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