at the rate prevailing when earned or
incurred. Realized gains and losses are determined on the identified cost
basis. Asset and liability accounts that are denominated in foreign
currencies are adjusted to reflect current exchange rates prevailing on the
respective dates traded. Dividend income is recorded on the ex-dividend date
or, for certain foreign securities, when notified; interest income is accrued
as earned. Transactions denominated in foreign currencies are recorded at the
rate prevailing when earned or incurred. Realized gains and losses are
determined on the identified cost basis. Asset and liability accounts that
are denominated in foreigh currencies are adjusted to reflect current
exchange rates.
- --------------------------------------------------------------------------------
C. Federal Income Taxes: It is the Fund's policy to comply with the requirements
of the Internal Revenue Code and regulations thereunder applicable to
regulated investment companies and to distribute all of its taxable income to
shareholders. Therefore, no Federal income tax provision is required. At
December 31, 1996, the Income and International Stock Portfolios had
available for federal income tax purposes unused capital loss carryovers of
approximately $27,000 and $16,382,000, respectively, which will expire on
December 31, 2002 and on December 31, 2004, respectively.
- --------------------------------------------------------------------------------
D. Return of Capital Distributions: The fund distributes all of its taxable
income, both net realized gains and net investment income, to shareholders.
Effective January 1, 1994 the Fund adopted Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. As
a result, the Fund changed the classification of distributions to
shareholders to better disclose the differences between financial statement
amounts and distributions determined in accordance with income tax
regulations.
The Aggressive Growth Portfolio incurred a net investment loss of $1,338,007
during 1996, which has been reclassified to paid-in-capital at December 31,
1996. Currency losses in the International Stock Portfolio incurred during
the year of $5,952,403 were reclassified between net investment income,
accumulated net realized loss, and paid-in-capital at December 31, 1996.
- --------------------------------------------------------------------------------
E. Forward Foreign Currency Exchange Contracts: A forward foreign currency
exchange contract is an agreement between two parties to buy or sell a
specific currency for a set price on a future date. The Fund may enter into
forward foreign currency exchange contracts to hedge security transactions or
holdings denominated in a foreign currency. Should foreign currency exchange
rates move unexpectedly, the Fund may not achieve the anticipated benefits of
the forward foreign currency exchange contracts and may realize a loss. The
use of forward foreign currency exchange contracts involves the risk of
imperfect correlation in movements in the price of the underlying hedged
assets and foreign currency exchange rates. During the period that a contract
is open, changes in the value of the contract are recognized as an unrealized
gain or loss by "marking to market" on a daily basis. A realized gain or loss
will be recognized when a contract is completed or canceled.
- --------------------------------------------------------------------------------
F. Estimates and Assumptions: The preparation of financial statements in
conformity with generally accepted accounting principals requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities as of the
date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
- --------------------------------------------------------------------------------
2. Restricted and Illiquid Securities
The Income Portfolio holds five securities, the Diversified Portfolio holds
six securities, and the Aggressive Growth Portfolio holds three securities
that were purchased in private placement transactions. These securities may
be resold in transactions exempt from registration or to the public if the
securities are registered. The sale of these securities may involve lengthy
negotiations and additional expense. These constraints may affect the
security's marketability, and therefore hinder prompt disposal at an
acceptable price. The Fund intends to invest no more than 15% of net assets
in illiquid and restricted securities, except for the Money Market Portfolio
where the restriction is 10% of net assets. Restricted securities (including
Rule 144A issues) held at December 31, 1996 are footnoted at the end of each
applicable Portfolio's schedule of investments.
- --------------------------------------------------------------------------------
B-81
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements December 31, 1996 - (Continued)
- --------------------------------------------------------------------------------
3. Expenses
The Fund has entered into investment management agreements with Metropolitan
Life. For providing investment management services to the Fund, Metropolitan
Life receives monthly compensation at the annual rate of 0.25% of the average
daily net assets of each of the Portfolios except the Aggressive Growth
Portfolio and the International Stock Portfolio; and 0.75% of the average
daily net assets of the Aggressive Growth Portfolio and the International
Stock Portfolio. The Fund and Metropolitan Life have entered into sub-
investment management agreements with State Street Research & Management
Company ("State Street Research"), a wholly-owned subsidiary of Metropolitan
Life. The agreements provide for the compensation to State Street Research
for the management of the Growth, Income, Diversified, and Aggressive Growth
Portfolios. The Fund and Metropolitan Life have entered into a separate sub-
investment management agreement with GFM International Investors Limited
("GFM"), a subsidiary of Metropolitan Life, for the International Stock
Portfolio. This agreement provides for the compensation to GFM for the
management of the International Stock Portfolio.
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 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, at 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.
- --------------------------------------------------------------------------------
4. Net Unrealized
Appreciation
(Depreciation)
As of December 31, 1996, gross unrealized appreciation and depreciation of
investments were as follows:
<TABLE>
<CAPTION>
Aggressive Stock International
Growth Income Diversified Growth Index Stock
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------------- ------------- ------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross Unrealized Appreciation... $ 256,290,033 $ 3,232,638 $ 150,691,907 $ 186,857,542 $313,206,359 $ 24,734,407
Gross Unrealized Depreciation... (12,541,156) (3,798,526) (11,269,313) (49,995,407) (9,554,758) (13,714,213)
-------------- ------------- ------------ ------------- ----------- ------------
Net Unrealized Appreciation
(Depreciation) of Investments*.. 243,748,877 (565,888) $ 139,422,594 $ 136,862,235 $303,651,601 $ 11,020,194
============== ============ ============== ============== ============ ============
Aggregate Cost of Securities
(including short-term
securities)..................... $1,350,148,596 $377,820,831 $1,297,896,601 $1,175,661,535 $824,382,316 $279,266,974
============== ============ ============== ============== ============ ============
</TABLE>
*Does not include unrealized gains related to foreign currency transactions
of $13, $148,389, $269,915, and $18,678 for the Growth, Income, Diversified,
and International Stock Portfolios, respectively, (see Note 7.)
- --------------------------------------------------------------------------------
B-82
<PAGE>
- --------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements December 31, 1996 - (Continued)
- --------------------------------------------------------------------------------
5. Capital
Stock
Activity
At December 31, 1996, there were 2,000,000,000 shares of $0.01 par value
common stock authorized for the Fund. The shares of common stock are divided
into seven series: Growth Portfolio, Income Portfolio, Money Market
Portfolio, Diversified Portfolio, Aggressive Growth Portfolio, Stock Index
Portfolio, and International Stock Portfolio.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31, 1996
-----------------------------------------------------------------------------------------------------------------
Money Aggressive Stock International
Growth Income Market Diversified Growth Index Stock
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
----------- ---------- ---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares Sold. . . . . . .. 8,155,023 3,698,482 1,814,089 10,207,431 11,414,917 16,259,851 3,530,056
Shares issued in
reinvestment
of dividends . . . . ... 4,909,141 1,951,255 196,231 7,567,236 1,290,947 1,170,618 261,862
----------- ---------- ---------- ----------- ---------- ----------- -----------
Total . . . ... 13,064,164 5,649,737 2,010,320 17,774,667 12,705,864 17,430,469 3,791,918
Shares redeemed . . . ... (409,835) (2,111,443) (1,893,767) (755,150) (1,025,632) (1,196,783) (2,578,350)
=========== ========== ========== =========== ========== =========== ===========
Net increase . . . . . .. 12,654,329 3,538,294 116,553 17,019,517 11,680,232 16,233,686 1,213,568
=========== ========== ========== =========== ========== =========== ===========
<CAPTION>
For the Year Ended December 31, 1995
-----------------------------------------------------------------------------------------------------------------
Money Aggressive Stock International
Growth Income Market Diversified Growth Index Stock
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
----------- ---------- ---------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares Sold............. 3,995,252 3,424,849 2,020,415 4,105,431 7,831,991 7,780,504 3,922,512
Shares issued in
reinvestment
of dividends........... 1,993,094 1,749,670 215,689 4,396,902 3,482,172 758,045 217,469
----------- ---------- ---------- ---------- ---------- ---------- -----------
Total........ 5,988,346 5,174,519 2,236,104 8,502,333 11,314,163 8,538,549 4,139,981
Shares redeemed........ (492,914) (2,039,460) (2,175,933) (5,238,484) (996,028) (452,967) (2,129,704)
=========== ========== ========== ========== ========== ========== ===========
Net increase........... 5,495,432 3,135,059 60,171 3,263,849 10,318,135 8,085,582 2,010,277
=========== ========== ========== ========== ========== ========== ===========
</TABLE>
- --------------------------------------------------------------------------------
6. Dividend
Distributions
The Fund distributes, at least annually, substantially all net investment
income, if any, of each Portfolio, which will then be reinvested in
additional full and fractional shares of the Portfolio. All net realized
long-term or short-term capital gains of the Fund, if any, are declared and
distributed at least annually to the shareholders of the Portfolio or
Portfolios to which such gains are attributable.
- --------------------------------------------------------------------------------
7. Foreign
Currency
Translations
The Growth Portfolio had an unrealized translation gain on foreign currency
receivables and payables as follows: Net unrealized translation gain:
<TABLE>
<S> <C>
Dividend Receivables $16
Tax Expense Payables (3)
-------------------
Net unrealized translation gain......... $13
===================
</TABLE>
The fair value of foreign currency contracts is the amount at which they
could be settled based on exchange rates obtained from dealers. As of
December 31, 1996, the Income Portfolio experienced an unrealized net gain of
$145,826 based on the following foreign currency exchange contracts
outstanding:
<TABLE>
<CAPTION>
Valuation Unrealized
Expiration Contract as of Appreciation
Sold Date Amount December 31, (Depreciation)
1996
-------------------- ------------------ ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Australian Dollar 1/24/97 $1,043,321 $1,044,864 ($1,543)
Australian Dollar 2/14/97 2,619,698 2,635,833 (16,135)
Canadian Dollar 1/24/97 1,150,421 1,126,489 23,932
Canadian Dollar 2/14/97 716,792 695,782 21,010
Danish Kroner 1/24/97 2,762,512 2,744,396 18,116
Danish Kroner 2/14/97 2,698,143 2,641,560 56,583
European Currency 2/14/97 2,708,120 2,664,257 43,863
Unit
---------------- ---------------- ----------------
$13,699,007 $13,553,181 $145,826
================ ================ ================
Net unrealized appreciation.................................................................. $145,826
================
</TABLE>
B-83
<PAGE>
- -------------------------------------------------------------------------------
Metropolitan Series Fund, Inc.
- -------------------------------------------------------------------------------
Notes to Financial Statements December 31, 1996 - (Continued)
- -------------------------------------------------------------------------------
7. (Continued)
The Income Portfolio had an unrealized translation gain on foreign currency
receivables and payables as follows:
Net unrealized translation gain:
Interest Receivables ($3,015)
Interest Reclaim Receivables 5,424
Tax Expense Receivables 154
-----------
Net unrealized translation gain............. $2,563
===========
As of December 31, 1996 the Diversified Portfolio experienced an unrealized
net gain of $274,050 based on the following foreign currency exchange
contracts outstanding:
<TABLE>
<CAPTION>
Valuation
as of Unrealized
Expiration Contract December 31, Appreciation
Sold Date Amount 1996 (Depreciation)
---------------------- ------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Australian Dollar 1/24/97 $1,428,120 $1,430,232 $(2,112)
Australian Dollar 2/14/97 3,622,729 3,645,521 (22,792)
Canadian Dollar 1/24/97 2,598,954 2,545,572 53,382
Danish Kroner 2/14/97 8,076,487 7,889,713 186,774
European Currency Unit 2/14/97 3,634,180 3,575,382 58,798
----------------- ----------------- -----------------
$19,360,470 $19,086,420 $274,050
================= ================= =================
Net unrealized appreciation............................................................. $274,050
=================
</TABLE>
The Diversified Portfolio had an unrealized translation loss on foreign currency
receivables and payables as follows:
<TABLE>
<S> <C>
Net unrealized translation (loss):
Dividends Receivables $9
Interest Receivables (4,355)
Tax Expense Payables 211
-------------
Net unrealized translation (loss)............... ($4,135)
=============
</TABLE>
The International Portfolio had an unrealized translation gain on foreign
currency receivables and payables as follows:
<TABLE>
<S> <C>
Net unrealized translation gain:
Cash Denominated in Foreign Currencies $37,841
Pending Spot Foreign Exchange Purchases 8,334
Pending Spot Foreign Exchange Sales (14,573)
Dividends Receivables 4,473
Interest Receivables (1,157)
Tax Reclaim Receivables (1,832)
Sales Receivable (28,233)
Purchase Payables 13,825
-------------
Net unrealized translation gain................. $18,678
=============
</TABLE>
B-84
<PAGE>
METROPOLITAN SERIES FUND, INC.
Management's Discussion and Analysis
- -------------------------------------------------------------------------------
METROPOLITAN SERIES FUND GROWTH PORTFOLIO
The Portfolio finished strong, among the top third of its fund category for
the 12-month period. Throughout the year, the manager seeking to achieve
consistently competitive returns, reduced the number of holdings of large,
growth company stocks. During the fourth quarter, investor interest narrowed
to the largest blue chip companies in the stock indices. Value stocks
outperformed during that period, before growth made a strong comeback.
John T. Wilson became portfolio manager in December 1996. At year-end, the
Portfolio held 64 stocks, continuing to focus on strong corporate leaders
across a broad spectrum of businesses. Heaviest investment was in consumer
staple products with steady demand and in technology stocks. There was
selective focus on energy and entertainment issues. The manager also reduced
the median market size of investments to take advantage of better valuations.
INVESTMENT OBJECTIVE
To seek long-term growth of capital and income and moderate current income.
UNDERLYING INVESTMENTS
Invests primarily in common stocks believed to be of good quality or to have
good growth potential or which are considered to be undervalued based on
historical investment standards.
PORTFOLIO COMPOSITION & TOTAL
RETURN AS OF DECEMBER 31, 1996
<TABLE>
<S> <C>
NET ASSETS $1.6 billion
</TABLE>
COMPOSITION
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
% OF TOTAL
SECURITY NET ASSETS
- -------- ----------
<S> <C>
BankAmerica Corp. .................................................. 3.21%
Citicorp............................................................ 2.94%
Schlumberger Ltd. .................................................. 2.93%
General Electric Co. ............................................... 2.50%
Monsanto Co. ....................................................... 2.44%
International Business Machines Corp. .............................. 2.42%
COMPAQ Computer Corp. .............................................. 2.18%
Burlington Resources, Inc. ......................................... 2.08%
Du Pont (E.I.) de Nemours & Co. .................................... 2.08%
Rohm & Haas Co. .................................................... 2.06%
</TABLE>
Due to active management, there is no guarantee that the Portfolio currently
invests or will continue to invest in the securities or industries listed.
PERFORMANCE SUMMARY
Comparison of Change in Value of a $10,000 Investment in the Growth Portfolio
and the S&P 500 Index from 12/31/86 to 12/31/96.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<S> <C> <C>
1yr. 5yr. 10yr.
22.18% 14.97% 14.77%
</TABLE>
[GRAPH APPEARS HERE INDICATING THE FOLLOWING INFORMATION:]
Growth
------
PORTFOLIO INDEX(1)
--------- --------
12/31/86 $ 10,000 $ 10,000
12/31/87 10,719 10,525
12/31/88 11,864 12,268
12/31/89 16,212 16,149
12/31/90 14,834 15,647
12/31/91 19,743 20,403
12/31/92 22,026 21,956
12/31/93 25,198 24,164
12/31/94 24,378 24,481
12/31/95 32,456 33,670
12/31/96 39,654 41,396
The above graph does not include withdrawal or surrender charges and Separate
Account expenses (general administrative expenses and mortality and expense
risk charges or cost of insurance charges). If performance information
included the effect of these additional charges, performance would have been
lower. Past performance is no guarantee of future results. Principal value and
investment return will vary and you may have a gain or loss when you withdraw
your money.
B-85
<PAGE>
METROPOLITAN SERIES FUND, INC.
Management's Discussion and Analysis
- -------------------------------------------------------------------------------
METROPOLITAN SERIES FUND INCOME PORTFOLIO
The Portfolio performed in the top quintile of its competing funds over the
12-month period. While the investing environment was difficult for bonds
throughout the year, the manager held defensive positions that were less
sensitive to interest rate changes than the market average. The Portfolio
continued to benefit from modest investments in foreign securities and in
bonds below investment-grade. However, with more than half of its assets
invested in U.S. Treasury bonds, the average quality of all holdings remained
high.
At year-end, the economic outlook reflected continuing moderate growth, with
inflation behaving well and the Federal Reserve maintaining its policy on
short-term interest rates. The manager planned to hold securities that would
mirror the market average if interest rates changed.
During 1996, the manager selected the Lehman Brothers Government/Corporate
Bond Index as its benchmark for comparing Portfolio performance. He determined
that this Index more accurately reflected the risk/return characteristics of
fixed income funds against which the Income Portfolio competes. The former
benchmark was the Lehman Brothers Aggregate Index, which is also presented
below for this transitional year.
INVESTMENT OBJECTIVE
To achieve the highest possible total return by combining current income with
capital gains, consistent with prudent investment risk and preservation of
capital.
UNDERLYING INVESTMENTS
Invests primarily in fixed income, high-quality debt securities.
PORTFOLIO COMPOSITION & TOTAL
RETURN AS OF DECEMBER 31, 1996
<TABLE>
<C> <S>
NET ASSETS $383.4 million
AVERAGE BOND QUALITY AA+
</TABLE>
PERFORMANCE SUMMARY
Comparison of Change in Value of a
$10,000 Investment in the Income
Portfolio, Lehman Brothers
Aggregate Index and the Lehman
Brothers Government/Corporate Bond
Index from 12/31/86 to 12/31/96.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<S> <C> <C>
1yr. 5yr. 10yr.
3.60% 7.39% 8.40%
</TABLE>
[GRAPH APPEARS HERE INDICATING THE FOLLOWING INFORMATION:]
Income
------
Portfolio Index(2) Index(5)
--------- -------- --------
12/31/86 $ 10,000 $ 10,000 $ 10,000
12/31/87 9,813 10,276 10,229
12/31/88 10,724 11,086 11,005
12/31/89 12,155 12,697 12,571
12/31/90 13,374 13,834 13,613
12/31/91 15,688 16,048 15,808
12/31/92 16,773 17,236 17,006
12/31/93 18,679 18,916 18,882
12/31/94 18,091 18,365 18,220
12/31/95 21,628 21,757 21,726
12/31/96 22,407 22,547 22,356
Index:
(2) Lehman Brothers Aggregate Index
(5) Lehman Gov't/Corp Bond
The above graph does not include
withdrawal or surrender charges and
Separate Account expenses (general
administrative expenses and
mortality and expense risk charges
or cost of insurance charges). If
performance information included
the effect of these additional
charges, performance would have
been lower. Past performance is no
guarantee of future results.
Principal value and investment
return will vary and you may have a
gain or loss when you withdraw your
money.
B-86
<PAGE>
METROPOLITAN SERIES FUND, INC.
Management's Discussion and Analysis
- -------------------------------------------------------------------------------
METROPOLITAN SERIES FUND MONEY MARKET PORTFOLIO
The Federal Reserve's fund's target for the second half of 1996 stayed firmly
at 5.25%. Investments in the short end of the yield curve could hardly earn
more than that, even before expenses were levied against these types of
investments. Short rates did inch another quarter point higher in the last
month of the year, which is a typical year-end response. Even then, the
expected rise never materialized to the same extent as former years.
In short, money market mutual fund returns were uneventful. However, despite
low market returns, the Portfolio yielded a rate of return that was 2% higher
than the rate of inflation.
The steadiness of low inflation and the stability of Federal Reserve's funds,
the very factors causing the equity markets to explode and the bond market to
vacillate in disbelief, suggest the course of short rates going forward. In
1997 short-term investments should remain quite steady as forces that may
cause rates to rise, such as a growing economy, will be offset by forces that
may cause the rates to decline, such as lowering inflation expectations.
INVESTMENT OBJECTIVE
To achieve the highest possible current income consistent with preservation of
capital and maintenance of liquidity.
UNDERLYING INVESTMENTS
Invests primarily in short-term money market instruments.
PORTFOLIO COMPOSITION & TOTAL
RETURN AS OF DECEMBER 31, 1996
<TABLE>
<S> <C>
NET ASSETS $41.6 million
</TABLE>
PERFORMANCE SUMMARY
Comparison of Change in Value of a
$10,000 Investment in the Money
Market Portfolio and the IBC's
Money Fund Report Averages(TM)/All
Taxable 30 Day* from 12/31/86 to
12/31/96.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<S> <C> <C>
1yr. 5yr. 10yr.
5.01% 4.21% 5.83%
</TABLE>
[GRAPH APPEARS HERE INDICATING THE FOLLOWING INFORMATION:]
Money Market
------------
Portfolio Index(3)
--------- ---------
12/31/86 $ 10,000 $ 10,000
12/31/87 $ 10,622 $ 10,612
12/31/88 $ 11,424 $ 11,367
12/31/89 $ 12,484 $ 12,375
12/31/90 $ 13,512 $ 13,342
12/31/91 $ 14,336 $ 14,104
12/31/92 $ 14,870 $ 14,578
12/31/93 $ 15,302 $ 14,972
12/31/94 $ 15,891 $ 15,503
12/31/95 $ 16,779 $ 16,353
12/31/96 $ 17,620 $ 17,164
Index:
(3) IBC's Money Portfolio
The above graph does not include
withdrawal or surrender charges and
Separate Account expenses (general
administrative expenses and
mortality and expense risk charges
or cost of insurance charges). If
performance information included
the effect of these additional
charges, performance would have
been lower. Past performance is no
guarantee of future results.
Principal value and investment
return will vary and you may have a
gain or loss when you withdraw your
money. The Money Market Portfolio
is not insured or guaranteed by the
- ------- U.S. government.
*Source: IBC's Money Fund Report
B-87
<PAGE>
METROPOLITAN SERIES FUND, INC.
Management's Discussion and Analysis
- -------------------------------------------------------------------------------
METROPOLITAN SERIES FUND DIVERSIFIED PORTFOLIO
The Portfolio performed well, completing its 10th year and finishing in the
top quartile of its fund category for the 12-month period. At year-end, there
were 153 total securities, excluding short-term instruments. Stocks remained
close to the allocation guideline at 61% of assets and outperformed the bond
segment despite volatile markets. The manager expanded holdings to companies
demonstrating consistent profitability, strong market leadership and above-
average earnings potential. John T. Wilson took over as stock portfolio
manager in December 1996.
For most of the year, the bond manager had invested defensively against rising
interest rates. Near year-end, he positioned the income segment to mirror the
market average if interest rates changed. The Portfolio continued to benefit
from modest investments in foreign securities and in bonds below investment-
grade. However, with more than half of the bond holdings in U.S. Treasuries,
average quality remained high.
During 1996, the bond manager selected the Lehman Brothers
Government/Corporate Bond Index as its benchmark for comparing fixed income
performance in the Portfolio. He determined that this Index more accurately
reflected the risk/return characteristics of fixed income funds against which
the Diversified Portfolio competes. The former benchmark was the Lehman
Brothers Aggregate Index, which is also presented below for this transitional
year.
INVESTMENT OBJECTIVE
To achieve a high total return while attempting to limit investment risk and
preserve capital.
UNDERLYING INVESTMENTS
Invests in equity securities, fixed income debt securities, or short-term
money market instruments, or any combination thereof, at the discretion of
State Street Research & Management Company.
PORTFOLIO COMPOSITION & TOTAL
RETURN AS OF DECEMBER 31, 1996
<TABLE>
<C> <S>
NET ASSETS $1.4 billion
AVERAGE BOND QUALITY AA+
</TABLE>
COMPOSITION
TOP TEN EQUITY HOLDINGS
<TABLE>
<CAPTION>
% OF TOTAL
SECURITY NET ASSETS
- -------- ----------
<S> <C>
BankAmerica Corp. .................................................. 1.98%
Schlumberger Ltd. .................................................. 1.81%
Citicorp............................................................ 1.80%
General Electric Co. ............................................... 1.53%
Monsanto Co. ....................................................... 1.50%
International Business Machines Corp. .............................. 1.49%
COMPAQ Computer Corp. .............................................. 1.34%
Burlington Resources, Inc. ......................................... 1.28%
Du Pont (E.I.) de Nemours & Co. .................................... 1.28%
Rohm & Haas Co. .................................................... 1.27%
</TABLE>
Due to active management, there is no guarantee that the Portfolio currently
invests or will continue to invest in the securities or industries listed.
PERFORMANCE SUMMARY
Comparison of Change in Value of a $10,000 Investment in the Diversified
Portfolio and the S&P 500 Index, Lehman Brothers Government/Corporate Bond
Index and Lehman Brothers Aggregate Index from 12/31/86 to 12/31/96.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<S> <C> <C>
1yr. 5yr. Inception
14.52% 12.14% 11.72%
</TABLE>
[GRAPH APPEARS HERE INDICATING THE FOLLOWING INFORMATION:]
Diversified
-----------
Portfolio Index(1) Index(2) Index(5)
--------- -------- -------- --------
12/31/86 $ 10,000 $ 10,000 $ 10,000 $ 10,000
12/31/87 10,363 10,525 10,276 10,229
12/31/88 11,322 12,268 11,086 11,005
12/31/89 13,785 16,149 12,697 12,571
12/31/90 13,785 15,647 13,834 13,613
12/31/91 17,209 20,403 16,048 15,808
12/31/92 18,841 21,956 17,236 17,006
12/31/93 21,243 24,164 18,916 18,882
12/31/94 20,593 24,481 18,365 18,220
12/31/95 26,159 33,670 21,757 21,726
12/31/96 29,956 41,396 22,547 22,356
Index:
(1) S&P 500 Index
(2) Lehman Brothers Aggregate Index
(5) Lehman Gov't/Corp Bond
The above graph does not include withdrawal or surrender charges and Separate
Account expenses (general administrative expenses and mortality and expense
risk charges or cost of insurance charges). If performance information
included the effect of these additional charges, performance would have been
lower. Past performance is no guarantee of future results. Principal value and
investment return will vary and you may have a gain or loss when you withdraw
your money.
B-88
<PAGE>
METROPOLITAN SERIES FUND, INC.
Management's Discussion and Analysis
- -------------------------------------------------------------------------------
METROPOLITAN SERIES FUND AGGRESSIVE GROWTH PORTFOLIO
The stock market in 1996 was risk-averse, favoring large company, blue-chip
stocks at the expense of small and medium-capitalization growth issues. A
dramatic flight to those large stock market leaders took place in the fourth
quarter. This narrow investment focus hurt many Portfolio holdings that
customarily were attractive growth stocks selected by a bottom-up valuation in
the manager's consistent investment process and style.
At year-end, the Portfolio held 148 stocks. Investment focus remained on
specialty retail, hotel and restaurant, and technology stocks emphasizing
products and services that help improve productivity. Consumer staples such as
business services, energy and finance were other important areas of
investment.
The manager kept the Portfolio positioned for maximum capital appreciation
when market investment broadens. He anticipated continued positive economic
growth with low inflation in 1997.
INVESTMENT OBJECTIVE
To achieve maximum capital appreciation.
UNDERLYING INVESTMENTS
Invests 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.
PORTFOLIO COMPOSITION & TOTAL
RETURN AS OF DECEMBER 31, 1996
<TABLE>
<S> <C>
NET ASSETS $1.3 billion
</TABLE>
COMPOSITION
TOP TEN EQUITY HOLDINGS
<TABLE>
<CAPTION>
% OF TOTAL
SECURITY NET ASSETS
- -------- ----------
<S> <C>
HFS, Inc. .......................................................... 4.84%
Republic Industries, Inc. .......................................... 3.30%
Gucci Group NV...................................................... 2.90%
Beneficial Corp. ................................................... 2.65%
Sanmina Holdings, Inc. ............................................. 2.55%
Extended Stay America, Inc. ........................................ 2.30%
Chase Manhattan Corp. .............................................. 1.98%
Philip Morris Cos., Inc. ........................................... 1.89%
Global Marine, Inc. ................................................ 1.78%
Lucent Technologies, Inc. .......................................... 1.72%
</TABLE>
Due to active management, there is no guarantee that the Portfolio currently
invests or will continue to invest in the securities or industries listed.
PERFORMANCE SUMMARY
Comparison of Change in Value of a $10,000 Investment in the Aggressive Growth
Portfolio and the S&P 500 Index from 4/29/88 to 12/31/96.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<S> <C> <C>
1yr. 5yr. Inception
7.72% 13.13% 16.65%
</TABLE>
[GRAPH APPEARS HERE INDICATING THE FOLLOWING INFORMATION:]
Aggressive Growth
-----------------
Portfolio Index(1)
--------- --------
04/29/88 $ 10,000 $ 10,000
12/31/88 10,521 10,910
12/31/89 13,776 14,360
12/31/90 12,351 13,914
12/31/91 20,553 18,144
12/31/92 22,688 19,524
12/31/93 27,822 21,488
12/31/94 27,298 21,770
12/31/95 35,350 29,941
12/31/96 38,081 36,811
Index:
(1) S&P 500 Index
The above graph does not include withdrawal or surrender charges and Separate
Account expenses (general administrative expenses and mortality and expense
risk charges or cost of insurance charges). If performance information
included the effect of these additional charges, performance would have been
lower. Past performance is no guarantee of future results. Principal value and
investment return will vary and you may have a gain or loss when you withdraw
your money.
B-89
<PAGE>
METROPOLITAN SERIES FUND, INC.
Management's Discussion and Analysis
- -------------------------------------------------------------------------------
METROPOLITAN SERIES FUND STOCK INDEX PORTFOLIO
In 1996 stocks in the S&P 500 Index were up strongly. This followed good gains
in 1995, giving the S&P 500 its best two year period since 1954-55. U.S.
stocks have benefited from a multiyear period of full employment, low
inflation and an absence of significant economic downturns. Economic growth,
productivity improvements and restructuring benefits have led to a doubling of
profits since 1991 for companies in the S&P 500 Index. Investors have been
willing to pay more for a given level of earnings because they have more
optimistic views of future economic stability, inflation and interest rates.
The Portfolio continued to follow its strategy of investing virtually all its
assets in stocks of companies in the S&P 500 Index. The Portfolio owns most of
the stocks in the Index and uses a computerized stock selection procedure in
order to achieve returns close to those of the S&P 500 Index.
INVESTMENT OBJECTIVE
To equal the performance of the Standard & Poor's 500 Composite Stock Price
Index (adjusted to assume reinvestment of dividends).
UNDERLYING INVESTMENTS
Invests in the common stocks of companies that are included in the S&P 500
Index.
PORTFOLIO COMPOSITION & TOTAL
RETURN AS OF DECEMBER 31, 1996
<TABLE>
<S> <C>
NET ASSETS $1.1 billion
</TABLE>
COMPOSITION
TOP TEN EQUITY HOLDINGS
<TABLE>
<CAPTION>
% OF TOTAL
SECURITY NET ASSETS
- -------- ----------
<S> <C>
General Electric Co. ............................................... 2.87%
Coca-Cola Co. ...................................................... 2.30%
Exxon Corp. ........................................................ 2.15%
Intel Corp. ........................................................ 1.89%
Microsoft Corp. .................................................... 1.73%
Philip Morris Cos., Inc. ........................................... 1.66%
Royal Dutch Petroleum Co. .......................................... 1.66%
Merck & Co., Inc. .................................................. 1.65%
International Business Machines Corp. .............................. 1.39%
Procter & Gamble Co. ............................................... 1.29%
</TABLE>
Due to active management, there is no guarantee that the Portfolio currently
invests or will continue to invest in the securities or industries listed.
PERFORMANCE SUMMARY
Comparison of Change in Value of a $10,000 Investment in the Stock Index
Portfolio and the S&P 500 Index from 5/1/90 to 12/31/96.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<S> <C> <C>
1yr. 5yr. Inception
22.66% 14.86% 15.68%
</TABLE>
[GRAPH APPEARS HERE INDICATING THE FOLLOWING INFORMATION:]
Stock Index
-----------
Portfolio Index(1)
--------- --------
05/01/90 $ 10,000 $ 10,000
12/31/90 10,195 10,245
12/31/91 13,229 13,359
12/31/92 14,213 14,376
12/31/93 15,569 15,821
12/31/94 15,753 16,029
12/31/95 21,561 22,046
12/31/96 26,447 27,104
Index:
(1) S&P 500 Index.
The above graph does not include withdrawal or surrender charges and Separate
Account expenses (general administrative expenses and mortality and expense
risk charges or cost of insurance charges). If performance information
included the effect of these additional charges, performance would have been
lower. Past performance is no guarantee of future results. Principal value and
investment return will vary and you may have a gain or loss when you withdraw
your money.
B-90
<PAGE>
METROPOLITAN SERIES FUND, INC.
Management's Discussion and Analysis
- -------------------------------------------------------------------------------
METROPOLITAN SERIES FUND INTERNATIONAL STOCK PORTFOLIO
Although performance improved markedly in the final quarter, the Portfolio
finished last among its peer group for the 12-month period. The Japanese
economy continued to struggle, and despite some selective profits and
restructured holdings, the Portfolio's investments there generally met with
depressed results. Steady strengthening of the U.S. dollar against the yen,
the German mark and other currencies throughout the year also reduced local
market returns. (The Portfolio is valued in dollars.) United Kingdom stocks
were a positive exception, but underweighted because of political concerns and
the effect of the sterling's strength on multinational company profits.
Ian Vose, Chief Executive Officer of the Portfolio's sub-adviser, took over
portfolio management early in 1996. At year-end, the manager anticipated
moderate growth with no significant inflationary pressures, based on fiscal
policies in continental Europe and Japan. Investment strategy emphasized
Europe, Southeast Asia and Australia as opportune regions.
INVESTMENT
OBJECTIVE/UNDERLYING
INVESTMENTS
To achieve long-term growth of capital by investing primarily in common stocks
and equity-related securities of non-United States companies.
PORTFOLIO COMPOSITION & TOTAL
RETURN AS OF DECEMBER 31, 1996
<TABLE>
<S> <C>
NET ASSETS $303.8 million
</TABLE>
COMPOSITION
TOP TEN EQUITY HOLDINGS
(BASED ON THE LOCATION OF THE COMPANY'S PRINCIPAL OPERATION)
<TABLE>
<CAPTION>
% OF TOTAL
SECURITY NET ASSETS
- -------- ----------
<S> <C>
Nomura Securities (Japan)........................................... 1.86%
Mitsubishi Estate (Japan)........................................... 1.75%
Bank of Ireland (Ireland)........................................... 1.61%
Sony Corp. (Japan).................................................. 1.58%
Canon, Inc. (Japan)................................................. 1.52%
British Petroleum Co. (United Kingdom).............................. 1.52%
Royal Dutch Petroleum (Netherlands)................................. 1.39%
Daimler-Benz AG (Germany)........................................... 1.36%
TDK Corp. (Japan)................................................... 1.28%
Novartis AG (Switzerland)........................................... 1.26%
</TABLE>
ASSET ALLOCATION BY COUNTRY AND GEOGRAPHY ON 12/31/96
BASED ON MARKET VALUE OF INVESTMENTS
[PIE CHART APPEARS HERE SHOWING THE FOLLOWING PERCENTAGES:]
<TABLE>
<CAPTION>
<S> <C>
Japan......................................... 28.3%
United Kingdom................................ 12.0%
France........................................ 8.5%
Germany....................................... 8.0%
Netherlands................................... 5.5%
Hong Kong..................................... 5.1%
Australia..................................... 4.1%
Switzerland................................... 3.4%
Spain......................................... 3.3%
Italy......................................... 2.6%
Other Europe.................................. 8.5%
Other Asia/Pacific............................ 8.5%
Other Mid-East/Africa/Latin America........... 2.2%
</TABLE>
Due to active management, there is no guarantee that the Portfolio currently
invests or will continue to invest in the securities or countries listed.
PERFORMANCE SUMMARY
Comparison of Change in Value of a $10,000 Investment in the International
Stock Portfolio and the Morgan Stanley EAFE Index from 5/1/91 to 12/31/96.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<S> <C> <C>
1yr. 5yr. Inception
(1.77%) 6.67% 5.56%
</TABLE>
[GRAPH APPEARS HERE INDICATING THE FOLLOWING INFORMATION:]
International Stock
--------------------
PORTFOLIO INDEX(4)
--------- --------
05/01/91 $ 10,000 $ 10,000
12/31/91 9,845 10,335
12/31/92 8,840 9,077
12/31/93 13,062 12,033
12/31/94 13,725 12,969
12/31/95 13,841 14,422
12/31/96 13,596 15,294
Index:
(4) Morgan Stanley EAFE
The Average Annual Total Returns were not materially affected by Metropolitan
Life Insurance Company's subsidy of certain expenses for part of 1993, and did
not produce return figures different from those displayed. The above graph
does not include withdrawal or surrender charges and Separate Account expenses
(general administrative expenses and mortality and expense risk charges or
cost of insurance charges). If performance information included the effect of
these additional charges, performance would have been lower. Past performance
is no guarantee of future results. Principal value and investment return will
vary and you may have a gain or loss when you withdraw your money.
B-91
<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.
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 INFORMATION OR TO
MAKE ANY REPRESENTATIONS, OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, 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
HAVING BEEN AUTHORIZED BY THE FUND, METRO-
POLITAN LIFE, STATE STREET RESEARCH, GFM,
METROPOLITAN TOWER, LOOMIS SAYLES, T. ROWE
PRICE, JANUS OR SCUDDER. THIS PROSPECTUS
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
(A) FINANCIAL STATEMENTS:
Included in Prospectus:
Financial Highlights for the Period June 24, 1984 to December 31,
1996
Included in Part B:
INDEPENDENT AUDITORS' REPORT
Schedule of Investments as of December 31, 1996--State Street
Research Growth Portfolio
Schedule of Investments as of December 31, 1996--State Street
Research Income Portfolio
Schedule of Investments as of December 31, 1996--MetLife Money
Market Portfolio
Schedule of Investments as of December 31, 1996--Discretionary
(now known as State Street Research Diversified) Portfolio
Schedule of Investments as of December 31, 1996--State Street
Research Aggressive Growth Portfolio
Schedule of Investments as of December 31, 1996--MetLife Stock
Index Portfolio
Schedule of Investments as of December 31, 1996--GFM International
Stock Portfolio
Statements of Assets and Liabilities, December 31, 1996
Statements of Operations for the year ended December 31, 1996
Statements of Changes in Net Assets for the year ended December
31, 1996 and the year ended December 31, 1995
Financial Highlights for the Period January 1, 1989 to December
31, 1996
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). -- 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). --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. 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. 17 to this Registration Statement on April 30, 1996. The
Powers of Attorney for Messrs. Hodgman and Tweedie are incorporated by
reference to the filing of Post-Effective Amendment No. 16 on April 28,
1995. The Power of Attorney for Mr. White is incorporated by reference to
the filing of Post-Effective Amendment No. 18 on December 18, 1996.
+++ Incorporated by reference to the filing of Post Effective Amendment No. 18
on December 18, 1996.
C-2
<PAGE>
ORGANIZATIONAL STRUCTURE OF METROPOLITAN AND SUBSIDIARIES
AS OF DECEMBER 31, 1996
The following is a list of subsidiaries of Metropolitan Life Insurance Company
("Metropolitan") as of December 31, 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 (Rhode Island)
a. Metropolitan Group Property and Casualty Insurance Company
(Rhode Island)
i. Metropolitan Reinsurance Company (U.K.) Limited (Great
Britain)
b. Metropolitan Casualty Insurance Company (Rhode Island)
c. Metropolitan General Insurance Company (Rhode Island)
d. 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)
f. MetLife General Insurance Agency of Massachusetts, Inc.
(Massachusetts)
C-3
<PAGE>
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)
(4) MetLife Capital, Limited Partnership (Delaware).
Partnership interests in MetLife Capital, Limited
Partnership are held by Metropolitan (90%) and MetLife
Capital Corporation (10%).
(5) CLJFinco, 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)
C-4
<PAGE>
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.
iv. MetLife Capital International Ltd. (Delaware).
b. MetLife Investment Management Corporation (Delaware)
i. MetLife Investments Limited (United Kingdom). 23rd Street
Investments, Inc. holds one share of MetLife Investments
Limited.
c. MetLife Investments Asia Limited (Hong Kong). One share of
MetLife Investments Asia Limited is held by W&C Services, Inc., a
nominee of Metropolitan Asset Management Corporation.
d. GFM International Investors Limited (United Kingdom). The common
stock of GFM International Investors Limited ("GFM") is held by
Metropolitan (99.5%) and by the former CEO 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. 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).
b. Metric Holdings, Inc. (Delaware)
i. Metric Management Inc. (Delaware)
ii. Metric Realty Corp. (Delaware)
(1) 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. holds 80% of the common stock of
Metric Colorado, Inc.
(2) Metric AV, Inc.
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%
C-5
<PAGE>
interest as general partner in Metric Institutional
Realty Advisors, L.P.
(5) 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.
iv. MetLife Realty Group, Inc. (Delaware)
6. MetLife Holdings, Inc. (Delaware)
a. MetLife Funding, Inc. (Delaware)
b. MetLife Credit Corp. (Delaware)
7. Metropolitan Tower Realty Company, Inc. (Delaware)
8. Met Life Real Estate Advisors, Inc. (California)
9. 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)
C-6
<PAGE>
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. 3309347 Canada, Inc. (Canada)
H. MetLife (UK) Limited (Great Britain). One share held by Metropolitan Tower
Corp.
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.
C-7
<PAGE>
K. Metropolitan Life Seguros de Vida S.A. (Argentina)
L. Metropolitan Life Seguros de Retiro S.A. (Argentina).
M. Met Life Holdings Luxembourg (Luxembourg)
N. Metropolitan Life Holdings, Netherlands BV (Netherlands)
O. MetLife International Holdings, Inc. (Delaware)
P. Metropolitan Life Insurance Company of Hong Kong Limited (Hong Kong)
C-8
<PAGE>
Q. 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. Cross & Brown Construction Corp. (New York)
c. CBNJ, Inc. (New Jersey)
d. SubBrown Corp. (New York)
R. MetPark Funding, Inc. (Delaware)
S. 2154 Trading Corporation (New York)
T. Transmountain Land & Livestock Company (Montana)
U. Met West Agribusiness, Inc. (Delaware)
V. Farmers National Company (Nebraska)
1. Farmers National Commodities, Inc. (Nebraska)
C-9
<PAGE>
W. MetLife Trust Company, National Association. (United States)
X. PESCO Plus, L.C. (Florida). Metropolitan holds a 50% interest in
PESCO Plus, L.C. and an unaffiliated party holds a 50% interest.
1. Public Employees Equities Services Company (Florida)
Y. Benefit Services Corporation (Georgia)
Z. G.A. Holding Corporation (MA)
A.A. TNE-Y, Inc. (DE)
A.B. CRH Companies, Inc. (MA)
A.C. NELRECO Troy, Inc. (MA)
A.D. TNE Funding Corporation (DE)
A.E. L/C Development Corporation (CA)
A.F. Boylston Capital Advisors, Inc. (MA)
1. New England Portfolio Advisors, Inc. (MA)
A.G. CRB Co., Inc. (MA) AEW Real Estate Advisors, Inc. holds 49,000 preferred
non-voting shares of CRB Co., Inc. AEW Advisors, Inc. holds 1,000
preferred non-voting shares of CRB Co., Inc.
A.H. DPA Holding Corp. (MA)
A.I. Lyon/Copley Development Corporation (CA)
A.J. NEL Partnership Investments I, Inc. (MA)
A.K. New England Life Mortgage Funding Corporation (MA)
A.L. Mercadian Capital L.P. (DE). Metropolitan holds a 95% limited partner
interest and an unaffiliated third party holds 5% of Mercadian Capital
L.P.
A.M. Mercadian Funding L.P. ( DE). Metropolitan holds a 95% limited partner
interest and an unaffiliated third party holds 5% of Mercadian
Funding L.P.
A.N. MetLife New England Holdings, Inc. (DE)
1. New England Life Insurance Company (MA)
a. New England Securities Corporation (MA)
b. Hereford Insurance Agency, Inc. (MA)
c. Hereford Insurance Agency of Alabama, Inc. (AL)
d. Hereford Insurance Agency of Minnesota, Inc. (MN)
e. Newbury Insurance Company, Limited (Bermuda)
f. TNE Information Services, Inc. (MA)
g. Exeter Reassurance Company, Ltd. (MA)
h. Omega Reinsurance Corporation (AZ)
i. New England Pension and Annuity Company (DE)
j. TNE Advisers, Inc. (MA)
k. New England Investment Companies, Inc. (MA)
1. New England Investment Companies, L.P. (DE) New England
Investment Companies, Inc. hold a 0.29% general partnership
interest in New England Investment Companies, L.P. MetLife New
England Holdings, Inc. holds a 54.90% limited partnership
interest in New England Investment Companies, L.P.
a. NEIC Holdings, Inc. (MA)
i. (1) Back Bay Advisors, Inc. (MA)
(2) Back Bay Advisors, L.P. (DE)
Back Bay Advisors, Inc.
holds a 1% general partner
interest and NEIC
Holdings, Inc. holds a 99%
limited partner interest
in Back Bay Advisors, L.P.
ii. Reich & Tang Asset Management, Inc. (MA)
(1) Reich & Tang Distributors, L.P. (DE)
Reich & Tang Asset Management Inc.
holds a 1% general interest and
Reich & Tang Asset Management, L.P.
holds a 99.5% limited partner
interest in Reich Tang Distributors, L.P.
(2) Reich & Tang Asset Management L.P.
Reich & Tang Asset Management, Inc.
holds a 0.5% general partner interest and
NEIC Holdings, Inc. hold a 99.5% limited
partner interest in Reich & Tang
Asset Management, L.P.
(3) Reich & Tang Services, L.P. (DE)
Reich & Tang Asset Management, Inc.
holds a 1% general partner interest and
Reich & Tang Asset Management, L.P.
holds a 99% limited partner interest
in Reich & Tang Services, L.P.
iii. Loomis, Sayles & Company, Inc. (MA)
(1) Loomis Sayles & Company, L.P. (DE)
Loomis Sayles & Company, Inc.
holds a 1% general partner interest and
Reich & Tang Asset Management, Inc. holds a 99%
limited partner interest in Loomis Sayles &
Company, L.P.
iv. Westpeak Investment Advisors, Inc. (MA)
(1) Westpeak Investment Advisors, L.P. (DE)
Westpeak Investment Advisors, Inc.
holds a 1% general partner interest and
Reich & Tang holds a 99% limited
partner interest in Westpeak Investment
Advisors, L.P.
v. VNSM, Inc. (DE)
(1) Vaughan, Nelson Scarborough & McConnell, L.P. (DE)
VNSM, Inc. holds a 1% general partner interest and
Reich & Tang Asset Management, Inc. holds a 99%
limited partner interest in Vaughan, Nelson
Scarborough & McConnell, L.P.
vi. MC Management, Inc. (MA)
(1) MC Management, L.P. (DE)
MC Management, Inc. holds a 1% general partner
interest and Reich & Tang Asset Management,
Inc. holds a 99% limited partner interest in MC
Management, L.P.
vii. Harris Associates, Inc. (DE)
(1) Harris Associates Securities L.P. (DE)
Harris Associates, Inc. holds a 1% general partner
interest and Harris Associates L.P. holds a
99% limited partner interest in Harris Associates
Securities, L.P.
(2) Harris Associates L.P. (DE)
Harris Associates, Inc. holds a 0.33% general
partner interest and New England Investment Company,
L.P. Inc. holds a 99.67% limited partner interest in
Harris Associates L.P.
(a) Harris Partners, Inc. (DE)
(b) Harris Partners L.L.C. (DE)
Harris Partners, Inc. holds a 1%
membership interest and
Harris Associates L.P. holds a 99%
membership interest in Harris Partners L.L.C.
(i) Aurora Limited Partnership (DE)
Harris Partners L.L.C. holds a 1% general
partner interest
(ii) Perseus Partners L.P. (DE) Harris Partners
L.L.C. holds a 1% general partner interest
(iii) Pleiades Partners L.P. (DE) Harris
Partners L.L.C. holds a 1% general partner
interest
(iv) Stellar Partners L.P. (DE)
Harris Partners L.L.C. holds a 1% general
partner interest
(v) SPA Partners L.P. (DE) Harris Partners
L.L.C. holds a 1% general partner interest
viii. Graystone Partners, Inc. (MA)
(1) Graystone Partners, L.P. (DE)
Graystone Partners, Inc. holds a 1%
general partner interest and New England
Investment Company, L.P.
holds a 99% limited partner interest in
Graystone Partners, L.P.
ix. NEF Corporation (MA)
(1) New England Funds, L.P. (DE) NEF Corporation holds a
1% general partner interest and New England
Investment Company, L.P. holds a 99% limited partner
interest in New England Funds, L.P.
(2) New England Funds Management, L.P. (DE) NEF
Corporation holds a 1% general partner interest and
New England Investment Company, L.P. holds a 99%
limited partner interest in New England Funds
Management, L.P.
l. Capital Growth Management, L.P. (DE)
New England Investment Companies, L.P. holds a 50% limited partner
interest in Capital Growth Management, L.P.
m. AEW Capital Management L.P. (DE)
New England Investment Companies, L.P. holds a 99% limited partner
interest and AEW Capital Management, Inc. holds a 1% general partner
interest in AEW Capital Management, L.P.
1. AEW Investment Group, Inc. (MA)
a. BBC Investment Advisors, Inc. (MA)
b. Copley/Ochard Investors, Inc. (MA)
i. Copley/Ochard Investors, L.P. (DE)
Copley/Ochard Investors, Inc.
holds a 1% general partner interest in
Copley/Ochard Investors, L.P.
c. AEW Real Estate Advisors, Inc. (MA)
i. AEW Advisors, Inc. (MA)
(1) Copley Management Partnership (MA)
Copley Advisors, Inc. holds a 1% general partner
interest in Copley Management Partnership.
(2) Coptel Associates L.P. (DE)
Copley Advisors, Inc. holds a 1% general partner
interest in Coptel Associates L.P.
(3) CIIF Associates (MA)
Copley Advisors, Inc. holds a .15% general partner
interest in CIIF Associates.
(4) CIIF Associates II Limited Partnership (DE)
Copley Advisors, Inc. holds a .15% general partner
interest in CIIF Associates II Limited Partnership.
(5) CIIF McInnes Associates (MA)
AEW Advisors, Inc. holds a .15% general partnership
interest in CIIF McInnes Associates.
(6) CIIF Oxnard Associates (MA)
AEW Advisors, Inc. holds a .15% general partnership
in CIIF Oxnard Associates.
(7) CIIF II Crossroads Limited Partnership (DE)
AEW Advisors, Inc. holds a 1% general partnership
in CIIF II Crossroads Limited Partnership.
(8) CIIF II Tech Center Associates L.P. (DE)
AEW Advisors, Inc. holds a 1% general partnership
in CIIF II Tech Center Associates L.P.
(9) CIIF II Tech Center, Inc. (MA)
AEW Advisors, Inc. holds a 5% interest in CIIF
II Tech Center Associates, Inc.
ii. Copley Properties Company, Inc. (MA)
(1) New England Life Pension Properties (MA).
Copley Properties Company, Inc. holds a 1% general
partner interest in New England Life Pension
Properties.
iii. Copley Properties Company II, Inc. (MA)
(1) New England Life Pension Properties II (MA).
Copley Properties Company II, Inc. holds a 1%
general partner interest in New England Life
Pension Properties II.
iv. Copley Properties Company III, Inc. (MA)
(1) New England Life Pension Properties III (MA).
Copley Properties Company III, Inc. holds a 1%
general partner interest in New England Life
Pension Properties III.
v. Copley Securities Corporation (MA)
vi. Copley Margarita Associates L.P. (MA)
AEW Real Estate Advisors, Inc. holds a 0.001% general
partner interest in Copley Margarita Associates L.P.
vii. Fourth Copley Corp. (MA)
(1) New England Life Pension Properties IV (MA).
Fourth Copley Corp. holds a 1% general partner
interest in New England Life Pension Properties IV.
viii. Fifth Copley Corp. (MA)
(1) New England Life Pension Properties V (MA).
Fifth Copley Corp. holds a 1% general partner
interest in New England Life Pension Properties V.
ix. Sixth Copley Corp. (MA)
(1) Copley Pension Properties VI (MA).
Sixth Copley Corp. holds a 1% general partner
interest in Copley Pension Properties VI.
x. Seventh Copley Corp. (MA).
(1) Copley Pension Properties VII (MA).
Seventh Copley Corp. holds a 1% general partner
interest in Copley Pension Properties VII.
xi. Eighth Copley Corp. (MA).
xii. First Income Corp. (MA).
(1) Copley Realty Income Partners 1 (MA).
First Income Corp. holds a 1% general partner
interest in Copley Realty Income Partners 1.
xiii. Second Income Corp. (MA).
(1) Copley Realty Income Partners 2 (MA).
Second Income Corp. holds a 1% general partner
interest in Copley Realty Income Partners 2.
xiv. Third Income Corp. (MA).
(1) Copley Realty Income Partners 3 (MA).
Third Income Corp. holds a 1% general partner
interest in Copley Realty Income Partners 3.
xv. Fourth Income Corp. (MA).
(1) Copley Realty Income Partners 4 (MA).
Fourth Income Corp. holds a 1% general partner
interest in Copley Realty Income Partners 4.
xvi. Third Singleton Corp. (MA).
(1) Copley Business Parks Associates L.P. (MA).
Third Singleton Corp. holds a 1% general partner
interest in Copley Business Parks Associates L.P.
xvii. Fourth Singleton Corp. (MA)
xviii. Fifth Singleton Corp. (MA)
(1) Copley Regional Centers Associates L.P. (MA).
Fifth Singleton Corp. holds a 1% general partner
interest in Copley Regional Centers Associates L.P.
xix. Sixth Singleton Corp. (MA).
(1) Copley Commerce Centers Associates L.P. (MA).
Sixth Singleton Corp. holds a 1% general partner
interest in Copley Commerce Centers Associates L.P.
xx. CTR Corp. (MA ).
xxi. New England Investment Associates, Inc. (DE)
xxii. BCOP Associates L.P. (MA)
AEW Real Estate Advisors, Inc. holds a 1% general
partner interest in BCOP Associates L.P.
xxiii AEW Real Estate Advisors Limited Partnership.
AEW Real Estate Advisors, Inc. holds a 25% general
partner interest in AEW Real Estate Advisors, Limited
Partnership.
d. BBC Investment Advisors, Inc. (MA)
AEW Investment Group, Inc. holds a 60% general partner
interest in BBC Investment Advisors, Inc. and Back Bay
Advisors, L.P. holds a 40% limited partner interest.
N. AEW Capital Management, Inc. (MA)
(i) Copley Management and Advisors, L.P. (DE)
AEW Capital Management, Inc. holds a 75% limited
partner interest and AEW Investment Group, Inc.
holds a 25% general partner interest in Copley
Management and Advisors, L.P.
(a) BBC Investment Advisors, L.P. (DE)
Copley Management Advisors, L.P. holds a
59.4% limited partner interest, Back Bay
Advisors, L.P. holda 39.6% limited partner
interest and BBC Investment Advisors, Inc.
holds a 1% general partner interest in
BBC Investment Advisors, L.P.
2. Copley Public Partners Holding, L.P. (DE)
AEW Capital Management, L.P. holds a 75% limited partner interest and
AEW Investment Group, Inc. holds a 25% general partner interest.
3. AEW Hotel Investment Corporation.
C-10
<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.
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% mt ST, owns a 50% interest and has the right to
designate 2 of the 4 members of the Board of Directors.
C-11
<PAGE>
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 ("MET
P&C"), 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 in each MILP. The MILPs have various's 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 Corp.; 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-12
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF
RECORD HOLDERS
AT FEBRUARY 1,
TITLE OF CLASS 1997
-------------- --------------
<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-13
<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 $1.6 trillion and total assets
under management of approximately $298 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>
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
Chairman Foundation,
Morgantown, WV
Trustee Lehigh University
Bethlehem, PA
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
</TABLE>
C-14
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<C> <C> <S>
Gerald Clark...... Director, Senior Execu- Metropolitan Life Insurance Company,
tive Vice-President and New York, NY
Chief Investment Offi-
cer since 1/97; prior
thereto Senior Execu-
tive Vice-President and
Chief Investment
Officer
Director/Officer Certain wholly-owned subsidiaries of
Metropolitan Life Insurance Company
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 Company,
President and Chief 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
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, NY
Trustees
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
</TABLE>
C-15
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<C> <C> <S>
Charles M. Leighton.. 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, MO
Executive Committee and
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, NY
Board, Director and
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
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
</TABLE>
C-16
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<C> <C> <S>
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 Company,
Board, President and New York, NY
Chief Executive Officer
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-17
<PAGE>
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
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
Ira Friedman.................... Senior Vice-President
Frederick P. Hauser............. Senior Vice-President & Controller
Anne E. Hayden.................. Senior Vice-President
Sibyl C. Jacobson............... Senior Vice-President
Joseph W. Jordan................ Senior Vice-President
Nicholas D. Latrenta............ 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
Dominick A. Prezzano............ Senior Vice-President
Joseph A. Reali................. Senior Vice-President
Vincent P. Reusing.............. Senior Vice-President
Felix Schirripa................. Senior Vice-President
Robert E. Sollmann, Jr. ........ Senior Vice-President
Thomas L. Stapleton............. Senior Vice-President & Tax Director
James F. Stenson................ Senior Vice-President
Stanley J. Talbi................ Senior Vice-President
Richard R. Tartre............... Senior Vice-President
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>
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.
The list of each director and certain officers of State Street Research
indicating any other business, profession, vocation or employment of a
substantial nature in which each such person is or has been, at any time
during the past two fiscal years, engaged for his or her own account or in the
capacity of director, officer, employee, partner or trustee is incorporated
herein by reference to the filing of Post-Effective Amendment No. 6 to the
Registration Statement of State Street Research Securities Trust on January
23, 1997.
C-18
<PAGE>
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 Retired Vice-Chairman of Metropolitan Life Insurance Company,
Athanassiades.......... the Board and Director New York, NY
Chairman of the Board since 12/95; prior
and Director thereto, Vice-Chairman
of the Board and
Director.
Director/Officer (until Certain wholly-owned subsidiaries of
12/96) 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
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 Limited
(until 1/95) Ottawa, Ontario, Canada
</TABLE>
C-19
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<S> <C> <C>
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
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
</TABLE>
C-20
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<S> <C> <C>
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
New York, NY
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
</TABLE>
C-21
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<S> <C> <C>
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
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
</TABLE>
C-22
<PAGE>
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL
NAME POSITION BUSINESS ADDRESS OF ORGANIZATION
---- -------- --------------------------------
<S> <C> <C>
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 GFM International Investors, Ltd
Director, Chief Executive 11th Floor, Orion House
Officer, and Chief 5 Upper St. Martins Lane
Investment Officer London, England WC2H9EA
</TABLE>
The 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 is incorporated
herein by reference to the filing of Post-Effective Amendment No. 51 to the
Registration Statement of the Scudder International Fund, Inc. (File No. 811-
642) on February 6, 1997. 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.
The list of each director and certain officers of Janus indicating any other
business, profession, vocation or employment of a substantial nature in which
each such person is or has been, at any time during the past five fiscal
years, engaged for his or her own account or in the capacity of director,
officer, employee, partner or trustee is incorporated herein by reference to
the filing of Post-Effective Amendment No. 10 to the Registration Statement
for Janus Aspen Series (File No. 33-63212) on February 13, 1997.
The list of each director and certain officers of T. Rowe Price indicating
any other business, profession, vocation or employment of a substantial nature
in which each such person is or has been, at any time during the past two
fiscal years, engaged for his or her own account or in the capacity of
director, officer, employee, partner or trustee is incorporated herein by
reference to Schedules A and D of Form ADV filed by T. Rowe Price pursuant to
the Investment Advisers Act of 1940 (SEC File No. 801-856).
C-23
<PAGE>
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.
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-24
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF
THE REQUIREMENTS FOR EFFECTIVENESS OF THIS AMENDED REGISTRATION STATEMENT
PURSUANT TO RULE 485(B) UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED
THIS AMENDED REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, AND STATE OF
NEW YORK, ON THE 28 DAY OF FEBRUARY, 1997.
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: ................................ February 28, 1997
CHRISTOPHER P. NICHOLAS, ESQ.
Attorney-in-Fact
C-25
<PAGE>
EXHIBIT 5(b)
LOOMIS SAYLES HIGH YIELD BOND PORTFOLIO INVESTMENT MANAGEMENT
AGREEMENT
AGREEMENT made this 3rd 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, 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 /s/ Christopher P. Nicholas
-------------------------------
Chief Operating Officer
Attest:
/s/ Robin Wayner
- -----------------------
Assistant Secretary
METROPOLITAN LIFE INSURANCE COMPANY
By /s/ Jeffrey J. Hodgman
---------------------------------
Executive Vice-President
Attest:
/s/ Ruth Gluck
- --------------------
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>
JANUS MID CAP PORTFOLIO INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 3rd 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 /s/ Christopher P. Nicholas
-----------------------------
Chief Operating Officer
Attest:
/s/ Robin Wagner
- -------------------
Assistant Secretary
METROPOLITAN LIFE INSURANCE COMPANY
By /s/ Jeffrey J. Hodgman
---------------------------------
Executive Vice-President
Attest:
/s/ Ruth Gluck
- ---------------------
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>
T. ROWE PRICE SMALL CAP GROWTH PORTFOLIO INVESTMENT MANAGEMENT
AGREEMENT
AGREEMENT made this 3rd 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 /s/ Christopher P. Nicholas
-----------------------------
Chief Operating Officer
Attest:
/s/ Robin Wagner
- -------------------
Assistant Secretary
METROPOLITAN LIFE INSURANCE COMPANY
By /s/ Jeffrey J. Hodgman
---------------------------------
Executive Vice-President
Attest:
/s/ Ruth Gluck
- ---------------------
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>
SCUDDER GLOBAL EQUITY PORTFOLIO INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 3rd 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 /s/ Christopher P. Nicholas
-----------------------------
Chief Operating Officer
Attest:
<PAGE>
/s/ Robin Wagner
- -------------------------
Assistant Secretary
METROPOLITAN LIFE INSURANCE COMPANY
By /s/ Jeffrey J. Hodgman
---------------------------------
Executive Vice-President
Attest:
/s/ Ruth Gluck
- --------------------
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>
EXHIBIT 5(g)
LOOMIS SAYLES HIGH YIELD BOND PORTFOLIO SUB-INVESTMENT
MANAGEMENT AGREEMENT
AGREEMENT made this 3rd day of March, 1997, among Metropolitan Series
Fund, Inc., a Maryland corporation (the "Fund"), Metropolitan Life Insurance
Company (the "Investment Manager"), a New York corporation, and Loomis, Sayles &
Company, L.P., a Delaware limited partnership (the "Sub-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 Loomis Sayles High Yield Bond Portfolio, the Janus Mid Cap
Portfolio, and the T. Rowe Price Small Cap Growth 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 Sub-Investment Manager is engaged principally in the business
of rendering advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940; and
WHEREAS, the Fund has employed the Investment Manager to act as investment
manager of the Loomis Sayles High Yield Bond Portfolio as set forth in the
Loomis Sayles High Yield Bond Portfolio Investment Management Agreement dated
March 3, 1997 between the Fund and the Investment Manager (the "Loomis Sayles
High Yield Bond Portfolio Investment Management Agreement"); and the Fund and
the Investment Manager desire to enter into a separate sub-investment management
agreement with respect to the Loomis Sayles High Yield Bond Portfolio of the
Fund with the Sub-Investment Manager;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund, the Investment Manager and the Sub-Investment
Manager hereby agree as follows:
ARTICLE 1.
Duties of the Sub-Investment Manager.
------------------------------------
Subject to the supervision and approval of the Investment Manager and the
Fund's Board of Directors, the Sub-Investment Manager will manage the investment
and reinvestment of the assets of the Fund's Loomis Sayles High Yield Bond
Portfolio (the "Portfolio") for the period and on the terms and conditions set
forth in this Agreement. In acting as Sub-Investment Manager to the Fund with
respect to the Portfolio, the Sub-Investment Manager 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
2
<PAGE>
securities or other assets in which it may invest, 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 and statement of additional information of the Fund
then currently effective under the Securities Act of 1933 (the "Prospectus").
Should the Board of Directors of the Fund or the Investment Manager at any time,
however, make any definite determination as to investment policy and notify in
writing the Sub-Investment Manager thereof, the Sub-Investment Manager shall be
bound by such determination for the period, if any, specified in such notice or
until similarly notified in writing that such determination has been revoked.
The Sub-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 it.
In connection with the selection of such brokers or dealers and the
placing of such orders, the Sub-Investment Manager is directed at all times to
follow the policies of the Fund set forth in the Prospectus. Nothing herein
shall preclude the "bunching" of orders for the sale or purchase of portfolio
securities with other Fund portfolios or with other accounts managed by the Sub-
Investment Manager. The Sub-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
3
<PAGE>
approximately averaged.
In connection with these services the Sub-Investment Manager will provide
investment research as to the Portfolio's investments and conduct a continuous
program of evaluation of its assets. The Sub-Investment Manager will furnish the
Investment Manager and the Fund such statistical information with respect to the
investments it makes for the Portfolio as the Investment Manager and the Fund
may reasonably request. On its own initiative, the Sub-Investment Manager will
apprise the Investment Manager and the Fund of important developments materially
affecting the Portfolio and will furnish the Investment Manager and the Fund
from time to time such information as may be believed appropriate for this
purpose. In addition, the Sub-Investment Manager will furnish the Investment
Manager and the Fund's Board of Directors such periodic and special reports as
either of them may reasonably request.
The Sub-Investment Manager will exercise its best judgment in rendering
the services provided for in this Article 1, and the Fund and the Investment
Manager agree, as an inducement to the Sub-Investment Manager's undertaking so
to do, that the Sub-Investment Manager will not be liable under this Agreement
for any mistake of judgment or in any other event whatsoever, except as
hereinafter provided. The Sub-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 or the
Investment Manager in any way or otherwise be deemed an agent of the Fund or the
Investment Manager other than in furtherance of its duties and responsibilities
as set forth in this Agreement.
4
<PAGE>
ARTICLE 2.
Sub-Investment Management Fee.
-----------------------------
The payment of advisory fees and the allocation of charges and expenses
between the Fund and the Investment Manager with respect to the Portfolio are
set forth in the Loomis Sayles High Yield Bond Portfolio Investment Management
Agreement. Nothing in this Loomis Sayles High Yield Bond Portfolio Sub-
Investment Management Agreement shall change or affect that arrangement. The
payment of advisory fees and the apportionment of any expenses related to the
services of the Sub-Investment Manager under this Agreement shall be the sole
concern of the Investment Manager and the Sub-Investment Manager and shall not
be the responsibility of the Fund.
In consideration of services rendered pursuant to this Agreement, the
Investment Manager will pay the Sub-Investment Manager on the first business day
of each month the fee at the annual rate specified by the schedule of fees in
the Appendix to this Agreement. The fee for any period from the date the
Portfolio commences operations to the end of the month will be prorated
according to the proportion which the period bears to the full month, and, upon
any termination of this Agreement before the end of any month, the fee for the
part of the month during which the Sub-Investment Manager acted under this
Agreement will be prorated according to the proportion which the period bears to
the full month and will be payable upon the date of termination of this
Agreement.
For the purpose of determining the fees payable to the Sub-Investment
Manager, the value of the Portfolio's net assets will be computed in the manner
specified in the Fund's Prospectus. The Sub-Investment Manager will bear all of
its own expenses (such as research
5
<PAGE>
costs) in connection with the performance of its duties under this Agreement
except for those which the Investment Manager agrees to pay.
Other Matters.
-------------
The Sub-Investment Manager may from time to time employ or associate with
itself any person or persons believed to be particularly fitted to assist in its
performance of services under this Agreement. The compensation of any such
persons will be paid by the Sub-Investment Manager, and no obligation will be
incurred by, or on behalf of, the Fund or the Investment Manager with respect to
them.
The Fund and the Investment Manager understand that the Sub-Investment
Manager now acts and will continue to act as investment manager to various
investment companies and fiduciary or other managed accounts, and the Fund and
the Investment Manager have no objection to the Sub-Investment Manager's so
acting. In addition, the Fund understands that the persons employed by the Sub-
Investment Manager to assist in the performance of the Sub-Investment Manager's
duties hereunder will not devote their full time to such service, and nothing
herein contained shall be deemed to limit or restrict the Sub-Investment
Manager's right or the right of any of the Sub-Investment Manager's affiliates
to engage in and devote time and attention to other businesses or to render
other services of whatever kind or nature.
The Sub-Investment Manager agrees that all books and records which it
maintains for the Fund are the Fund's property. The Sub-Investment Manager also
agrees upon request of the Investment Manager or the Fund, promptly to surrender
the books and records to the requester or make the books and records available
for inspection by representatives of
6
<PAGE>
regulatory authorities. The Sub-Investment Manager further agrees to maintain
and preserve the Fund's books and records in accordance with the Investment
Company Act and rules thereunder.
The Sub-Investment Manager will not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except for a loss resulting from
willful misfeasance, bad faith or gross negligence of the Sub-Investment Manager
in the performance of its duties or from reckless disregard of its obligations
and duties under this Agreement.
The Investment Manager has herewith furnished the Sub-Investment Manager
copies of the Fund's Prospectus, Articles of Incorporation and By-Laws as
currently in effect and agrees during the continuance of this Agreement to
furnish the Sub-Investment Manager copies of any amendments or supplements
thereto before or at the time the amendments or supplements become effective.
The Sub-Investment Manager will be entitled to rely on all documents furnished
to it by the Investment Manager or the Fund.
ARTICLE 3.
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.
7
<PAGE>
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 and Sub-Investment Manager, or by
the Investment Manager or Sub-Investment Manager on sixty days' written notice
to the Fund. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Loomis Sayles High Yield
Bond Portfolio Investment Management Agreement.
ARTICLE 4.
Definitions.
-----------
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 5.
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.
8
<PAGE>
ARTICLE 6.
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.
ARTICLE 7.
Notices.
-------
Notices to be given hereunder shall be addressed to:
Fund: Christopher P. Nicholas
Vice-President and Chief Operating Officer
Metropolitan Series Fund, Inc.
One Madison Avenue, Area 7G
New York, New York 10010
Investment Manager: Gary A. Beller, Esq.
Executive Vice-President and General Counsel
Metropolitan Life Insurance Company
One Madison Avenue, Area 11G
New York, New York 10010
Sub-Investment Manager: Daniel J. Fuss
Executive Vice President
Loomis, Sayles & Company, L.P.
One Financial Center
Boston, Massachusetts 02111
Changes in the foregoing notice provisions may be made by notice in
writing to the other parties and the addresses set forth above. Notice shall be
effective upon delivery.
9
<PAGE>
METROPOLITAN SERIES FUND, INC.
By /s/ Christopher P. Nicholas
-----------------------------------------
Christopher P. Nicholas
Attest:
/s/ Robin Wagner
- --------------------
Robin Wagner
METROPOLITAN LIFE INSURANCE
COMPANY
By /s/ Jeffrey J. Hodgman
-----------------------------------------
Jeffrey J. Hodgman
Attest:
/s/ Ruth Gluck
- ----------------------
Ruth Gluck
LOOMIS, SAYLES & COMPANY, L.P.
By /s/ Jeffrey L. Meade
------------------------------------------
Jeffrey L. Meade
Attest:
/s/ Janet Shields
- --------------------
Janet Shields
10
<PAGE>
APPENDIX
LOOMIS, SAYLES & COMPANY, L.P.
------------------------------
Metropolitan Series Fund Fee Schedule
-------------------------------------
Loomis Sayles High Yield Bond Portfolio
---------------------------------------
.50% of the average daily value of the net assets of the
Portfolio
11
<PAGE>
JANUS MID CAP PORTFOLIO SUB-INVESTMENT
MANAGEMENT AGREEMENT
AGREEMENT made this 3rd day of March, 1997, among Metropolitan Series
Fund, Inc., a Maryland corporation (the "Fund"), Metropolitan Life Insurance
Company (the "Investment Manager"), a New York corporation, and Janus Capital
Corporation, a Colorado corporation (the "Sub-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 Loomis Sayles High Yield Bond Portfolio, the Janus Mid Cap
Portfolio, and the T. Rowe Price Small Cap Growth 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 Sub-Investment Manager is engaged principally in the business
of rendering advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940; and
WHEREAS, the Fund has employed the Investment Manager to act as investment
manager of the Janus Mid Cap Portfolio as set forth in the Janus Mid Cap
Portfolio Investment Management Agreement dated March 3, 1997 between the Fund
and the Investment Manager (the "Janus Mid Cap Portfolio Investment Management
Agreement"); and the Fund and the Investment Manager desire to enter into a
separate sub-investment management agreement with respect to the Janus Mid Cap
Portfolio of the Fund with the Sub-Investment Manager;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund, the Investment Manager and the Sub-Investment
Manager hereby agree as follows:
ARTICLE 1.
Duties of the Sub-Investment Manager.
------------------------------------
Subject to the supervision and approval of the Investment Manager and the
Fund's Board of Directors, the Sub-Investment Manager will manage the investment
and reinvestment of the assets of the Fund's Janus Mid Cap Portfolio (the
"Portfolio") for the period and on the terms and conditions set forth in this
Agreement. In acting as Sub-Investment Manager to the Fund with respect to the
Portfolio, the Sub-Investment Manager 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 in
2
<PAGE>
which it may invest, 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 and
statement of additional information of the Fund then currently effective under
the Securities Act of 1933 (the "Prospectus"). Should the Board of Directors of
the Fund or the Investment Manager at any time, however, make any definite
determination as to investment policy and notify in writing the Sub-Investment
Manager thereof, the Sub-Investment Manager shall be bound by such determination
for the period, if any, specified in such notice or until similarly notified in
writing that such determination has been revoked. The Sub-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 it.
The Sub-Investment Manager makes no representation or warranty, express or
implied, that any level of performance or investment results will be achieved by
the Portfolio or that the Portfolio will perform comparably with any standard or
index, including other clients of the Sub-Investment Manager, whether public or
private.
Absent written instructions from the Investment Manager, to the contrary,
the Sub-Investment Manager shall place all orders for the purchase and sale of
investment instruments for the Portfolio with brokers or dealers selected by the
Sub-Investment Manager, which may include brokers or dealers affiliated with the
Sub-Investment Manager. In connection with
3
<PAGE>
the selection of such brokers or dealers and the placing of such orders, the
Sub-Investment Manager is directed at all times to follow the policies of the
Fund set forth in the Prospectus. Nothing herein shall preclude the "bunching"
of orders for the sale or purchase of portfolio securities with other Fund
portfolios or with other accounts managed by the Sub-Investment Manager. In
allocating orders, the Sub-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.
The Sub-Investment Manager shall use its best efforts to obtain execution
of portfolio transactions at prices that are advantageous to the Portfolio and
at commission rates that are reasonable in relation to the benefits received.
However, the Sub-Investment Manager may, to the extent permitted by applicable
laws or regulations, select brokers or dealers on the basis that they provide
brokerage, research, or other services or products to the Portfolio and/or other
accounts serviced by the Sub-Investment Manager. The Sub-Investment Manager
may, to the extent so permitted, place portfolio transactions with a broker or
dealer with whom it has negotiated a commission in excess of the commission
another broker or dealer would have charged for effecting that transaction if
the Sub-Investment Manager 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 the overall responsibilities that the Sub-Investment Manager and
its affiliates have with respect to the Portfolio and to accounts over which
they exercise investment discretion, and not all such services or
4
<PAGE>
products will necessarily be used by the Sub-Investment Manager in managing the
Portfolio.
In connection with these services the Sub-Investment Manager will provide
investment research as to the Portfolio's investments and conduct a continuous
program of evaluation of its assets. The Sub-Investment Manager will furnish the
Investment Manager and the Fund such statistical information with respect to the
investments it makes for the Portfolio as the Investment Manager and the Fund
may reasonably request. On its own initiative, the Sub-Investment Manager will
apprise the Investment Manager and the Fund of important developments materially
affecting the Portfolio and will furnish the Investment Manager and the Fund
from time to time such information as may be believed appropriate for this
purpose. In addition, the Sub-Investment Manager will furnish the Investment
Manager and the Fund's Board of Directors such periodic and special reports as
either of them may reasonably request, provided that the Sub-Investment Manager
shall not be responsible for Portfolio accounting, nor shall it be required to
generate information derived from Portfolio accounting data.
The Sub-Investment Manager will exercise its best judgment in rendering
the services provided for in this Article 1, and the Fund and the Investment
Manager agree, as an inducement to the Sub-Investment Manager's undertaking so
to do, that the Sub-Investment Manager will not be liable under this Agreement
for any mistake of judgment or in any other event whatsoever, except as
hereinafter provided. The Sub-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 or the
Investment Manager in any way or otherwise be deemed an agent
5
<PAGE>
of the Fund or the Investment Manager other than in furtherance of its duties
and responsibilities as set forth in this Agreement.
The Sub-Investment Manager shall be responsible for the preparation and
filing of Schedule 13G and Form 13F on behalf of the Portfolio. The Sub-
Investment Manager shall not be responsible for the preparation or filing of any
reports required of the Portfolio by any governmental or regulatory agency,
except as expressly agreed to in writing. The Sub-Investment Manager shall vote
proxies received in connection with securities held by the Portfolio.
The Sub-Investment Manager shall have no responsibility to monitor certain
limitations or restrictions for which the Sub-Investment Manager has not been
provided sufficient information by the Investment Manager, including without
limitation, the "short-short" test and the 90%-source test of the Internal
Revenue Code. The Investment Manager has the responsibility of obtaining and
providing such information.
The Sub-Investment Manager shall be subject to a written code of ethics
adopted by it pursuant to Rule 17j-1(b) of the Investment Company Act, and shall
not be subject to any other code of ethics, including the Investment Manager's
code of ethics, unless specifically adopted by the Sub-Investment Manager.
ARTICLE 2.
Sub-Investment Management Fee.
-----------------------------
The payment of advisory fees and the allocation of charges and expenses
between the Fund and the Investment Manager with respect to the Portfolio are
set forth in the Janus Mid Cap Portfolio Investment Management Agreement.
Nothing in this Janus Mid Cap
6
<PAGE>
Portfolio Sub-Investment Management Agreement shall change or affect that
arrangement. The payment of advisory fees and the apportionment of any expenses
related to the services of the Sub-Investment Manager under this Agreement shall
be the sole concern of the Investment Manager and the Sub-Investment Manager and
shall not be the responsibility of the Fund.
In consideration of services rendered pursuant to this Agreement, the
Investment Manager will pay the Sub-Investment Manager on the first business day
of each month the fee at the annual rate specified by the schedule of fees in
the Appendix to this Agreement. The fee for any period from the date the
Portfolio commences operations to the end of the month will be prorated
according to the proportion which the period bears to the full month, and, upon
any termination of this Agreement before the end of any month, the fee for the
part of the month during which the Sub-Investment Manager acted under this
Agreement will be prorated according to the proportion which the period bears to
the full month and will be payable upon the date of termination of this
Agreement.
For the purpose of determining the fees payable to the Sub-Investment
Manager, the value of the Portfolio's net assets will be computed in the manner
specified in the Fund's Prospectus. The Sub-Investment Manager will bear all of
its own organizational, operational and business expenses in connection with the
performance of its duties under this Agreement but shall not be obligated to pay
any expenses of the Investment Manager, the Fund, or the Portfolio, including
without limitation: (a) interest and taxes; (b) brokerage commissions and other
costs in connection with the purchase or sale of securities or other investment
instruments for the Portfolio; and (c) custodian fees and expenses. Any
reimbursement of
7
<PAGE>
management fees required by any expense limitation provision and any liability
arising out of a violation of Section 36(b) of the Investment Company Act shall
be the sole responsibility of the Investment Manager.
Other Matters.
-------------
The Sub-Investment Manager may from time to time employ or associate with
itself any person or persons believed to be particularly fitted to assist in its
performance of services under this Agreement. The compensation of any such
persons will be paid by the Sub-Investment Manager, and no obligation will be
incurred by, or on behalf of, the Fund or the Investment Manager with respect to
them.
The Fund and the Investment Manager understand that the Sub-Investment
Manager now acts and will continue to act as investment manager to various
investment companies and fiduciary or other managed accounts, and the Fund and
the Investment Manager have no objection to the Sub-Investment Manager's so
acting. In addition, the Fund understands that the persons employed by the Sub-
Investment Manager to assist in the performance of the Sub-Investment Manager's
duties hereunder will not devote their full time to such service, and nothing
herein contained shall be deemed to limit or restrict the Sub-Investment
Manager's right or the right of any of the Sub-Investment Manager's affiliates
to engage in and devote time and attention to other businesses or to render
other services of whatever kind or nature.
The Sub-Investment Manager agrees that all books and records which it
maintains for the Fund are the Fund's property. The Sub-Investment Manager also
agrees upon request of the Investment Manager or the Fund, promptly to surrender
the books and records to the
8
<PAGE>
requester or make the books and records available for inspection by
representatives of regulatory authorities. The Sub-Investment Manager further
agrees to maintain and preserve the Fund's books and records in accordance with
the Investment Company Act and rules thereunder.
The Sub-Investment Manager will not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except for a loss resulting from
willful misfeasance, bad faith or gross negligence of the Sub-Investment Manager
in the performance of its duties or from reckless disregard of its obligations
and duties under this Agreement. The Investment Manager shall hold harmless and
indemnify the Sub-Investment Manager, its affiliates, directors, officers,
shareholders, employees or agents for any loss not directly resulting from the
Sub-Investment Manager's willful misfeasance, bad faith or gross negligence.
The Investment Manager has herewith furnished the Sub-Investment Manager
copies of the Fund's Prospectus, Articles of Incorporation and By-Laws as
currently in effect and agrees during the continuance of this Agreement to
furnish the Sub-Investment Manager copies of any amendments or supplements
thereto before or at the time the amendments or supplements become effective
and, to the extent relevant, before filing with the SEC. The Sub-Investment
Manager will be entitled to rely on all documents furnished to it by the
Investment Manager or the Fund. The Investment Manager shall timely furnish the
Sub-Investment Manager with such additional information as may a reasonably
necessary for or requested by the Sub-Investment Manager to perform its
responsibilities pursuant to this Agreement.
9
<PAGE>
The Investment Manager shall be responsible for setting up and maintaining
brokerage accounts and other accounts (or take such action as reasonably
requested by the Sub-Investment Manager to enable it to establish such accounts)
as the Sub-Investment Manager deems advisable to allow for the purchase or sale
of various forms of securities pursuant to this Agreement.
The Sub-Investment Manager shall have no liability for the acts or
omissions of any custodian of the Portfolio's assets, including but not limited
to, responsibility for the segregation requirements of the Investment Company
Act or other applicable law.
ARTICLE 3.
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 and Sub-Investment Manager, or by
the Investment Manager or Sub-Investment Manager on sixty days' written notice
to the Fund. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Janus Mid
10
<PAGE>
Cap Portfolio Investment Management Agreement.
ARTICLE 4.
Definitions.
-----------
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 5.
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 6.
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.
11
<PAGE>
ARTICLE 7.
Notices.
-------
Notices to be given hereunder shall be addressed to:
Fund: Christopher P. Nicholas
Vice-President and Chief Operating Officer
Metropolitan Series Fund, Inc.
One Madison Avenue, Area 7G
New York, New York 10010
Investment Manager: Gary A. Beller, Esq.
Executive Vice-President and General Counsel
Metropolitan Life Insurance Company
One Madison Avenue, Area 11G
New York, New York 10010
Sub-Investment Manager: David Tucker, Esq.
General Counsel
Janus Capital Corporation
100 Fillmore Street
Denver, Colorado 80206
Changes in the foregoing notice provisions may be made by notice in
writing to the other parties and the addresses set forth above. Notice shall be
effective upon delivery.
12
<PAGE>
METROPOLITAN SERIES FUND, INC.
By /s/ Christopher P. Nicholas
-------------------------------------------
Christopher P. Nicholas
Attest:
/s/ Robin Wagner
- --------------------
Robin Wagner
METROPOLITAN LIFE INSURANCE
COMPANY
By /s/ Jeffrey J. Hodgman
-------------------------------------------
Jeffrey J. Hodgman
Attest:
/s/ Ruth Gluck
- ----------------------
Ruth Gluck
JANUS CAPITAL CORPORATION
By /s/ Stephen Stieneker
-------------------------------------------
Stephen Stieneker
Attest:
/s/ Bonnie Howe
- --------------------
Bonnie Howe
13
<PAGE>
APPENDIX
JANUS CAPITAL
-------------
Metropolitan Series Fund Fee Schedule
-------------------------------------
Janus Mid Cap Portfolio
-----------------------
1st 100M .55%
next $400M .50%
above $500M .45%
of the average daily value of the net assets of the
Portfolio
14
<PAGE>
T. ROWE PRICE SMALL CAP GROWTH PORTFOLIO SUB-INVESTMENT
MANAGEMENT AGREEMENT
AGREEMENT made this 3rd day of March, 1997, among Metropolitan Series
Fund, Inc., a Maryland corporation (the "Fund"), Metropolitan Life Insurance
Company (the "Investment Manager"), a New York corporation, and T. Rowe Price
Associates, Inc., a Maryland corporation (the "Sub-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,
<PAGE>
the Loomis Sayles High Yield Bond Portfolio, the Janus Mid Cap Portfolio, and
the T. Rowe Price Small Growth Cap Portfolio, each of which pursues its
investment objectives through separate investment policies, and the Fund may add
or delete portfolios from time to time;
WHEREAS, the Sub-Investment Manager is engaged principally in the business
of rendering advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940; and
WHEREAS, the Fund has employed the Investment Manager to act as investment
manager of the T. Rowe Price Small Cap Growth Portfolio as set forth in the T.
Rowe Price Small Cap Portfolio Investment Management Agreement dated March 3,
1997 between the Fund and the Investment Manager (the "T. Rowe Price Small Cap
Growth Portfolio Investment Management Agreement"); and the Fund and the
Investment Manager desire to enter into a separate sub-investment management
agreement with respect to the T. Rowe Price Small Cap Growth Portfolio of the
Fund with the Sub-Investment Manager;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund, the Investment Manager and the Sub-Investment
Manager hereby agree as follows:
ARTICLE 1.
Duties of the Sub-Investment Manager.
------------------------------------
2
<PAGE>
Subject to the supervision and approval of the Investment Manager and the
Fund's Board of Directors, the Sub-Investment Manager will manage the investment
and reinvestment of the assets of the Fund's T. Rowe Price Small Cap Growth
Portfolio (the "Portfolio") for the period and on the terms and conditions set
forth in this Agreement. In acting as Sub-Investment Manager to the Fund with
respect to the Portfolio, the Sub-Investment Manager 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 in
which it may invest, 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 and
statement of additional information of the Fund then currently effective under
the Securities Act of 1933 (the "Prospectus"). Should the Board of Directors of
the Fund or the Investment Manager at any time, however, make any definite
determination as to investment policy and notify the Sub-Investment Manager
thereof in writing, the Sub-Investment Manager shall be bound by such
determination for the period, if any, specified in such notice or until
similarly notified
3
<PAGE>
in writing that such determination has been revoked. The Sub-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 it.
The Sub-Investment Manager agrees that, in placing orders with broker-
dealers for the purchase or sale of portfolio securities, it shall attempt to
obtain best execution at favorable security prices; provided that, on behalf of
the Portfolio, the Sub-Investment Manager may, in its discretion, agree to pay a
broker-dealer that furnishes brokerage or research services as such services are
defined under Section 28(e) of the Securities Exchange Act of 1934, as amended
("1934 Act") or in accord with any other applicable laws or regulations, a
higher commission than that which might have been charged by another
broker-dealer for effecting the same transactions, if the Sub-Investment Manager
determines in good faith that such commission is reasonable in relation to the
brokerage and research service provided by the broker-dealer, viewed in terms of
either that particular transaction or the overall responsibilities of the Sub-
Investment Manager with respect to the accounts as to which it exercises
investment discretion.
4
<PAGE>
On occasions when the Sub-Investment Manager deems the purchase of a
security to be in the best interest of the Portfolio as well as other clients of
the Sub-Investment Manager, the Sub-Investment Manager, to the extent permitted
by applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be purchased or sold to attempt to obtain a more
favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Sub-Investment Manager
in the manner the Sub-Investment Manager considers to be the most equitable and
consistent with its fiduciary obligations to the Portfolio and to its other
clients.
In connection with these services the Sub-Investment Manager will provide
investment research as to the Portfolio's investments and conduct a continuous
program of evaluation of its assets. The Sub-Investment Manager will furnish the
Investment Manager and the Fund such statistical information with respect to the
investments it makes for the Portfolio as the Investment Manager and the Fund
may reasonably request. On its own initiative, the Sub-Investment Manager will
apprise the Investment Manager and the Fund of important developments materially
affecting the Portfolio and will furnish the Investment Manager and the Fund
from time to time such information as
5
<PAGE>
may be believed appropriate for this purpose. In addition, the Sub-Investment
Manager will furnish the Investment Manager and the Fund's Board of Directors
such periodic and special reports as either of them may reasonably request.
The Sub-Investment Manager will exercise its best judgment in rendering
the services provided for in this Article 1, and the Fund and the Investment
Manager agree, as an inducement to the Sub-Investment Manager's undertaking so
to do, that the Sub-Investment Manager will not be liable under this Agreement
for any mistake of judgment or in any other event whatsoever, except as
hereinafter provided. The Sub-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 or the
Investment Manager in any way or otherwise be deemed an agent of the Fund or the
Investment Manager other than in furtherance of its duties and responsibilities
as set forth in this Agreement.
ARTICLE 2.
Sub-Investment Management Fee.
-----------------------------
The payment of advisory fees and the allocation of charges and expenses
between the Fund and the Investment Manager with respect to the Portfolio are
set forth in the T. Rowe Price Small Cap Growth
6
<PAGE>
Portfolio Investment Management Agreement. Nothing in this T. Rowe Price Small
Cap Growth Portfolio Sub-Investment Management Agreement shall change or affect
that arrangement. The payment of advisory fees and the apportionment of any
expenses related to the services of the Sub-Investment Manager under this
Agreement shall be the sole concern of the Investment Manager and the Sub-
Investment Manager and shall not be the responsibility of the Fund.
In consideration of services rendered pursuant to this Agreement, the
Investment Manager will pay the Sub-Investment Manager on the first business day
of each month the fee at the annual rate specified by the schedule of fees in
the Appendix to this Agreement. The fee for any period from the date the
Portfolio commences operations to the end of the month will be prorated
according to the proportion which the period bears to the full month, and, upon
any termination of this Agreement before the end of any month, the fee for the
part of the month during which the Sub-Investment Manager acted under this
Agreement will be prorated according to the proportion which the period bears to
the full month and will be payable upon the date of termination of this
Agreement.
For the purpose of determining the fees payable to the Sub-Investment
Manager, the value of the Portfolio's net assets will be computed in the manner
specified in the Fund's Prospectus. The
7
<PAGE>
Sub-Investment Manager will bear all of its own expenses (such as research
costs) in connection with the performance of its duties under this Agreement
except for those which the Investment Manager agrees to pay.
Other Matters.
-------------
The Sub-Investment Manager may from time to time employ or associate with
itself any person or persons believed to be particularly fitted to assist in its
performance of services under this Agreement. The compensation of any such
persons will be paid by the Sub-Investment Manager, and no obligation will be
incurred by, or on behalf of, the Fund or the Investment Manager with respect to
them.
The Fund and the Investment Manager understand that the Sub-Investment
Manager now acts and will continue to act as investment manager to various
investment companies and fiduciary or other managed accounts, and the Fund and
the Investment Manager have no objection to the Sub-Investment Manager's so
acting. In addition, the Fund understands that the persons employed by the Sub-
Investment Manager to assist in the performance of the Sub-Investment Manager's
duties hereunder will not devote their full time to such service, and nothing
herein contained shall be deemed to limit or restrict the Sub-Investment
Manager's right or the right of any of the Sub-Investment Manager's affiliates
to engage in and devote time and
8
<PAGE>
attention to other businesses or to render other services of whatever kind or
nature.
The Sub-Investment Manager agrees that all books and records which it maintains
for the Fund are the Fund's property. The Sub-Investment Manager also agrees
upon request of the Investment Manager or the Fund, promptly to surrender the
books and records to the requester or make the books and records available for
inspection by representatives of regulatory authorities. The Sub-Investment
Manager further agrees to maintain and preserve the Fund's books and records in
accordance with the Investment Company Act and rules thereunder.
The Sub-Investment Manager will not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except for a loss resulting from
willful misfeasance, bad faith or gross negligence of the Sub-Investment Manager
in the performance of its duties or from reckless disregard of its obligations
and duties under this Agreement.
The Investment Manager has herewith furnished the Sub-Investment Manager
copies of the Fund's Prospectus, Articles of Incorporation and By-Laws as
currently in effect and agrees during the continuance of this Agreement to
furnish the Sub-Investment
9
<PAGE>
Manager copies of any amendments or supplements thereto before or at the time
the amendments or supplements become effective. The Sub-Investment Manager will
be entitled to rely on all documents furnished to it by the Investment Manager
or the Fund.
ARTICLE 3.
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 and Sub-Investment Manager, or by
the Investment Manager or Sub-Investment Manager on sixty days' written notice
to the Fund. This Agreement shall automatically terminate in the event
10
<PAGE>
of its assignment or in the event of the termination of the T. Rowe Price Small
Cap Growth Portfolio Investment Management Agreement.
ARTICLE 4.
Definitions.
-----------
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 5.
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 6.
Governing Law.
-------------
The provisions of this Agreement shall be construed and
11
<PAGE>
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.
ARTICLE 7.
Notices.
-------
Notices to be given hereunder shall be addressed to:
Fund: Christopher P. Nicholas
Vice-President and Chief Operating Officer
Metropolitan Series Fund, Inc.
One Madison Avenue, Area 7G
New York, New York 10010
Investment Manager: Gary A. Beller, Esq.
Executive Vice-President and General Counsel
Metropolitan Life Insurance Company
One Madison Avenue, Area 11G
New York, New York 10010
Sub-Investment Manager: John Cammack
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore Maryland 21202
Copy to: Henry H. Hopkins, Esq.
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore Maryland 21202
12
<PAGE>
Changes in the foregoing notice provisions may be made by notice in
writing to the other parties and the addresses set forth above. Notice shall be
effective upon delivery.
13
<PAGE>
METROPOLITAN SERIES FUND, INC.
By /s/ Christopher P. Nicholas
-------------------------------------------
Christopher P. Nicholas
Attest:
/s/ Robin Wagner
- --------------------
Robin Wagner
METROPOLITAN LIFE INSURANCE
COMPANY
By /s/ Jeffrey J. Hodgman
-------------------------------------------
Jeffrey J. Hodgman
Attest:
/s/ Ruth Gluck
- ----------------------
Ruth Gluck
T. ROWE PRICE ASSOCIATES, INC.
By /s/ Nancy Morris
-------------------------------------------
Nancy Morris
Attest:
/s/ Darrell N. Branan
- ---------------------
Darrell N. Branan
14
<PAGE>
APPENDIX
T. ROWE PRICE ASSOCIATES, INC.
------------------------------
Metropolitan Series Fund Fee Schedule
-------------------------------------
T. Rowe Price Small Cap Growth Portfolio
----------------------------------------
1st 100M .35%
next $300M .30%
above $400 .25%
of the average daily value of the net assets of the
Portfolio
15
<PAGE>
SCUDDER GLOBAL EQUITY PORTFOLIO SUB-INVESTMENT
MANAGEMENT AGREEMENT
AGREEMENT made this 3rd day of March, 1997, among Metropolitan Series
Fund, Inc., a Maryland corporation (the "Fund"), Metropolitan Life Insurance
Company (the "Investment Manager"), a New York corporation, and Scudder, Stevens
& Clark, Inc., a Delaware corporation (the "Sub-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 Loomis Sayles High Yield Bond Portfolio, the Janus Mid Cap
Portfolio, and the T. Rowe Price Small Cap Growth 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 Sub-Investment Manager is engaged principally in the business
of rendering advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940; and
WHEREAS, the Fund has employed the Investment Manager to act as investment
manager of the Scudder Global Equity Portfolio as set forth in the Scudder
Global Equity Portfolio Investment Management Agreement dated March 3, 1997
between the Fund and the Investment Manager (the "Scudder Global Equity
Portfolio Investment Management Agreement"); and the Fund and the Investment
Manager desire to enter into a separate sub-investment management agreement with
respect to the Scudder Global Equity Portfolio of the Fund with the Sub-
Investment Manager;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund, the Investment Manager and the Sub-Investment
Manager hereby agree as follows:
ARTICLE 1.
Duties of the Sub-Investment Manager.
------------------------------------
Subject to the supervision and approval of the Investment Manager and the
Fund's Board of Directors, the Sub-Investment Manager will manage the investment
and reinvestment of the assets of the Fund's Scudder Global Equity Portfolio
(the "Portfolio") for the period and on the terms and conditions set forth in
this Agreement. In acting as Sub-Investment Manager to the Fund with respect to
the Portfolio, the Sub-Investment Manager 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 in
2
<PAGE>
which it may invest, 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 and
statement of additional information of the Fund then currently effective under
the Securities Act of 1933 (the "Prospectus"). Should the Board of Directors of
the Fund or the Investment Manager at any time, however, make any definite
determination as to investment policy and notify in writing the Sub-Investment
Manager thereof, the Sub-Investment Manager shall be bound by such determination
for the period, if any, specified in such notice or until similarly notified in
writing that such determination has been revoked. The Sub-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 it.
In connection with the selection of such brokers or dealers and the
placing of such orders, the Sub-Investment Manager is directed at all times to
follow the policies of the Fund set forth in the Prospectus. Nothing herein
shall preclude the "bunching" of orders for the sale or purchase of portfolio
securities with other Fund portfolios or with other accounts managed by the Sub-
Investment Manager. The Sub-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.
3
<PAGE>
In connection with these services the Sub-Investment Manager will provide
investment research as to the Portfolio's investments and conduct a continuous
program of evaluation of its assets. The Sub-Investment Manager will furnish the
Investment Manager and the Fund such statistical information with respect to the
investments it makes for the Portfolio as the Investment Manager and the Fund
may reasonably request. On its own initiative, the Sub-Investment Manager will
apprise the Investment Manager and the Fund of important developments materially
affecting the Portfolio and will furnish the Investment Manager and the Fund
from time to time such information as may be believed appropriate for this
purpose. In addition, the Sub-Investment Manager will furnish the Investment
Manager and the Fund's Board of Directors such periodic and special reports as
either of them may reasonably request.
The Sub-Investment Manager will exercise its best judgment in rendering
the services provided for in this Article 1, and the Fund and the Investment
Manager agree, as an inducement to the Sub-Investment Manager's undertaking so
to do, that the Sub-Investment Manager will not be liable under this Agreement
for any mistake of judgment or in any other event whatsoever, except as
hereinafter provided. The Sub-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 or the
Investment Manager in any way or otherwise be deemed an agent of the Fund or the
Investment Manager other than in furtherance of its duties and responsibilities
as set forth in this Agreement.
4
<PAGE>
ARTICLE 2.
Sub-Investment Management Fee.
-----------------------------
The payment of advisory fees and the allocation of charges and expenses
between the Fund and the Investment Manager with respect to the Portfolio are
set forth in the Scudder Global Equity Portfolio Investment Management
Agreement. Nothing in this Scudder Global Equity Portfolio Sub-Investment
Management Agreement shall change or affect that arrangement. The payment of
advisory fees and the apportionment of any expenses related to the services of
the Sub-Investment Manager under this Agreement shall be the sole concern of the
Investment Manager and the Sub-Investment Manager and shall not be the
responsibility of the Fund.
In consideration of services rendered pursuant to this Agreement, the
Investment Manager will pay the Sub-Investment Manager on the first business day
of each month the fee at the annual rate specified by the schedule of fees in
the Appendix to this Agreement. The fee for any period from the date the
Portfolio commences operations to the end of the month will be prorated
according to the proportion which the period bears to the full month, and, upon
any termination of this Agreement before the end of any month, the fee for the
part of the month during which the Sub-Investment Manager acted under this
Agreement will be prorated according to the proportion which the period bears to
the full month and will be payable upon the date of termination of this
Agreement.
For the purpose of determining the fees payable to the Sub-Investment
Manager, the value of the Portfolio's net assets will be computed in the manner
specified in the Fund's Prospectus. The Sub-Investment Manager will bear all of
its own expenses (such as research
5
<PAGE>
costs) in connection with the performance of its duties under this Agreement
except for those which the Investment Manager agrees to pay.
Other Matters.
-------------
The Sub-Investment Manager may from time to time employ or associate with
itself any person or persons believed to be particularly fitted to assist in its
performance of services under this Agreement. The compensation of any such
persons will be paid by the Sub-Investment Manager, and no obligation will be
incurred by, or on behalf of, the Fund or the Investment Manager with respect to
them.
The Fund and the Investment Manager understand that the Sub-Investment
Manager now acts and will continue to act as investment manager to various
investment companies and fiduciary or other managed accounts, and the Fund and
the Investment Manager have no objection to the Sub-Investment Manager's so
acting. In addition, the Fund understands that the persons employed by the Sub-
Investment Manager to assist in the performance of the Sub-Investment Manager's
duties hereunder will not devote their full time to such service, and nothing
herein contained shall be deemed to limit or restrict the Sub-Investment
Manager's right or the right of any of the Sub-Investment Manager's affiliates
to engage in and devote time and attention to other businesses or to render
other services of whatever kind or nature.
The Sub-Investment Manager agrees that all books and records which it
maintains for the Fund are the Fund's property. The Sub-Investment Manager also
agrees upon request of the Investment Manager or the Fund, promptly to surrender
the books and records to the requester or make the books and records available
for inspection by representatives of
6
<PAGE>
regulatory authorities. The Sub-Investment Manager further agrees to maintain
and preserve the Fund's books and records in accordance with the Investment
Company Act and rules thereunder.
The Sub-Investment Manager will not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except for a loss resulting from
willful misfeasance, bad faith or gross negligence of the Sub-Investment Manager
in the performance of its duties or from reckless disregard of its obligations
and duties under this Agreement.
The Investment Manager has herewith furnished the Sub-Investment Manager
copies of the Fund's Prospectus, Articles of Incorporation and By-Laws as
currently in effect and agrees during the continuance of this Agreement to
furnish the Sub-Investment Manager copies of any amendments or supplements
thereto before or at the time the amendments or supplements become effective.
The Sub-Investment Manager will be entitled to rely on all documents furnished
to it by the Investment Manager or the Fund.
ARTICLE 3.
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.
7
<PAGE>
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 and Sub-Investment Manager, or by
the Investment Manager or Sub-Investment Manager on sixty days' written notice
to the Fund. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Scudder Global Equity
Portfolio Investment Management Agreement.
ARTICLE 4.
Definitions.
-----------
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 5.
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.
8
<PAGE>
ARTICLE 6.
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.
ARTICLE 7.
Notices.
-------
Notices to be given hereunder shall be addressed to:
Fund: Christopher P. Nicholas
Vice-President and Chief Operating Officer
Metropolitan Series Fund
One Madison Avenue, Area 7G
New York, New York 10010
Investment Manager: Gary A. Beller, Esq.
Executive Vice-President and General Counsel
Metropolitan Life Insurance Company
One Madison Avenue, Area 11G
New York, New York 10010
Sub-Investment Manager: William E. Holzer
Managing Director
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, New York 10154
9
<PAGE>
Changes in the foregoing notice provisions may be made by notice in
writing to the other parties and the addresses set forth above. Notice shall be
effective upon delivery.
10
<PAGE>
METROPOLITAN SERIES FUND, INC.
By /s/ Christopher P. Nicholas
-------------------------------------------
Christopher P. Nicholas
Attest:
/s/ Robin Wagner
- --------------------
Robin Wagner
METROPOLITAN LIFE INSURANCE
COMPANY
By /s/ Jeffrey J. Hodgman
-------------------------------------------
Jeffrey J. Hodgman
Attest:
/s/ Ruth Gluck
- ----------------------
Ruth Gluck
SCUDDER, STEVENS & CLARK, INC.
By /s/ Cornelia Small
-------------------------------------------
Cornelia Small
Attest:
/s/ John Lamb
- --------------------
John Lamb
11
<PAGE>
APPENDIX
SCUDDER, STEVENS & CLARK, INC.
------------------------------
Metropolitan Series Fund Fee Schedule
-------------------------------------
Scudder Global Equity Portfolio
-------------------------------
1st $50M .70%
next $50M .35%
next $400M .30%
above $500M .275% of the average daily value of the net
assets of the Portfolio
12
<PAGE>
EXHIBIT 10(f)
LAW OFFICES
FREEDMAN, LEVY, KROLL & SIMONDS
WASHINGTON SQUARE - 1050 CONNECTICUT AVE., N.W.
WASHINGTON, D.C. 20036-5366
(202 457-5100
CABLE "ATTORNEYS"
TELECOPIER: 202-457-5151
February 27, 1997
OPINION AND CONSENT OF COUNSEL
Metropolitan Series Fund, Inc.
One Madison Avenue
New York, New York 10010
Executives:
This opinion is given in connection with the filing with the Securities
and Exchange Commission ("SEC") by Metropolitan Series Fund, Inc., a Maryland
Corporation (the "Fund"), of Post-Effective Amendment No. 19 under the
Securities Act of 1933 ("1933 Act") and Amendment No. 21 under the Investment
Company Act of 1940 ("1940 Act") to the Fund's Registration Statement on Form
N-1A (File Nos. 2-80751 and 811-3618, the "Registration Statement"), relating to
an indefinite number of the Fund's two billion authorized shares of capital
stock, par value $.01 per share, which includes, among others, 100 million
authorized shares of each of the Loomis Sayles High Yield Bond Portfolio, Janus
Mid Cap Portfolio, T. Rowe Price Small Cap Growth Portfolio, and Scudder Global
Equity Portfolio (collectively, the "Portfolios"), respectively, each Portfolio
being a separate series of the Fund's capital stock. The Fund's authorized
shares of capital stock relating to these Portfolios are hereinafter referred to
collectively as the "Shares."
We have examined the following: the Fund's Articles of Incorporation, as
amended, and Articles Supplementary, dated October 22, 1984, May 16, 1986,
October 6, 1987, January 27, 1988, January 25, 1990, August 3, 1990, and
December 17, 1996; the Fund's By-Laws, as amended January 27, 1988; the Fund's
Board of Directors' resolutions, dated December 16, 1996, authorizing the
creation of each Portfolio and the issuance of the shares of each Portfolio,
and certain minutes of the Board of Directors related thereto; the Notification
of Registration on Form N-8A filed with the SEC under the 1940 Act on December
6, 1982; the Registration Statement as originally filed with the SEC under the
1933 Act and the 1940 Act on the same date, and the amendments thereto filed
with the SEC, including Post-Effective Amendment No.
<PAGE>
Freedman, Levy, Drill & Simonds
Metropolitan Series Fund, Inc.
February 26, 1997
Page 2
19 to the Registration Statement substantially in the form in which it is to be
filed with the SEC; a current Certificate of Good Standing by the State of
Maryland; pertinent provisions of the laws of Maryland; and such other records,
certificates, documents and statutes that we have deemed relevant in order to
render the opinion expressed herein.
Based on the foregoing examination, we are of the opinion that:
1. The Fund is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Maryland; and
2. The Shares to be offered for sale by the Fund, when issued in the
manner contemplated by the Registration Statement, as amended, will
be legally issued, fully-paid, and non-assessable.
This letter expresses our opinion as to the Maryland General Corporation
Law, addressing matters such as due formation and, in effect, the authorization
and issuance of shares of capital stock, but does not extend to the securities
or "Blue Sky" laws of Maryland or to federal securities or other laws.
We consent to the use of this opinion as an Exhibit to the Registration
Statement, as amended.
Very truly yours,
/s/ Freedman, Levy, Knoll & Simonds
Freedman, Levy, Kroll & Simonds
<PAGE>
Exhibit 11(a)
INDEPENDENT AUDITORS' CONSENT
We consent to use in this Registration Statement of Metropolitan Series Fund,
Inc. on Form N-1A of our report dated February 14, 1997 appearing in the
December 31, 1996 Annual Report of Metropolitan Series Fund Inc., included as
part of the Statement of Additional Information, which is part of such
Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
February 25, 1997
<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 $ 22,000,000, 2,200,000 shares of Common
Stock, $.01 Par Value, of the Fund (hereinafter the "Stock") as follows:
1,000,000 Shares of Stock of the Scudder Global Equity Portfolio
500,000 Shares of Stock of the T. Rowe Price Small Cap Growth Portfolio
500,000 Shares of Stock of the Janus Mid Cap Portfolio
200,000 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 as of the 3RD day of March, 1997.
Metropolitan Life Insurance Company
By: /s/ Jeffrey J. Hodgman
-------------------------------------
Jeffrey J. Hodgman
Title: Executive Vice-President
Metropolitan Series Fund, Inc.
By: /s/ Christopher P. Nicholas
-------------------------------------
Christopher P. Nicholas
Title: Chief Operating Officer, Vice-President
and Secretary
<PAGE>
EXHIBIT 17
SPECIMEN PRICE MAKE-UP SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE OF REGISTRANT'S
PORTFOLIO SECURITIES OUTSTANDING TOTAL OFFERING
AND OTHER ASSETS SECURITIES PRICE PER UNIT
--------------------- ----------- --------------
<S> <C> <C> <C>
State Street Research Growth
Portfolio.................... $1,597,728,475 52,371,833 $30.51
State Street Research Income
Portfolio.................... $ 383,394,838 31,028,144 $12.36
MetLife Money Market Portfo-
lio.......................... $ 41,636,631 3,989,790 $10.44
State Street Research Diversi-
fied Portfolio............... $1,448,841,167 86,916,919 $16.67
State Street Research Ag-
gressive Growth Portfolio.... $1,321,849,364 48,752,452 $27.11
MetLife Stock Index Portfolio. $1,122,297,334 50,487,679 $22.23
GFM International Stock Port-
folio........................ $ 303,825,483 25,415,562 $11.95
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NAME> GROWTH
<NUMBER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
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<INVESTMENTS-AT-COST> 1350148596
<INVESTMENTS-AT-VALUE> 1593897472
<RECEIVABLES> 5051541
<ASSETS-OTHER> 1132
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<DISTRIBUTIONS-OF-GAINS> (134047463)
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NAME> INCOME
<NUMBER> 2
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 377820831
<INVESTMENTS-AT-VALUE> 377254943
<RECEIVABLES> 6050214
<ASSETS-OTHER> 145979
<OTHER-ITEMS-ASSETS> 68077
<TOTAL-ASSETS> 383519214
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 124376
<TOTAL-LIABILITIES> 124376
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 385179755
<SHARES-COMMON-STOCK> 31028144
<SHARES-COMMON-PRIOR> 27489851
<ACCUMULATED-NII-CURRENT> 2224983
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (3592401)
<ACCUM-APPREC-OR-DEPREC> (417499)
<NET-ASSETS> 383394838
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 25197173
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<EXPENSES-NET> 1146142
<NET-INVESTMENT-INCOME> 24051031
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<DISTRIBUTIONS-OF-GAINS> (697717)
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<NUMBER-OF-SHARES-SOLD> 3698482
<NUMBER-OF-SHARES-REDEEMED> (2111443)
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<ACCUMULATED-NII-PRIOR> 1648141
<ACCUMULATED-GAINS-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> (7314639)
<GROSS-ADVISORY-FEES> 911476
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<GROSS-EXPENSE> 1146142
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<PER-SHARE-NAV-BEGIN> 12.73
<PER-SHARE-NII> 0.82
<PER-SHARE-GAIN-APPREC> (0.36)
<PER-SHARE-DIVIDEND> (0.81)
<PER-SHARE-DISTRIBUTIONS> (0.02)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.36
<EXPENSE-RATIO> 0.003
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<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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 41600630
<INVESTMENTS-AT-VALUE> 41600630
<RECEIVABLES> 134923
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<OTHER-ITEMS-ASSETS> 3359
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<TOTAL-LIABILITIES> 102281
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<OVERDISTRIBUTION-NII> (10491)
<ACCUMULATED-NET-GAINS> 2365
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<EXPENSES-NET> 179114
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<REALIZED-GAINS-CURRENT> 1031
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<DISTRIBUTIONS-OF-GAINS> (1192)
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<NUMBER-OF-SHARES-SOLD> 1814089
<NUMBER-OF-SHARES-REDEEMED> (1893767)
<SHARES-REINVESTED> 196231
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<GROSS-EXPENSE> 179114
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<PER-SHARE-NAV-BEGIN> 10.45
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<PER-SHARE-DIVIDEND> (0.54)
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<PER-SHARE-NAV-END> 10.44
<EXPENSE-RATIO> 0.004
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<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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1297896601
<INVESTMENTS-AT-VALUE> 1437319196
<RECEIVABLES> 12094616
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<OTHER-ITEMS-ASSETS> 124
<TOTAL-ASSETS> 1449688981
<PAYABLE-FOR-SECURITIES> 462249
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 385565
<TOTAL-LIABILITIES> 847814
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<PAID-IN-CAPITAL-COMMON> 1253361990
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<ACCUM-APPREC-OR-DEPREC> 139692509
<NET-ASSETS> 1448841167
<DIVIDEND-INCOME> 10704528
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<EXPENSES-NET> 3721538
<NET-INVESTMENT-INCOME> 42980569
<REALIZED-GAINS-CURRENT> 135252779
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<DISTRIBUTIONS-OF-INCOME> (42176327)
<DISTRIBUTIONS-OF-GAINS> (84750798)
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<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> (4529347)
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<PER-SHARE-NAV-BEGIN> 15.95
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> 1.77
<PER-SHARE-DIVIDEND> (0.53)
<PER-SHARE-DISTRIBUTIONS> (1.07)
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NAME> AGGRESSIVE GROWTH
<NUMBER> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1175661535
<INVESTMENTS-AT-VALUE> 1312523770
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<SENIOR-LONG-TERM-DEBT> 0
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<OVERDISTRIBUTION-NII> (899023)
<ACCUMULATED-NET-GAINS> 39939458
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<ACCUM-APPREC-OR-DEPREC> 136862235
<NET-ASSETS> 1321849364
<DIVIDEND-INCOME> 4256611
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<EXPENSES-NET> 9279402
<NET-INVESTMENT-INCOME> (1338007)
<REALIZED-GAINS-CURRENT> 78458844
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<DISTRIBUTIONS-OF-GAINS> (35104245)
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<NUMBER-OF-SHARES-SOLD> 11414917
<NUMBER-OF-SHARES-REDEEMED> (1025632)
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<OVERDIST-NET-GAINS-PRIOR> (3415141)
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NAME> STOCK INDEX
<NUMBER> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 824382316
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<OVERDISTRIBUTION-GAINS> (1609566)
<ACCUM-APPREC-OR-DEPREC> 303651601
<NET-ASSETS> 1122297334
<DIVIDEND-INCOME> 18697228
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<EXPENSES-NET> 2564299
<NET-INVESTMENT-INCOME> 16426973
<REALIZED-GAINS-CURRENT> 7811922
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<DISTRIBUTIONS-OF-INCOME> (16158730)
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NAME> INTERNATIONAL STOCK
<NUMBER> 7
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
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<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (18134160)
<ACCUM-APPREC-OR-DEPREC> 11038872
<NET-ASSETS> 303825483
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<INTEREST-INCOME> 1351412
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<EXPENSES-NET> 3009469
<NET-INVESTMENT-INCOME> 1728132
<REALIZED-GAINS-CURRENT> (25299526)
<APPREC-INCREASE-CURRENT> 17465452
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<DISTRIBUTIONS-OF-INCOME> (16086)
<DISTRIBUTIONS-OF-GAINS> (3229290)
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<NUMBER-OF-SHARES-SOLD> 3530057
<NUMBER-OF-SHARES-REDEEMED> (2578350)
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<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> (1444824)
<OVERDIST-NET-GAINS-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> 12.29
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> (0.28)
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</TABLE>
