<PAGE>
PROSPECTUS
FOR
METROPOLITAN SERIES FUND, INC.
April 30, 1999
The investment options offered by the Metropolitan Series Fund (the "Fund")
under this Prospectus are:
MetLife Stock Index State Street Research
Portfolio Growth Portfolio
State Street Research T. Rowe Price Large Cap
Diversified Portfolio Growth Portfolio
Harris Oakmark Large Cap Lehman Brothers(R)
Value Portfolio Aggregate Bond Index
Portfolio
As with all mutual fund shares, neither the Securities and Exchange Commission
nor any state securities authority have approved or disapproved these
securities, nor have they determined if this Prospectus is accurate or
complete. Any representation otherwise is a criminal offense.
METLIFE(R) [LOGO]
[LOGO] STATE STREET RESEARCH
HARRIS ASSOCIATES L.P.
-------------------------
Investment Management
T. ROWE PRICE [LOGO]
<PAGE>
Carefully review the objectives and investment practices of the Portfolios and
consider your ability to assume the risks involved before allocating payments
to particular Portfolios.
State Street Research Growth Portfolio
TABLE OF CONTENTS FOR THIS PROSPECTUS
<TABLE>
<CAPTION>
Page
in this
Subject Prospectus
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<S> <C>
Risk/Return Summary............................................... 2
Performance and Volatility........................................ 7
About the Investment Managers..................................... 11
Portfolio Turnover Rates.......................................... 14
Dividends, Distributions and Taxes................................ 14
General Information About the Fund and its Purpose................ 14
Sale and Redemption of Shares..................................... 15
Financial Highlights.............................................. 16
Appendix A--Portfolio Manager Prior Performance................... 20
Appendix B--Certain Investment Practices.......................... 23
Appendix C--Description of Some Investments,
Techniques, and Risks............................................ 26
</TABLE>
Risk/Return Summary
About all the Portfolios
Each Portfolio of the Fund has its own investment objective. Since investment
in any Portfolio involves both opportunities for gain and risks of loss, we
cannot give you assurance that the Portfolios will achieve their objectives.
You should carefully review the objectives and investment practices of the
Portfolios and consider your ability to assume the risks involved before
allocating payments to particular Portfolios.
While certain of the investment techniques, instruments and risks associated
with each Portfolio are referred to in the discussion that follows, additional
information on these subjects appears in Appendix B and C to this Prospectus.
However, those discussions do not list every type of investment, technique, or
risk to which a Portfolio may be exposed. Further, the Portfolios may change
their investment practices at any time without notice, except for those
policies that this Prospectus or the Statement of Additional Information
("SAI") specifically identify as requiring a shareholder vote to change. Unless
otherwise indicated, all percentage limitations, as well as characterization of
a company's capitalization, are evaluated as of the date of purchase of the
security.
About the State Street Research Growth Portfolio:
Investment objective: long-term growth of capital and income and moderate
current income.
Principal investment strategies: The Portfolio generally invests the greatest
portion of its assets in equity securities of larger, established companies and
equity securities that are selling below what the portfolio manager believes to
be their intrinsic values. Other principal strategies include investing in
cyclical securities and smaller emerging growth companies with potential for
above average earnings growth.
2
<PAGE>
State Street Research Diversified Portfolio
Principal risks: The risks described after the following captions under
"Principal Risks of Investing in the Fund:" "Equity investing;" "Investing in
larger companies;" "Investing in less mature companies, smaller companies and
companies with "special situations';" "Growth investing;" and "Value
investing." Volatility may be indicative of risk. Please refer to the
discussion under "Performance and Volatility."
About the State Street Research Diversified Portfolio:
Investment objective: high total return while attempting to limit investment
risk and preserve capital.
Principal investment strategies: The Portfolio invests portions of its assets
in the following three asset categories: (i) Equity securities of the type that
can be purchased by the State Street Research Growth Portfolio. While the
portion of the Portfolio's assets so invested will usually be similar in
composition to the State Street Research Growth Portfolio, the composition may
vary; (ii) Non-convertible debt securities in the three highest rating
categories as determined by a nationally recognized statistical rating
organization ("NRSRO"), or of comparable quality ("top three ratings"). The
maturities of the debt securities the Portfolio invests in vary depending on
market values and trends and can be long-term (10 or more years), intermediate
term (1-10 years) or short-term (less than 1 year). The Portfolio may also
invest in debt securities that are not within the top three rating categories,
convertible securities and preferred stocks of companies that have senior
securities rated within the top three credit rating categories, as well as up
to 10% of total assets in common stocks acquired by conversion of convertible
securities or exercise of warrants attached to debt securities; and (iii) Short
term money market instruments with minimal credit risks including: corporate
debt securities, United States government securities, government agency
securities, bank certificates of deposit, bankers' acceptances, variable amount
master demand notes and repurchase and reverse repurchase agreements. No
absolute limits apply to the portion of assets invested in each category. The
amount of assets invested in each type of security will depend upon economic
conditions, the general level of common stock prices, interest rates and other
relevant considerations, including the risks of each type of security.
Principal risks: The major risk for the Portfolio is that the portfolio
managers will not correctly anticipate the relative performance of different
asset categories for specific periods resulting in the Portfolio
underperforming other types of asset allocation investments or other types of
investments in general. In addition, with respect to the portion of its assets
invested in equity securities of the type that can be purchased by the State
Street Research Growth Portfolio, the Portfolio is subject to the same risks as
that Portfolio. With respect to the portion of its assets invested in non-
convertible debt securities, the Portfolio is subject to the risks described
after the following captions under "Principal Risks of Investing in the Fund:"
"Investing in fixed income securities;" "Prepayment risk;" and "Zero coupon
risks." With respect to the portion of its assets invested in short term money
market instruments, the major risk involved with this portion of the Portfolio
is that the overall yield of the assets in this portion could decrease and
lower the return on your investment. Situations that can lower the yield
include those that cause short-term interest rates to decline. The risks
3
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Harris Oakmark Large Cap Value Portfolio
T. Rowe Price Large Cap Growth Portfolio
associated with each portion of the Portfolio may be moderated, however, by the
greater variety of asset types in which the State Street Research Diversified
Portfolio is generally expected to invest, as compared with portfolios that
invest solely in a particular asset class. Volatility may be indicative of
risk. Please refer to the discussion under "Performance and Volatility."
About the Harris Oakmark Large Cap Value Portfolio
Investment objective: long-term capital appreciation.
Principal investment strategies: The Portfolio normally invests at least 65% of
its total assets in equity securities of large capitalization U.S. companies.
The portfolio managers define large-capitalization ("large-cap") companies as
those whose market capitalization falls within the range of companies included
in the S&P 500 Index at the time of the purchase. As of December 31, 1998, this
included companies with capitalizations of approximately $487 million and
above. The portfolio managers' chief consideration in selecting equity
securities for the Portfolio is their judgment as to the size of the discount
at which the security trades, relative to its economic value. The portfolio
managers' investment philosophy is predicated on the belief that, over time,
market price and value converge and that the investment in securities priced
significantly below long-term value presents the best opportunity to achieve
long-term capital appreciation. The portfolio managers use several methods to
analyze value, but consider the primary determinant to be the enterprise's
long-run ability to generate cash for its owners. The portfolio managers also
believe the risks of equity investing are often reduced if management's
interests are strongly aligned with the interests of its stockholders.
Principal risks: The risks described after the following captions under
"Principal Risks of Investing in the Fund:" "Equity investing;" "Investing in
larger companies;" "Investing in less mature companies, smaller companies and
companies with "special situations';" and "Value investing." Volatility may be
indicative of risk.
About the T. Rowe Price Large Cap Growth Portfolio:
Investment objective: long-term growth of capital and, secondarily, dividend
income.
Principal investment strategies: The Portfolio normally invests at least 65% of
its total assets in a diversified group of large capitalization growth
companies. The portfolio managers define "large-cap" companies as those whose
market capitalization falls within the range of the largest 300 companies
included in the Russell 3000 Index at the time of the purchase. As of December
31, 1998, this included companies with capitalizations of approximately $6.3
billion and above. The Portfolio generally looks for companies with above-
average growth in earnings and cash flow; the ability to sustain earnings
momentum even during economic slowdowns by operating in industries or service
sectors where earnings and dividends can outpace inflation and the overall
economy; or that have a lucrative niche in the economy where profit margins
widen due to economic factors (rather than one-time events such as lower
taxes). The Portfolio expects to invest in common stocks of companies that
normally (but not always) pay dividends that are generally expected to rise in
future years as earnings rise.
4
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The Index Portfolios
Lehman Brothers Aggregate Bond Index Portfolio
Principal risks: The risks described after the following captions under
"Principal Risks of Investing in the Fund:" "Equity investing;" "Investing in
larger companies;" "Investing in securities of foreign issuers;" and "Growth
investing." The risks of equity investing may be moderated by the fact that the
Portfolio emphasizes dividend paying securities. On the other hand, that may
expose the Portfolio more directly to interest rate risk. Volatility may be
indicative of risk.
About the Index Portfolios
Principal investment strategies applicable to all the Index Portfolios: Each
Index Portfolio has as an investment objective to equal the performance of a
particular index. Certain strategies common to the Index Portfolios are
discussed in the next paragraph below. Thereafter, the unique aspects of the
objective and principal strategies of each Index Portfolio are discussed.
In addition to securities of the type contained in its index, each Portfolio
also expects to invest, as a principal investment strategy, in securities index
futures contracts and/or related options to simulate full investment in the
index while retaining liquidity, to facilitate trading, to reduce transaction
costs or to seek higher return when these derivatives are priced more
attractively than the underlying security. Also, since the Portfolios attempt
to keep transaction costs low, the portfolio manager generally will rebalance a
Portfolio only if it deviates from the applicable index by a certain percent,
depending on the company, industry, and country, as applicable. MetLife
monitors the tracking performance of the Portfolio through examination of the
"correlation coefficient." A perfect correlation would produce a coefficient of
1.00. The Portfolio will attempt to maintain a target correlation coefficient
of at least .95.
Lehman Brothers Aggregate Bond Index Portfolio:
Investment objective: to equal the performance of the Lehman Brothers Aggregate
Bond Index.
Principal investment strategies: In addition to the strategies outlined above
under "Principal investment strategies applicable to all the Index Portfolios,"
the Portfolio will normally invest most of its assets in fixed income
securities included in the Lehman Brothers Aggregate Bond Index. This index is
comprised of the Lehman Brothers Government/Corporate Index, the Lehman
Brothers Mortgage-Backed Securities Index, the Lehman Brothers Asset-Backed
Securities Index and, effective July 1, 1999, the Lehman Brothers Commercial
Mortgage-Backed Securities Index. The Portfolio may continue to hold debt
securities that no longer are included in the Index, if, together with any
money market instruments or cash, such holdings are no more than 20% of the
Portfolio's net assets. The types of fixed income securities included in the
Index are debt obligations issued or guaranteed by the United States Government
or its agencies or instrumentalities, debt obligations issued or guaranteed by
U.S. corporations, debt obligations issued or guaranteed by foreign companies,
sovereign governments, municipalities, governmental agencies or international
agencies, and mortgage-backed securities. The Portfolio will invest in a
sampling of the bonds included in the Lehman Brothers Aggregate Bond Index. The
bonds purchased for the Portfolio are chosen to, as a group, reflect the
composite performance of the Index. As the Portfolio's total assets grow, a
larger percentage of bonds included in the Index will be included in the
Portfolio.
5
<PAGE>
MetLife Stock Index Portfolio
Principal risks: The risks described after the following captions under
"Principal Risks of Investing in the Fund:" "Investing in fixed income
securities;" "Prepayment risk;" "Zero coupon risks;" and "Index investing."
Volatility may be indicative of risk.
MetLife Stock Index Portfolio:
Investment objective: to equal the performance of the Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index").
Principal investment strategies: In addition to the strategies outlined above
under "Principal investment strategies applicable to all the Index Portfolios,"
the Portfolio will normally invest most of its assets in common stocks included
in the S&P 500 Index. The S&P 500 Index consists of 500 common stocks, most of
which are listed on the New York Stock Exchange. The stocks included in the S&P
500 Index are issued by companies among those whose outstanding stock have the
largest aggregate market value, although stocks that are not among the 500
largest are included in the S&P 500 Index for diversification purposes.
Principal risks: The risks described after the following captions under
"Principal Risks of Investing in the Fund:" "Equity investing;" "Investing in
larger companies;" and "Index investing." Volatility may be indicative of risk.
Please refer to the discussion under "Performance and Volatility."
6
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Performance and Volatility
The following tables and charts are provided to illustrate the variability of
the investment returns that each Portfolio shown below has earned in the past.
. Average annual total return measures a Portfolio's performance over time, and
compares those returns to a representative index. Periods of 1, 5, and 10
years (or since inception as applicable) are presented.
. The graphs of year-by-year returns examine volatility by illustrating a
Portfolio's historic highs and lows, as well as the consistency of returns.
. In general, as reflected in this section, Portfolios with higher average
annual total returns tend to be more volatile.
. Return calculations do not reflect insurance product fees or other charges,
and if included these charges would reduce each Portfolio's past performance.
Also, past performance does not necessarily indicate how a particular
Portfolio will perform in the future.
[STATE STREET RESEARCH DIVERSIFIED CHART APPEARS HERE]
State Street Research Diversified
Investment Results
Average Annual Total Returns
As of December 31, 1998
--------------------------------------
1 Year 5 Years 10 Years
------ ------- --------
State Street Research
Diversified 19.64% 15.26% 14.33%
- ---------------------------------------------------------------------------
S&P 500 28.60% 24.05% 19.19%
- ---------------------------------------------------------------------------
Lehman Brothers Aggregate 8.69% 7.27% 9.26%
[BAR CHART APPEARS HERE]
89 21.76
90 0.00
91 24.84
92 9.48
93 12.75
94 -3.06
95 27.03
96 14.52
97 20.58
98 19.64
During the 10-year period shown in the bar chart, the highest return for a
quarter was 11.7% (quarter ended June 30, 1998) and the lowest return for a
quarter was -8.8% (quarter ended Sept. 30, 1990).
[STATE STREET RESEARCH GROWTH CHART APPEARS HERE]
State Street Research Growth
Investment Results
Average Annual Total Returns
As of December 31, 1998
-----------------------------------
1 Year 5 Years 10 Years
------ ------- --------
State Street Research Growth 28.18% 20.96% 18.59%
- --------------------------------------------------------------------------
S&P 500 Index 28.60% 24.05% 19.19%
[BAR CHART APPEARS HERE]
89 36.64
90 -8.50
91 33.09
92 11.56
93 14.40
94 -3.25
95 33.14
96 22.18
97 28.36
98 28.18
During the 10-year period shown in the bar chart, the highest return for a
quarter was 38.6% (quarter ended Dec. 31, 1998) and the lowest return for a
quarter was -22.6% (quarter ended Sept. 30, 1998).
Harris Oakmark Large Cap Value
Since the Portfolio commenced operations effective
November 9, 1998,
no volatility or performance information is available.
7
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T. Rowe Price Large Cap Growth
Since the Portfolio commenced operations effective
November 9, 1998,
no volatility or performance information is available.
Lehman Brothers(R) Aggregate Bond Index
Since the Portfolio commenced operations effective
November 9, 1998,
no volatility or performance information is available.
[METLIFE STOCK INDEX CHART APPEARS HERE]
MetLife Stock Index
Investment Results
Average Annual Total Returns
As of December 31, 1998
-------------------------------------------
1 Year 5 Years Inception
------ ------- ---------
MetLife
Stock Index 28.23% 23.55% 18.88%
- ---------------------------------------------------------------------------
S&P 500 28.60% 24.05% 19.39%
[BAR GRAPH APPEARS HERE]
91 29.76
92 7.44
93 9.54
94 1.18
95 36.87
96 22.66
97 32.19
98 28.23
During the 10-year period shown in the bar chart, the highest return for a
quarter was 21.3% (quarter ended Dec. 31, 1998) and the lowest return for a
quarter was -13.6% (quarter ended Sept. 30, 1990).
8
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Carefully review the principal risks associated with investing in the
Portfolios.
Principal Risks of Investing in the Fund
The following briefly describes the principal risks that are associated with
one or more of the Fund's Portfolios.
Equity investing: Portfolios that invest in equities could lose money due to
sudden unpredictable drops in value and the potential for periods of lackluster
performance. Such adverse developments could result from general market or
economic conditions and/or developments at a particular company that the
portfolio managers do not foresee or circumstances that they do not evaluate
correctly. Historically, investments in equities have been more volatile than
many other investments.
This is a principal risk for the following Portfolios:
Harris Oakmark Large Cap Value, State Street Research Growth, State Street
Research Diversified, T. Rowe Price Large Cap Growth and MetLife Stock Index.
Investing in less mature companies, smaller companies and companies with
"special situations": These investments can be particularly sensitive to market
movements, because they may be thinly traded and their market prices tend to
reflect future expectations. Also, these companies often have limited product
lines, markets or financial resources and their management personnel may lack
depth and experience. (For an explanation of "special situations" see
"investment styles" in Appendix C.)
This is a principal risk for the following Portfolios:
Harris Oakmark Large Cap Value, State Street Research Growth and State Street
Research Diversified.
Investing in larger companies: Larger more established companies may be unable
to respond quickly to new competitive challenges such as changes in technology
and consumer tastes. Many larger companies also may not be able to attain the
high growth rates of successful smaller companies, especially during extended
periods of economic expansion.
This is a principal risk for the following Portfolios:
State Street Research Diversified, Harris Oakmark Large Cap Value, State Street
Research Growth, T. Rowe Price Large Cap Growth and MetLife Stock Index.
Investing in fixed income securities: These types of investments are subject to
loss in value if the market interest rates subsequently rise after purchase of
the obligation. This risk is greater for investments with longer remaining
durations. Another risk is that the issuer's perceived creditworthiness can
drop and cause the fixed income investment to lose value or the issuer could
default on interest or principal payments causing a loss in value. Lower rated
instruments, especially so called "junk bonds," involve greater risks due to
the financial health of the issuer and the economy generally and their market
prices can be more volatile.
This is a principal risk for the following Portfolios:
State Street Research Diversified and Lehman Brothers Aggregate Bond Index.
Prepayment risk: Prepayment risk is the risk that an issuer of a debt security
owned by a Portfolio repays the debt before it is due. This is most
9
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likely to occur when interest rates have declined and the issuer can therefore
refinance the debt at a lower interest rate. A Portfolio that owns debt
obligations that are prepaid would generally have to reinvest the amount
prepaid in lower yielding instruments. Also, debt obligations that can be
prepaid tend to increase less in value when interest rates decline, and
decrease more when interest rates rise, than otherwise similar obligations that
are not prepayable.
This is a principal risk for the following Portfolios:
State Street Research Diversified and Lehman Brothers Aggregate Bond Index.
Zero coupon risks: "Zero coupon" securities are debt obligations that provide
for payment of interest at the maturity date, rather than over the life of the
instrument. The values of zero coupon securities tend to respond more to
changes in interest rates than do otherwise comparable debt obligations that
provide for periodic payment of interest.
This is a principal risk for the following Portfolios:
State Street Research Diversified and Lehman Brothers Aggregate Bond Index.
Investing in securities of foreign issuers: Investment in securities that are
traded outside the U.S. have additional risks beyond those of investing in U.S.
securities. Foreign securities are frequently more volatile and less liquid
than their U.S. counterparts for reasons that may include unstable political
and economic climates, lack of standardized accounting practices, limited
information available to investors and smaller markets that are more sensitive
to trading activity. Also, changes in currency exchange rates have the
potential of reducing gains or creating losses. There also can be risks of
expropriation, currency controls, foreign taxation or withholding, and less
secure procedures for transacting business in securities. The risks of
investing in foreign securities are usually higher in emerging markets such as
most countries in Southeast Asia, Eastern Europe, Latin America and Africa.
This is a principal risk for the T. Rowe Price Large Cap Growth Portfolio.
Value investing: This investment approach has additional risk associated with
it because the portfolio manager's judgement that a particular security is
undervalued in relation to the company's fundamental economic values may prove
incorrect.
This is a principal risk for the following Portfolios:
Harris Oakmark Large Cap Value, State Street Research Growth and State Street
Research Diversified.
Growth investing: This investment approach has additional risk associated with
it due to the volatility of growth stocks. Growth companies usually invest a
high portion of earnings in their businesses, and may lack the dividends of
value stocks that can cushion prices in a falling market. Also, earnings
disappointments often lead to sharply falling prices because investors buy
growth stocks in anticipation of superior earnings growth.
This is a principal risk for the following Portfolios:
State Street Research Growth, State Street Research Diversified and T. Rowe
Price Large Cap Growth.
10
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About MetLife
Portfolio management of the State Street Research Portfolios
Index investing: Unlike actively managed portfolios, portfolios that attempt to
match the return of an index generally will not use any defensive strategies.
You, therefore, will bear the risk of adverse market conditions with respect to
the market segment that the index seeks to match. In addition, transaction
costs, other Portfolio or Fund expenses, brief delays that occur until a
Portfolio can invest cash it receives and other tracking errors may result in a
Portfolio's return being lower than the return of the applicable index.
This is a principal risk for the following Portfolios:
MetLife Stock Index and Lehman Brothers Aggregate Bond Index.
Defensive Strategies
Except with respect to the index Portfolios, portfolio managers generally may
use defensive strategies. These include holding greater cash positions, short-
term money market instruments or similar investments that are not within the
Portfolio's usual investment strategy, but do not violate any prohibition to
which the Portfolio is subject. Portfolio managers may use defensive strategies
when they believe that market conditions are not favorable for profitable
investing or when the portfolio manager is otherwise unable to locate favorable
investment opportunities. Adopting a defensive position, however, can mean that
a Portfolio would be unable to meet its investment objective.
About The Investment Managers
Metropolitan Life Insurance Company ("MetLife") has overall responsibility for
investment management for each Portfolio and day-to-day investment management
responsibility for the index Portfolios. (MetLife also performs general
administrative and management services for the Fund.) In addition, MetLife is
the Fund's principal underwriter and distributor. MetLife also manages its own
investment assets and those of certain affiliated companies and other entities.
MetLife is a mutual life insurance company which sells insurance policies and
annuity contracts. On December 31, 1998, it had total life insurance in force
of approximately $1.7 trillion and total assets under management of
approximately $359 billion. MetLife is the parent of Metropolitan Tower Life
Insurance Company ("Metropolitan Tower").
State Street Research & Management Company ("State Street Research") is the
sub-investment manager for the State Street Research Portfolios. It is a
Delaware corporation and traces its history back to 1924. It is a wholly-owned
indirect subsidiary of MetLife. In addition to the Fund, it provides investment
management services to several mutual funds and institutional clients. As of
December 31, 1998, State Street Research had investment arrangements in effect
for about $54 billion in assets.
The following gives you information on the portfolio managers for certain of
the State Street Research Portfolios:
State Street Research Diversified Portfolio:
The portfolio manager for the portion of the Portfolio that invests similarly
to the State Street Research Growth Portfolio is the same as the portfolio
manager of the Portfolio (see portfolio manager information). Kim Peters, a
Senior Vice President at State Street Research since 1994, has been with the
firm since 1986. Mr. Peters is the portfolio manager for the portion of the
Portfolio that invests in non-convertible debt securities and has been
11
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Portfolio management of the Harris Oakmark Large Cap Value Portfolio
Portfolio management of the T. Rowe Price Large Cap Growth Portfolio
primarily responsible for its day-to-day management for 5 years. During the
past five years, Mr. Peters has also served as a Vice President at State Street
Research. Assets are allocated among the portions of the Portfolio based on the
input of State Street Research's Asset Allocation Committee.
State Street Research Growth Portfolio:
John T. Wilson, a Senior Vice President at State Street Research since April,
1998, has been with the firm since 1996. Mr. Wilson is the portfolio manager
for the Portfolio and has been primarily responsible for its day-to-day
management for the past 2 years. During the past five years, he was also a
portfolio manager with Phoenix Investment Counsel, Inc.
Harris Associates L.P. ("Harris") is the sub-investment manager of the Harris
Oakmark Large Cap Value Portfolio. Together with its predecessors it has
provided investment management services to mutual funds since 1970. It is a
wholly-owned subsidiary of Nvest Companies, L.P. whose general partner, Nvest
Corporation, is an indirect wholly-owed subsidiary of MetLife. In addition to
the Fund, it provides investment management services to several mutual funds as
well as individuals, trusts, endowments, institutional clients and private
partnerships. As of December 31, 1998, Harris had investment arrangements in
effect for about $17 billion in assets.
Robert J. Sanborn and Edward Loeb are co-portfolio managers for the Portfolio
and have been primarily responsible for its day-to-day management since its
inception in November, 1998. Mr. Sanborn is the portfolio manager for other
mutual funds managed by Harris. During the past five years, Mr. Sanborn has
been a Portfolio Manager of Harris, a Director of Harris Associates Inc., its
general partner, and the Executive Vice President of Harris Associates
Investment Trust, a registered mutual fund with six series, including The
Oakmark Fund, for which he is the fund manager. Mr. Loeb is the portfolio
manager for numerous individual and institutional clients. During the past five
years, Mr. Loeb has been a Portfolio Manager at Harris and, since June 1997,
Vice President of the Investment Advisory Department of Harris. Mr. Sanborn and
Mr. Loeb have been with Harris since 1988 and 1989, respectively.
T. Rowe Price Associates, Inc. ("T. Rowe Price") is the sub-investment manager
of the T. Rowe Price Large Cap Growth Portfolio. A Maryland corporation, it
dates back to 1937. In addition to the Fund, it provides investment management
services to many retail and institutional accounts. As of December 31, 1998, T.
Rowe Price and its affiliates had investment management arrangements in effect
for about $148 billion in assets.
The Portfolio is managed by an Investment Advisory Committee. Robert W. Smith,
Committee Chairman, has been responsible for the day-to-day management of the
Portfolio since its inception in November, 1998 and works with the Committee in
developing and executing the Portfolio's investment program. Mr. Smith joined
T. Rowe Price and began managing assets there in 1992. Mr. Smith and the
Investment Advisory Committee manage other mutual funds, including the T. Rowe
Price Growth Stock Fund.
12
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Investment Management Fees
Fund Expenses
The Fund pays MetLife monthly for its investment management services. MetLife
pays each sub-investment manager for their investment management services.
There is no separate charge to the Fund for the sub-investment management
services.
For the Portfolios indicated below, the following table shows the investment
management and sub-investment management fees for the year ending December 31,
1998 as an annual percentage of the average daily net assets of each Portfolio.
<TABLE>
<CAPTION>
% of Average
Daily Net Assets
% of Average Paid by
Daily Net Assets Investment
Paid to Manager to
Investment Sub-Investment
Portfolio Manager Manager
- -----------------------------------------------------------------------------------
<S> <C> <C>
MetLife Stock Index .25% N/A
- -----------------------------------------------------------------------------------
State Street Research Growth .49% .34%
- -----------------------------------------------------------------------------------
State Street Research Diversified .44% .28%
</TABLE>
The Portfolios indicated in the following table have been in operation for less
than one year. The following shows the investment management and sub-investment
management fee schedules as an annual percentage of the average daily net
assets of each Portfolio.
<TABLE>
<CAPTION>
% per
% per annum
annum Paid to
Average paid to Sub-
Daily Net Investment Investment
Portfolio Assets Manager Manager
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Lehman Brothers Aggregate
Bond Index All assets .25% N/A
- ---------------------------------------------------------------------------------
1st $50 million .70% .50%
T. Rowe Price Large Cap Growth over $50 million .60% .40%
- ---------------------------------------------------------------------------------
1st $250 million .75% .65%
Harris Oakmark Large Cap Value Over $250 million .70% .60%
</TABLE>
- --------
The Fund is responsible for paying its own expenses. However, MetLife
voluntarily pays expenses of certain Portfolios in excess of a certain
percentage of net assets until the earlier of either total net assets of the
Portfolio reaching $100 million or a certain date as follows:
<TABLE>
<CAPTION>
SUBSIDIZED
EXPENSES* IN
PORTFOLIO EXCESS OF DATE
<S> <C> <C>
Harris Oakmark Large Cap Value 0.20% 11/2/00
T. Rowe Price Large Cap Growth 0.20% 11/2/00
Lehman Brothers Aggregate Bond Index 0.20% 11/2/00
</TABLE>
- --------
*Expenses for this purpose exclude the investment management fees payable to
MetLife, brokerage commissions on portfolio transactions (including any other
direct costs related to portfolio investment transactions), taxes, interest and
other loan costs owed by the Fund and any unusual one-time expenses (such as
legal related expenses).
These subsidies and other prior expense reimbursement arrangements can increase
the performance of the Portfolios. MetLife also has the right to stop these
payments at any time upon notice to the Board of Directors and to Fund
shareholders.
13
<PAGE>
Dividends are reinvested.
Portfolio Turnover Rates
The rate of portfolio turnover is the annual amount, expressed as a percentage,
of a Portfolio's securities that it replaces in one year. The portfolio
turnover rate will not be a limiting factor when it is deemed appropriate to
purchase or sell securities for a Portfolio. Portfolio turnover may vary from
year to year or within a year, depending upon economic, market or business
conditions and client contributions and withdrawals. To the extent that
brokerage commissions and transaction costs are incurred in buying and selling
portfolio securities, the rate of portfolio turnover could affect each
Portfolio's net asset value. The historical rates of portfolio turnover for all
of the Portfolios are set forth in the Prospectus under the Financial
Highlights.
Dividends, Distributions and Taxes
The Fund intends to qualify as a regulated investment company under the tax law
and, as such distributes substantially all of each Portfolio's ordinary net
income and capital gains each calendar year as a dividend to the separate
accounts funding the Contracts to avoid an excise tax on certain undistributed
amounts. The Fund expects to pay no income tax. Dividends are reinvested in
additional full and partial shares of the Portfolio as of the dividend payment
date.
The Fund and its Portfolios intend to comply with special diversification and
other tax law requirements that apply to investments under variable life
insurance and annuity contracts. Under these rules, shares of the Fund will
generally only be available through the purchase of a variable life insurance
or annuity contract. Income tax consequences to Contract owners who allocate
premiums to Fund shares are discussed in the prospectus for the Contracts that
is attached at the front of this Prospectus.
General Information about the Fund and its Purpose
The Fund is an open-end management investment company (or "mutual fund"). The
Fund is a "series" type of mutual fund, which issues separate classes (or
series) of stock. Each class or series represents an interest in a separate
portfolio of Fund investments ("Portfolio").
The Fund offers its shares to MetLife and its affiliated insurance companies
("Insurance Companies"), including Metropolitan Tower. The Insurance Companies
hold the Fund's shares in separate accounts that they use to support variable
life insurance policies and variable annuity contracts (together, the
"Contracts"). Not all of the Portfolios of the Fund are available to each of
these separate accounts. An Insurance Company holding Fund shares for a
separate account has different rights from those of the owner of a Contract.
The terms "shareholder" or "shareholders" in this Prospectus refer to the
Insurance Companies, and not to any Contract owner.
14
<PAGE>
Contract owners may allocate the amounts under the Contracts for ultimate
investment in the Portfolios.
Fund shares are available only through variable life and variable annuity
contracts.
Within limitations described in the appropriate Contract, owners may allocate
the amounts under the Contracts for ultimate investment in the various
Portfolios of the Fund. See the prospectus which is attached at the front of
this Prospectus for a description of (a) the Contract, (b) the Portfolios of
the Fund that are available under that Contract and (c) the relationship
between increases or decreases in the net asset value of Fund shares (and any
dividends and distributions on such shares) and the benefits provided under
that Contract.
Some of the Portfolios have names and investment objectives that are very
similar to certain publicly available mutual funds that are managed by the same
money managers. These Portfolios are not those publicly available mutual funds
and will not have the same performance. Different performance will result from
such factors as different implementation of investment policies, different cash
flows into and out of the Portfolios, different fees, and different sizes.
It is conceivable that in the future it may be disadvantageous for different
types of variable life insurance and variable annuity separate accounts to
invest simultaneously in the Fund. However, the Fund, Metropolitan Tower and
MetLife do not currently foresee any such disadvantages. The Fund's Board of
Directors intends to monitor for the existence of any material irreconcilable
conflict between or among such owners, and the Insurance Companies will take
whatever remedial action may be necessary.
Sale and Redemption of Shares
Shares are sold and redeemed at a price equal to the net asset value without
any sales charges. The Insurance Companies purchase or redeem shares of each
Portfolio, based on, among other things: (1) the amount of net Contract
premiums or purchase payments transferred to the separate accounts; (2)
transfers to or from separate account investment divisions; (3) policy loans;
(4) loan repayments; and (5) benefit payments to be effected on a given date
under the Contracts. Generally, these purchases and redemptions are priced
using the Portfolio net asset value computed for the same date and time as are
used to price the corresponding Contract transaction.
Each Portfolio's net asset value per share is calculated by taking its assets
(including dividends and interest received or accrued), deducting its
liabilities (including accrued expenses and dividends payable) and dividing the
result by the total number of the Portfolio's outstanding shares. To determine
the value of a Portfolio's assets, cash and receivables are valued at their
face amounts. Interest is recorded as accrued and dividends are recorded on the
ex-dividend date.
Securities, options and futures contracts held by the Portfolios are valued at
market value. Short-term debt instruments with a maturity of 60 days or less
held by all Portfolios are valued on an amortized cost basis. When market
quotations are not readily available for securities and assets, or when the
Board of Directors determines that customary pricing procedures would result in
an unreliable valuation, they are valued at fair value as determined by the
Board of Directors. Such a fair value procedure could be followed, for example,
if (1) an event occurs after the time of the most recent available market
quotations that is likely to have affected the value of those securities or (2)
such market quotations for other reasons do not reflect information material to
the value of those securities. The possibility of fair value pricing
15
<PAGE>
A Portfolio's net asset value per share is determined once daily.
means that changes in a Portfolio's net asset value may not always correspond
to changes in quoted prices of a Portfolio's investments.
A Portfolio's net asset value per share is determined once daily immediately
after any dividends are declared and is currently determined at the close of
regular trading on the New York Stock Exchange. When it is open, regular
trading on the New York Stock Exchange usually ends at 4:00 p.m., Eastern time.
The net asset value may also be determined on days when the New York Stock
Exchange is closed when there has been trading in a Portfolio's securities
which would result in a material change in the net asset value.
Computer Software Systems
The services provided to the Fund by MetLife as investment manager and
distributor, the other managers and the transfer agent, depend on the smooth
functioning of their computer systems. Many computer software systems in use
today cannot distinguish the year 2000 from the year 1900 because of the way
dates are encoded and calculated. That failure could negatively impact handling
of securities trades, pricing and account services and otherwise adversely
impact the companies, organizations, and markets in which the Portfolios may
invest and may reduce a Portfolio's returns. MetLife, the other managers, and
transfer agents are actively working on necessary changes to their computer
systems to deal with this issue and expect that their systems will be adapted
in time for that event, although there cannot be assurance of success.
Financial Highlights
The financial highlights table is intended to help you understand each
Portfolio's financial performance for the past 5 years, or since inception of
the Portfolio if shorter. Certain information reflects financial results for a
single share of the Portfolio. The total returns in the table represent the
rate that a shareholder would have earned or lost on an investment in a
Portfolio (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Fund's financial statements, are included in the annual report, which is
available upon request.
16
<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. For further information about the performance of the Portfolios, see
the Fund's December 31, 1998 Management Discussion and Analysis which appears in
the Fund's annual report, which is incorporated by reference into the Statement
of Additional Information.
<TABLE>
<CAPTION>
Selected Data For a Share of Capital STATE STREET RESEARCH GROWTH PORTFOLIO
Stock Outstanding Throughout Period: --------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: Beginning of period $ 31.92 $ 30.51 $ 27.56 $ 21.81 $ 23.27
- -------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income .................. 0.36 0.44 0.36 0.35 0.30
Net realized and unrealized gain/(loss) 8.52 7.72 5.78 6.83 (1.06)
----------- ----------- ----------- ----------- ----------
Total From Investment Operations ....... 8.88 8.16 6.14 7.18 (0.76)
----------- ----------- ----------- ----------- ----------
Less Distributions:
Dividends from net investment income ... (0.36) (0.44) (0.36) (0.35) (0.30)
Distributions from net realized capital
gains .................................. (3.34) (6.31) (2.83) (1.08) (0.40)
----------- ----------- ----------- ----------- ----------
Total Distributions .................... (3.70) (6.75) (3.19) (1.43) (0.70)
----------- ----------- ----------- ----------- ----------
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: End of period .......... $ 37.10 $ 31.92 $ 30.51 $ 27.56 $ 21.81
- -------------------------------------------------------------------------------------------------------------------------
Total return ........................... 28.18% 28.36% 22.18% 33.14% (3.25)%
Net assets at end of period (000's) .... $ 3,112,081 $ 2,349,062 $ 1,597,728 $ 1,094,751 $ 746,433
Supplemental Data/Significant Ratios:
Operating expenses to average net assets 0.53% 0.43% 0.29% 0.31% 0.32%
Net investment income to average net
assets ................................. 1.04% 1.37% 1.29% 1.46% 1.40%
Portfolio turnover (1) ................. 74.29% 82.81% 93.05% 45.52% 57.27%
</TABLE>
<TABLE>
<CAPTION>
Selected Data For a Share of Capital STATE STREET RESEARCH DIVERSIFIED PORTFOLIO
Stock Outstanding Throughout Period: --------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: Beginning of period .... $ 16.98 $ 16.67 $ 15.95 $ 13.40 $ 14.41
- -------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income .................. 0.60 0.60 0.55 0.59 0.51
Net realized and unrealized gain/(loss) 2.70 2.71 1.77 3.02 (0.95)
----------- ----------- ----------- ----------- ----------
Total From Investment Operations ....... 3.30 3.31 2.32 3.61 (0.44)
----------- ----------- ----------- ----------- ----------
Less Distributions:
Dividends from net investment income ... (0.57) (0.60) (0.53) (0.58) (0.50)
Distributions from net realized capital
gains ................................... (1.32) (2.40) (1.07) (0.48) (0.07)
----------- ----------- ----------- ----------- ----------
Total Distributions .................... (1.89) (3.00) (1.60) (1.06) (0.57)
----------- ----------- ----------- ----------- ----------
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: End of period .......... $ 18.39 $ 16.98 $ 16.67 $ 15.95 $ 13.40
- -------------------------------------------------------------------------------------------------------------------------
Total return ........................... 19.64% 20.58% 14.52% 27.03% (3.06)%
Net assets at end of period (000's) .... $ 2,656,987 $ 1,982,232 $ 1,448,841 $ 1,114,834 $ 892,826
Supplemental Data/Significant Ratios:
Operating expenses to average net assets 0.48% 0.40% 0.29% 0.31% 0.32%
Net investment income to average net
assets ................................. 3.39% 3.50% 3.38% 3.92% 3.66%
Portfolio turnover (1) ................. 105.89% 114.79% 91.07% 79.29% 96.49%
</TABLE>
- ---------------------
Footnotes Appear on Page 19.
17
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Selected Data For a Share of Capital METLIFE STOCK INDEX PORTFOLIO
Stock Outstanding Throughout Period: ---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: Beginning of period ......... $ 28.78 $ 22.23 $ 18.56 $ 13.87 $ 14.25
- -------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income ....................... 0.37 0.34 0.33 0.32 0.33
Net realized and unrealized gain/(loss) ..... 7.75 6.79 3.88 4.79 (0.17)
----------- ----------- ----------- ----------- -----------
Total From Investment Operations ............ 8.12 7.13 4.21 5.11 0.16
----------- ----------- ----------- ----------- -----------
Less Distributions:
Dividends from net investment income ........ (0.36) (0.34) (0.33) (0.32) (0.32)
Distributions from net realized capital gains (1.16) (0.24) (0.21) (0.10) (0.22)
----------- ----------- ----------- ----------- -----------
Total Distributions ......................... (1.52) (0.58) (0.54) (0.42) (0.54)
----------- ----------- ----------- ----------- -----------
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: End of period ............... $ 35.38 $ 28.78 $ 22.23 $ 18.56 $ 13.87
- -------------------------------------------------------------------------------------------------------------------------------
Total return ................................ 28.23% 32.19% 22.66% 36.87% 1.18%
Net assets at end of period (000's) ......... $ 3,111,919 $ 2,020,480 $ 1,122,297 $ 635,823 $ 363,001
Supplemental Data/Significant Ratios:
Operating expenses to average net assets .... 0.30% 0.33% 0.30% 0.32% 0.33%
Net investment income to average net assets . 1.21% 1.47% 1.91% 2.22% 2.51%
Portfolio turnover (1) ...................... 15.07% 10.69% 11.48% 6.35% 6.66%
</TABLE>
<TABLE>
<CAPTION>
LEHMAN
HARRIS T. ROWE PRICE BROTHERS
OAKMARK LARGE LARGE CAP AGGREGATE
CAP VALUE GROWTH BOND INDEX
PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- -----------
Selected Data For a Share of Capital FOR THE PERIOD NOVEMBER 9, 1998
Stock Outstanding Throughout Period: (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31,
-----------------------------------------------------
1998 1998 1998
------------ ------------- -------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: Beginning of period ........................ $ 10.00 $ 10.00 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income ...................................... 0.03 0.01 0.07
Net realized and unrealized gain/(loss) ................... (0.30) 1.02 0.07
------------ ------------ -------------
Total From Investment Operations ........................... (0.27) 1.03 0.14
------------ ------------ -------------
Less Distributions:
Dividends from net investment income ....................... (0.03) (0.01) (0.08)
Distributions from net realized capital gains .............. -- -- --
------------ ------------ -------------
Total Distributions ........................................ (0.03) (0.01) (0.08)
------------ ------------ -------------
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE: End of period .............................. $ 9.70 $ 11.02 $ 10.06
- ------------------------------------------------------------------------------------------------------------------------
Total return ............................................... (2.70)% 10.28% 1.38%
Net assets at end of period (000's) ........................ $ 8,658 $ 6,740 $ 58,810
Supplemental Data/Significant Ratios:
Operating expenses to average net assets ................... 0.70% 0.50% 0.42%
Operating expenses to average net assets before voluntary
expense reimbursements ..................................... 1.79% 2.62% 0.59%
Net investment income to average net assets ................ 2.47% 0.93% 5.28%
Net investment income to average net assets
before voluntary expense reimbursements .................... 1.38% (1.19)% 5.11%
Portfolio turnover (1) ..................................... 0.00% 5.69% 11.08%
</TABLE>
- ---------------------
Footnotes Appear on Page 19.
18
<PAGE>
Notes:
- ------
* Ratios have been determined based on annualized operating results for the
period. Twelve month results may be different.
(1) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio
securities owned during the period. Securities with a maturity or
expiration date at the time of acquisition of one year or less are
excluded from the calculation. Purchases and sales of securities
(excluding short-term securities) for the year ended December 31, 1998
are as follows:
Purchases Sales of Securities
--------- -------------------
State Street Research Growth .......... $2,101,526,633 $1,891,659,069
State Street Research Diversified ..... 2,719,642,384 2,256,406,848
MetLife Stock Index ................... 863,635,727 382,070,345
Harris Oakmark Large Cap Value ........ 7,987,916 --
T. Rowe Price Large Cap Growth ........ 5,944,837 207,322
Lehman Brothers Aggregate Bond Index .. 63,057,826 5,783,973
See Notes to Financial Statements.
19
<PAGE>
Appendix A To Prospectus
Portfolio Manager Prior Performance
Because they commenced operations only on November 9, 1998, limited performance
history is available for the Harris Oakmark Large Cap Value, T. Rowe Price
Large Cap Growth, and Lehman Brothers Aggregate Bond Index Portfolios. The
following, however, sets forth total return information for the one-year,
three-year, five-year and ten-year periods ended December 31, 1998 (or since
inception if more recent) for certain similar accounts that are managed by the
same sub-investment managers as are these three Portfolios. Year-to-date
information is also given for the two months ended February 28, 1999. Results
are shown on a "total return" basis and include reinvestment of all dividends
and capital gain distributions.
The tables also show the total return information for appropriate indices for
the same periods. The index performance information set forth below does not
reflect any fees and expenses that the applicable Fund Portfolio will bear.
Finally each table also shows the related Fund Portfolio over the period of its
existence.
Each sub-investment manager has represented to the Fund that, except as
otherwise noted, the similar accounts for which performance figures are shown
include all of the sub-investment manager's investment company and other
accounts that (a) have been managed with investment objectives, policies, and
strategies substantially similar to those used in managing the corresponding
Portfolio, (b) are of sufficient size that their performance would be
considered relevant to the owner of a policy or contract investing in that
Portfolio and (c) are otherwise deemed sufficiently comparable to warrant
including their performance.
The similar accounts are shown for illustrative purposes only and do not
necessarily predict future performance of the Portfolios. You should be aware
that the Portfolios are likely to differ from other accounts managed by the
same sub-investment manager in such matters as size, cash flow pattern, expense
levels and certain tax matters. Accordingly, the portfolio holdings and
performance of the Portfolio will vary from those of such other accounts.
The performance figures set forth below do not reflect any of the charges and
deductions under the terms of the variable annuity contracts and variable life
insurance policies that may invest in the Portfolios. These charges may be
substantial and will cause the investment return under such a contract or
policy to be less than that of the Portfolio. Such charges are discussed in
detail in the appropriate Contract prospectus.
20
<PAGE>
THE FOLLOWING PERFORMANCE INFORMATION DOES NOT REPRESENT THE PERFORMANCE OF ANY
FUND PORTFOLIO EXCEPT IN THE RIGHT HAND COLUMN OF EACH TABLE.
Harris
<TABLE>
<CAPTION>
Harris Oakmark
Large Cap Value
Total Return for Oakmark Fund Portfolio
Period (unaudited) (8/5/91)/1/ S&P 500 Index/2/ (11/9/98)
------------------ ------------ ---------------- ---------------
<S> <C> <C> <C>
Year to Date (ended 2/28/99) 1.98% .94% -1.34%
Since inception of Harris
Oakmark Large Cap Value
Portfolio (11/9/98 to 12/31/98,
annualized) -- not available 4.01%
One Year (12/97 to 12/98) 3.74% 28.58% --
Three Year (12/95 to 12/98,
annualized) 16.89% 28.17% --
Five Year (12/93 to 12/98,
annualized) 17.28% 24.05% --
8/5/91 to 12/98, annualized
(since inception of the Oakmark
Fund) 26.22% 19.73% --
</TABLE>
- --------
/1/ As of December 31, 1998 the Oakmark Fund, a mutual fund, had assets of
$7.32 billion. The actual fees and expenses of the fund whose performance is
shown has been used. Had the Portfolio's estimated fees and expenses been used
(whether before or after estimated expense reimbursement), the performance
figures would have been lower. Performance figures are based on historical
performance and do not guarantee future results.
/2/ The S&P 500 Index is an unmanaged index of common stocks that are primarily
issued by companies with large aggregate market values. Performance for the
index has been obtained from public sources and has not been audited.
T. Rowe Price
<TABLE>
<CAPTION>
Lipper
T. Rowe Price Variable Funds Morgan T. Rowe Price
Total Return for Growth Stock Underlying Growth Stanley Large Cap
Period (unaudited) Fund/1/ Funds Average/2/ S&P 500/2/ EAFE Index/2/ Growth Portfolio
------------------ ------------- ----------------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Year to Date (ended
2/28/99) -1.18% 0.13% 0.94% -2.63% -1.00%
Since inception of T.
Rowe Large Cap Growth
Portfolio (11/9/98 to
12/31/98, annualized) -- -- -- not available 9.18%
One Year (12/31/97 to
12/31/98) 27.41% 24.94% 28.57% 20.33% --
Three Year (12/31/95 to
12/31/98, annualized) 25.20% 23.77% 28.23% 9.31% --
Five Year (12/31/93 to
12/31/98, annualized) 20.99% 20.25% 24.06% 9.50% --
Ten Year (12/31/88 to
12/31/98, annualized) 17.70% 17.83% 19.21% 5.85% --
</TABLE>
- --------
/1/ As of December 31, 1998 the T. Rowe Price Growth Stock Fund, a mutual fund,
had assets of $5.04 billion. The total returns were calculated using the actual
fees and expenses of the fund whose performance is shown. Had the Portfolio's
estimated fees and expenses been used (whether before or after estimated
expense reimbursement), the performance figures would have been lower.
Performance figures are based on historical performance and do not guarantee
future results.
/2/ The Lipper Variable Funds Underlying Growth Funds Average represents the
average total return based on net asset values of all underlying growth funds.
The S&P 500 Index is an unmanaged index of common stocks that are primarily
issued by companies with large aggregate market values. Performance for the
indices has been obtained from public sources and has not been audited.
21
<PAGE>
MetLife
<TABLE>
<CAPTION>
Lehman Brothers Lehman Brothers
Total Return for MetLife Fixed Aggregate Aggregate Bond
Period (unaudited) Income Account/1/ Bond Index/2/ Index Portfolio
------------------ ----------------- --------------- ---------------
<S> <C> <C> <C>
Year to Date (ended
2/28/99) -1.52% -1.04% -1.19%
Since inception of Lehman
Brothers Aggregate Bond
Index Portfolio (11/9/98
to 12/31/98, annualized) -- not available .17%
One Year (12/31/97 to
12/31/98) 8.23% 8.06% --
Two Year (12/31/96 to
12/31/98), annualized 8.74% 9.40% --
8/1/96 to 12/31/98,
annualized/3/ 8.79% 9.96% --
</TABLE>
- --------
/1/ As of December 31, 1998 the MetLife Fixed Income Account, a non-mutual fund
separate account, had assets of $305.8 million. The MetLife Fixed Income
Account is not an SEC registered investment company and does not comply with
requirements of Subchapter M of the Internal Revenue Code. The management of
the Account would not have been affected had the Account been a registered
investment company that complied with all legal requirements applicable to such
companies and Subchapter M of the Code. The total returns were calculated using
the estimated fees and expenses of the Lehman Brothers Aggregate Bond Index
Portfolio. Performance figures are based on historical performance and do not
guarantee future results.
/2/ Lehman Brothers Aggregate Bond Index is an unmanaged index comprised of the
Lehman Brothers Government/Corporate Index, the Lehman Brothers Mortgaged-
Backed Securities Index, and the Lehman Brothers Asset-Backed Securities Index
and effective July 1, 1999, the Lehman Brothers Commercial Mortgage-Backed
Securities Index. Performance for the index has been obtained from public
sources and has not been audited.
/3/ MetLife was not the investment manager of the separate account until August
1, 1996. Prior thereto an affiliate of MetLife was the investment manager for
the separate account.
22
<PAGE>
Appendix B To Prospectus
Certain Investment Practices
The Table that follows sets forth certain investment practices in which some or
all of the Portfolios may engage. These practices will not be the primary
activity of any Portfolio, however, except if noted under "Risk/Return Summary"
in the Prospectus. The following Portfolio numbers are used in the table:
<TABLE>
<CAPTION>
Portfolio
Number Portfolio Name
--------- --------------
<C> <S>
1. State Street Research Diversified
2. State Street Research Growth
3. Harris Oakmark Large Cap Value
</TABLE>
<TABLE>
<CAPTION>
Portfolio
Number Portfolio Name
--------- --------------
<C> <S>
4. T. Rowe Price Large Cap Growth
5. Lehman Brothers Aggregate Bond Index
6. MetLife Stock Index
</TABLE>
<TABLE>
<CAPTION>
Percentage limit per Portfolio
Item Investment practice Portfolios on assets/1/
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Sell covered call options on securities and All None
stock indices as a hedge against or to
minimize anticipated loss in value.
- ----------------------------------------------------------------------------------------------------
2 Sell covered put options on securities and 4 None
stock indices to earn additional income, as a
hedge against or to minimize anticipated loss
in value.
- ----------------------------------------------------------------------------------------------------
3 Sell covered put and covered call options on 4 None
currencies as a hedge against anticipated
declines in currency exchange rates in which
securities are held or to be purchased or to
earn additional income.
- ----------------------------------------------------------------------------------------------------
4 Purchase put options on securities and All None
indices that correlate with a Portfolio's
securities for defensive purposes in order to
protect against anticipated declines in
values.
- ----------------------------------------------------------------------------------------------------
5 Purchase call options on securities and All None
indices that correlate with that Portfolio's
securities.
- ----------------------------------------------------------------------------------------------------
6 Purchase put options on currencies for 4 None
defensive purposes in order to protect
against anticipated declines in values on
currencies in which a Portfolio's securities
are or may be denominated.
- ----------------------------------------------------------------------------------------------------
7 Purchase call options on currencies that 4 None
correlate with the currencies in which the
Portfolio's securities may be denominated.
- ----------------------------------------------------------------------------------------------------
8 Purchase and sell otherwise permitted stock, 3 None
currency, and index put and call options
"over-the-counter" (rather than only on
established exchanges).
- ----------------------------------------------------------------------------------------------------
9 Purchase and sell futures contracts (on All, except Combined limit on the sum of
recognized futures exchanges) on debt 6 the initial margin for
securities and indices of debt securities as futures and options sold on
a hedge against or to minimize adverse futures, plus premiums paid
principal fluctuations resulting from for unexpired options on
anticipated interest rate changes or to futures, is 5% of total
adjust exposure to the bond market. assets (excluding "in the
money" and, for Portfolio 3,
"bona fide hedging" as
defined by the Commodity
Futures Trading Commission)
- ----------------------------------------------------------------------------------------------------
10 Purchase and sell future contracts (on All, except Same as Item 9
recognized futures exchanges) on equity 3,5
securities or stock indices as a hedge or to
enhance return.
- ----------------------------------------------------------------------------------------------------
11 Purchase and sell currency futures contracts 4 Same as Item 9
(on recognized futures exchanges) as a hedge
or to adjust exposure to the currency market.
- ----------------------------------------------------------------------------------------------------
12 Sell covered call options on and purchase put All Same as Item 9
and call options contracts on futures
contracts (on recognized futures exchanges)
of the type and for the same reasons the
Portfolio is permitted to enter futures
contracts.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Percentage limit per Portfolio
Item Investment practice Portfolios on assets/1/
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
13 Sell covered put options on futures contracts 4 Same as Item 9
(on recognized futures exchanges) of the type
and for the same reasons the Portfolio is
permitted to enter into futures contracts.
- ---------------------------------------------------------------------------------------------------------
14 Enter into forward foreign currency exchange All, except 6 None
contracts to hedge currency risk relating to
securities denominated, exposed to, or traded
in a foreign currency in which the Portfolio
may invest.
- ---------------------------------------------------------------------------------------------------------
15 Enter into forward foreign currency exchange 4 5% of total assets
contracts for non hedging purposes.
- ---------------------------------------------------------------------------------------------------------
16 Enter into transactions to offset or close All None
out any of the above.
- ---------------------------------------------------------------------------------------------------------
17 Mortgage-related securities (except for IOs All None
and POs).
- ---------------------------------------------------------------------------------------------------------
18 Mortgage related interest only (IOs) and All, except 6 None
principal only (POs) securities.
- ---------------------------------------------------------------------------------------------------------
19 Use swaps, caps, floors and collars on 4,5 None
interest rates, currencies and indices as a
risk management tool.
- ---------------------------------------------------------------------------------------------------------
20 Invest in foreign securities (including A. 1,2,6 A. Not more than 10% of its
investments through European Depository total assets in securities
Receipts ("EDRs") and International of foreign issuers, except
Depository Receipts ("IDRs")). up to 25% of its total
assets may be invested in
securities: issued,
assumed or guaranteed by
foreign governments or
their political
subdivisions or
instrumentalities; assumed
or guaranteed by domestic
issuers; or issued,
assumed or guaranteed by
foreign issuers with a
class securities listed on
the New York Stock
Exchange.*
B. 5 B. None
C. 4 C. Foreign Securities
limited to 30% of total
assets (excluding
reserves)*
D. 3 D. Foreign Securities
limited to 25% of total
assets*
- ---------------------------------------------------------------------------------------------------------
21 Lend Portfolio securities. A. 1,2,6 A. 20% of total assets*
B. 3,4,5 B. 33 1/3% of total assets*
- ---------------------------------------------------------------------------------------------------------
22 Invest in securities that are illiquid. All 15% of total assets
- ---------------------------------------------------------------------------------------------------------
23 Invest in other investment companies, which A. All A. 10% of total assets
may involve payment of duplicate fees. except as in B below
(except that only 5% of
total assets may be
invested in a single
investment company and no
portfolio can purchase
more than 3% of the total
outstanding voting
securities of any one
investment company or,
together with other
investment companies
having the same investment
adviser, purchase more
than 10% of the voting
stock of any "closed-end"
investment company).
B. 4 B. Up to 25% of total assets
may be invested in
affiliated money market
funds for defensive
purposes or as a means of
receiving a return on idle
cash.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Percentage limit per Portfolio
Item Investment practice Portfolios on assets/1/
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
24 Invest in money market instruments issued by 4 None
a commercial bank or savings and loan
associations (or its foreign branch or
agency) notwithstanding that the bank or
association has less than $1 billion in total
assets, is not a member of the Federal
Deposit Insurance Corporation, is not
organized in the U.S., and/or is not
operating in the U.S.
- ---------------------------------------------------------------------------------------------------------
25 Invest in securities issued by companies All 25% of total assets
primarily engaged in any one industry. (provided that the following
will be considered separate
industries: each type of
utility service; each type
of oil or oil-related
company. Also, savings and
loans are a separate
industry from finance
companies; and for the money
market securities of
Portfolio number 2
securities issued or
guaranteed by the U.S.
government, its agencies or
instrumentalities and debt
securities issued by
domestic banks are not
subject to the
restriction).* (The Fund
will disclose when more than
25% of a Portfolio's total
assets are invested in four
oil related industries. For
Portfolio number 5,
companies engaged in the
business of financing may be
classified according to the
industries of their parent
or sponsor companies, or
industries that otherwise
most affect the financing
companies).
- ---------------------------------------------------------------------------------------------------------
26 Borrow in the form of short-term credits All Together with items 27 and
necessary to clear Portfolio transactions; 28, up to 1/3 of the amount
enter into reverse repurchase arrangements. by which total assets exceed
total liabilities (less
those represented by such
obligations).*
- ---------------------------------------------------------------------------------------------------------
27 Borrow money for extraordinary or emergency All 5% of total assets*
purposes (e.g. to honor redemption requests
which might otherwise require the sale of
securities at an inopportune time).
- ---------------------------------------------------------------------------------------------------------
28 Purchase securities on a "when-issued" basis. 3,4,5 None
- ---------------------------------------------------------------------------------------------------------
29 Invest in real estate interests, including All 10% of total assets*
real estate mortgage loans, but excluding
investments in exchange-traded real estate
investment trusts and shares of other real
estate companies.
- ---------------------------------------------------------------------------------------------------------
30 Purchase American Depository Receipts A. 1,2 A. Together with the assets
("ADRs"). referred to in Item 20 A
above, 35% of total assets
B. 4 B. Together with assets
referred to in Item 20 D
above, 30% of total assets
C. 3 C. Together with assets
referred to in Item 20 F
above, 25% of total assets
- ---------------------------------------------------------------------------------------------------------
31 Invest in debt securities. A. All, except 3,5 A. None
B. 3,5 B. None on investment grade
securities but 25% of
total assets for 3, 5% for
5 in below investment
grade securities.
- ---------------------------------------------------------------------------------------------------------
32 Invest in preferred stocks. All None
- ---------------------------------------------------------------------------------------------------------
33 Invest in common stocks. All None
- ---------------------------------------------------------------------------------------------------------
34 Invest in hybrid instruments. A. All, except 4 A. None
B. 4 B. 10% of its total assets
</TABLE>
- -----------
/1/ At time of investment, unless otherwise noted.
* Policy may be changed only by shareholder vote.
25
<PAGE>
Appendix C To Prospectus
To varying extents, the portfolio managers may use the following techniques and
investments in managing the Portfolios.
Capitalization
Description Of Some Investments, Techniques, And Risks
Investment Styles
A value investing approach concentrates on securities that are undervalued in
relation to a company's fundamental economic values. Securities may be
undervalued for various reasons including special situations (i.e., where the
portfolio manager believes that a company's securities will appreciate when the
market recognizes a specific development at the company, such as a new product
or process, a management change or a technological breakthrough). A growth
investing approach emphasizes stocks of companies that are projected to grow at
above-average rates based on the company's earnings growth potential.
Index Portfolios attempt to equal the return of a particular index, which can
provide broad exposure to various market segments. Unlike actively managed
portfolios, they do not expect to use any defensive strategies and investors
bear the risk of adverse market conditions.
Lehman Brothers sponsors the Lehman Brothers Aggregate Bond Index and the
McGraw Hill Companies, Inc. sponsors the Standard & Poor's 500 Composite Stock
Price Index (together referred to as "index sponsors"). The index sponsors have
no responsibility for and do not participate in the management of the Portfolio
assets or sale of the Portfolio shares. Each index and its associated
trademarks and service marks are the exclusive property of the respective index
sponsors. The Metropolitan Series Fund, Inc. Statement of Additional
Information contains a more detailed description of the limited relationship
the index sponsors have with MetLife and the Fund.
Capitalization measures the size of a company, based on the aggregate market
value of the company's outstanding stock. Different Portfolios may use
different definitions with respect to whether a company is classified as a
small-cap, mid-cap or large-cap company. Investments in companies that are less
mature or are small or mid-cap may present greater opportunities for capital
appreciation than investments in larger, more mature companies, but also
present greater risks including:
. greater price volatility because they are less broadly traded
. less available public information
. greater price volatility due to limited product lines, markets, financial
resources, and management experience.
26
<PAGE>
Equity Securities
Debt ("Fixed Income") Securities
Equity securities include common stocks, preferred stocks, convertible
securities and warrants. Equity securities may offer a higher rate of return
than debt securities. However, the risks associated with investments in equity
securities may also be higher, because the investment performance of equity
securities depends upon factors which are difficult to predict. Equity security
values may fluctuate in response to the activities of an individual company or
in response to general market, interest rate, and/or economic conditions.
Historically, equity securities have provided greater long-term returns and
have entailed greater short-term risk than other securities choices. Depending
on their terms, however, preferred stock and convertible securities may have
investment and risk characteristics more closely resembling those of debt
securities than those of other equity securities.
Common stocks represent ownership in a company and participate in company
profits through dividend payments or capital
appreciation after other claims are satisfied. Common stock generally has the
greatest potential for appreciation and depreciation of all corporate
securities (other than warrants) since the share price reflects the company's
earnings.
Preferred stocks represent an ownership interest in a company of a specified
rank (after bonds and before common stocks) with respect to dividend payments
and company assets. Preferred stock generally receives a dividend, but may also
omit or be in danger of omitting a dividend payment, in which case it would be
purchased for its capital appreciation potential.
Convertible securities generally are bonds or preferred stocks which can be
exchanged, through warrants or otherwise, into a specified number of shares of
the issuer's common stock. Convertible securities generally pay higher interest
or dividends than common stock but lower interest or dividends than non-
convertible securities.
Warrants are rights issued by the issuer of a security (usually common stock)
to purchase that security at a specified price for a specified period of time.
They do not represent an ownership interest in the issuing company, and their
prices do not necessarily parallel the prices of the underlying security.
Some of the many varieties of debt securities that the Portfolios may purchase
are described below. Most debt securities (other than those that have
"floating" interest rates) will increase in value if market interest rates
subsequently decrease and decrease in value if market interest rates
subsequently increase. In most market environments these variations tend to be
more pronounced the longer the security's remaining duration. Changes in the
issuer's perceived creditworthiness can also significantly affect the value of
any debt securities that a Portfolio holds.
Investment grade securities are rated by at least one nationally recognized
statistical rating organization in one of its top four rating categories, or if
unrated, the portfolio manager must determine that the securities are of
comparable quality. All other securities are considered below investment grade.
Below investment grade securities are also known as "junk bonds." Although they
generally provide higher yields, below investment grade fixed income
securities, and to a lesser extent, lower rated investment grade fixed income
securities, expose a Portfolio to greater risks than higher rated investment
grade securities including:
. the inability of the issuer to meet principal and interest payments
. loss in value due to economic recession or substantial interest rate
increases
27
<PAGE>
Foreign Investments
. adverse changes in the public's perception of these securities
. legislation limiting the ability of financial institutions to invest in these
securities
. lack of liquidity in secondary markets
. market price volatility
Mortgage-related securities represent a direct or indirect interest in a pool
of mortgages such as FNMAs, FHLMCs, Collateralized Mortgage Obligations
("CMOs"), and related securities including GNMAs and mortgage-backed
securities. They may be issued or guaranteed by U.S. government
instrumentalities or other entities whose obligation is securitized by the
underlying portfolio of mortgages or mortgage-backed securities. These
securities are valued based on expected prepayment rates. The risks associated
with prepayment of the obligations makes these securities more volatile in
response to changing interest rates than other fixed-income securities.
Interest only securities ("IOs") are entitled to interest payments from a class
of these securities and principal only securities ("POs") are entitled to
principal payments from a class of these securities. POs are more volatile in
response to changing interest rates than mortgage-related securities that
provide for interest payments. IOs also are extremely volatile and generally
experience a loss in value in the event prepayment rates are greater than
anticipated, which occurs generally when interest rates fall, and an increase
in value when interest rates rise.
Asset-backed securities represent a direct or indirect interest in a pool of
receivables such as automobile, credit cards, equipment leases, or student
loans. The issuers of the asset-backed securities are special purpose entities
that do not have significant assets other than the receivables securitizing the
securities. The collateral supporting these securities generally is of shorter
maturity than mortgage-related securities, but exposes a Portfolio to similar
risks associated with prepayment of the receivables prior to maturity.
Zero coupon securities credit interest at a specified rate but do not
distribute cash payments for interest as it falls due. These securities
fluctuate in value due to changes in interest rates more than comparable debt
obligations that pay periodic interest.
Foreign securities include equity securities and debt securities of non-U.S.
domiciled issuers. A few of the many varieties of foreign investments are
described below.
EDRs and IDRs are receipts issued in Europe, generally by a non-U.S. bank or
trust company, that evidence ownership of non-U.S. securities.
GDRs are securities convertible into equity securities of foreign issuers.
Forward Foreign Currency Exchange Contracts obligate a Portfolio to purchase or
sell a specific currency on a specified date for a specified amount. They can
be used to hedge the currency risk relating to securities traded in or exposed
to a foreign currency. When used as a hedge, substitute or proxy currency can
also be used instead of the currency in which the investment is actually
denominated. This is known as proxy hedging. These contracts can also be used
to generate income or adjust a Portfolio's exposure to various currencies.
Synthetic Non-U.S. Money Market positions are created through the simultaneous
purchase of a U.S. dollar-denominated money market
28
<PAGE>
American Depository Receipts ("ADRs")
U.S. Dollar-Denominated Money Market Securities of Foreign Issuers
Derivative Instruments
instrument and a forward foreign currency exchange contract to deliver U.S.
dollars for a foreign currency. These are purchased instead of foreign currency
denominated money market securities because they can provide greater liquidity.
Foreign Securities Risk Considerations.
Although Portfolios that invest in foreign securities may reduce their overall
risk by providing further diversification, the Portfolios will be exposed to
the risks listed below. In addition, these risks may be heightened for
investments in developing countries:
. adverse effects from changing political, social or economic conditions,
diplomatic relations, taxation or investment regulations
. limitations on repatriation of assets
. expropriation
. costs associated with currency conversions
. less publicly available information because foreign securities and issuers
are generally not subject to the reporting requirements of the SEC
. differences in financial evaluation because foreign issuers are not subject
to the domestic accounting, auditing and financial reporting standards and
practices
. lack of development or efficiency with respect to non-domestic securities
markets and brokerage practices (including higher, non-negotiable brokerage
costs)
. less liquidity (including due to delays in transaction settlement)
. more price volatility
. smaller options and futures markets, causing lack of liquidity for these
securities
. higher custodial and settlement costs
. change in net asset value of the Portfolio's shares on days when shareholders
will not be able to purchase or redeem Fund shares.
ADRs are U.S. dollar-denominated certificates issued by a U.S. bank or trust
company which represent the right to receive securities of a foreign issuer
deposited in a domestic bank or foreign branch of a U.S. bank. ADRs are traded
on domestic exchanges or in the U.S. over-the-counter market and are registered
domestically. These factors eliminate certain risks associated with investing
in foreign securities.
These securities may be registered domestically and traded on domestic
exchanges or in the U.S. over-the-counter market (e.g., Yankee securities). If
the securities are registered domestically, certain risk factors of investing
in foreign securities are eliminated. These securities may also be registered
abroad and traded exclusively in foreign markets (e.g., Eurodollar securities).
Futures contracts are agreements to buy or sell a security, or deliver a final
cash settlement price in connection with an index, interest rate, currency, or
other contracts not calling for physical delivery, for a set price in the
future. A Portfolio must post an amount equal to a portion of the total market
value of the futures contract as initial margin, which is returned when a
Portfolio's obligations under the contract have been satisfied. From time to
time thereafter, the Portfolio may have to post variation margin to maintain
this amount as the market value of the contract fluctuates.
Special skill is required in order to effectively use futures contracts. No
Portfolio will use futures contracts or options thereon for leveraging
purposes. Certain risks exist when a Portfolio uses futures contracts including
the:
29
<PAGE>
. inability to close out or offset futures contract transactions at favorable
prices
. reduction of the Portfolio's income
. reduction in the value of the subject of the futures contract or of the
contract itself
. imperfect correlation between the value of the futures contract and the value
of the subject of the contract
. prices moving contrary to the portfolio manager's expectation
Call options give the purchaser the right to buy and obligate the seller to
sell an underlying security, currency, stock index (which is based on the
weighted average of the securities in the index), or futures contract at a
specified "exercise" price during the option period. There are certain risks to
a Portfolio that sells call options, including the inability to effect closing
transactions at favorable prices or to participate in the appreciation of the
subject of the call option above the exercise price. Purchasing call options
exposes a Portfolio to the risk of losing the entire premium it has paid for
the option.
Put options give the purchaser the right to sell and obligate the seller to
purchase an underlying security, currency, stock index (which is based on the
weighted average of the securities in the index) or futures contract at a
specified "exercise" price during the option period. There are certain risks to
a Portfolio that sells put options, including the inability to effect closing
transactions at favorable prices and the obligation to purchase the subject of
the put option at prices which may be greater than current market values or
exchange rates. Purchasing put options exposes a Portfolio to the risk of
losing the entire premium it has paid for the option if the option cannot be
exercised profitably.
Covered options involve a Portfolio's (a) segregating liquid assets with its
custodian that at all times at least equal the Portfolio's obligations under
such options, (b) holding an appropriate offsetting option or other derivative
instrument, or, (c) in the case of a call option sold by the Fund, owning the
securities or other investments subject to the option.
Hybrid instruments combine elements of futures contracts or options with
elements of debt, preferred equity, depository instruments, or other evidence
of indebtedness. A portion of or all interest payments to the Portfolio and/or
the principal or stated amount payable to the Portfolio at maturity,
redemption, or retirement of the hybrid instrument are determined by reference
to prices, changes in prices, or differences between prices of securities,
currencies, intangibles, goods, articles, or commodities or by another
benchmark such as an index or interest rate.
Hybrid instruments can be an efficient means of exposing a Portfolio to a
particular market in order to enhance total return. Hybrid instruments are
potentially more volatile and carry greater market risks than traditional debt
instruments. The risks of investing in these instruments reflect a combination
of the risks of investing in securities, options, futures and currencies.
Hybrid securities typically do not trade on exchanges. Hybrid instruments are
frequently (or may become) less liquid than other types of investments. They
also expose the Portfolio to losses if the other party to the transaction fails
to meet its obligations.
Portfolios use swaps, caps, floors and collars as risk management tools to
protect against changes in interest rates or in security or currency values, or
30
<PAGE>
When-Issued Securities
Securities Lending
to gain exposure to certain markets in an economical way. Swap transactions
involve an agreement where one party exchanges payments equal to a floating
interest rate, currency exchange rate or variation in interest rates or
currency indexes on a specified amount (the "notional amount"), and the other
party agrees to make payments equal to a fixed rate on the same amount for a
specified period. Caps give the purchaser the right to receive payments from
the seller to the extent a specified interest rate, currency exchange rate or
index exceeds a specified level during a specified period of time. Floors give
the purchaser the right to receive payments from the seller to the extent a
specified interest rate, currency exchange rate or index is less than a
specified level during a specified period of time. Collars give the purchaser
the right to receive payments from the seller to the extent a specified
interest rate, currency exchange rate or index is outside an agreed upon range
during a specified period of time.
A Portfolio will not use swaps, caps, floors or collars to leverage its
exposure to changing interest rates, currency rates, or security values. Nor
will a Portfolio sell interest rate caps, floors or collars unless it owns
securities that will provide the interest that the Portfolio may be required to
pay.
The use of swaps, caps and floors exposes the Portfolio to investment risks
different than those associated with other security transactions including:
. total loss of the Portfolio's investment in swaps and the sale of caps,
floors and collars (a Portfolio's purchase of caps, floors and collars can
result only in the loss of the purchase price)
. investment performance of the Portfolio can be worse than if these techniques
were not used if the assumptions used in entering into the transactions were
incorrect
. since these instruments generally do not trade on exchanges, a Portfolio may
not be able to enter into offsetting positions, or may suffer other losses,
if the other party to the transaction fails to meet its obligations
. more market volatility than other types of investments
Purchasing securities "when-issued" is a commitment by a Portfolio to buy a
security before the security is actually issued. The amount of the Portfolio's
payment obligation and the security's interest rate are determined when the
commitment is made, even though no interest accrues until the security is
issued, which is generally 15 to 120 days later. The Portfolio will segregate
liquid assets with its custodian sufficient at all times to satisfy these
commitments. If the value of the security is less when delivered than when the
commitment was made, the Portfolio will suffer a loss.
Securities lending involves lending some of a Portfolio's securities to
brokers, dealers and financial institutions. As collateral for the loan, the
Portfolio receives an amount that is at all times equal to at least 100% of the
current market value of the loaned securities. The Portfolio invests the
collateral in short-term high investment grade securities, or in a mutual fund
that invests in such securities. Securities lending can increase current income
for a Portfolio because the Portfolio continues to receive payments equal to
the interest and dividends on loaned securities. Also, the investment
experience of the cash collateral will inure to the Portfolio. Loans will not
have a term longer than 30 days and will be terminable at any time. As with any
extension of credit, securities lending exposes a Portfolio to some risks
including delay in recovery and loss of rights in the collateral if the
borrower fails financially.
31
<PAGE>
Metropolitan Series Fund, Inc.
---------------------
Principal Office of the Fund
1 Madison Avenue
New York, New York 10010
---------------------
Investment Manager
Metropolitan Life Insurance Company
1 Madison Avenue
New York, New York 10010
(Principal Business Address)
Sub-Investment Managers
State Street Research &
Management Company
One Financial Center
Boston, Massachusetts 02111
(Principal Business Address)
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
(Principal Business Address)
Harris Associates, LP
2 North LaSalle Street
Chicago, IL 60602
(Principal Executive Offices)
Custodian, Transfer Agent and
Dividend Paying Agent
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(Principal Business Address)
No dealer, salesman, or other person has been authorized to give any informa-
tion or to make any representations, other than those contained in this Pro-
spectus, in connection with the offer made by this Prospectus, and, if given or
made, such other information or representations must not be relied upon as hav-
ing been authorized by the Fund, Metropolitan Life, State Street Research, Met-
ropolitan Tower, T. Rowe Price or Harris. This Prospectus does not constitute
an offering in any state in which such offering may not lawfully be made.
<PAGE>
How to learn more:
We have incorporated the Statement of Additional Information ("SAI") into this
Prospectus. That means the SAI is considered part of this Prospectus as though
it were included in it. The SAI contains more information about the Fund. Also,
the Fund's annual and semi-annual reports to shareholders (the "reports")
contain more information including information on each Portfolio's investments
and a discussion of the market conditions and investment strategies that
affected each Portfolio's performance for the period covered by the report.
How to get copies:
To request a free copy of the SAI or the reports or to make any other
inquiries, write or call:
Metropolitan Life Insurance Company
200 Park Avenue Area 5P
New York, NY 10166-0188
Phone: (800) 638-2704 ext 0606
You can also get information about the Fund (including the SAI) from the
Securities and Exchange Commission (a copying fee may apply) by visiting or
writing to its Public Reference Room or using its Internet site at:
Securities and Exchange Commission
Public Reference Room
Washington, D.C. 20549
Call 1-800-SEC-0330 (for information about
using the Public Reference Room)
Internet site: http://www.sec.gov
IC# 811-3618
99042XIY(exp0500)MLIC-LD
