<PAGE>
Filed pursuant to Rule 497(c)
Registration File Nos. 2-90380
811-4001
April 30, 1999
Preference Plus(Registered) Account Variable Annuity Contracts Issued by
Metropolitan Life Insurance Company
This Prospectus describes individual and group Preference Plus contracts for
deferred variable annuities ("Deferred Annuities") and Preference Plus
immediate variable income annuities ("Income Annuities").
You decide how to allocate your money among the various available investment
choices. The investment choices available to you are listed in the contract
for your Deferred Annuity or Income Annuity. Your choices may include the
Fixed Interest Account (not described in this Prospectus) and investment
divisions available through Metropolitan Life Separate Account E which, in
turn, invest in the following corresponding portfolios of the Metropolitan
Series Fund, Inc. ("Metropolitan Fund"):
State Street Research Aggressive Growth
State Street Research Diversified
State Street Research Growth
State Street Research Income
Harris Oakmark Large Cap Value
Janus Mid Cap
Loomis Sayles High Yield Bond
Neuberger Berman Partners Mid Cap Value
Santander International Stock
Scudder Global Equity
T. Rowe Price Large Cap Growth
T. Rowe Price Small Cap Growth
Lehman Brothers Aggregate Bond Index
MetLife Stock Index
Morgan Stanley EAFE(Registered) Index
Russell 2000(Registered) Index
How to learn more:
Before investing, read the information in this Prospectus about the Deferred
Annuities, Income Annuities and Metropolitan Life Separate Account E. Keep
this Prospectus for future reference. For more information, request a copy of
the Statement of Additional Information ("SAI"), dated April 30, 1999. The SAI
is considered part of this Prospectus as though it were included in the
Prospectus. The Table of Contents of the SAI appears on page A-PPA-46 of this
Prospectus. To request a free copy of the SAI or to ask questions, write or
call:
Metropolitan Life Insurance Company
Retirement & Savings Center, Area 2H
One Madison Avenue
New York, NY 10010-3690
Attention: Brian Mack
Phone: (800) 553-4459
The Securities and Exchange Commission has a website (http://www.sec.gov)
which you may visit to view this Prospectus, SAI and other information. The
Securities and Exchange Commission has not approved or disapproved these
securities or determined if this Prospectus is truthful or complete. Any
representation otherwise is a criminal offense.
The current Metropolitan Fund Prospectus is attached to the back of this
Prospectus. You should also read the Metropolitan Fund Prospectus carefully
before purchasing a Deferred Annuity or Income Annuity. This Prospectus is not
valid unless attached to a Metropolitan Fund Prospectus.
MetLife(Registered)
- -------------------------------------------------------------------------------
Deferred Annuities Available:
o Non-Qualified
o Traditional IRA
o Roth IRA
o SIMPLE IRA
o SEP IRA
Income Annuities Available:
o Non-Qualified
o Traditional IRA
o Roth IRA
o SIMPLE IRA
o SEP IRA
A word about investment risk:
An investment in any of these variable annuities involves investment risk. You
could lose money you invest. Money invested is NOT:
o a bank deposit or obligation;
o federally insured or guaranteed; or
o endorsed by any bank or other financial institution.
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Important Terms You Should Know ............................... A-PPA-4
Table of Expenses ............................................. A-PPA-6
Accumulation Unit Values Table ................................ A-PPA-9
MetLife ....................................................... A-PPA-13
Metropolitan Life Separate Account E .......................... A-PPA-13
The Variable Annuities in this Prospectus ..................... A-PPA-14
A Deferred Annuity ....................................... A-PPA-14
An Income Annuity ........................................ A-PPA-14
Your Investment Choices ....................................... A-PPA-15
Deferred Annuities ............................................ A-PPA-16
The Deferred Annuity and Your Retirement Plan ............ A-PPA-16
Automated Investment Strategies .......................... A-PPA-17
Purchase Payments ........................................ A-PPA-18
Allocation of Purchase Payments ........................ A-PPA-18
Automated Purchase Payments ............................ A-PPA-18
Electronic Applications ................................ A-PPA-18
Limits on Purchase Payments ............................ A-PPA-19
The Value of Your Investment ............................. A-PPA-19
Transfers ................................................ A-PPA-20
Access to Your Money ..................................... A-PPA-21
Systematic Withdrawal Program .......................... A-PPA-21
Minimum Distribution ................................... A-PPA-22
Contract Fee ............................................. A-PPA-23
Charges .................................................. A-PPA-23
Insurance-Related Charge ............................... A-PPA-23
Investment-Related Charge .............................. A-PPA-23
Premium Taxes ............................................ A-PPA-24
Early Withdrawal Charges ................................. A-PPA-24
When No Early Withdrawal Charge Applies ................ A-PPA-25
When Another Early Withdrawal Charge May Apply ......... A-PPA-26
Free Look ................................................ A-PPA-27
Death Benefit ............................................ A-PPA-27
Pay-out Options (or Income Options) ...................... A-PPA-27
A-PPA-2
<PAGE>
Income Annuities .............................................. A-PPA-28
Income Payment Types ..................................... A-PPA-29
Allocation ............................................... A-PPA-30
Minimum Size of Your Income Payment ...................... A-PPA-30
The Value of Your Income Payments ........................ A-PPA-30
Transfers ................................................ A-PPA-31
Contract Fee ............................................. A-PPA-31
Charges .................................................. A-PPA-32
Insurance-Related Charge ............................... A-PPA-32
Investment-Related Charge .............................. A-PPA-32
Premium Taxes ............................................ A-PPA-32
Free Look ................................................ A-PPA-32
General Information ........................................... A-PPA-33
Administration ........................................... A-PPA-33
Purchase Payments ...................................... A-PPA-33
Confirming Transactions ................................ A-PPA-33
Transactions by Telephone .............................. A-PPA-34
Processing of Certain Transactions ..................... A-PPA-34
Valuation .............................................. A-PPA-34
Advertising Performance .................................. A-PPA-35
Changes to Your Deferred Annuity or Income Annuity ....... A-PPA-36
Voting Rights ............................................ A-PPA-36
Who Sells the Deferred Annuities and Income Annuities .... A-PPA-37
Financial Statements ..................................... A-PPA-38
When We Can Cancel Your Deferred Annuity or Income Annuity A-PPA-38
Income Taxes .................................................. A-PPA-38
Table of Contents for the Statement of Additional Information . A-PPA-46
Appendix for Premium Tax Table ................................ A-PPA-47
MetLife does not intend to offer the Deferred Annuities or Income Annuities
anywhere they may not lawfully be offered and sold. MetLife has not authorized
any information or representations about the Deferred Annuities or Income
Annuities other than the information in this Prospectus, the attached
prospectus, supplements to the prospectuses or any supplemental sales material
we authorize.
A-PPA-3
<PAGE>
Important Terms You Should Know
Account Balance
When you purchase a Deferred Annuity an account is set up for you. Your
Account Balance is the total amount of money credited to you under your
Deferred Annuity including money in the investment divisions of the Separate
Account and the Fixed Interest Account.
Accumulation Unit Value
Under a Deferred Annuity, money paid-in or transferred into an investment
division of the Separate Account is credited to you in the form of
accumulation units. Accumulation units are established for each investment
division. We determine the value of these accumulation units each day the New
York Stock Exchange is open for regular trading. The values increase or
decrease based on the investment performance of the corresponding underlying
portfolios.
Annuity Unit Value
Under an Income Annuity or variable payout option, the money paid-in or
transferred into an investment division of the Separate Account is held in the
form of annuity units. Annuity units are established for each investment
division. We determine the value of these annuity units each day the New York
Stock Exchange is open for regular trading. The values increase or decrease
based on the investment performance of the corresponding underlying
portfolios.
Assumed Investment Return (AIR)
Under an income annuity, the AIR is a percentage rate of return assumed to
determine the amount of the first variable income payment. The AIR is also the
benchmark that is used to calculate the investment performance of a given
investment division to determine all subsequent payments to you.
Contract
A contract is the legal agreement between you and MetLife or the certificate
under a group annuity contract between MetLife and your employer, plan trustee
or other entity. The contract contains relevant provisions of your Deferred
Annuity or Income Annuity. MetLife issues contracts for each of the annuities
described in this Prospectus.
Contract Year
Generally, the Contract Year for a Deferred Annuity is the period ending on
the last day of the month in which the anniversary of when we issue the
annuity occurs and each following 12 month period.
A-PPA-4
<PAGE>
Early Withdrawal Charge
The early withdrawal charge is the amount we deduct from your Account Balance
in addition to your requested withdrawal amount, if you withdraw money
prematurely from a Deferred Annuity. This charge is often referred to as a
deferred sales load or back-end sales load.
Investment Division
Investment divisions are subdivisions of the Separate Account. When you
allocate or transfer money to an investment division, the investment division
purchases shares of a portfolio (with the same name) within the Metropolitan
Fund.
MetLife
Metropolitan Life Insurance Company is the company that issues the Deferred
Annuities and Income Annuities. Throughout this Prospectus, MetLife is also
referred to as "we," "us" or "our."
MetLife Designated Office
Your MetLife Designated Office is the MetLife office that will generally
handle the processing of all your requests concerning your Deferred Annuity or
Income Annuity. MetLife will notify you and provide you with the address of
your MetLife Designated Office.
Separate Account
A separate account is an investment account. All assets contributed to
investment divisions under the Deferred Annuities and Income Annuities are
pooled in the Separate Account and maintained for the benefit of investors in
Deferred Annuities and Income Annuities.
You
In this Prospectus, depending on the context, "you" may mean either the
purchaser of the Deferred Annuity or Income Annuity, the annuitant under an
Income Annuity, or the participant or annuitant under certain group
arrangements.
Variable Annuity
An annuity in which returns/income payments are based upon the performance of
investments such as stocks and bonds held by one or more underlying
portfolios. You assume the investment risk for any amounts allocated to the
investment divisions in a variable annuity.
<PAGE>
A-PPA-5
TABLE OF EXPENSES--PREFERENCE PLUS DEFERRED ANNUITIES AND INCOME ANNUITIES
The following table shows the Separate Account and Metropolitan Fund charges
and expenses you will incur. The table is based on past experience and is
subject to change. It is not intended to show your actual expenses which may
be higher or lower. The table does not show fees for the Fixed Interest
Account or premium taxes which may apply. We have provided examples to show
you the impact of Separate Account and Metropolitan Fund charges and expenses
on a hypothetical investment of $1,000 that has an assumed 5% return on the
investment.
Separate Account and Metropolitan Fund expenses for the fiscal year ending
December 31, 1998:
<TABLE>
<CAPTION>
Contractowner Transaction Expenses For All Investment Divisions Currently Offered
<S> <C>
Sales Load Imposed on Purchases ............................................. None
Deferred Sales Load (as a percentage of the purchase payment funding the
withdrawal during the accumulation period) (1) ............................. From 0% to 7%
Exchange Fee ................................................................ None
Surrender Fee ............................................................... None
Annual Contract Fee (2) ........................................................ None
Separate Account Annual Expenses (as a percentage of average account value) (3)
General Administrative Expenses Charge ...................................... .50%
Mortality and Expense Risk Charge ........................................... .75%
Total Separate Account Annual Expenses ...................................... 1.25%
</TABLE>
<TABLE>
<CAPTION>
Metropolitan Fund Annual Expenses (as a percentage of average net assets)
OTHER TOTAL OTHER TOTAL
MANAGE- EXPENSES EXPENSES EXPENSES EXPENSES
MENT WITHOUT WITHOUT AFTER EXPENSE AFTER EXPENSE
FEES REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
State Street Research Aggressive Growth Portfolio (4)(5) . .71 .04 .75 .04 .75
State Street Research Diversified Portfolio (4)(5) ....... .43 .05 48 .05 .48
State Street Research Growth Portfolio (4)(5) ............ .48 .05 .53 .05 .53
State Street Research Income Portfolio (4)(5) ............ .33 .06 .39 .06 .39
Harris Oakmark Large Cap Value Portfolio (5)(7) .......... .75 .80 1.55 .20 .95
Janus Mid Cap Portfolio (5)(6) ........................... .72 .09 .81 .09 .81
Loomis Sayles High Yield Bond Portfolio (6) .............. .70 .35 1.05 .31 1.01
Neuberger Berman Partners Mid Cap Value Portfolio (5)(7) . .70 .89 1.59 .20 .90
Santander International Stock Portfolio (4)(5) ........... .75 .27 1.02 .27 1.02
Scudder Global Equity Portfolio (5)(6) ................... .74 .28 1.02 .28 1.02
T. Rowe Price Large Cap Growth Portfolio (5)(7) .......... .70 1.18 1.88 .20 .90
T. Rowe Price Small Cap Growth Portfolio (5)(6) .......... .53 .14 .67 .14 .67
Lehman Brothers Aggregate Bond Index Portfolio (7) ....... .25 .32 .57 .23 .48
MetLife Stock Index Portfolio (4) ........................ .25 .05 .30 .05 .30
Morgan Stanley EAFE(Registered) Index Portfolio (7) ...... .30 .99 1.29 .25 .55
Russell 2000 Index Portfolio (7) ......................... .25 .70 .95 .20 .45
</TABLE>
A-APPA-6
<PAGE>
Example
If you surrender your Deferred Annuity (withdraw all your money) at the end
of the time periods listed below, you would pay the following expenses on a
$1,000 investment in each investment division listed below, assuming a 5%
annual return on assets:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Aggressive Growth Portfolio ........ $83 $108 $135 $234
State Street Research Diversified Portfolio .............. 81 99 121 205
State Street Research Growth Portfolio ................... 81 101 124 211
State Street Research Income Portfolio ................... 80 97 116 196
Harris Oakmark Large Cap Value Portfolio ................. 92 133 176 316
Janus Mid Cap Portfolio .................................. 84 110 138 241
Loomis Sayles High Yield Bond Portfolio .................. 86 117 151 265
Neuberger Berman Partners Mid Cap Value Portfolio ........ 92 134 179 320
Santander International Stock Portfolio .................. 86 116 149 263
Scudder Global Equity Portfolio .......................... 86 116 149 263
T. Rowe Price Large Cap Growth Portfolio ................. 95 143 193 348
T. Rowe Price Small Cap Growth Portfolio ................. 82 105 131 226
Lehman Brothers Aggregate Bond Index Portfolio ........... 81 102 126 215
MetLife Stock Index Portfolio ............................ 79 94 111 186
Morgan Stanley EAFE(Registered) Index Portfolio .......... 89 125 163 291
Russell 2000 Index Portfolio ............................. 85 114 146 255
</TABLE>
If you annuitize (elect a pay-out option under your Deferred Annuity) or do
not surrender your Deferred Annuity at the end of the time periods listed
below, you would pay the following expenses on a $1,000 investment in each
investment division listed below, assuming a 5% annual return on assets
(8):
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Aggressive Growth Portfolio ........ $21 $63 $109 $234
State Street Research Diversified Portfolio .............. 18 55 95 205
State Street Research Growth Portfolio ................... 18 56 97 211
State Street Research Income Portfolio ................... 17 52 90 196
Harris Oakmark Large Cap Value Portfolio ................. 29 88 150 316
Janus Mid Cap Portfolio .................................. 21 65 112 241
Loomis Sayles High Yield Bond Portfolio .................. 24 72 124 265
Neuberger Berman Partners Mid Cap Value Portfolio ........ 29 89 152 320
Santander International Stock Portfolio .................. 23 72 123 263
Scudder Global Equity Portfolio .......................... 23 72 123 263
T. Rowe Price Large Cap Growth Portfolio ................. 32 98 166 348
T. Rowe Price Small Cap Growth Portfolio ................. 20 61 105 226
Lehman Brothers Aggregate Bond Index Portfolio ........... 19 58 99 215
MetLife Stock Index Portfolio ............................ 16 49 85 186
Morgan Stanley EAFE(Registered) Index Portfolio .......... 26 80 137 291
Russell 2000 Index Portfolio ............................. 23 69 119 255
</TABLE>
A-APPA-7
<PAGE>
TABLE OF EXPENSES (continued)
1 There are times when the early withdrawal charge does not apply to
amounts that are withdrawn from a Deferred Annuity. Each Contract Year
you may take the greater of 10% of your Account Balance or your purchase
payments made over 7 years ago free of early withdrawal charges.
2 A $20 annual contract fee is imposed on money in the Fixed Interest
Account. This fee may be waived under certain circumstances. There is a
one time contract fee of $350 for Income Annuities. We do not charge
this fee if you elect a pay-out option under your Deferred Annuity and
you have owned your Deferred Annuity more than two years.
3 Our total Separate Account Annual Expenses will not exceed 1.25% of your
average balance in the investment divisions. For purposes of
presentation here, we estimated the allocation between general
administrative expenses and the mortality and expense risk charge.
4 Prior to May 16, 1993, we paid all expenses of the Metropolitan Fund
(other than management fees, brokerage commissions, taxes, interest and
extraordinary or non-recurring expenses).
5 Each Portfolio's management fee decreases when its assets grow to
certain dollar amounts. The "break point" dollar amounts at which the
management fee declines are more fully explained in the prospectus for
the Metropolitan Fund.
6 These Portfolios began operations on March 3, 1997. We paid all expenses
(other than management fees, brokerage commissions, taxes, interest and
extraordinary or non-recurring expenses) in excess of .20% of the
average net assets for each of these Portfolios until the Portfolio's
total assets reached $100 million, or until March 2, 1999, whichever
came first. The expense information in the Table has been restated to
reflect current expenses as if they had been in effect during the entire
prior year.
7 These Portfolios began operations on November 9, 1998. We pay all
expenses (other than management fees, brokerage commissions, taxes,
interest and extraordinary or non-recurring expenses) in excess of .20%
(.25% for the Morgan Stanley EAFEIndex Portfolio) of the average
net assets for each of these Portfolios until each Portfolio's total
assets reaches $100 million, or until November 8, 2000, whichever comes
first. The expense information in the Table has been restated to reflect
current expenses as if they had been in effect during the entire prior
year.
8 This example assumes no early withdrawal charges are applicable. In
order to make this assumption for a pay-out option under your Deferred
Annuity, we also assumed that you selected an income payment type under
which you will receive payments over your lifetime or for a period of at
least five full years.
A-PPA-8
<PAGE>
ACCUMULATION UNIT VALUES FOR EACH INVESTMENT DIVISION
(For an accumulation unit outstanding throughout the period)
These tables and bar charts show fluctuations in the Accumulation Unit
Values for each investment division from year end to year end. The
information in this table has been derived from the Separate Account's
full financial statements or other reports (such as the annual
report).
<TABLE>
<CAPTION>
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
PREFERENCE PLUS DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Aggressive Growth Division ............. 1998 $25.05 $28.12 38,975
[YEAR END ACCUMULATION UNIT VALUE 1997 23.77 25.05 43,359
BAR CHARTS OMITTED FOR THIS DIVISION 1996 22.35 23.77 43,962
AND EACH OF THE NINE FOLLOWING DIVISIONS] 1995 17.47 22.35 33,899
1994 18.03 17.47 26,890
1993 14.89 18.03 17,094
1992 13.66 14.89 5,747
1991 8.31 13.66 1,060
1990 10.00(a) 8.31 49
State Street Research Diversified Division ................... 1998 22.89 27.05 73,897
1997 19.22 22.89 62,604
1996 17.00 19.22 52,053
1995 13.55 17.00 42,712
1994 14.15 13.55 40,962
1993 12.70 14.15 31,808
1992 11.75 12.70 7,375
1991 9.52 11.75 1,080
1990 10.00(a) 9.52 44
</TABLE>
A-PPA-9
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
PREFERENCE PLUS DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Growth Division ....................... 1998 $27.10 $34.30 64,053
1997 21.37 27.10 60,102
1996 17.71 21.37 49,644
1995 13.47 17.71 38,047
1994 14.10 13.47 32,563
1993 12.48 14.10 24,608
1992 11.32 12.48 9,432
1991 8.61 11.32 2,824
1990 10.00(a) 8.61 178
State Street Research Income Division ....................... 1998 17.89 19.33 20,060
1997 16.49 17.89 16,307
1996 16.12 16.49 16,604
1995 13.65 16.12 15,252
1994 14.27 13.65 13,923
1993 12.98 14.27 14,631
1992 12.29 12.98 5,918
1991 10.60 12.29 1,210
1990 10.00(a) 10.60 32
Janus Mid Cap Division ...................................... 1998 12.69 17.19 19,031
1997 10.00(b) 12.69 7,417
Loomis Sayles High Yield Bond Division ...................... 1998 10.51 9.60 3,882
1997 10.00(b) 10.51 2,375
</TABLE>
A-PPA-10
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
PREFERENCE PLUS DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Santander International Stock Division ...................... 1998 $13.28 $16.07 14,330
1997 13.77 13.28 15,865
1996 14.19 13.77 17,780
1995 14.25 14.19 17,553
1994 13.74 14.25 16,674
1993 9.41 13.74 6,921
1992 10.61 9.41 966
1991 10.00(c) 10.61 92
Scudder Global Equity Division .............................. 1998 10.85 12.43 7,712
1997 10.00(b) 10.85 4,826
T. Rowe Price Small Cap Growth Division ..................... 1998 11.76 12.02 13,119
1997 10.00(b) 11.76 6,932
MetLife Stock Index Division ................................ 1998 29.28 37.08 71,204
1997 22.43 29.28 58,817
1996 18.52 22.43 43,141
1995 13.70 18.52 29,883
1994 13.71 13.70 23,458
1993 12.67 13.71 18,202
1992 11.94 12.67 8,150
1991 9.32 11.94 1,666
1990 10.00(a) 9.32 55
</TABLE>
A-PPA-11
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
PREFERENCE PLUS DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Harris Oakmark Large Cap Value Division 1998 $10.00(d) $9.71 386
Lehman Brothers Aggregate Bond Division 1998 10.00(d) 10.12 793
Morgan Stanley EAFE(Registered) Index Division 1998 10.00(d) 10.79 342
Neuberger Berman Partners Mid Cap Value Division 1998 10.00(d) 10.73 297
Russell 2000 Index Division 1998 10.00(d) 10.53 598
T. Rowe Price Large Cap Growth Division 1998 10.00(d) 11.01 407
</TABLE>
- ---------
In addition to the above mentioned Accumulation Units, there were cash
reserves of $22,530,195 as of December 31, 1998, applicable to Income
Annuities (including those not described in this Prospectus) receiving
annuity payouts.
(a) Inception Date July 2, 1990.
(b) Inception Date March 3, 1997.
(c) Inception Date July 1, 1991.
(d) Inception Date November 9, 1998. A bar chart does not appear for this
Division because there is less than one calendar year of performance
history.
A-PPA-12
<PAGE>
MetLife
Our main office is located at One Madison Avenue, New York, New York 10010.
MetLife was formed under the laws of New York State in 1868. Headquartered in
New York City, MetLife is a leading provider of insurance and financial
services to a broad spectrum of individual and institutional customers. With
approximately $359 billion worth of assets under management as of December 31,
1998, MetLife provides individual insurance and investment products to
approximately 9 million households in the United States. MetLife also provides
group insurance and investment products to corporations and other institutions
employing over 33 million people.
We are a mutual life insurance company. In November 1998, MetLife announced
its intention to convert to a stock company from a mutual company. MetLife's
board of directors authorized the development of a plan to "demutualize." The
plan will be subject to approval by the board of directors, the State of New
York Insurance Department and policyholders. As of April 30, 1999, we do not
know the details of the plan or when or if it will take effect.
Metropolitan Life Separate Account E
We established Metropolitan Life Separate Account E on September 27, 1983. The
purpose of the Separate Account is to hold the variable assets that underlie
the Preference Plus Account Variable Annuity Contracts and some other variable
annuity contracts we issue. We have registered the Separate Account with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940.
The Separate Account's assets are solely for the benefit of those who invest
in the Separate Account and no one else, including our creditors. We are
obligated to pay all money we owe under the Deferred Annuities and Income
Annuities even if that amount exceeds the assets in the Separate Account. The
assets of the Separate Account are held in our name on behalf of the Separate
Account and legally belong to us. All the income, gains, and losses (realized
or unrealized) resulting from these assets are credited to or charged against
the contracts issued from this Separate Account without regard to our other
business.
A-PPA-13
<PAGE>
The Variable Annuities in this Prospectus
There are two types of variable annuities described in this Prospectus:
Deferred Annuities and Income Annuities. These annuities are "variable"
because the value of your account or income payment varies based on the
investment performance of the investment divisions you choose. In short, the
value of your Deferred Annuity, your income payments under a variable pay-out
option of your Deferred Annuity, or your income payments under your Income
Annuity, may go up or down. Since the investment performance is not
guaranteed, your money is at risk. The degree of risk will depend on the
investment divisions you select. The Accumulation Unit Value or Annuity Unit
Value for each investment division rises or falls based on the investment
performance (or "experience") of the Portfolio with the same name.
The Deferred Annuities have a fixed interest rate option called the Fixed
Interest Account. With the Fixed Interest Account, your money earns a rate of
interest that we guarantee. Income Annuities and the variable pay-out options
under the Deferred Annuities have a fixed payment option called the Fixed
Income Option. Under the Fixed Income Option, we guarantee the amount of your
fixed income payments. These fixed options are not described in this
Prospectus although we occasionally refer to them.
A Deferred Annuity
You accumulate money in your account during the pay-in phase by making one or
more purchase payments. MetLife will hold your money and credit investment
returns as long as the money remains in your account.
The pay-out phase begins when you either take all of your money out of the
account or elect to have us pay you "income" payments using the money in your
account. The number and the amount of the income payments you receive will
depend on such things as the type of pay-out option you choose, your
investment choices, and the amount used to provide your income payments.
Because Deferred Annuities offer various insurance benefits such as payment
options, including our guarantee of income for your lifetime, they are
"annuities."
An Income Annuity
An Income Annuity, also known as an immediate annuity, only has a "pay-out"
phase. You make a single purchase payment and select the type of pay-out
option suited to your needs. Some of the pay-out options guarantee an income
stream for your lifetime or your and another's lifetimes. Some Income
Annuities guarantee a time period of your choice over which MetLife will make
income payments. Income Annuities also have other features. The amount of your
income payments you receive will depend on such things as the type of pay-out
option you choose, your investment choices and the amount of your purchase
payment.
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Group Deferred Annuities and group Income Annuities are also available. They
are offered to an employer, association, trust or other group for its
employees, members or participants.
A Deferred Annuity consists of two phases: the accumulation or "pay-in" phase
and the income annuity or "pay-out" phase.
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A-PPA-14
<PAGE>
Your Investment Choices
The Metropolitan Fund and each Portfolio are more fully described in the
Metropolitan Fund's prospectus and its SAI. The Metropolitan Fund's prospectus
is attached at the end of this Prospectus. You should read the Metropolitan
Fund prospectus carefully before making purchase payments to the investment
divisions. The SAI is available upon your request.
The investment choices are:
Lehman Brothers Aggregate Bond Index Portfolio
State Street Research Income Portfolio
State Street Research Diversified Portfolio
MetLife Stock Index Portfolio
Harris Oakmark Large Cap Value Portfolio
T. Rowe Price Large Cap Growth Portfolio
State Street Research Growth Portfolio
Neuberger Berman Partners Mid Cap Value Portfolio
Janus Mid Cap Portfolio
Loomis Sayles High Yield Bond Portfolio
State Street Research Aggressive Growth Portfolio
Russell 2000(Registered) Index Portfolio
T. Rowe Price Small Cap Growth Portfolio
Scudder Global Equity Portfolio
Morgan Stanley EAFE(Registered) Index Portfolio
Santander International Stock Portfolio
Some of the investment choices may not be available under the terms of your
Deferred Annuity or Income Annuity. Your contract will indicate the investment
divisions that are available to you. Your investment choices may be limited
because:
o Some of the investment divisions are not approved in your state.
o Your employer, association or other group contractholder limits the number
of available investment divisions.
o We have restricted the available investment divisions.
o For Income Annuities, some states limit you to four choices (four
investment divisions or three investment divisions and the Fixed Income
Option).
The investment divisions buy and sell shares of corresponding mutual fund
portfolios. These Portfolios, which are part of the Metropolitan Fund, invest
in stocks, bonds and other investments. All dividends declared by the
Portfolios are earned by the Separate Account and reinvested. Therefore, no
dividends are distributed to you under the Deferred Annuities or Income
Annuities. Dividends generally are reflected in an increase in the
Accumulation or Annuity Unit Value. You pay no transaction expenses (i.e.,
front-end sales load or back-end sales load charges) as a result of the
Separate Account's purchase or sale of these mutual fund shares. The
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The degree of investment risk you assume will depend on the investment
divisions you choose. We have listed your choices in order of risk from the
most conservative to the most aggressive.
There is a possibility you will lose principal in the investment choices.
However, they generally offer the opportunity for greater returns over the
long term than our guaranteed fixed options.
While the investment divisions and their comparably named Portfolios may have
names, investment objectives and management which are identical or similar to
publicly available mutual funds, these are not those mutual funds. The
Metropolitan Fund Portfolios most likely will not have the same performance
experience as any publicly available mutual fund.
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A-PPA-15
<PAGE>
Portfolios of the Metropolitan Fund are available only by purchasing MetLife
annuities and life insurance policies and are never sold directly to the
public.
The Metropolitan Fund is a "series" type fund registered with the Securities
and Exchange Commission as an "open-end management investment company" under
the Investment Company Act of 1940 (the "1940 Act"). A "series" fund means
that each Portfolio is one of several available through the Metropolitan Fund.
Except for the Janus Mid Cap Portfolio, each Portfolio is "diversified" under
the 1940 Act.
The Portfolios of the Metropolitan Fund pay us a monthly fee for our services
as investment manager. These fees, as well as the operating expenses paid by
each Portfolio, are described in the Metropolitan Fund prospectus and SAI.
In addition, the Metropolitan Fund prospectus discusses other separate
accounts of MetLife and Metropolitan Tower Life Insurance Company that invest
in the Metropolitan Fund. The risks of these arrangements are also discussed.
Deferred Annuities
This Prospectus describes five kinds of Deferred Annuities under which you can
accumulate money:
o Non-Qualified
o Traditional IRAs (Individual
Retirement Annuities)
o Roth IRAs (Roth Individual
Retirement Annuities)
o SIMPLE IRAs (Savings Incentive
Match Plan for Employees
Individual Retirement Annuities)
o SEPs (Simplified Employee Pensions)
Certain group Deferred Annuities may be issued to a bank that does nothing but
hold them as contractholder.
The Deferred Annuity and Your Retirement Plan
If you participate through a retirement plan, the Deferred Annuity may provide
that all or some of your rights as described in this Prospectus are subject to
the plan's terms. Limitations on your rights may apply to investment choices,
purchase payments, withdrawals, transfers, the death benefit and pay-out
options. We may rely on your employer's or plan administrator's statements to
us as to the terms of the plan or your entitlement to any amounts. We will not
be responsible for determining what your plan says. You should consult your
Deferred Annuity contract and plan document to see how you may be affected.
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These Deferred Annuities may be either issued to you as an individual or to a
group (you are then a participant under the group's Deferred Annuity).
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A-PPA-16
<PAGE>
Automated Investment Strategies
There are five automated investment strategies available to you. These
investment strategies are available to you without any additional charges. As
with any investment program, no strategy can guarantee a gain - you can lose
money. We may modify or terminate any of the strategies at any time. You may
have only one automated investment strategy in effect at a time.
The Equity Generator(Service Mark): An amount equal to the interest earned in
the Fixed Interest Account is transferred monthly to either the MetLife Stock
Index or State Street Research Aggressive Growth investment division, based on
your selection.
As an added benefit of this strategy, you will not pay early withdrawal
charges from your purchase payments, provided that 100% of your contributions
are allocated to the Fixed Interest Account for the life of your Deferred
Annuity and you never request allocation changes or transfers. Early
withdrawal charges may be taken from any of your earnings.
The Equalizer(Service Mark): You start with equal amounts of money in the
Fixed Interest Account and your choice of either the MetLife Stock Index
Division or the State Street Research Aggressive Growth Division. Each quarter
amounts are transferred between the Fixed Interest Account and your chosen
investment division to make the value of each equal. Say you choose the
MetLife Stock Index Division. If over the quarter, it outperforms the Fixed
Interest Account, money is transferred to the Fixed Interest Account.
Conversely, if the Fixed Interest Account outperforms the MetLife Stock Index
Division, money is transferred into the MetLife Stock Index Division.
The Rebalancer(Service Mark): You select a specific asset allocation for
your entire Account Balance from among the investment divisions and the Fixed
Interest Account. Each quarter, we transfer amounts among these options to
bring the percentage of your Account Balance in each option back to your
original allocation.
The Index Selector(Service Mark): You may select one of five asset allocation
models which are designed to correlate to various risk tolerance levels. Based
on the model you choose, your entire Account Balance is divided among the
Lehman Brothers Aggregate Bond Index, MetLife Stock Index, Morgan Stanley
EAFE(Registered) Index and Russell 2000 Index investment divisions and the
Fixed Interest Account. Each quarter, the percentage in each of these
investment divisions and the Fixed Interest Account is brought back to the
original percentage by transferring amounts among the investment divisions and
the Fixed Interest Account.
In the future, we may permit you to allocate less than 100% of your Account
Balance to this strategy. This strategy may experience more volatility than
our other strategies. The models are subject to change from time to time. We
provide the elements to formulate the models. We may rely on a third party for
its expertise in creating appropriate allocations.
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We created these investment strategies to help you manage your money. You
decide if one is appropriate for you, based upon your risk tolerance and
saving goals. These strategies were designed to help you take advantage of the
tax-deferred status of an annuity.
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A-PPA-17
<PAGE>
The Allocator(Service Mark): Each month a dollar amount you choose is
transferred from the Fixed Interest Account to any of the investment divisions
you choose. You select the day of the month and the number of months over
which the transfers will occur. A minimum transfer of $50 is the only
requirement.
The Equity Generator and the Allocator are dollar cost averaging strategies.
Dollar cost averaging involves investing at regular intervals of time. Since
this involves continuously investing regardless of fluctuating prices, you
should consider whether you can continue the strategy through periods of
fluctuating prices.
Purchase Payments
There is no minimum purchase payment. You may continue to make purchase
payments while you receive Systematic Withdrawal Program payments, as
described later in this Prospectus, unless your purchase payments are made
through automatic payroll deduction, check-o-matic, salary reduction or salary
deduction.
Allocation of Purchase Payments
You decide how your money is allocated among the Fixed Interest Account and
the investment divisions. You can change your allocations for additional
purchase payments. We will make allocation changes when we receive your
request for a change. You may also specify an effective date for the change as
long as it is within 30 days after we receive the request.
Automated Purchase Payments
If you purchase a Traditional IRA, a Roth IRA or a Non-Qualified Deferred
Annuity, you may elect to have purchase payments made automatically. With
"automatic payroll deduction" your employer deducts an amount from your salary
and makes the purchase payment for you. With "check-o-matic" your bank deducts
money from your checking account and makes the purchase payment for you.
Electronic Applications
When circumstances permit, we may be able to electronically submit your
complete initial application to your MetLife Designated Office. If you elect
to use this process, our local office or your sales representative will
actually transmit the record of your purchase payment and application. Your
actual purchase payment, application and other related documents will then be
forwarded to your MetLife Designated Office. We may, for certain Deferred
Annuities, treat the electronic purchase payment as though we had received
payment at your MetLife Designated Office in order to credit and value the
purchase payment.
We may do this if:
o The electronic purchase payment is received at your MetLife Designated
Office and accompanied by a properly completed electronic application
record; and
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You may make purchase payments to your Deferred Annuity whenever you choose,
up to the date you begin receiving payments from a pay-out option. However,
Federal tax rules may limit the amount and frequency of your purchase
payments.
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A-PPA-18
<PAGE>
o Your money, application and other documentation are received in good order
at your MetLife Designated Office within five business days following the
transmission of the electronic record. Generally, the electronic record is
received at your MetLife Designated Office the business day following its
transmission by the sales representative or local office.
If, however, your purchase payment and paper copy of the application are
received at your MetLife Designated Office before the electronic record,
then your purchase payment will be credited and valued as of the date it
is received.
Limits on Purchase Payments
Your ability to make purchase payments may be limited by:
o Federal tax laws;
o Our right to limit the total of your purchase payments to $500,000. We may
change the maximum by telling you in writing at least 90 days in advance;
and
o Regulatory requirements. For example, if you reside in Washington or
Oregon, we may be required to limit your ability to make purchase payments
after you have held the Deferred Annuity for more than three years, if the
Deferred Annuity was issued to you after you were age 60, or after you turn
age 63, if the Deferred Annuity was issued before you were age 61.
The Value of Your Investment
Accumulation Units are credited to you when you make purchase payments or
transfers into an investment division. When you withdraw or transfer money
from an investment division, accumulation units are liquidated. We determine
the number of accumulation units you have by dividing the amount of your
purchase payment, transfer or withdrawal by the Accumulation Unit Value on the
date of the transaction.
This is how we calculate the Accumulation Unit Value for each investment
division:
o First, we determine the change in investment performance (including any
investment-related charge) for the underlying Portfolio from the previous
trading day to the current trading day;
o Next, we subtract the daily equivalent of our insurance-related charge
(general administrative expense and mortality and expense risk charges)
for each day since the last Accumulation Unit Value was calculated; and
o Finally, we multiply the previous Accumulation Unit Value by this result.
A-PPA-19
<PAGE>
Examples
Calculating the Number of Accumulation Units
Assume you make a purchase payment of $500 into one investment division and
that investment division's Accumulation Unit Value is currently $10.00. You
would be credited with 50 accumulation units.
$500 = 50 accumulation units
----
10
Calculating the Accumulation Unit Value
Assume yesterday's Accumulation Unit Value was $10.00 and the number we
calculate for today's investment experience (minus charges) for an underlying
portfolio is 1.05. Today's Accumulation Unit Value is $10.50. The value of
your $500 investment is then $525.
$10.00 x 1.05 = $10.50 is the new Accumulation Unit Value
However, assume that today's investment experience (minus charges) is .95
instead of 1.05. Today's Accumulation Unit Value is $9.50. The value of your
$500 investment is then $475.
$10.00 x .95 = $9.50 is the new Accumulation Unit Value
Transfers
You can make an unlimited number of transfers between investment divisions or
between the investment divisions and the Fixed Interest Account. For us to
process a transfer, you must tell us:
o The percentage or dollar amount of the transfer;
o The investment division (or Fixed Interest Account) from which you want the
money to be transferred;
o The investment division (or Fixed Interest Account) to which you want the
money to be transferred; and
o Whether you intend to start, stop or modify an automated investment strategy
by making the transfer.
We may require you to:
o Use our forms;
o Maintain a minimum Account Balance (if the transfer is in connection with an
automated investment strategy); or
o Transfer a minimum amount if the transfer is in connection with the
Allocator.
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You may transfer money within your contract as often as you like. You will not
incur current taxes on your earnings or any early withdrawal charges as a
result of transferring your money.
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A-PPA-20
<PAGE>
Access To Your Money
You may withdraw either all or part of your Account Balance from the Deferred
Annuity. Withdrawals must be at least $500 (or the Account Balance, if less).
To process your request, we need the following information:
o The percentage or dollar amount of the withdrawal; and
o The investment division (or Fixed Interest Account) from which you want the
money to be withdrawn.
Generally, if you request, we will make payments directly to other investments
on a tax-free basis. You may only do so if all applicable tax and state
regulatory requirements are met and we receive all information necessary for
us to make the payment. We may require you to use our forms.
Systematic Withdrawal Program
Under this program and subject to approval in your state, you may choose to
automatically withdraw a specific dollar amount or a percentage of your
Account Balance each Contract Year. This amount is then paid in equal portions
throughout the Contract Year according to the time frame you select, e.g.,
monthly, quarterly, semi-annually or annually. Once the Systematic Withdrawal
Program is initiated, the payments will automatically renew each Contract
Year.
If you elect to withdraw a dollar amount, we will pay you the dollar amount
each Contract Year. If you elect to withdraw a percentage of your Account
Balance, each Contract Year we recalculate the dollar amount you will receive
based on your new Account Balance.
Calculating Your Payment Based on a Percentage Election for the First Contract
Year You Elect the Systematic Withdrawal Program: If you choose to receive a
percentage of your Account Balance, we will determine the dollar amount
payable on the date these payments begin. When you first elect the program, we
will pay this dollar amount over the remainder of the Contract Year. For
example, if you select to receive payments on a monthly basis, the percentage
of your Account Balance you request equals $12,000, and there are six months
left in the Contract Year, we will pay you $2,000 a month.
Calculating Your Payment for Subsequent Contract Years of the Systematic
Withdrawal Program: For each subsequent year that your Systematic Withdrawal
Program remains in effect, we will deduct from your Deferred Annuity and pay
you over the Contract Year either the dollar amount that you chose or a dollar
amount equal to the percentage of your Account Balance you chose. For example,
if you select to receive payments on a monthly basis, ask for a percentage and
that percentage equals $12,000 at the start of a Contract Year, we will pay
you $1,000 a month.
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Income taxes, tax penalties and early withdrawal charges may apply to any
withdrawal you make.
We will withdraw the payments from the Fixed Interest Account or investment
divisions you select, either pro rata or in the proportions you request. Each
payment must be at least $50.
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A-PPA-21
<PAGE>
If you do not provide us with your desired allocation, or there are
insufficient amounts in the investment divisions or the Fixed Interest Account
that you selected, the payments will be taken out pro rata from the Fixed
Interest Account and any investment divisions in which you then have money.
Selecting a Payment Date: Your payment date is the date we make the
withdrawal. When you select or change a payment date, we must receive your
request at least 10 days prior to the selected payment date. If we do not
receive your request in time, we will make the payment a month after the date
you selected. If you do not select a payment date, we will automatically begin
systematic withdrawals within 30 days after we receive your request. Changes
in the dollar amount, percentage, or timing of payments can be made at the
beginning of any Contract Year and once a year. However, we must receive your
request at least 30 days in advance. If you make any of these changes, we will
treat your contract as though you were starting a new Systematic Withdrawal
Program.
Although we need your written authorization to begin this program, you may
cancel this program at any time by telephone or by writing to us at your
MetLife Designated Office.
Systematic Withdrawal Program payments may be subject to an early withdrawal
charge unless an exception to this charge applies. For purposes of determining
how much of the annual payment amount is exempt from this charge under the
free withdrawal provision (discussed later), all Systematic Withdrawal Program
payments in a Contract Year are characterized as a single lump sum withdrawal
as of your first payment date in that Contract Year. When you first elect the
program, we will calculate the percentage of your Account Balance your
Systematic Withdrawal Payment represents based on your Account Balance on the
first Systematic Withdrawal Program payment date. For all subsequent Contract
Years, we will calculate the percentage of your Account Balance your
Systematic Withdrawal payment represents based on your Account Balance on the
first Systematic Withdrawal Program payment date of that Contract Year. We
will determine separately the early withdrawal charge and any relevant factors
(such as applicable exceptions) for each Systematic Withdrawal Program payment
as of the date it is withdrawn from your Deferred Annuity.
Minimum Distribution
In order for you to comply with certain tax law provisions, you may be
required to take money out of your Deferred Annuity. Rather than receiving
your minimum distribution in one annual lump-sum payment, you may request that
we pay it to you in installments throughout the calendar year. However, we may
require that you maintain a certain Account Balance at the time you request
these payments.
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If you would like to receive your systematic withdrawal payment on or about
the first of the month, you should request that the payment date be the 20th
day of the month.
Your Account Balance will be reduced by the amount of your systematic
withdrawal payments and applicable withdrawal charges. Payments under this
program are not the same as income payments you would receive from a Deferred
Annuity pay-out option or under an Income Annuity.
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A-PPA-22
<PAGE>
Contract Fee
There is no Separate Account annual contract fee.
o For the Non-Qualified, Traditional IRA, Roth IRA and SEP Deferred
Annuities, you pay a $20 annual fee from the Fixed Interest Account at
the end of each Contract Year if your Account Balance is less than
$20,000 and you are not enrolled in the check-o-matic or automatic
payroll deduction programs.
o For the SIMPLE IRA Deferred Annuity, you pay a $20 annual fee from the
Fixed Interest Account at the end of each Contract Year if your Account
Balance is less than $20,000 and you do not make a purchase payment
during the Contract Year.
Charges
There are two types of charges you pay while you have money in an investment
division:
o Insurance-related charge, and
o Investment-related charge.
Insurance-Related Charge
You will pay an insurance-related charge for the Separate Account that is no
more than 1.25% annually of the average value of the amount you have in the
Separate Account. This charge pays us for general administrative expenses and
for the mortality and expense risk of the Deferred Annuity.
General administrative expenses we incur include financial, actuarial,
accounting, and legal expenses.
The mortality portion of the insurance-related charge pays us for the risk
that you may live longer than we estimated. Then, we could be obligated to pay
you more in payments from a pay-out option than we anticipated. Also, we bear
the risk that the guaranteed death benefit we would pay should you die during
your "pay-in" phase is larger than your Account Balance. We also bear the risk
that our expenses in administering the Deferred Annuities may be greater than
we estimated (expense risk).
Investment-Related Charge
This charge pays us as the investment manager of the Metropolitan Fund for
managing money in the Portfolios and investment operating expenses. The
percentage you pay depends on which investment divisions you select. Amounts
for each investment division are listed in the Table of Expenses.
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The charges you pay will not reduce the number of accumulation units credited
to you. Instead, we deduct the charges each time we calculate the Accumulation
Unit Value.
MetLife guarantees that the Separate Account
insurance-related charge will not increase while you have a Deferred Annuity.
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A-PPA-23
<PAGE>
Premium Taxes
Some jurisdictions tax what are called "annuity considerations." These may
apply to purchase payments, Account Balances and death benefits. In most
jurisdictions, we currently do not deduct any money from purchase payments,
Account Balances or death benefits to pay these taxes. Generally, our practice
is to deduct money to pay premium taxes (also known as "annuity" taxes) only
when you exercise a pay-out option. In certain jurisdictions, we may also
deduct money to pay premium taxes on lump sum withdrawals or when you exercise
a pay-out option. We may deduct an amount to pay premium taxes some time in
the future since the laws and the interpretation of the laws relating to
annuities are subject to change.
Premium taxes, if applicable, range from .5% to 5.0% depending on the Deferred
Annuity you purchase and your home state or jurisdiction. A chart in the
Appendix shows the jurisdictions where premium taxes are charged and the
amount of these taxes.
Early Withdrawal Charges
An early withdrawal charge of up to 7% may apply if you withdraw purchase
payments within 7 years of when they were credited to your Deferred Annuity.
To determine the early withdrawal charge for Deferred Annuities, we treat your
Fixed Interest Account and Separate Account as if they were a single account
and ignore both your actual allocations and the Fixed Interest Account or
investment division from which the withdrawal is actually coming. To do this,
we first assume that your withdrawal is from amounts (other than earnings)
that can be withdrawn without an early withdrawal charge, then from other
amounts (other than earnings) and then from earnings, each on a
"first-in-first-out" (oldest money first) basis. Once we have determined the
amount of the early withdrawal charge, we will actually withdraw it from the
Fixed Interest Account and the investment divisions in the same proportion as
the withdrawal is being made. In determining what the withdrawal charge is, we
do not include earnings, although the actual withdrawal to pay it may come
from earnings.
For partial withdrawals, the early withdrawal charge is determined by dividing
the amount that is subject to the early withdrawal charge by 100% minus the
applicable percentage shown in the following chart. Then we will make the
payment directed and withdraw the early withdrawal charge.
For a full withdrawal we multiply the amount to which the withdrawal charge
applies by the percentage shown, keep the result as an early withdrawal charge
and pay you the rest. We will treat your request as a request for a full
withdrawal if your Account Balance is not sufficient to pay both the requested
withdrawal and the early withdrawal charge.
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You will not pay an early withdrawal charge on any purchase payments made more
than 7 years ago.
We do not include your earnings when calculating early withdrawal charges.
However, if the early withdrawal charge is greater than the available purchase
payments, then we will take the early withdrawal charges, in whole or in part,
from your earnings.
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A-PPA-24
<PAGE>
The early withdrawal charge on purchase payments withdrawn is as follows:
During Purchase Payment Year
Year 1 2 3 4 5 6 7 8 & Later
Percentage 7% 6% 5% 4% 3% 2% 1% 0%
By law, your total early withdrawal charges applied to amounts in the
investment divisions will never exceed 9% of all your purchase payments in the
investment divisions.
The early withdrawal charge reimburses us for our costs in selling the
Deferred Annuities. We may use our profits (if any) from the mortality and
expense risk charge to pay for our costs to sell the Deferred Annuities which
exceed the amount of early withdrawal charges we collect. However, we believe
that our sales costs may exceed the early withdrawal charges we collect. If
so, we will pay the difference out of our general profits.
When No Early Withdrawal Charge Applies
In some cases, we will not charge you the early withdrawal charge when you
make a withdrawal. We may, however, ask you to prove that you meet any
conditions listed below.
You do not pay an early withdrawal charge:
o On transfers you make within your Deferred Annuity.
o On withdrawals of purchase payments you made over seven years ago.
o If you choose payments over one or more lifetimes or for a period of at
least five years (without the right to accelerate the payments).
o If you die during the pay-in phase. Your beneficiary will receive the full
death benefit without deduction.
o If you withdraw up to to 10% of your Account Balance in a Contract Year.
This 10% total withdrawal may be taken in an unlimited number of partial
withdrawals during that Contract Year. Each time you make a withdrawal, we
calculate what percentage your withdrawal represents at that time. Only
when the total of these percentages exceeds 10% will you have to pay early
withdrawal charges.
o If the withdrawal is required for you to avoid Federal income tax
penalties or to satisfy Federal income tax rules or Department of Labor
regulations that apply to your Deferred Annuity. This exception does not
apply if you have a Non-Qualified or Roth IRA Deferred Annuity.
o Because you accept an amendment converting your Traditional IRA Deferred
Annuity to a Roth IRA Deferred Annuity.
o If your contract provides for this, on your first withdrawal to which an
early withdrawal charge would otherwise apply, and either you or your
spouse:
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Early withdrawal charges never apply to transfers among investment divisions
or transfers to or from the Fixed Interest Account.
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A-PPA-25
<PAGE>
o Has been a resident of certain nursing home facilities for a minimum of 90
consecutive days; or
o Is diagnosed with a terminal illness and not expected to live more
than a year.
When Another Early Withdrawal Charge May Apply
If you transferred money from certain eligible MetLife contracts into a
Deferred Annuity, you may have different early withdrawal charges for these
transfer amounts. Any purchase payments made after the transfer are subject to
the usual early withdrawal charge schedule.
o Amounts transferred before January 1, 1996:
o We credit your transfer amounts with the time you held them under
your original contract or if it will produce a lower charge;
o We use the following schedule to determine early withdrawal charges
(determined as previously described) for transferred amounts from
your original contract.
During Purchase Payment Year
Year 1 2 3 4 5 6 and Beyond
Percentage 5% 4% 3% 2% 1% 0%
o Amounts transferred on or after January 1, 1996:
o For certain contracts which we issued at least two years before the
date of transfer (except as noted below), we apply the withdrawal
charge under your original contract but not any of the original
contract's exceptions or reductions to the withdrawal charge
percentage that do not apply to a Deferred Annuity or if it will
produce a lower charge.
We use the following schedule to determine early withdrawal charges
for transferred amounts from your original contract:
After the Transfer
Year 1 2 3 4 5 6 and Beyond
Percentage 5% 4% 3% 2% 1% 0%
o If we issued the other contract less than two years before the date
of the transfer or it has a separate withdrawal charge for each
purchase payment, we treat your purchase payments under the other
contract as if they were made under the Deferred Annuity as of the
date we received them under that contract.
o Alternatively, if provided for in your Deferred Annuity, we credit your
purchase payments with the time you held them under your original
contract.
A-PPA-26
<PAGE>
Free Look
You may cancel your Deferred Annuity within a certain time period. This is
known as a "free look." We must receive your request to cancel in writing. The
number of days for this "free look" varies from state to state. The time
period may also vary depending on your age and whether you purchased your
Deferred Annuity from us directly, through the mail or with money from another
annuity or life insurance policy. Again, depending on state law, we may refund
all of your purchase payments or your Account Balance as of the date your
refund request is received at your MetLife Designated Office.
Death Benefit
One of the insurance guarantees we provide you under your Deferred Annuity is
that your beneficiaries will be protected against market downturns. You name
your beneficiary(ies). If you die during the pay-in phase, the death benefit
your beneficiary receives will be the greatest of:
o Your Account Balance;
o Your highest Account Balance as of the end of the fifth calendar year in
which you have the Deferred Annuity and as of the end of each later five
year period. In any case, less any later partial withdrawals, fees and
charges; or
o The total of all of your purchase payments less any partial withdrawals.
We will only pay the death benefit when we receive both proof of your death
and appropriate instructions for payment.
Your beneficiary has the option to apply the death benefit (less any
applicable premium taxes) to a pay-out option offered under your Deferred
Annuity. Your beneficiary may, however, decide to take a lump sum cash
payment.
Pay-out Options (or Income Options)
You may convert your Deferred Annuity into a regular stream of income after
your "pay-in" or "accumulation" phase. When you select your pay-out option,
you will be able to choose from the range of options we then have available.
You have the flexibility to select a stream of income to meet your needs. If
you decide you want a pay-out option, we withdraw some or all of your Account
Balance (less any premium taxes and applicable contract fees). Then, we apply
the remainder to the option. You are not required to hold your Deferred
Annuity for any minimum time period before you may annuitize. However, if you
annuitize within two years of purchasing the Deferred Annuity, a $350 contract
fee applies. Generally, you may defer receiving payments for up to one year
after you have chosen your pay-out option.
When considering a pay-out option, you should think about whether you want:
o Payments guaranteed by us for the rest of your life (or for the rest of
two lives) or for a specified period;
o A fixed dollar payment or a variable payment;
o A refund feature.
- ------------------------------------------------------------------------------
The pay-out phase is often referred to as either "annuitizing" your contract
or taking an income annuity.
Should our current immediate annuity rates for a
fixed pay-out option provide for greater payments than those quoted in your
contract, we will use the current rates.
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A-PPA-27
<PAGE>
Your income payment amount will depend upon your choices. For lifetime
options, the age and sex of the measuring lives (annuitants) will also be
considered. For example, if you select a pay-out option guaranteeing payments
for your and your spouse's lifetimes, your payments will typically be lower
than if you select a pay-out option with payments over only your lifetime.
By the date specified in your contract, if you do not either elect to continue
the contract, select a pay-out option or withdraw your entire Account Balance,
and your Deferred Annuity was not issued under a retirement plan, we will
automatically issue you a life annuity with a 10 year guarantee. In that case,
if you do not tell us otherwise, your Fixed Interest Account Balance will be
used to provide a Fixed Income Option and your Separate Account Balance will
be used to provide a variable pay-out option. However, if we do ask you what
you want us to do and you do not respond, we may treat your silence as a
request by you to continue your Deferred Annuity.
Because the features of variable pay-out options under the Deferred Annuities
are identical to the features of Income Annuities, please read the sections
under the "Income Annuities" heading for more information.
Income Annuities
Income Annuities provide you with a regular stream of payments for either your
lifetime or a specific period. You have the flexibility to select a stream of
income to meet your needs. Income Annuities can be purchased so that you begin
receiving payments immediately or you can apply the Account Balance of your
Deferred Annuity to a pay-out option to receive payments during your "pay-out"
phase. With an Income Annuity, you must start receiving payments within the
first year after the annuity is issued.
We do not guarantee that your variable payments will be a specific amount of
money. You may choose to have a portion of the payment fixed and guaranteed
under the Fixed Income Option.
Using proceeds from the following types of arrangements, you may purchase
Income Annuities to receive immediate payments:
o Non-Qualified o Roth IRA o SIMPLE IRA
o Traditional IRA o SEP IRA
If you have accumulated amounts in any of the listed investment vehicles, your
lump sum withdrawal from that investment vehicle may be used to purchase an
appropriate Income Annuity as long as income tax requirements are met.
If your retirement plan has purchased an Income Annuity, your choice of
pay-out options may be subject to the terms of the plan. We may rely on your
employer's or plan administrator's statements to us as to the terms of the
plan or your entitlement to any payments. We will not be responsible for
interpreting the terms of your plan. You should review your plan document to
see how you may be affected.
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You may choose the frequency of your income payments. For example, you may
receive your payments on a monthly, quarterly, semiannual or annual basis.
- ------------------------------------------------------------------------------
A-PPA-28
<PAGE>
Income Payment Types
Currently, we provide you with a wide variety of income payment types to suit
a range of personal preferences.
There are three people who are involved in payments under your Income Annuity:
o Owner: the person or entity which has all rights under the Income Annuity
including the right to direct who receives payment.
o Annuitant: the person whose life is the measure for determining the
timing and sometimes the dollar amount of payments.
o Beneficiary: the person who receives continuing payments/or a lump sum
payment if the owner dies.
Your income payment amount will depend in large part on the type of income
payment type you choose. For example, if you select an "Income for Two Lives
Annuity," your payments will typically be lower than if you select a "Your
Lifetime Annuity." The following income payment types are available:
Your Lifetime Annuity: A variable income payable during the annuitant's life.
Your Lifetime with a Guaranteed Period Annuity: A variable income payable
during the annuitant's life with a guaranteed number of years. If, at the
death of the annuitant, payments have been made for less than the guaranteed
period, payments are made to the owner of the annuity (or the beneficiary if
the owner dies before the end of the guaranteed period) for the rest of the
guaranteed period.
Your Lifetime With a Refund Annuity: A variable income payable during the
annuitant's life with a refund provision. If, at the death of the annuitant,
the total of all income payments is less than the purchase payment that we
received, we will pay the owner of the annuity (or to the beneficiary if the
owner is not alive) an amount equal to the difference.
Income for Two Lives Annuity: A variable income payable while either of two
annuitants is alive. After one annuitant dies, payments continue if the other
annuitant is alive. Payments stop once both annuitants are no longer alive.
Payments after one annuitant dies may be the same as those paid while both
were alive or may be a lower percentage that is selected when the annuity is
purchased (e.g. 75%, 66 2/3% or 50%).
Income for Two Lives with a Guaranteed Period Annuity: This is the same as the
Income for Two Lives Annuity described above, but we guarantee to pay the full
amount (not a reduced percentage) for the guaranteed period even if one or
both annuitants die. If, upon the death of both annuitants, payments have been
made for less than the guaranteed period, payments are made to the owner of
the annuity (or the beneficiary if the owner dies before the end of the
guaranteed period) for the rest of the guaranteed period.
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Many times, the Owner and the Annuitant are the same person.
When deciding how to receive income, consider:
o The amount of income you need;
o The amount you expect to receive from other sources;
o The growth potential of other investments; and
o How long you would like your income to last.
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A-PPA-29
<PAGE>
Income for Two Lives with a Refund Annuity: This is the same as the Income for
Two Lives Annuity described above, but if, upon the death of both annuitants,
the total of all of income payments is less than the purchase payment that we
received, we will pay the owner of the annuity (or the beneficiary if the
owner is not alive) an amount equal to the difference.
Income for a Guaranteed Period Annuity: A variable income payable for a
guaranteed period (5-30 years). Payments cease at the end of the guaranteed
period (which is often called a "term certain" period) even if the annuitant
is still alive. If the annuitant dies before the end of the guaranteed period,
payments are made to the owner of the annuity (or to the beneficiary if the
owner dies before the end of the guaranteed period) for the rest of the
guaranteed period.
Allocation
You decide how your money is allocated among the Fixed Income Option and the
investment divisions.
Minimum Size of Your Income Payment
Your initial income payment must be at least $50. If you live in
Massachusetts, the initial income payment must be at least $20. This means
that the amount of your purchase payment or the amount used from a Deferred
Annuity to provide a pay-out option must be large enough to produce this
minimum initial income payment.
The Value of Your Income Payments
Annuity units are credited to you when you make a purchase payment or transfer
into an investment division. Before we determine the number of annuity units
to credit to you, we reduce a purchase payment (but not a transfer) by any
premium taxes and the contract fee, if applicable. We then compute an initial
income payment amount using the Assumed Investment Return ("AIR"), your income
payment type and the age and sex of the measuring lives. We then divide that
amount by the Annuity Unit Value on the date of the transaction. When you
transfer money from an investment division, annuity units in that investment
division are liquidated.
Your payment is determined by using the AIR to benchmark the investment
experience of the investment divisions you select. The higher your AIR, the
higher your first income payment will be. Your next payments will only
increase in proportion to the amount the investment experience of your chosen
investment divisions exceeds the AIR and Separate Account charges. Likewise,
your payments will decrease to the extent the investment experience of your
chosen investment divisions is less than the AIR and Separate Account charges.
A lower AIR will result in a lower initial variable income payment, but
subsequent variable income payments will increase more rapidly or decline more
slowly as changes occur in the investment experience of the investment
divisions.
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The AIR is stated in your contract and may range from 3% to 6%.
- ------------------------------------------------------------------------------
A-PPA-30
<PAGE>
Your income payments are determined ten days prior to your income payment
date or your contract's issue date, if later.
This is how we calculate the Annuity Unit Value for each investment division:
o First, we determine the change in investment experience (including any
investment-related charge) for the underlying portfolio from the previous
trading day to the current trading day;
o Next, we subtract the daily equivalent of your insurance-related charge
(general administrative expenses and mortality and expense risk charges)
for each day since the last day the Annuity Unit Value was calculated;
o Then, we divide by the daily equivalent of your AIR; and
o Finally, we multiply the previous Annuity Unit Value by this result.
Transfers
You can make an unlimited number of transfers among investment divisions or
from the investment divisions to the Fixed Income Option. There is no early
withdrawal charge to make a transfer. If you reside in certain states you may
be limited to four options (including the Fixed Interest Option).
For us to process a transfer, you must tell us:
o The percentage or dollar amount of the transfer;
o The investment division (or Fixed Income Option) to which you want
to transfer; and
o The investment division from which you want to transfer.
We may require that you use our forms to make transfers.
Contract Fee
A one time $350 contract fee is taken from your purchase payment when you
purchase an Income Annuity prior to allocating the remainder of the purchase
payment to either the investment divisions and/or the Fixed Income Option.
This charge covers our administrative costs including preparation of the
Income Annuities, review of applications and recordkeeping. If you select a
pay-out option under your Deferred Annuity and you purchased that Deferred
Annuity at least two years ago, we will waive the contract fee.
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Once you transfer money into the Fixed Income Option you may not later
transfer it into an investment division.
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A-PPA-31
<PAGE>
Charges
There are two types of charges you pay if you allocate any of your purchase
payment to the investment divisions:
o Insurance-related charge; and
o Investment-related charge.
Insurance-Related Charge
You will pay an insurance-related charge for the Separate Account that is no
more than 1.25% annually of the average value of the amount you have in the
Separate Account. This charge pays us for general administrative expenses and
for mortality and expense risk of the Income Annuity.
General administrative expenses we incur include financial, actuarial,
accounting, and legal expenses.
The mortality portion of the insurance-related charge pays us for the risk
that you may live longer than we estimated. Then, we could be obligated to pay
you more in payments than we anticipated.
We also bear the risk that our expenses in administering the Income Annuities
will be greater than we estimated (expense risk).
Investment-Related Charge
This charge pays us as the investment manager of the Metropolitan Fund for
managing money in the Portfolios and investment operating expenses. The
percentage you pay depends on the investment divisions you select. Amounts for
each investment division are listed in the Table of Expenses.
Premium Taxes
Some jurisdictions tax what are called "annuity considerations." We deduct
money to pay "premium" taxes (also known as "annuity" taxes) when you make the
purchase payment.
Premium taxes if applicable, range from .5% to 5.0% depending on the Income
Annuity you purchased and your home state or jurisdiction. A chart in the
Appendix shows the jurisdictions where premium taxes are charged and the
amount of these taxes.
Free Look
You may cancel your Income Annuity within a certain time period. This is known
as a "free look." We must receive your request to cancel in writing. The
number of days for this "free look" varies from state to state. The "free
look" may also vary depending on your age and whether you purchased your
Income Annuity from us directly, through the mail or with money from another
annuity or life insurance policy. Again, depending on state law, we may refund
all of your purchase payment or the value of your
- ------------------------------------------------------------------------------
The charges you pay will not reduce the number of annuity units credited to
you. Instead, we deduct the charges when calculating the Annuity Unit Value.
You do not have a "free look" if you are electing income payments in the
pay-out phase of your Deferred Annuity.
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A-PPA-32
<PAGE>
annuity units as of the date your refund request is received at your MetLife
Designated Office.
General Information
Administration
All transactions will be processed in the manner described below.
Purchase Payments
Send your purchase payments by check or money order made payable to "MetLife"
to your MetLife Designated Office. We will provide you with all necessary
forms. We must have all completed documents to credit your purchase payments.
Usually, your initial purchase payment is credited to you within two days of
receipt at your MetLife Designated Office. However, if you fill out our forms
incorrectly or incompletely or other documentation is not completed properly,
we have up to five business days to credit the payment. If the problem cannot
be resolved by the fifth business day, we will notify you and give you the
reasons for the delay. At that time, you will be asked whether you agree to
let us keep your money until the problem is resolved. If you do not agree or
we cannot reach you by the fifth business day, your money will be returned.
Under certain group Deferred Annuities and group Income Annuities, your
employer, or the group in which you are a participant or member must identify
you on their reports to us and tell us how your money should be allocated
among the investment divisions and the Fixed Interest Account/Fixed Income
Option.
Purchase payments (including any portion of your Account Balance under a
Deferred Annuity which you apply to a pay-out option) are effective and valued
as of 4:00 p.m. Eastern time, on the day we receive them in good order at your
MetLife Designated Office, except when they are received:
o On a day when the Accumulation Unit Value/Annuity Unit Value is not
calculated, or
o After 4:00 p.m. Eastern time.
In those cases, the purchase payments will be effective the next day the
Accumulation Unit Value or Annuity Unit Value, as applicable, is calculated.
Confirming Transactions
You will receive a written statement confirming that a transaction was
recently completed. Certain transactions made on a periodic basis, such as
check-o-matic, Systematic Withdrawal Program payments, and automated
investment strategy transfers, may be confirmed quarterly.
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Generally, your requests including all subsequent purchase payments are
effective the day we receive them at your MetLife Designated Office.
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A-PPA-33
<PAGE>
Transactions by Telephone
You may conduct a variety of transactions by telephone, unless prohibited by
state law. Some of these transactions include:
o Transfers
o Changes to investment strategies
o Changes in the allocation of future purchase payments.
Your telephone transaction must be completed by 4:00 p.m. Eastern Time if you
want the transaction to take place on that day.
We have put into place reasonable security procedures to insure that
instructions communicated by telephone are genuine. For example, all telephone
calls are recorded. Also, you will be asked to provide some personalized data
prior to giving your instructions over the telephone. When someone contacts us
by telephone and follows our security procedures, we will assume that you are
authorizing us to act upon those telephone instructions. Neither we nor the
Separate Account will be liable for any loss, expense or cost arising out of
any requests that we or the Separate Account reasonably believe to be
authentic. In the unlikely event that you have trouble reaching us, requests
should be made in writing to your MetLife Designated Office.
Processing of Certain Transactions
If we are notified of your death before a requested transaction is completed,
we will cancel the request. For example, if you request a transfer or
withdrawal for a date in the future under a Deferred Annuity and then die
before that date, we simply pay the death benefit instead. For Income Annuity
transfers, we will cancel the request and continue making payments to your
beneficiary if your Income Annuity so provides. Or, depending on your Income
Annuity provisions, we may continue making payments to a joint annuitant or
pay your beneficiary a refund.
Valuation
We separately determine the Accumulation Unit Value and Annuity Unit Value for
each investment division once each day when the New York Stock Exchange is
open for trading. If permitted by law, we may change the period between
calculations but we will give you 30 days notice.
When you request a transaction, we will process the transaction using the next
available Accumulation Unit Value for Deferred Annuities or Annuity Unit Value
for Income Annuities. Subject to our procedure, we will make withdrawals under
a Deferred Annuity and transfers under a Deferred Annuity or Income Annuity at
a later date, if you request. If your withdrawal request is to elect a
variable pay-out option under your
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You may authorize your sales representative to make telephone transactions on
your behalf. You must complete our form and we must agree.
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A-PPA-34
<PAGE>
Deferred Annuity, we base the number of annuity units you receive on the next
available Annuity Unit Value.
Advertising Performance
We periodically advertise the performance of the investment divisions. You may
get performance information from a variety of sources including your quarterly
statements, your MetLife representative, the internet, annual reports and
semiannual reports.
We may state performance in terms of "yield," "change in Accumulation Unit
Value/Annuity Unit Value," "average annual total return," or some combination
of these terms.
Yield is the net income generated by an investment in a particular investment
division for 30 days or a month. These figures are expressed as percentages.
This percentage yield is compounded semiannually.
Change in Accumulation/Annuity Unit Value is calculated by determining the
percentage change in the value of an accumulation (or annuity) unit for a
certain period. These numbers may also be annualized. Change in
Accumulation/Annuity Unit Value may be used to demonstrate performance for a
hypothetical investment (such as $10,000) over a specified period. These
performance numbers reflect the deduction of the total Separate Account
charges; however, yield and change in Accumulation/Annuity Unit Value
performance do not reflect the possible imposition of early withdrawal
charges. Early withdrawal charges would reduce performance experience.
Average annual total return calculations reflect all Separate Account charges
and applicable early withdrawal charges. These figures also assume a steady
annual rate of return.
Performance figures will vary among the various Deferred Annuities and Income
Annuities as a result of different Separate Account charges and early
withdrawal charges. For purposes of presentation, we may assume that certain
Deferred Annuities and Income Annuities were in existence prior to their
inception date. In these cases, we calculate performance based on the
historical performance of the underlying Metropolitan Fund Portfolios. We use
the actual accumulation unit or annuity unit data after the inception date.
We calculate performance for certain investment strategies including the
Equalizer, Equity Generator and each asset allocation model of the Index
Selector. We calculate the performance as a percentage by presuming a certain
dollar value at the beginning of a period and comparing this dollar value with
the dollar value based on historical performance at the end of that period.
This percentage return assumes that there have been no withdrawals or other
unrelated transactions.
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All performance numbers are based upon historical earnings. These numbers are
not intended to indicate future results.
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A-PPA-35
<PAGE>
Changes to Your Deferred Annuity or
Income Annuity
We have the right to make certain changes to your Deferred Annuity or Income
Annuity, but only as permitted by law. We make changes when we think they
would best serve the interest of annuity owners or would be appropriate in
carrying out the purposes of the Deferred Annuity or Income Annuity. If the
law requires, we will also get your approval and the approval of any
appropriate regulatory authorities. Examples of the changes we may make
include:
o To operate the Separate Account in any form permitted by law.
o To take any action necessary to comply with or obtain and continue any
exemptions under the law.
o To transfer any assets in an investment division to another investment
division, or to one or more separate accounts, or to our general account,
or to add, combine or remove investment divisions in the Separate
Account.
o To substitute for the Portfolio shares in any investment division, the
shares of another class of the Metropolitan Fund or the shares of another
investment company or any other investment permitted by law.
o To change the way we assess charges, but without increasing the aggregate
amount charged to the Separate Account and any currently available
portfolio in connection with the Deferred Annuities or Income Annuities.
o To make any necessary technical changes in the Deferred Annuities or
Income Annuities in order to conform with any of the above-described
actions.
If any changes result in a material change in the underlying investments of an
investment division in which you have a balance, we will notify you of the
change. You may then make a new choice of investment divisions. For Deferred
Annuities issued in Pennsylvania (and Income Annuities where required by law),
we will ask your approval before making any technical changes.
Voting Rights
Based on our current view of applicable law, you have voting interests under
your Deferred Annuity or Income Annuity concerning Metropolitan Fund proposals
that are subject to a shareholder vote. Therefore, you are entitled to give us
instructions for the number of shares which are deemed attributable to your
Deferred Annuity or Income Annuity.
A-PPA-36
<PAGE>
We will vote the shares of each of the underlying Portfolios held by the
Separate Account based on instructions we receive from those having a voting
interest in the corresponding investment divisions. However, if the law or the
interpretation of the law changes, we may decide to exercise the right to vote
the Portfolio's shares based on our own judgment.
There are certain circumstances under which we may disregard voting
instructions. However, in this event, a summary of our action and the reasons
for such action will appear in the next semiannual report. If we do not
receive your voting instructions, we will vote your interest in the same
proportion as represented by the votes we receive from other investors. Shares
of the Metropolitan Fund that are owned by our general account or by any of
our unregistered separate accounts will be voted in the same proportion as the
aggregate of:
o The shares for which voting instructions are received, and
o The shares that are voted in proportion to such voting instructions.
However, if the law or the interpretation of the law changes, we may decide to
exercise the right to vote the Portfolio's shares based on our judgment.
Who Sells the Deferred Annuities and
Income Annuities
All Deferred Annuities and Income Annuities, are sold through our licensed
sales representatives. We are registered with the Securities and Exchange
Commission as a broker-dealer under the Securities Exchange Act of 1934. We
are also a member of the National Association of Securities Dealers, Inc.
Deferred Annuities and Income Annuities are also sold through other registered
broker-dealers. They also may be sold through the mail.
The licensed sales representatives and broker-dealers who sell the annuities
may be compensated for these sales by commissions that we pay. There is no
front-end sales load deducted from purchase payments to pay sales commissions.
The Separate Account does not pay sales commissions. The commissions we pay
range from 0% to 6%.
We also make payments to our licensed sales representatives based upon the
total Account Balances of the Deferred Annuities assigned to the sales
representative. Under this compensation program, we pay an amount up to .12%
of the total Account Balances of the Deferred Annuities and other annuity
contracts, certain mutual fund account balances and cash values of certain
life insurance policies. These asset based commissions compensate the sales
representative for servicing the Deferred Annuities. These payments are not
made for Income Annuities.
A-PPA-37
<PAGE>
Financial Statements
The financial statements and related notes for the Separate Account and
MetLife are in the SAI and are available from MetLife upon request. Deloitte &
Touche, LLP, who are independent auditors, audit these financial statements.
When We Can Cancel Your Deferred Annuity or Income Annuity
We may not cancel your Income Annuity.
We may cancel your Deferred Annuity only if we do not receive any purchase
payments from you for 36 consecutive months and your Account Balance is less
than $2,000. We will only do so to the extent allowed by law. If we do so for
a Deferred Annuity delivered in New York, we will return the full Account
Balance. In all other cases, you will receive an amount equal to what you
would have received if you had requested a total withdrawal of your Account
Balance. Early withdrawal charges may apply.
Income Taxes
The following information on taxes is a general discussion of the subject. It
is not intended as tax advice. The Internal Revenue Code ("Code") is complex
and subject to change regularly. Consult your own tax advisor about your
circumstances, any recent tax developments, and the impact of state income
taxation. The SAI has additional tax information. For purposes of this
section, we address Deferred Annuities and Income Annuities together as
annuities. In addition, because the tax treatment of Income Annuities and the
pay-out option under Deferred Annuities is generally the same, they are
discussed together as income payments.
General
Deferred annuities are a means of setting aside money for future needs-usually
retirement. Congress recognizes how important saving for retirement is and has
provided special rules in the Internal Revenue Code (Code).
All IRAs receive tax deferral under the Code. Although there are no additional
tax benefits by funding your IRA with an annuity, it does provide you
additional insurance benefits such as an available guaranteed income for life.
We are not responsible for determining if your employer's plan or arrangement
satisfies the requirements of the Code and/or ERISA (the Employee Retirement
Income Security Act of 1974).
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Simply stated, earnings on Deferred Annuities are generally not subject to
income tax until they are withdrawn. This is known as tax deferral.
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A-PPA-38
<PAGE>
Withdrawals
Because these products are intended for retirement, if you make a taxable
withdrawal before age 59 1/2 you may incur a tax penalty.
When you withdraw money from your contract, the amount reported as income
differs depending on the type of:
o annuity you purchase (e.g., Non-Qualified or IRA); and
o pay-out option you elect.
We will withold a portion of the amount of your withdrawal for income taxes,
unless you elect otherwise. The amount we withhold is determined by the Code.
If you meet certain requirements, your Roth IRA earnings are free from Federal
income taxes.
Withdrawals Before Age 59 1/2
If you receive a taxable distribution from your contract before you reach age
59 1/2, this amount may be subject to a 10% penalty tax, in addition to
ordinary income taxes.
As indicated in the chart below, some taxable distributions prior to age 59 1/2
are exempt from the penalty. Some of these exceptions include amounts
received:
<TABLE>
<CAPTION>
Type of Contract
--------------------------------------------
Non Trad. Roth Simple
Qualified IRA IRA IRA SEP
----- --- --- --- ---
<S> <C> <C> <C> <C> <C>
In a series of substantially
equal payments made annually
(or more frequently)
for life or life expectancy (SEPP) x x x x x
After you die x x x x x
After you become totally disabled
(as defined in the Code) x x x x x
To pay deductible medical expenses x x x x
To pay medical insurance premiums if
you are unemployed x x x x
After December 31, 1997 to pay for
qualified higher education expenses, or x x x x
After December 31, 1997 for qualified
first time home purchases up to $10,000 x x x x
</TABLE>
* For SIMPLE IRA's the tax penalty for early withdrawals is generally
increased to 25% for withdrawals within the first two years of your
participation in the SIMPLE IRA.
A-PPA-39
<PAGE>
Systematic Withdrawal Program for Substantially Equal Periodic Payments (SEPP)
If you are considering using the Systematic Withdrawal Program for the purpose
of meeting the SEPP exception to the 10% tax penalty, consult with your tax
advisor.
If you receive systematic payments that you intend to qualify for the SEPP
exception, any modifications to your payment before age 59 1/2 or within five
years after beginning Systematic Withdrawal Program payments will result in
the retroactive imposition of the 10% penalty.
Minimum Distribution Requirements
As the table shows, under some contracts, generally you must begin receiving
withdrawals by April 1 of the calendar year following the year in which you
reach age 70 1/2.
A tax penalty of 50% applies to withdrawals which should have been taken but
were not. Complex rules apply to the timing and calculation of these
withdrawals.
Type of Contract
-------------------------------------------
Non Trad. Roth Simple
Qualified IRA IRA IRA SEP
----- --- --- --- ---
70 1/2 Minimum
distribution no yes no yes yes
rules apply
Non-Qualified Annuities
o Contributions to Non-Qualified annuities are on an "after-tax" basis, so
you only pay income taxes on your earnings. Generally, these earnings are
taxed when you receive them from the contract.
o Your Non-Qualified annuity may be exchanged for another Non-Qualified
annuity without paying income taxes if certain Code requirements are met.
o When a non-natural person owns a Non-Qualified annuity the annuity will
generally not be treated as an annuity for tax purposes and thus loses
the benefit of tax deferral. Corporations and certain other entities are
generally considered non-natural persons. However, an annuity owned by a
non-natural person as agent for an individual will be treated as an
annuity for tax purposes.
o Annuities issued after October 21, 1988 by the same insurance company in
the same year are combined for tax purposes. As a result, a greater
portion of your withdrawals may be considered taxable income than you
would otherwise expect.
- ------------------------------------------------------------------------------
You may combine the money required to be withdrawn from each of your
Traditional IRAs and withdraw this amount from any one or more of them.
After-tax means that your purchase payments to your annuity do not reduce your
taxable income or give you a tax deduction.
- ------------------------------------------------------------------------------
A-PPA-40
<PAGE>
In those limited situations where the annuity is beneficially owned by a
non-natural person and the annuity qualifies as such for Federal income tax
purposes, the entity may have a limited ability to deduct interest or, in the
case of an insurance company, to deduct insurance reserves or incurred losses.
Contributions
Although the Code does not limit the amount of your purchase payments, your
contract may limit them.
Withdrawals
Generally, when you make a withdrawal from your non-qualified annuity, the
Code treats such a withdrawal as:
o First coming from earnings (and thus subject to income tax); and
o Then from your purchase payments (which are not subject to income tax).
o This rule does not apply to payments made pursuant to an income pay-out
option under your contract
Different tax rules apply to payments made pursuant to an income annuity
pay-out option under your contract. They are subject to an "exclusion ratio"
which determines how much of each payment is treated as:
o A non-taxable return of your contributions; and
o A taxable payment of earnings.
If you choose an income annuity payout option we generally will tell you how
much of each income payment is a non-taxable return of contributions.
Generally, once the total amount treated as a non-taxable return of your
purchase payments equals your purchase payments, then all remaining income
payments are fully taxable.
Under the Code, withdrawals from Non-Qualified annuities need not be made by a
particular age. However, it is possible that the Internal Revenue Service may
determine that you must take a lump sum withdrawal or elect to receive income
payments by a certain age (e.g., 85).
After Death
If you die before payments under an income annuity begin, we must make payment
of your entire interest in the contract within five years of your death or
begin payments under an income annuity allowed by the Code to your beneficiary
within one year of your death.
If you die after income payments begin, payments must continue to be made at
least as rapidly as before your death in accordance with the income type
selected.
If you die before all purchase payments are returned, the unreturned amount
may be deductible on your final income tax return or excluded from income by
your beneficiary if income payments continue after your death.
- ------------------------------------------------------------------------------
If you die during the accumulation phase of a Deferred Annuity and your spouse
is your beneficiary or a co-owner he or she may elect to continue as "owner"
of the contract.
- ------------------------------------------------------------------------------
A-PPA-41
<PAGE>
Individual Retirement Annuities
[Traditional IRA, Roth IRA, SIMPLE IRAs and SEPs]
Generally, except for Roth IRAs, IRAs can accept deductible (or pre-tax)
contributions. Deductible or pre-tax purchase payments will be taxed when
distributed from the contract.
o Your annuity is generally not forfeitable (e.g. not subject to claims of
your creditors) and you may not transfer it to someone else.
o You can transfer your IRA proceeds to a similar IRA, (or a SIMPLE IRA to
a Traditional IRA after two years), without incurring Federal income
taxes if certain conditions are satisfied.
Traditional IRA Annuities
Contributions
Generally:
o Contributions to Traditional and Roth IRAs are limited to the lesser of
100% of compensation or $2,000 per year. A $2,000 contribution can also
be made for a non-working spouse provided the couple's compensation is at
least equal to their aggregate contributions.
o Contributions in excess of this amount may be subject to a penalty tax.
o Contributions are generally permitted up to age 70 1/2.
o These age and dollar limits do not apply to tax-free rollovers or
transfers.
o If certain conditions are met, you can change your Traditional IRA
contribution to a Roth IRA before you file your income tax return
(including filing extensions).
Withdrawals
Withdrawals are included in income except for the portion that represents a
return of non-deductible purchase payments. This portion is determined based
on a ratio of all non-deductible contributions to the total values of all your
IRAs.
After Death
Generally, if you die before required minimum distribution withdrawals have
begun we must make payment of your entire interest within five years after the
year of your death or begin income payments under an income annuity allowed by
the Code to your beneficiary by December 31st of the year after your death.
If your spouse is your beneficiary, and, if your contract permits, your spouse
may delay the start of income payments until December 31 of the year in which
you would have reached age 70 1/2.
- ------------------------------------------------------------------------------
Your total annual contributions to all your Traditional and Roth IRAs may not
exceed the lesser of $2,000 or 100% of your compensation.
In some cases, your purchase payments may be tax deductible.
If your spouse is your beneficiary and if your contract permits, he or she may
elect to continue as "owner" of the contract.
- ------------------------------------------------------------------------------
A-PPA-42
<PAGE>
If you die after required withdrawals begin, payments must continue at least
as rapidly as under the distribution method in effect at your death.
Roth IRA Annuities
General
Roth IRAs are different from other IRAs because you have the opportunity to
enjoy tax-free earnings. However, you can only make after-tax contributions to
a Roth IRA.
Contributions
Roth IRA contributions are non-deductible and are limited to the lesser of
100% of compensation or $2,000 per year. You may contribute up to the annual
contribution limit in 1999 if your adjusted gross income does not exceed
$95,000 ($150,000 for married couples filing jointly). Contribution limits are
phased out if your income is between:
Status Income
---------- -----------
Individual $95,000--$110,000
Married filing jointly $150,000--$160,000
Married filing separately $0--$10,000
o Annual contribution limits do not apply to a rollover from a Roth IRA to
another Roth IRA or a conversion from a Traditional IRA to a Roth IRA.
o You can contribute to a Roth IRA after age 70 1/2.
o If you exceed the contribution limits you may be subject to a tax penalty.
o If certain conditions are met, you can change your Roth IRA contribution
to a Traditional IRA before you file your income return (including filing
extensions).
Withdrawals
Generally withdrawals of earnings from Roth IRAs are free from federal income
tax if they meet the following two requirements:
1) The withdrawal is made:
o At least five taxable years after your first contribution to a Roth IRA,
and
2) the withdrawal is made:
o When you reach age 59 1/2;
o Upon your death or disability; or
o For a qualified first-time home purchase (up to $10,000).
Withdrawals of earnings which do not meet these requirements are taxable and a
10% penalty tax may apply if made before age 59 1/2.
- ------------------------------------------------------------------------------
Annual contributions to your IRAs, including Roth IRAs, may not exceed the
lesser of $2,000 or 100% of your "compensation" as defined by the Code, except
for "spousal" IRAs.
- ------------------------------------------------------------------------------
A-PPA-43
<PAGE>
Withdrawals from a Roth IRA are made first from purchase payments and then
from earnings. Generally, you do not pay income tax on withdrawals of purchase
payments. However, withdrawals of taxable converted amounts prior to age 59 1/2
will be subject to the 10% penalty tax (unless you meet an exception) if made
within 5 taxable years of such conversion.
In addition, if you withdraw converted money in 1998, 1999 or 2000 which
received the special four year income inclusion treatment discussed later, the
withdrawal will be included in income in the year of the withdrawal (in addition
to the amounts to be included under the four year income inclusion election).
The total aggregate amount to be included in income shall not exceed the total
taxable amount of the conversion.
The order in which money is withdrawn from a Roth IRA is as follows:
(All Roth IRAs owned by a taxpayer are combined for withdrawal purposes.)
o The first money withdrawn is any annual (non-conversion/rollover)
contributions to the Roth IRA. These are received tax and penalty free.
o The next money withdrawn is from conversion/rollover contributions from a
non-Roth IRA, on a first-in, first-out basis. For these purposes,
distributions are treated as coming first from the taxable portion of the
conversion/rollover contribution. As previously discussed, depending upon
when it occurs, withdrawals of taxable converted amounts may be subject
to a penalty tax, or result in the acceleration of inclusion of income.
o The next money withdrawn is from earnings in the Roth IRA. This is
received tax-free if it meets the requirements previously discussed,
otherwise it is subject to federal income tax and an additional 10%
penalty tax may apply if you are under age 59 1/2.
Conversion
You may convert/rollover an existing IRA to a Roth IRA if your adjusted gross
income does not exceed $100,000 in the year you convert.
Except to the extent you have non-deductible IRA contributions, the amount
converted from an existing IRA into a Roth IRA is taxable. Generally, the 10%
early withdrawal penalty does not apply to conversions/rollovers. (See
exception discussed previously.) For conversions that occurred in 1998, you
could have elected to include the taxable amount in income over a four year
period beginning in 1998.
Unless you elect otherwise, amounts converted from a Traditional IRA to a Roth
IRA will be subject to income tax withholding. The amount withheld is
determined by the Code.
- ------------------------------------------------------------------------------
If you are married but file separately, you may not convert an existing IRA
into a Roth IRA.
- ------------------------------------------------------------------------------
A-PPA-44
<PAGE>
If you mistakenly convert or otherwise wish to change your Roth IRA
contribution to a Traditional IRA contribution, the tax law now allows you to
reverse your conversion provided you do so before you file your tax return for
the year of the contribution and if certain conditions are met.
After Death
Generally, when you die we must make payment of your entire interest within
five years after the year of your death or begin income payments under an
income annuity allowed by the Code to your beneficiary by December 31st of the
year after your death.
If your spouse is your beneficiary and if your contract permits, he or she may
elect to continue as "owner" of the contract.
A-PPA-45
<PAGE>
Table of Contents for the Statement of Additional Information
Page
Cover Page .............................................................. 1
Table of Contents ....................................................... 1
Independent Auditors .................................................... 2
Services ................................................................ 2
Year 2000 ............................................................... 2
Distribution of Certificates and Interests in the
Deferred Annuities and Income Annuities ........................... 2
Experience Factor ....................................................... 2
Early Withdrawal Charge ................................................. 2
Variable Income Payments ................................................ 2
Investment Management Fees .............................................. 5
Performance Data and Advertisement of
the Separate Account .............................................. 6
Voting Rights ........................................................... 7
ERISA ................................................................... 8
Taxes ................................................................... 9
Performance Data ........................................................ 22
Financial Statements of the Separate Account ............................ 35
Financial Statements of MetLife ......................................... 61
A-PPA-46
<PAGE>
Appendix
Premium Tax Table
If you are a resident of one of the following jurisdictions, the percentage
amount listed by that jurisdiction is the premium tax rate which will be
applied to your Deferred Annuity or Income Annuity.
Non-Qualified and Traditional IRA, SIMPLE IRA
Roth IRA Deferred and SEP Deferred
Annuities and Income Annuities and
Annuities Income Annuities(1)
California ............. 2.35% 0.5%(2)
Kentucky(3) ............ 2.0% 2.0%
Maine .................. 2.0%
Nevada ................. 3.5%
Puerto Rico ............ 1.0% 1.0%
South Dakota ........... 1.25%
U.S. Virgin Islands .... 5.0% 5.0%
West Virginia .......... 1.0% 1.0%
Wyoming ................ 1.0%
1 Premium tax rates applicable to Traditional IRA, SIMPLE IRA and SEP
Deferred Annuities and Income Annuities purchased for use in
connection with individual retirement trust or custodial accounts
meeting the requirements of Section 408(a) of the Code are included
under the column heading "Traditional IRA, SIMPLE IRA and SEP
Deferred Annuities and Income Annuities."
2 With respect to Deferred Annuities and Income Annuities purchased for
use in connection with individual retirement trust or custodial
accounts meeting the requirements of Section 408(a) of the Code, the
annuity tax rate in California is 2.35% instead of 0.5%.
3 The premium tax in Kentucky is repealed effective January 1, 2000.
PEANUTS (Copyright) United Feature Syndicate, Inc.
(Copyright) 1999 Metropolitan Life Insurance Company
A-PPA-47
<PAGE>
Request For a Statement of
Additional Information/Change of Address
If you would like any of the following Statements of Additional Information,
or have changed your address, please check the appropriate box below and
return to the address below.
o Metropolitan Life Separate Account E, Metropolitan Series Fund Inc.
o I have changed my address. My current address is:
Name
-------------------------- ---------------------------------
(Contract Number)
Address
---------------------------------
---------------------------------
- --------------------------------- ---------------------------------
(Signature) zip
Metropolitan Life Insurance Company
Attn: Brian Mack
Retirement and Savings Center, Area 2H
One Madison Avenue
New York, NY 10010
<PAGE>
MetLife(Registered)
Bulk Rate
U.S. Postage Paid
Rutland, VT
Permit 220
Metropolitan Life Insurance Company
Johnstown Office, 500 Schoolhouse Road
Johnstown, PA 15904-2914
Address Service Requested
<PAGE>
April 30, 1999
Preference Plus(Registered) Account Variable Annuity Contracts
Issued by Metropolitan Life Insurance Company
This Prospectus describes individual and group Preference Plus contracts for
deferred variable annuities ("Deferred Annuities") and Preference Plus immediate
variable income annuities ("Income Annuities").
- --------------------------------------------------------------------------------
You decide how to allocate your money among the various available investment
choices. The investment choices available to you are listed in the contract for
your Deferred Annuity or Income Annuity. Your choices may include the Fixed
Interest Account (not described in this Prospectus) and investment divisions
available through Metropolitan Life Separate Account E which, in turn, invest in
the following corresponding portfolios of the Metropolitan Series Fund, Inc.
("Metropolitan Fund") and a portfolio of the Calvert Variable Series, Inc.
("Calvert Fund"):
State Street Research Aggressive Growth
State Street Research Diversified
State Street Research Growth
State Street Research Income
Harris Oakmark Large Cap Value
Janus Mid Cap
Loomis Sayles High Yield Bond
Neuberger Berman Partners Mid Cap Value
Santander International Stock
Scudder Global Equity
T. Rowe Price Large Cap Growth
T. Rowe Price Small Cap Growth
Lehman Brothers Aggregate Bond Index
MetLife Stock Index
Morgan Stanley EAFE(Registered) Index
Russell 2000(Registered) Index
Calvert Social Balanced
How to learn more:
Before investing, read the information in this Prospectus about the Deferred
Annuities, Income Annuities and Metropolitan Life Separate Account E. Keep this
Prospectus for future reference. For more information, request a copy of the
Statement of Additional Information ("SAI"), dated April 30, 1999. The SAI is
considered part of this Prospectus as though it were included in the Prospectus.
The Table of Contents of the SAI appears on page B-PPA-46 of this Prospectus. To
request a free copy of the SAI or to ask questions, write or call:
Metropolitan Life Insurance Company
Retirement & Savings Center, Area 2H
One Madison Avenue
New York, NY 10010-3690
Attention: Brian Mack
Phone: (800) 553-4459
The Securities and Exchange Commission has a website (http://www.sec.gov) which
you may visit to view this Prospectus, SAI and other information. The Securities
and Exchange Commission has not approved or disapproved these securities or
determined if this Prospectus is truthful or complete. Any representation
otherwise is a criminal offense.
The current Metropolitan Fund prospectus and, if applicable, the Calvert Fund
prospectus are attached to the back of this prospectus. You should also read
these prospectuses carefully before purchasing a Deferred Annuity or Income
Annuity. This Prospectus is not valid unless attached to Metropolitan Fund and,
if applicable, Calvert Fund prospectuses.
MetLife(Registered)
- --------------------------------------------------------------------------------
Deferred Annuities Available:
o TSA
o PEDC
o Keogh
o 403(a)
Income Annuities Available:
o TSA
o PEDC
o Keogh
o 403(a)
A word about investment risk:
An investment in any of these variable annuities involves investment risk. You
could lose money you invest. Money invested is NOT:
o a bank deposit or obligation;
o federally insured or guaranteed; or
o endorsed by any bank or other financial institution.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Important Terms You Should Know ................................... B-PPA-4
Table of Expenses ................................................. B-PPA-6
Accumulation Unit Values Table .................................... B-PPA-9
MetLife ........................................................... B-PPA-13
Metropolitan Life Separate Account E .............................. B-PPA-13
The Variable Annuities in this Prospectus ......................... B-PPA-14
A Deferred Annuity ........................................... B-PPA-14
An Income Annuity ............................................ B-PPA-14
Your Investment Choices ........................................... B-PPA-15
Deferred Annuities ................................................ B-PPA-16
The Deferred Annuity and Your Retirement Plan ................ B-PPA-17
Automated Investment Strategies .............................. B-PPA-17
Purchase Payments ............................................ B-PPA-18
Allocation of Purchase Payments .............................. B-PPA-19
Limits on Purchase Payments ................................ B-PPA-19
The Value of Your Investment ................................. B-PPA-19
Transfers .................................................... B-PPA-20
Access to Your Money ......................................... B-PPA-21
Systematic Withdrawal Program for TSA
Deferred Annuities ......................................... B-PPA-21
Minimum Distribution ....................................... B-PPA-22
Contract Fee ................................................. B-PPA-23
Charges ...................................................... B-PPA-23
Insurance-Related Charge ................................... B-PPA-23
Investment-Related Charge .................................. B-PPA-24
Premium Taxes ................................................ B-PPA-24
Early Withdrawal Charges ..................................... B-PPA-24
When No Early Withdrawal Charge Applies .................... B-PPA-25
When Another Early Withdrawal Charge May Apply ............. B-PPA-27
Free Look .................................................... B-PPA-28
Death Benefit ................................................ B-PPA-29
Pay-out Options (or Income Options) .......................... B-PPA-29
Income Annuities .................................................. B-PPA-30
Income Payment Types ......................................... B-PPA-31
B-PPA-2
<PAGE>
Allocation ................................................... B-PPA-32
Minimum Size of Your Income Payment .......................... B-PPA-32
The Value of Your Income Payments ............................ B-PPA-32
Transfers .................................................... B-PPA-33
Contract Fee ................................................. B-PPA-33
Charges ...................................................... B-PPA-34
Insurance-Related Charge ................................... B-PPA-34
Investment-Related Charge .................................. B-PPA-34
Premium Taxes ................................................ B-PPA-34
Free Look .................................................... B-PPA-34
General Information ............................................... B-PPA-35
Administration ............................................... B-PPA-35
Purchase Payments .......................................... B-PPA-35
Confirming Transactions .................................... B-PPA-35
Transactions by Telephone .................................. B-PPA-36
Processing of Certain Transactions ......................... B-PPA-36
Valuation .................................................. B-PPA-36
Advertising Performance ...................................... B-PPA-37
Changes to Your Deferred Annuity or Income Annuity ........... B-PPA-38
Voting Rights ................................................ B-PPA-38
Who Sells the Deferred Annuities and Income Annuities ........ B-PPA-39
Financial Statements ......................................... B-PPA-40
Your Spouse's Rights ......................................... B-PPA-40
When We Can Cancel Your Deferred Annuity or
Income Annuity ............................................... B-PPA-40
Income Taxes ...................................................... B-PPA-41
Table of Contents of the Statement of Additional
Information ....................................................... B-PPA-46
Appendix for Premium Tax Table .................................... B-PPA-47
Appendix II for Texas Optional Retirement Program ................. B-PPA-48
MetLife does not intend to offer the Deferred Annuities or Income Annuities
anywhere they may not lawfully be offered and sold. MetLife has not authorized
any information or representations about the Deferred Annuities or Income
Annuities other than the information in this Prospectus, any attached prospectus
or supplements to the prospectuses or any supplemental sales material we
authorize.
B-PPA-3
<PAGE>
Important Terms You Should Know
Account Balance
When you purchase a Deferred Annuity an account is set up for you. Your Account
Balance is the total amount of money credited to you under your Deferred Annuity
including money in the investment divisions of the Separate Account and the
Fixed Interest Account.
Accumulation Unit Value
Under a Deferred Annuity, money paid-in or transferred into an investment
division of the Separate Account is credited to you in the form of accumulation
units. Accumulation units are established for each investment division. We
determine the value of these accumulation units each day the New York Stock
Exchange is open for regular trading. The values increase or decrease based on
the investment performance of the corresponding underlying portfolios.
Annuity Unit Value
Under an Income Annuity or variable payout option, the money paid-in or
transferred into an investment division of the Separate Account is held in the
form of annuity units. Annuity units are established for each investment
division. We determine the value of these annuity units each day the New York
Stock Exchange is open for regular trading. The values increase or decrease
based on the investment performance of the corresponding underlying portfolios.
Assumed Investment Return (AIR)
Under an income annuity, the AIR is a percentage rate of return assumed to
determine the amount of the first variable income payment. The AIR is also the
benchmark that is used to calculate the investment performance of a given
investment division to determine all subsequent payments to you.
Contract
A contract is the legal agreement between you and MetLife or the certificate
under a group annuity contract between MetLife and your employer, plan trustee
or other entity. You as the participant or annuitant receive a certificate under
the contract. The contract contains relevant provisions of your Deferred Annuity
or Income Annuity. MetLife issues contracts for each of the annuities described
in this Prospectus.
Contract Year
Generally, the Contract Year for a Deferred Annuity is the period ending on the
last day of the month in which the anniversary of when we issue the annuity
occurs and each following 12 month period. However, depending on underwriting
and plan requirements, the first Contract Year may range from the initial three
to 15 months after the Deferred Annuity is issued.
B-PPA-4
<PAGE>
Early Withdrawal Charge
The early withdrawal charge is the amount we deduct from your Account Balance in
addition to your requested withdrawal amount, if you withdraw money prematurely
from a Deferred Annuity. This charge is often referred to as a deferred sales
load or back-end sales load.
Investment Division
Investment divisions are subdivisions of the Separate Account. When you allocate
or transfer money to an investment division, the investment division purchases
shares of a portfolio (with the same name) within the Metropolitan Fund or
Calvert Fund.
MetLife
Metropolitan Life Insurance Company is the company that issues the Deferred
Annuities and Income Annuities. Throughout this Prospectus, MetLife is also
referred to as "we," "us" or "our."
MetLife Designated Office
The MetLife Designated Office is the MetLife office that will generally handle
the processing of all your requests concerning your Deferred Annuity or Income
Annuity. MetLife will notify you and provide you with the address of your
MetLife Designated Office.
Separate Account
A separate account is an investment account. All assets contributed to
investment divisions under the Deferred Annuities and Income Annuities are
pooled in the Separate Account and maintained for the benefit of investors in
Deferred Annuities and Income Annuities.
You
In this Prospectus, depending on the context, "you" may mean either the
purchaser of the Deferred Annuity or Income Annuity, or, the participant or
annuitant for whom money is invested under certain group arrangements. In cases
where we are referring to giving instructions or making payments to us for PEDC
contracts, "you" means the employer or trustee. For Keogh contracts, "you" means
the trustee of the Keogh plan. Under PEDC or Keogh plans where the participant
or annuitant is allowed to choose among investment choices, "you" means the
participant or annuitant where it refers to giving instructions among the
investment choices.
Variable Annuity
An annuity in which returns/income payments are based upon the performance of
investments such as stocks and bonds held by one or more underlying portfolios.
You assume the investment risk for any amounts allocated to the investment
divisions in a variable annuity.
B-PPA-5
<PAGE>
TABLE OF EXPENSES--PREFERENCE PLUS DEFERRED ANNUITIES AND INCOME ANNUITIES
The following table shows the Separate Account, Metropolitan Fund and Calvert
Fund charges and expenses you will incur. The table is on past experience and is
subject to change. It is not intended to show your actual expenses which may be
higher or lower. The table does not show fees for the Fixed Interest Account or
premium taxes which may apply. We have provided examples to show you the impact
of Separate Account, Metropolitan Fund and Calvert Fund charges and expenses on
a hypothetical investment of $1,000 that has an assumed 5% return on the
investment.
Separate Account, Metropolitan Fund and Calvert Fund expenses for the fiscal
year ending December 31, 1998:
Contractowner Transaction Expenses For All
Investment Divisions Currently Offered
Sales Load Imposed on Purchases.......................... None
Deferred Sales Load (as a percentage of the
purchase payment funding the withdrawal during the
accumulation period)(1)................................. From 0% to 7%
Exchange Fee............................................. None
Surrender Fee............................................ None
Annual Contract Fee (2)..................................... None
Separate Account Annual Expenses (as a percentage
of average account value) (3)
General Administrative Expenses Charge................... .50%
Mortality and Expense Risk Charge........................ .75%
Total Separate Account Annual Expenses................... 1.25%
Metropolitan Fund Annual Expenses (as a percentage of average net assets)
<TABLE>
<CAPTION>
OTHER TOTAL OTHER TOTAL
- EXPENSES EXPENSES EXPENSES EXPENSES
MANAGEMENT WITHOUT WITHOUT AFTER EXPENSE AFTER EXPENSE
FEES REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
State Street Research Aggressive Growth
Portfolio (4)(5)................................... .71 .04 .75 .04 .75
State Street Research Diversified Portfolio (4)(5)... .43 .05 .48 .05 .48
State Street Research Growth Portfolio (4)(5)........ .48 .05 .53 .05 .53
State Street Research Income Portfolio (4)(5)........ .33 .06 .39 .06 .39
Harris Oakmark Large Cap Value Portfolio (5)(7)...... .75 .80 1.55 .20 .95
Janus Mid Cap Portfolio (5)(6)....................... .72 .09 .81 .09 .81
Loomis Sayles High Yield Bond Portfolio (6).......... .70 .35 1.05 .31 1.01
Neuberger Berman Partners Mid Cap Value
Portfolio (5)(7)................................... .70 .89 1.59 .20 .90
Santander International Stock Portfolio (4)(5)....... .75 .27 1.02 .27 1.02
Scudder Global Equity Portfolio (5)(6)............... .74 .28 1.02 .28 1.02
T. Rowe Price Large Cap Growth Portfolio (5)(7)...... .70 1.18 1.88 .20 .90
T. Rowe Price Small Cap Growth Portfolio (5)(6)...... .53 .14 .67 .14 .67
Lehman Brothers Aggregate Bond Index Portfolio (7)... .25 .32 .57 .23 .48
MetLife Stock Index Portfolio (4).................... .25 .05 .30 .05 .30
Morgan Stanley EAFE(Registered) Index Portfolio (7).. .30 .99 1.29 .25 .55
Russell 2000 Index Portfolio (7)..................... .25 .20 .45 .20 .45
Calvert Fund Annual Expenses (as a percentage of average
net assets)
<CAPTION>
OTHER TOTAL OTHER TOTAL
- EXPENSES EXPENSES EXPENSES EXPENSES
MANAGEMENT WITHOUT WITHOUT AFTER EXPENSE AFTER EXPENSE
FEES REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Calvert Social Balanced Portfolio (8).............. .70 .18 .88 .16 .86
</TABLE>
B-PPA-6
<PAGE>
Example
If you surrender your Deferred Annuity (withdraw all your money) at the end of
the time periods listed below, you would pay the following expenses on a $1,000
investment in each investment division listed below, assuming a 5% annual return
on assets:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Aggressive Growth Portfolio.................. $83 $108 $135 $234
State Street Research Diversified Portfolio........................ 81 99 121 205
State Street Research Growth Portfolio............................. 81 101 124 211
State Street Research Income Portfolio............................. 80 97 116 196
Calvert Social Balanced Portfolio.................................. 85 112 142 248
Harris Oakmark Large Cap Value Portfolio........................... 92 133 176 316
Janus Mid Cap Portfolio............................................ 84 110 138 241
Loomis Sayles High Yield Bond Portfolio............................ 86 117 151 265
Neuberger Berman Partners Mid Cap Value Portfolio.................. 92 134 179 320
Santander International Stock Portfolio............................ 86 116 149 263
Scudder Global Equity Portfolio.................................... 86 116 149 263
T. Rowe Price Large Cap Growth Portfolio........................... 95 143 193 348
T. Rowe Price Small Cap Growth Portfolio........................... 82 105 131 226
Lehman Brothers Aggregate Bond Index Portfolio..................... 81 102 126 215
MetLife Stock Index Portfolio...................................... 79 94 111 186
Morgan Stanley EAFE(Registered)Index Portfolio..................... 89 125 163 291
Russell 2000 Index Portfolio....................................... 85 114 146 255
</TABLE>
If you annuitize (elect a pay-out option under your Deferred Annuity) or do not
surrender your Deferred Annuity at the end of the time periods listed below, you
would pay the following expenses on a $1,000 investment in each investment
division listed below, assuming a 5% annual return on assets (9):
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Aggressive Growth Portfolio................... $21 $63 $109 $234
State Street Research Diversified Portfolio......................... 18 55 95 205
State Street Research Growth Portfolio.............................. 18 56 97 211
State Street Research Income Portfolio.............................. 17 52 90 196
Calvert Social Balanced Portfolio................................... 22 67 115 248
Harris Oakmark Large Cap Value Portfolio............................ 29 88 150 316
Janus Mid Cap Portfolio............................................. 21 65 112 241
Loomis Sayles High Yield Bond Portfolio............................. 24 72 124 265
Neuberger Berman Partners Mid Cap Value Portfolio................... 29 89 152 320
Santander International Stock Portfolio............................. 23 72 123 263
Scudder Global Equity Portfolio..................................... 23 72 123 263
T. Rowe Price Large Cap Growth Portfolio............................ 32 98 166 348
T. Rowe Price Small Cap Growth Portfolio............................ 20 61 105 226
Lehman Brothers Aggregate Bond Index Portfolio...................... 19 58 99 215
MetLife Stock Index Portfolio....................................... 16 49 85 186
Morgan Stanley EAFE(Registered) Index Portfolio..................... 26 80 137 291
Russell 2000 Index Portfolio........................................ 23 69 119 255
</TABLE>
B-PPA-7
<PAGE>
TABLE OF EXPENSES (continued)
1 There are times when the early withdrawal charge does not apply to amounts
that are withdrawn from a Deferred Annuity. Each Contract Year you may take
the greater of 10% (20% under certain Deferred Annuities) of your Account
Balance or your purchase payments made over 7 years ago free of early
withdrawal charges.
2 A $20 annual contract fee is imposed on money in the Fixed Interest
Account. This fee may be waived under certain circumstances. There is a one
time contract fee of $350 for Income Annuities. We do not charge this fee
if you elect a pay-out option under your Deferred Annuity and you have
owned your Deferred Annuity more than two years.
3 Our total Separate Account Annual Expenses will not exceed 1.25% of your
average balance in the investment divisions. For purposes of presentation
here, we estimated the allocation between general administrative expenses
and the mortality and expense risk charge.
4 Prior to May 16, 1993, we paid all expenses of the Metropolitan Fund (other
than management fees, brokerage commissions, taxes, interest and
extraordinary or non-recurring expenses).
5 Each Portfolio's management fee decreases when its assets grow to certain
dollar amounts. The "break point" dollar amounts at which the management
fee declines are more fully explained in the prospectus for the
Metropolitan Fund.
6 These Portfolios began operations on March 3, 1997. We paid all expenses
(other than management fees, brokerage commissions, taxes, interest and
extraordinary or non-recurring expenses) in excess of .20% of the average
net assets for each of the following Portfolios until the Portfolio's total
assets reached $100 million, or until March 2, 1999, whichever came first.
The expense information in the Table has been restated to reflect current
expenses as if they had been in effect during the entire prior year.
7 These Portfolios began operations on November 9, 1998. We pay all expenses
(other than management fees, brokerage commissions, taxes, interest and
extraordinary or non-recurring expenses) in excess of .20% (.25% for the
Morgan Stanley EAFE(Registered) Index Portfolio) of the average net assets
for each of the following Portfolios until the Portfolio's total assets
reach $100 million, or until November 8, 2000, whichever comes first. The
expense information in the Table has been restated to reflect current
expenses as if they had been in effect during the entire prior year.
8 Calvert Social Balanced Portfolio's management fees reflect an increase of
.01% which is attributed to an increase in transfer agency expenses. Part
of the Portfolio's other expenses are paid by a third party. The expense
information in the Table has been restated to reflect current expenses as
if they had been in effect during the entire prior year.
9 This example assumes no early withdrawal charges are applicable. In order
to make this assumption for a pay-out option under your Deferred Annuity,
we also assumed that you selected an income payment type under which you
will receive payments over your lifetime or for a period of at least five
full years.
B-PPA-8
<PAGE>
ACCUMULATION UNIT VALUES FOR EACH INVESTMENT DIVISION
(For an accumulation unit outstanding throughout the period)
These tables and bar charts show fluctuations in the Accumulation Unit Values
for each investment division from year end to year end, we have included bar
charts. The information in this table has been derived from the Separate
Account's full financial statements or other reports (such as the annual
report).
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
PREFERENCE PLUS DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Aggressive Growth Division............. 1998 $25.05 $28.12 38,975
[YEAR END ACCUMULATION UNIT VALUE 1997 23.77 25.05 43,359
BAR CHARTS OMITTED FOR THIS DIVISION 1996 22.35 23.77 43,962
AND EACH OF THE 10 FOLLOWING DIVISIONS] 1995 17.47 22.35 33,899
1994 18.03 17.47 26,890
1993 14.89 18.03 17,094
1992 13.66 14.89 5,747
1991 8.31 13.66 1,060
1990 10.00(a) 8.31 49
State Street Research Diversified Division................... 1998 22.89 27.05 73,897
1997 19.22 22.89 62,604
1996 17.00 19.22 52,053
1995 13.55 17.00 42,712
1994 14.15 13.55 40,962
1993 12.70 14.15 31,808
1992 11.75 12.70 7,375
1991 9.52 11.75 1,080
1990 10.00(a) 9.52 44
</TABLE>
B-PPA-9
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
PREFERENCE PLUS DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Growth Division........................ 1998 $27.10 $34.30 64,053
1997 21.37 27.10 60,102
1996 17.71 21.37 49,644
1995 13.47 17.71 38,047
1994 14.10 13.47 32,563
1993 12.48 14.10 24,608
1992 11.32 12.48 9,432
1991 8.61 11.32 2,824
1990 10.00(a) 8.61 178
State Street Research Income Division........................ 1998 17.89 19.33 20,060
1997 16.49 17.89 16,307
1996 16.12 16.49 16,604
1995 13.65 16.12 15,252
1994 14.27 13.65 13,923
1993 12.98 14.27 14,631
1992 12.29 12.98 5,918
1991 10.60 12.29 1,210
1990 10.00(a) 10.60 32
Calvert Social Balanced Division............................. 1998 22.16 25.45 1,367
1997 18.68 22.16 1,181
1996 16.80 18.68 995
1995 13.11 16.80 787
1994 13.71 13.11 630
1993 12.86 13.71 473
1992 12.10 12.86 239
1991 10.58 12.10 63
1990 10.00(b) 10.58 0
</TABLE>
B-PPA-10
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
PREFERENCE PLUS DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Janus Mid Cap Division.......................................... 1998 $12.69 $17.19 19,031
1997 10.00(c) 12.69 7,417
Loomis Sayles High Yield Bond Division.......................... 1998 10.51 9.60 3,882
1997 10.00(c) 10.51 2,375
Santander International Stock Division.......................... 1998 13.28 16.07 14,330
1997 13.77 13.28 15,865
1996 14.19 13.77 17,780
1995 14.25 14.19 17,553
1994 13.74 14.25 16,674
1993 9.41 13.74 6,921
1992 10.61 9.41 966
1991 10.00(d) 10.61 92
Scudder Global Equity Division.................................. 1998 10.85 12.43 7,712
1997 10.00(c) 10.85 4,826
T. Rowe Price Small Cap Growth Division......................... 1998 11.76 12.02 13,119
1997 10.00(c) 11.76 6,932
</TABLE>
B-PPA-11
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
PREFERENCE PLUS DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MetLife Stock Index Division.................................... 1998 $29.28 $37.08 71,204
1997 22.43 29.28 58,817
1996 18.52 22.43 43,141
1995 13.70 18.52 29,883
1994 13.71 13.70 23,458
1993 12.67 13.71 18,202
1992 11.94 12.67 8,150
1991 9.32 11.94 1,666
1990 10.00(a) 9.32 55
Harris Oakmark Large Cap Value Division......................... 1998 10.00(e) 9.71 386
Lehman Brothers Aggregate Bond Division......................... 1998 10.00(e) 10.12 793
Morgan Stanley EAFE(Registered)Index Division................... 1998 10.00(e) 10.79 342
Neuberger Berman Partners Mid Cap Value Division................ 1998 10.00(e) 10.73 297
Russell 2000 Index Division..................................... 1998 10.00(e) 10.53 598
T. Rowe Price Large Cap Growth Division......................... 1998 10.00(e) 11.01 407
</TABLE>
- ----------
In addition to the above mentioned Accumulation Units, there were cash reserves
of $22,530,195 as of December 31, 1998, applicable to Income Annuities
(including those not described in this Prospectus) receiving annuity payouts.
(a) Inception Date July 2, 1990.
(b) Inception Date September 17, 1990.
(c) Inception Date March 3, 1997.
(d) Inception Date July 1, 1991.
(e) Inception Date November 9, 1998. A bar chart does not appear for this
Division because there is less than one calendar year of performance
history.
B-PPA-12
<PAGE>
MetLife
Our main office is located at One Madison Avenue, New York, New York 10010.
MetLife was formed under laws of New York State in 1868. Headquartered in New
York City, MetLife is a leading provider of insurance and financial services to
a broad spectrum of individual and institutional customers. With approximately
$359 billion worth of assets under management as of December 31, 1998, MetLife
provides individual insurance and investment products to approximately 9 million
households in the United States. MetLife also provides group insurance and
investment products to corporations and other institutions employing over 33
million people.
We are a mutual life insurance company. In November 1998, MetLife announced its
intention to convert to a stock company from a mutual company. MetLife's board
of directors authorized the development of a plan to "demutualize." The plan
will be subject to approval by the board of directors, the State of New York
Insurance Department and policyholders. As of April 30, 1999, we do not know the
details of the plan or when or if it will take effect.
Metropolitan Life Separate Account E
We established Metropolitan Life Separate Account E on September 27, 1983. The
purpose of the Separate Account is to hold the variable assets that underlie the
Preference Plus Account Variable Annuity Contracts and some other variable
annuity contracts we issue. We have registered the Separate Account with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940.
The Separate Account's assets are solely for the benefit of those who invest in
the Separate Account and no one else, including our creditors. We are obligated
to pay all money we owe under the Deferred Annuities and Income Annuities even
if that amount exceeds the assets in the Separate Account. The assets of the
Separate Account are held in our name on behalf of the Separate Account and
legally belong to us. All the income, gains, and losses (realized or unrealized)
resulting from these assets are credited to or charged against the contracts
issued from this Separate Account without regard to our other business.
B-PPA-13
<PAGE>
The Variable Annuities in this Prospectus
There are two types of variable annuities described in this Prospectus: Deferred
Annuities and Income Annuities. These annuities are "variable" because the value
of your account or income payment varies, based on the investment performance of
the investment divisions you choose. In short, the value of your Deferred
Annuity, your income payments under a variable pay-out option of your Deferred
Annuity, or your income payments under your Income Annuity, may go up or down.
Since the investment performance is not guaranteed, your money is at risk. The
degree of risk will depend on the investment divisions you select. The
Accumulation Unit Value or Annuity Unit Value for each investment division rises
or falls based on the investment performance (or "experience") of the Portfolio
with the same name.
The Deferred Annuities have a fixed interest rate option called the Fixed
Interest Account. With the Fixed Interest Account, your money earns a rate of
interest that we guarantee. Income Annuities and the variable pay-out options
under the Deferred Annuities have a fixed payment option called the Fixed Income
Option. Under the Fixed Income Option, we guarantee the amount of your fixed
income payments. These fixed options are not described in this Prospectus
although we occasionally refer to them.
A Deferred Annuity
You accumulate money in your account during the pay-in phase by making one or
more purchase payments. MetLife will hold your money and credit any investment
returns as long as the money remains in your account.
The pay-out phase begins when you either take all of your money out of the
account or elect to have us pay you "income" payments using the money in your
account. The number and the amount of the income payments you receive will
depend on such things as the type of pay-out option you choose, your investment
choices, and the amount used to provide your income payments. Because Deferred
Annuities offer various insurance benefits such as pay-out options, including
our guarantee of income for your lifetime, they are "annuities."
An Income Annuity
An Income Annuity, also known as an immediate annuity, only has a "pay-out"
phase. You make a single purchase payment and select the type of pay-out option
suited to your needs. Some of the pay-out options guarantee an income stream for
your lifetime or your and another's lifetimes. Some Income Annuities guarantee a
time period of your choice
- --------------------------------------------------------------------------------
Group Deferred Annuities and group Income Annuities are also available. They are
offered to an employer, association, trust or other group for its employees,
members or participants.
A Deferred Annuity consists of two phases: the accumulation or "pay-in" phase
and the income annuity or "pay-out" phase.
- --------------------------------------------------------------------------------
B-PPA-14
<PAGE>
over which MetLife will make income payments. Income Annuities also have other
features. The amount of your income payments you receive will depend on such
things as the type of pay-out option you choose, your investment choices and the
amount of your purchase payment.
Your Investment Choices
The Metropolitan Fund, the Calvert Fund and each of their Portfolios are more
fully described in their respective prospectuses and SAIs. The Metropolitan
Fund's prospectus is attached at the end of this Prospectus. If the Calvert
Social Balanced Portfolio is available to you, then you will also receive a
Calvert Fund prospectus. You should read the prospectuses carefully before
making purchase payments to the investment divisions. The SAIs are available
upon your request.
The investment choices are:
Lehman Brothers Aggregate Bond Index Portfolio
State Street Research Income Portfolio
State Street Research Diversified Portfolio
Calvert Social Balanced Portfolio
MetLife Stock Index Portfolio
Harris Oakmark Large Cap Value Portfolio
T. Rowe Price Large Cap Growth Portfolio
State Street Research Growth Portfolio
Neuberger Berman Partners Mid Cap Value Portfolio
Janus Mid Cap Portfolio
Loomis Sayles High Yield Bond Portfolio
State Street Research Aggressive Growth Portfolio
Russell 2000 Index Portfolio
T. Rowe Price Small Cap Growth Portfolio
Scudder Global Equity Portfolio
Morgan Stanley EAFE(Registered) Index Portfolio
Santander International Stock Portfolio
Some of the investment choices may not be available under the terms of the
Deferred Annuity or Income Annuity. The contract will indicate the investment
divisions that are available to you. Your investment choices may be limited
because:
o Some of the investment divisions are not approved in your state.
o Your employer, association or other group contractholder limits the number
of available investment divisions.
o We have restricted the available investment divisions.
o For Income Annuities, some states limit you to four choices (four
investment divisions or three investment divisions and the Fixed Income
Option).
- --------------------------------------------------------------------------------
The degree of investment risk you assume will depend on the investment divisions
you choose. We have listed your choices in order of risk from the most
conservative to the most aggressive.
There is a possibility you will lose principal in the investment choices.
However, they generally offer the opportunity for greater returns over the long
term than our guaranteed fixed options.
- --------------------------------------------------------------------------------
B-PPA-15
<PAGE>
The investment divisions buy and sell shares of corresponding mutual fund
portfolios. These Portfolios, which are either part of the Metropolitan Fund or
the Calvert Fund, invest in stocks, bonds and other investments. All dividends
declared by the Portfolios are earned by the Separate Account and reinvested.
Therefore, no dividends are distributed to you under the Deferred Annuities or
Income Annuities. Dividends generally are reflected in an increase in the
Accumulation or Annuity Unit Value. You pay no transaction expenses (i.e.,
front-end sales load or back-end sales load charges) as a result of the Separate
Account's purchase or sale of these mutual fund shares. The Portfolios of the
Metropolitan Fund are available only by purchasing MetLife annuities and life
insurance policies and are never sold directly to the public. The Calvert Social
Balanced Portfolio is made available by the Calvert Fund only through various
insurance company annuities and life insurance policies.
The Metropolitan Fund and the Calvert Fund are each a "series" type fund
registered with the Securities and Exchange Commission as an "open-end
management investment company" under the Investment Company Act of 1940 (the
"1940 Act"). A "series" fund means that each Portfolio is one of several
available through the fund. Except for the Janus Mid Cap and the Calvert Social
Balanced Portfolios, each Portfolio is "diversified" under the 1940 Act.
The Portfolios of the Metropolitan Fund pay us a monthly fee for our services as
investment manager. The Calvert Social Balanced Portfolio pays Calvert Asset
Management Company, Inc. a monthly fee as its investment manager. These fees, as
well as the operating expenses paid by each Portfolio, are described as
applicable in the Metropolitan Fund and the Calvert Fund prospectuses and SAIs.
In addition, the Metropolitan Fund prospectus discusses other separate accounts
of MetLife and Metropolitan Tower Life Insurance Company that invest in the
Metropolitan Fund. The Calvert Fund prospectus discusses different separate
accounts of the various insurance companies that invest in the portfolios of the
Calvert Fund. The risks of these arrangements are also discussed in each fund's
prospectus.
Deferred Annuities
This Prospectus describes four kinds of Deferred Annuities under which you can
accumulate money:
o TSA (Tax Sheltered Annuity)
o PEDC (Public Employee Deferred Compensation)
o Keogh (Keogh plans under Section 401)
o 403(a) (Qualified Annuity plans under Section 403(a))
- --------------------------------------------------------------------------------
While the investment divisions and their comparably named Portfolios may have
names, investment objectives and management which are identical or similar to
publicly available mutual funds, these are not those mutual funds. The
Portfolios most likely will not have the same performance experience as any
publicly available mutual fund.
- --------------------------------------------------------------------------------
B-PPA-16
<PAGE>
Certain group Deferred Annuities may be issued to a bank that does nothing but
hold them as contractholder. Deferred Annuities may be either:
o Allocated (your Account Balance records are kept for you as an individual);
or
o Unallocated (Account Balance records are kept for a plan or group as a
whole).
The Deferred Annuity and Your Retirement Plan
If you participate through a retirement plan, the Deferred Annuity may provide
that all or some of your rights as described in this Prospectus are subject to
the plan's terms. Limitations on your rights may apply to investment choices,
automated investment strategies, purchase payments, withdrawals, transfers, the
death benefit and pay-out options. The Deferred Annuity may provide that a plan
administrative fee will be paid by making a withdrawal from your Account
Balance. We may rely on your employer's or plan administrator's statements to us
as to the terms of the plan or your entitlement to any amounts. We will not be
responsible for determining what your plan says. You should consult the Deferred
Annuity contract and plan document to see how you may be affected. If you are a
Texas Optional Retirement Program participant, please see Appendix II for
specific information which applies to you.
Automated Investment Strategies
There are five automated investment strategies available to you. These
investment strategies are available to you without any additional charge.
However, the investment strategies are not available to Keogh Deferred Annuities
or other unallocated contracts. As with any investment program, no strategy can
guarantee a gain - you can lose money. We may modify or terminate any of the
strategies at any time. You may have only one automated investment strategy in
effect at a time.
The Equity Generator(ServiceMark): An amount equal to the interest earned in the
Fixed Interest Account is transferred monthly to either the MetLife Stock Index
or State Street Research Aggressive Growth investment division, based on your
selection.
As an added benefit of this strategy, you will not pay early withdrawal charges
from your purchase payments, provided that 100% of your contributions are
allocated to the Fixed Interest Account for the life of your Deferred Annuity
and you never request allocation changes or transfers. Early withdrawal charges
may be taken from any of your earnings.
The Equalizer(ServiceMark): You start with equal amounts of money in the Fixed
Interest Account and your choice of either the MetLife Stock Index Division or
the State Street Research Aggressive Growth Division. Each quarter amounts are
transferred between the Fixed Interest Account and your chosen investment
division to make the value of each equal. Say you choose the MetLife Stock
- --------------------------------------------------------------------------------
These Deferred Annuities may be either issued to you as an individual or to a
group (you are then a participant under the group's Deferred Annuity).
We created these investment strategies to help you manage your money. You decide
if one is appropriate for you, based upon your risk tolerance and saving goals.
These strategies were designed to help you take advantage of the tax-deferred
status of an annuity.
- --------------------------------------------------------------------------------
B-PPA-17
<PAGE>
Index Division. If over the quarter, it outperforms the Fixed Interest Account,
money is transferred to the Fixed Interest Account. Conversely, if the Fixed
Interest Account outperforms the MetLife Stock Index Division, money is
transferred into the MetLife Stock Index Division.
The Rebalancer(ServiceMark): You select a specific asset allocation for your
entire Account Balance from among the investment divisions and the Fixed
Interest Account. Each quarter, we transfer amounts among these options to bring
the percentage of your Account Balance in each option back to your original
allocation.
The Index Selector(ServiceMark): You may select one of five asset allocation
models which are designed to correlate to various risk tolerance levels. Based
on the model you choose, your entire Account Balance is divided among the Lehman
Brothers Aggregate Bond Index, MetLife Stock Index, Morgan Stanley
EAFE(Registered) Index and Russell 2000 Index investment divisions and the Fixed
Interest Account. Each quarter, the percentage in each of these investment
divisions and the Fixed Interest Account is brought back to the original
percentage by transferring amounts among the investment divisions and the Fixed
Interest Account.
In the future, we may permit you to allocate less than 100% of your Account
Balance to this strategy. This strategy may experience more volatility than our
other strategies. The models are subject to change from time to time. We provide
the elements to formulate the models. We may rely on a third party for its
expertise in creating appropriate allocations.
The Allocator(ServiceMark): Each month a dollar amount you choose is transferred
from the Fixed Interest Account to any of the investment divisions you choose.
You select the day of the month and the number of months over which the
transfers will occur. A minimum transfer of $50 is the only requirement.
The Equity Generator and the Allocator are dollar cost averaging strategies.
Dollar cost averaging involves investing at regular intervals of time. Since
this involves continuously investing regardless of fluctuating prices, you
should consider whether you can continue the strategy through periods of
fluctuating prices.
Purchase Payments
There is no minimum purchase payment except for the unallocated Keogh Deferred
Annuity. If you have an unallocated Keogh Deferred Annuity, each purchase
payment must be at least $2,000. In addition, your total purchase payments must
be at least $15,000 for your first Contract Year and $5,000 for each subsequent
Contract Year. Unless limited by tax law, you may continue to make purchase
payments while you receive Systematic Withdrawal Program payments, as described
later in this Prospectus, unless your purchase payments are made through salary
reduction or salary deduction.
- --------------------------------------------------------------------------------
You may make purchase payments to your Deferred Annuity whenever you choose, up
to the date you begin receiving payments from a pay-out option. However, Federal
tax rules may limit the amount and frequency of your purchase payments.
- --------------------------------------------------------------------------------
B-PPA-18
<PAGE>
Allocation of Purchase Payments
You decide how your money is allocated among the Fixed Interest Account and the
investment divisions. You can change your allocations for additional purchase
payments. We will make allocation changes when we receive your request for a
change. You may also specify an effective date for the change as long as it is
within 30 days after we receive the request.
Limits on Purchase Payments
Your ability to make purchase payments may be limited by:
o Federal tax laws.
o Our right to limit the total of your purchase payments to $500,000. We may
change the maximum by telling you in writing at least 90 days in advance.
o Regulatory requirements. For example, if you reside in Washington or
Oregon, we may be required to limit your ability to make purchase payments
after you have held the Deferred Annuity for more than three years, if the
Deferred Annuity was issued to you after you were age 60, or after you turn
age 63, if the Deferred Annuity was issued before you were age 61 (Except
under a PEDC Deferred Annuity).
o For Keogh, TSA and PEDC Deferred Annuities, a withdrawal if you should
leave your job.
o Receiving systematic termination payments (described later).
The Value of Your Investment
Accumulation Units are credited to you when you make purchase payments or
transfers into an investment division. When you withdraw or transfer money from
an investment division, accumulation units are liquidated. We determine the
number of accumulation units you have by dividing the amount of your purchase
payment, transfer or withdrawal by the Accumulation Unit Value on the date of
the transaction.
This is how we calculate the Accumulation Unit Value for each investment
division:
o First, we determine the change in investment performance (including any
investment-related charge) for the underlying Portfolio from the previous
trading day to the current trading day;
o Next, we subtract the daily equivalent of our insurance-related charge
(general administrative expenses and mortality and expense risk charges)
for each day since the last Accumulation Unit Value was calculated; and
o Finally, we multiply the previous Accumulation Unit Value by this result.
B-PPA-19
<PAGE>
Examples
Calculating the Number of Accumulation Units
Assume you make a purchase payment of $500 into one investment division and that
investment division's Accumulation Unit Value is currently $10.00. You would be
credited with 50 accumulation units.
$500 = 50 accumulation units
----
10
Calculating the Accumulation Unit Value
Assume yesterday's Accumulation Unit Value was $10.00 and the number we
calculate for today's investment experience (minus charges) for an underlying
portfolio is 1.05. Today's Accumulation Unit Value is $10.50. The value of your
$500 investment is then $525.
$10.00 x 1.05 = $10.50 is the new Accumulation Unit Value
However, assume that today's investment experience (minus charges) is .95
instead of 1.05. Today's Accumulation Unit Value is $9.50. The value of your
$500 investment is then $475.
$10.00 x .95 = $9.50 is the new Accumulation Unit Value
Transfers
You can make an unlimited number of transfers between investment divisions or
between the investment divisions and the Fixed Interest Account. For us to
process a transfer, you must tell us:
o The percentage or dollar amount of the transfer;
o The investment division (or Fixed Interest Account) from which you want the
money to be transferred;
o The investment division (or Fixed Interest Account) to which you want the
money to be transferred; and
o Whether you intend to start, stop or modify an automated investment
strategy by making the transfer.
We may require you to:
o Use our forms;
o Maintain a minimum Account Balance (if the transfer is in connection with
an automated investment strategy or if there is an outstanding loan from
the Fixed Interest Account); or
o Transfer a minimum amount if the transfer is in connection with the
Allocator.
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You may transfer money within your contract as often as you like. You will not
incur current taxes on your earnings or any early withdrawal charges as a result
of transferring your money.
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Access To Your Money
You may withdraw either all or a part of your Account Balance from the Deferred
Annuity. Withdrawals must be at least $500 (or the Account Balance, if less). To
process your request, we need the following information:
o The percentage or dollar amount of the withdrawal; and
o The investment division (or Fixed Interest Account) from which you want the
money to be withdrawn.
Generally, if you request, we will make payments directly to other investments
on a tax-free basis. You may only do so if all applicable tax and state
regulatory requirements are met and we receive all information necessary for us
to make the payment. We may require you to use our forms.
If you are a member of the Michigan Education Association and employed with a
school district which purchased a TSA Deferred Annuity before January 15, 1996,
then you must tell us the source of money from which we may take a withdrawal.
This includes salary reduction, elective deferrals, direct rollovers, direct
transfers or employer contributions.
Systematic Withdrawal Program For TSA Deferred Annuities
If we agree and if approved in your state for TSA Deferred Annuities, you may
choose to automatically withdraw a specific dollar amount or a percentage of
your Account Balance each Contract Year. This amount is then paid in equal
portions throughout the Contract Year according to the time frame you select,
e.g., monthly, quarterly, semi-annually or annually. Once the Systematic
Withdrawal Program is initiated the payments will automatically renew each
Contract Year.
If you elect to withdraw a dollar amount we will pay you the dollar amount each
Contract Year. If you elect to withdraw a percentage of your Account Balance,
each Contract Year we recalculate the dollar amount you will receive based on
your new Account Balance.
Calculating Your Payment Based on a Percentage Election for the First Contract
Year You Elect the Systematic Withdrawal Program: If you choose to receive a
percentage of your Account Balance, we will determine the dollar amount payable
on the date these payments begin. When you first elect the program, we will pay
this dollar amount over the remainder of the Contract Year. For example, if you
select to receive payments on a monthly basis, the percentage of your Account
Balance you request equals $12,000, and there are six months left in the
Contract Year, we will pay you $2,000 a month.
Calculating Your Payment for Subsequent Contract Years of the Systematic
Withdrawal Program: For each subsequent year that your Systematic
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Income taxes, tax penalties and early withdrawal charges may apply to any
withdrawal you make. Tax law generally prohibits withdrawals from TSA Deferred
Annuities before you reach age 59 1/2.
We will withdraw the payments from the Fixed Interest Account or investment
divisions you select, either pro rata or in the proportions you request. Each
payment must be at least $50.
If you elect to receive payments through this program, you must either be over
59 1/2 years old or have left your job.
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Withdawal Program: For each subsequent year that your Systematic Withdrawal
Program remains in effect, we will deduct from your Deferred Annuity and pay you
over the Contract Year either the dollar amount that you chose or a dollar
amount equal to the percentage of your Account Balance you chose. For example,
if you select to receive payments on a monthly basis, ask for a percentage and
that percentage equals $12,000 at the start of a Contract Year, we will pay you
$1,000 a month.
If you do not provide us with your desired allocation, or there are insufficient
amounts in the investment divisions or the Fixed Interest Account that you
selected, the payments will be taken out pro rata from the Fixed Interest
Account and any investment divisions in which you then have money.
Selecting a Payment Date: Your payment date is the date we make the withdrawal.
When you select or change a payment date, we must receive your request at least
10 days prior to the selected payment date. If we do not receive your request in
time, we will make the payment a month after the date you selected. If you do
not select a payment date, we will automatically begin systematic withdrawals
within 30 days after we receive your request. Changes in the dollar amount,
percentage, or timing of payments can be made once a year at the beginning of
any Contract Year. However, we must receive your request at least 30 days in
advance. If you make any of these changes we will treat your request as though
you were starting a new Systematic Withdrawal Program.
Although we need your written authorization to begin this program, you may
cancel this program at any time by telephone or by writing to us at your MetLife
Designated Office.
Systematic Withdrawal Program payments may be subject to an early withdrawal
charge unless an exception to this charge applies. For purposes of determining
how much of the annual payment amount is exempt from this charge under the free
withdrawal provision (discussed later), all Systematic Withdrawal Program
payments in a Contract Year are characterized as a single lump sum withdrawal as
of your first payment date in that Contract Year. When you first elect the
program, we will calculate the percentage of your Account Balance your
Systematic Withdrawal Program payment represents based on your Account Balance
on the first Systematic Withdrawal Program payment date. For all subsequent
Contract Years, we will calculate the percentage of your Account Balance your
Systematic Withdrawal Program payment represents based on your Account Balance
on the first Systematic Withdrawal Program payment date of that Contract Year.
We will determine separately the early withdrawal charge and any relevant
factors (such as applicable exceptions) for each Systematic Withdrawal Program
payment as of the date it is withdrawn from your Deferred Annuity.
Minimum Distribution
In order for you to comply with certain tax law provisions, you may be required
to take money out of your Deferred Annuity. Rather than receiving
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If you would like to receive your systematic withdrawal payment by the first of
the month you should request that the payment date be the 20th of the prior
month.
Your Account Balance will be reduced by the amount of your systematic withdrawal
payments and applicable withdrawal charges. Payments under this program are not
the same as income payments you would receive from a Deferred Annuity pay-out
option or under an Income Annuity.
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your minimum distribution in one annual lump-sum payment, you may request that
we pay it to you in installments throughout the calendar year. However, we may
require that you maintain a certain Account Balance at the time you request
these payments.
Contract Fee
There is no Separate Account annual contract fee.
o For all contracts except the Keogh Deferred Annuity and certain TSA
Deferred Annuities, you pay a $20 annual fee from the Fixed Interest
Account at the end of each Contract Year if your Account Balance is less
than $10,000 and if you fail to make purchase payments during the year.
o For the Keogh Deferred Annuity with individual participant recordkeeping
(allocated) you pay a $20 charge applied against any amounts in the Fixed
Interest Account.
o For the Keogh Deferred Annuity with no individual participant recordkeeping
(unallocated) there is no contract fee.
o There is no contract fee for certain TSA Deferred Annuities.
Charges
There are two types of charges you pay while you have money in an investment
division:
o Insurance-related charge, and
o Investment-related charge.
Insurance-Related Charge
You will pay an insurance-related charge for the Separate Account that is no
more than 1.25% annually of the average value of the amount you have in the
Separate Account. This charge pays us for general administrative expenses and
for the mortality and expense risk of the Deferred Annuity.
General administrative expenses we incur include financial, actuarial,
accounting, and legal expenses.
The mortality portion of the insurance-related charge pays us for the risk that
you may live longer than we estimated. Then, we could be obligated to pay you
more in payments from a pay-out option than we anticipated. Also, for allocated
Deferred Annuities, we bear the risk that the guaranteed death benefit we would
pay should you die during your "pay-in" phase is larger than your Account
Balance. We also bear the risk that our expenses in administering the Deferred
Annuities may be greater than we estimated (expense risk).
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The charges you pay will not reduce the number of accumulation units credited to
you. Instead, we deduct the charges each time we calculate the Accumulation Unit
Value.
MetLife guarantees that the Separate Account insurance-related charge will not
increase while you have a Deferred Annuity.
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Investment-Related Charge
This charge pays the investment managers of the Metropolitan Fund and Calvert
Fund for managing money in the Portfolios and investment operating expenses. We
manage the Metropolitan Fund. The percentage you pay depends on which investment
divisions you select. Amounts for each investment division are listed in the
Table of Expenses.
Premium Taxes
Some jurisdictions tax what are called "annuity considerations." These may apply
to purchase payments, Account Balances and death benefits. In most
jurisdictions, we currently do not deduct any money from purchase payments,
Account Balances or death benefits to pay these taxes. Generally, our practice
is to deduct money to pay premium taxes (also known as "annuity taxes") only
when you exercise a pay-out option. In certain jurisdictions, we may also deduct
money to pay premium taxes on lump sum withdrawals or when you exercise a
pay-out option. We may deduct an amount to pay premium taxes some time in the
future since the laws and the interpretation of the laws relating to annuities
are subject to change.
Premium taxes, if applicable, range from .5% to 5.0% depending on the Deferred
Annuity you purchase and your home state or jurisdiction. A chart in the
Appendix shows the jurisdictions where premium taxes are charged and the amount
of these taxes.
Early Withdrawal Charges
An early withdrawal charge of up to 7% may apply if you withdraw purchase
payments within 7 years of when they were credited to your Deferred Annuity. To
determine the early withdrawal charge for Deferred Annuities, we treat your
Fixed Interest Account and Separate Account as if they were a single account and
ignore both your actual allocations and the Fixed Interest Account or investment
division from which the withdrawal is actually coming. To do this, we first
assume that your withdrawal is from amounts (other than earnings) that can be
withdrawn without an early withdrawal charge, then from other amounts (other
than earnings) and then from earnings, each on a "first-in-first-out" (oldest
money first) basis. Once we have determined the amount of the early withdrawal
charge, we will actually withdraw it from the Fixed Interest Account and the
investment divisions in the same proportion as the withdrawal is being made. In
determining what the withdrawal charge is, we do not include earnings, although
the actual withdrawal to pay it may come from earnings.
For partial withdrawals, the early withdrawal charge is determined by dividing
the amount that is subject to the early withdrawal charge by 100% minus the
applicable percentage shown in the following chart. Then we will make the
payment directed, and withdraw the early withdrawal charge.
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For a full withdrawal we multiply the amount to which the withdrawal charge
applies by the percentage shown, keep the result as an early withdrawal charge
and pay you the rest. We will treat your request as a request for a full
withdrawal if your Account Balance is not sufficient to pay both the requested
withdrawal and the early withdrawal charge.
The early withdrawal charge on purchase payments withdrawn is as follows:
During Purchase Payment/Contract Year
Year 1 2 3 4 5 6 7 8 & Later
Percentage 7% 6% 5% 4% 3% 2% 1% 0%
If you are a member of the Michigan Education Association and employed by a
school district which purchased a TSA Deferred Annuity before January 15, 1996,
then we impose the early withdrawal charge in the above table for the first
seven Contract Years.
By law, your total early withdrawal charges applied to the investment divisions
will never exceed 9% of all your purchase payments in the investment divisions.
The early withdrawal charge reimburses us for our costs in selling the Deferred
Annuities. We may use our profits (if any) from the mortality and expense risk
charge to pay for our costs to sell the Deferred Annuities which exceed the
amount of early withdrawal charges we collect. However, we believe that our
sales costs may exceed the early withdrawal charges we collect. If so, we will
pay the difference out of our general profits.
When No Early Withdrawal Charge Applies
In some cases, we will not charge you the early withdrawal charge when you make
a withdrawal. We may, however, ask you to prove that you meet any conditions
listed below.
You do not pay an early withdrawal charge:
o On transfers you make within your Deferred Annuity.
o On withdrawals of purchase payments you made over seven years ago.
o If you choose payments over one or more lifetimes or for a period of at
least five years (without the right to accelerate the payments).
o If you die during the pay-in phase. Your beneficiary will receive the full
death benefit without deduction.
o If you withdraw up to 10% (20% for the unallocated Keogh and certain TSA
Deferred Annuities) of your Account Balance each Contract Year. This 10%
(or 20%) total withdrawal may be taken in an unlimited number of partial
withdrawals during that Contract Year. Each time you make a withdrawal, we
calculate what percentage your withdrawal represents at that time. Only
when the total of these percentages exceeds 10% (or 20%) will you have to
pay early withdrawal charges. If you have a Keogh Deferred Annuity,
generally you are allowed to take the "free withdrawal" on top of any other
withdrawals which are
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You will not pay an early withdrawal charge on any purchase payments made more
than 7 years ago.
We do not include your earnings when calculating early withdrawal charges.
However, if the early withdrawal charge is greater than the rest of your
purchase payments, then we will take the early withdrawal charges, in whole or
in part, from your earnings.
Early withdrawal charges never apply to transfers among investment divisions or
transfers to or from the Fixed Interest Account.
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<PAGE>
otherwise exempt from the early withdrawal charge. This is not true if your
other withdrawals are in connection with a systematic termination or purchase
payments made over 7 years ago.
o If the withdrawal is required for you to avoid Federal income tax penalties
or to satisfy Federal income tax rules or Department of Labor regulations
that apply to your Deferred Annuity.
o Systematic Termination. For unallocated Keogh and certain TSA Deferred
Annuities, and the TSA Deferred Annuity for certain Texas institutions of
higher education which takes effect when the institution withdraws its
endorsement of the TSA Deferred Annuity or if you retire or leave your job
according to the requirements of the Texas Optional Retirement Program, you
may withdraw your total Account Balance without an early withdrawal charge
when the Account Balance is paid in annual installments based on the
following percentages of your Account Balance for that year's withdrawal:
Contract Year
Year 1* 2 3 4 5
Percentage 20% 25% 331/3% 50% remainder
* Less that Contract Year's withdrawals
Any money you withdraw in excess of these percentages in any Contract Year
will be subject to early withdrawal charges. You may stop the systematic
termination of the contract. If you ask to restart systematic termination,
you begin at the beginning of the schedule listed above.
o If you are disabled and request a total withdrawal. Disability is defined
in the Federal Social Security Act. If the Keogh or TSA Deferred Annuity is
issued in connection with your retirement plan which is subject to the
Employee Retirement Income Security Act of 1974 and if your plan document
defines disability, your plan's definition governs.
o If you retire:
o For the Keogh, TSA and 403(a) Deferred Annuities, if there is a plan
and you retire according to the requirements of the plan. This
exemption does not apply to withdrawals of money transferred into
these TSA Deferred Annuities from other investment vehicles on a tax
free basis (plus earnings on such amounts).
o For the unallocated Keogh Deferred Annuity, if your plan defines
retirement and you retire under that definition. If you are a
"restricted" participant, according to the terms of the Deferred
Annuity, you must have participated in the Deferred Annuity for the
time stated in the contract.
o For certain TSA Deferred Annuities without a plan, if you have
continuously participated for at least 10 years. This exemption does
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<PAGE>
not apply to withdrawals of money transferred into these TSA Deferred
Annuities from other investment vehicles on a tax free basis (plus
earnings on such amounts).
o For the allocated Keogh Deferred Annuity, if you have continuously
participated for at least 7 years.
o For the PEDC Deferred Annuity, if you retire.
o For certain TSA Deferred Annuities, if you retired before the contract
was purchased (including money transferred from other investment
vehicles on a tax free basis plus earnings on that money).
o If you leave your job:
o For the unallocated Keogh Deferred Annuity, also if you are a
"restricted" participant, according to the terms of the Deferred
Annuity, you must have participated in the Deferred Annuity for the
time stated in the contract.
o For the TSA and 403(a) Deferred Annuities, also if you have
continuously participated for at least 10 years. This exemption does
not apply to withdrawals of money transferred into TSA and 403(a)
Deferred Annuities from other investment vehicles on a tax free basis
(plus earnings on such amounts).
o For the allocated Keogh Deferred Annuity, also if you have
continuously participated for at least 7 years.
o For PEDC and certain TSADeferred Annuities, if you leave your job with
the employer that bought the Deferred Annuity.
o For certain TSA Deferred Annuities, if you left your job before the
contract was purchased(including money transferred from other
investment vehicles on a tax free basis plus earnings on that money).
o For Keogh and certain TSA Deferred Annuities, if your plan terminates and
the Account Balance is transferred into another annuity contract we issue.
o For PEDC, unallocated Keogh and certain TSADeferred Annuities, if you
suffer from an unforeseen hardship.
o For Keogh Deferred Annuities, if you make a direct transfer to another
investment vehicle we have preapproved. For the unallocated Keogh Deferred
Annuity, if you are a "restricted" participant, according to the terms of
the Deferred Annuity, you also must roll over your Account Balance to a
MetLife individual retirement annuity within 120 days after you are
eligible to receive a plan distribution.
When Another Early Withdrawal Charge May Apply
If you transferred money from certain eligible MetLife contracts into a
Deferred Annuity, you may have different early withdrawal charges for
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these transfer amounts. Any purchase payments made after the transfer are
subject to the usual early withdrawal charge schedule.
o Amounts transferred before January 1, 1996:
o We credit your transfer amounts with the time you held them under your
original contract or if it will produce a lower charge;
o We use the following schedule to determine early withdrawal charges
(determined as previously described) for transferred amounts from your
original contract.
During Purchase Payment Year
Year 1 2 3 4 5 6 and Beyond
Percentage 5% 4% 3% 2% 1% 0%
o Amounts transferred on or after January 1, 1996:
o For certain contracts which we issued at least two years before the
date of the transfer (except as noted below), we apply the withdrawal
charge under your original contract but not any of the original
contract's exceptions or reductions to the withdrawal charge
percentage that do not apply to a Deferred Annuity or if it will
produce a lower charge.
o We use the following schedule to determine early withdrawal charges
(determined as previously described) for transferred amounts from your
original contract:
After the Transfer
Year 1 2 3 4 5 6 and Beyond
Percentage 5% 4% 3% 2% 1% 0%
o If we issued the other contract less than two years before the date of
the transfer or it has a separate withdrawal charge for each purchase
payment, we treat your purchase payments under the other contract as
if they were made under the Deferred Annuity as of the date we
received them under that contract.
o Alternatively, if provided for in your Deferred Annuity, we credit your
purchase payments with the time you held them under your original contract.
Free Look
You may cancel the Deferred Annuity within a certain time period. This is know
as a "free look." We must receive your request to cancel in writing.
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The number of days for this "free look" varies from state to state. The time
period may also vary depending on your age and whether you purchased the
Deferred Annuity from us directly, through the mail or with money from another
annuity or life insurance policy. Again, depending on state law, we may refund
all of your purchase payments or your Account Balance as of the date your refund
request is received at your MetLife Designated Office.
Death Benefit
One of the insurance guarantees we provide you under the Deferred Annuity is
that your beneficiaries will be protected against market downturns. You name
your beneficiary(ies) for TSA and 403(a) Deferred Annuities. Your beneficiary
under a PEDC Deferred Annuity is the trustee or employer. Under a Keogh Deferred
Annuity the death benefit is paid to the plan's trustee. If you die during the
pay-in phase, the death benefit your beneficiary receives will be the greatest
of:
o Your Account Balance;
o Your highest Account Balance as of the end of any fifth calendar year in
which you have the Deferred Annuity and as of the end of each later five
year period. In any case, less any later partial withdrawals, fees, charges
and outstanding loans; or
o The total of all of your purchase payments less any partial withdrawals,
In each case, we deduct the amount of any outstanding loans from the death
benefit.
For the allocated Keogh Deferred Annuity, your death benefit under the Deferred
Annuity will be no more than your Account Balance.
We will only pay the death benefit when we receive both proof of your death and
appropriate instructions for payment.
Your beneficiary has the option to apply the death benefit (less any applicable
premium taxes) to a pay-out option offered under your Deferred Annuity. Your
beneficiary may, however, decide to take a lump sum cash payment.
Pay-out Options (or Income Options)
You may convert your Deferred Annuity into a regular stream of income after your
"pay-in" or "accumulation" phase. When you are selecting your pay-out option,
you will be able to choose from the range of options we then have available. You
have the flexibility to select a stream of income to meet your needs. If you
decide you want a pay-out option, we withdraw some or all of your Account
Balance (less any premium taxes, applicable contract fees and outstanding
loans). Then, we apply the remainder to the option. You are not required to hold
your Deferred Annuity for any minimum time period before you may annuitize.
However, if you annuitize within two years of purchasing the Deferred Annuity, a
$350 contract fee applies. Generally, you may defer receiving payments for up to
one year after you have chosen your pay-out option.
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There is no death benefit for the unallocated Keogh Deferred Annuity.
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When considering a pay-out option, you should think about whether you want:
o Payments guaranteed by us for the rest of your life (or for the rest of two
lives) or for a specified period;
o A fixed dollar payment or a variable payment;
o A refund feature.
Your income payment amount will depend upon your choices. For lifetime options,
the age and sex of the measuring lives (annuitants) will also be considered. For
example, if you select a pay-out option guaranteeing payments for your and your
spouse's lifetimes, your payments will typically be lower than if you select a
pay-out option with payments over only your lifetime.
By the date specified in your contract, if you do not either elect to continue
the contract, select a pay-out option or withdraw your entire Account Balance,
and your Deferred Annuity was not issued under a retirement plan, we will
automatically issue you a life annuity with a 10 year guarantee. In that case,
if you do not tell us otherwise, your Fixed Interest Account Balance will be
used to provide a Fixed Income Option and your Separate Account Balance will be
used to provide a variable pay-out option. However, if we do ask you what you
want us to do and you do not respond, we may treat your silence as a request by
you to continue your Deferred Annuity.
Because the features of variable pay-out options under the Deferred Annuities
are identical to the features of Income Annuities, please read the sections
under the "Income Annuities" heading for more information.
Income Annuities
Income Annuities provide you with a regular stream of payments for either your
lifetime or a specific period. You have the flexibility to select a stream of
income to meet your needs. Income Annuities can be purchased so that you begin
receiving payments immediately or you can apply the Account Balance of the
Deferred Annuity to a pay-out option to receive payments during your "pay-out"
phase. With an Income Annuity, you must start receiving payments within the
first year after the annuity is issued.
We do not guarantee that your variable payments will be a specific amount of
money. You may choose to have a portion of the payment fixed and guaranteed
under the Fixed Income Option.
Using proceeds from the following types of arrangements, you may purchase Income
Annuities to receive immediate payments:
o TSA
o PEDC
o Keogh
o 403(a)
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The pay-out phase is often referred to as either "annuitizing" your contract or
an income annuity.
Should our current immediate annuity rates for a fixed pay-out option provide
for greater payments than those quoted in your contract, we will use the current
rates.
You may choose the frequency of your income payments. For example, you may
receive your payments on a monthly, quarterly, semiannual or annual basis.
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If you have accumulated amounts in any of the listed investment vehicles, your
lump sum withdrawal from that investment vehicle may be used to purchase an
appropriate Income Annuity as long as income tax requirements are met.
If your retirement plan has purchased an Income Annuity, your choice of pay-out
options may be subject to the terms of the plan. We may rely on your employer's
or plan administrator's statements to us as to the terms of the plan or your
entitlement to any payments. We will not be responsible for interpreting the
terms of your plan. You should review your plan document to see how you may be
affected.
Income Payment Types
Currently, we provide you with a wide variety of income payment types to suit a
range of personal preferences.
There are three people who are involved in payments under your Income Annuity:
o Owner: the person or entity which has all rights under the Income Annuity
including the right to direct who receives payment.
o Annuitant: the person whose life is the measure for determining the timing
and sometimes the dollar amount of payments.
o Beneficiary: the person who receives continuing payments or a lump sum
payment if the owner dies.
Your income payment amount will depend in large part on the type of income
payment type you choose. For example, if you select an "Income for Two Lives
Annuity," your payments will typically be lower than if you select a "Your
Lifetime Annuity." The following income payment types are available:
Your Lifetime Annuity: A variable income payable during the annuitant's life.
Your Lifetime with a Guaranteed Period Annuity: A variable income payable during
the annuitant's life with a guaranteed number of years. If, at the death of the
annuitant, payments have been made for less than the guaranteed period, payments
are made to the owner of the annuity (or the beneficiary if the owner dies
before the end of the guaranteed period) for the rest of the guaranteed period.
Your Lifetime With a Refund Annuity: A variable income payable during the
annuitant's life with a refund provision. If, at the death of the annuitant, the
total of all income payments is less than the purchase payment that we received,
we will pay the owner of the annuity (or to the beneficiary if the owner is not
alive) an amount equal to the difference.
Income for Two Lives Annuity: A variable income payable while either of two
annuitants is alive. After one annuitant dies, payments continue if the other
annuitant is alive. Payments stop once both annuitants are no longer alive.
Payments after one annuitant dies may be the same as those paid while both were
alive or may be a lower percentage that is selected when the annuity is
purchased (e.g. 75%, 66 2/3% or 50%).
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Many times the Owner and the Annuitant are the same person.
When deciding how to receive income, consider:
o The amount of income you need;
o The amount you expect to receive from other sources;
o The growth potential of other investments; and
o How long you would like your income to last.
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Income for Two Lives with a Guaranteed Period Annuity: This is the same as the
Income for Two Lives Annuity described above, but we guarantee to pay the full
amount (not a reduced percentage) for the guaranteed period even if one or both
annuitants die. If, upon the death of both annuitants, payments have been made
for less than the guaranteed period, payments are made to the owner of the
annuity (or the beneficiary if the owner dies before the end of the guaranteed
period) for the rest of the guaranteed period.
Income for Two Lives with a Refund Annuity: This is the same as the Income for
Two Lives Annuity described above, but if upon the death of both annuitants, the
total of all of income payments is less than the purchase payment that we
received, we will pay the owner of the annuity (or to the beneficiary if the
owner is not alive) an amount equal to the difference.
Income for a Guaranteed Period Annuity: A variable income payable for a
guaranteed period (5-30 years). Payments cease at the end of the guaranteed
period (which is often called a "term certain" period) even if the annuitant is
still alive. If the annuitant dies before the end of the guaranteed period,
payments are made to the owner of the annuity (or to the beneficiary if the
owner dies before the end of the guaranteed period) for the rest of the
guaranteed period.
Allocation
You decide how your money is allocated among the Fixed Income Option and the
investment divisions.
Minimum Size of Your Income Payment
Your initial income payment must be at least $50. If you live in Massachusetts,
the initial income payment must be at least $20. This means that the amount of
your purchase payment or the amount used from a Deferred Annuity to provide a
pay-out option must be large enough to produce this minimum initial income
payment.
The Value of Your Income Payments
Annuity units are credited to you when you make a purchase payment or transfer
into an investment division. Before we determine the number of annuity units to
credit to you, we reduce a purchase payment (but not a transfer) by any premium
taxes and the contract fee, if applicable. We then compute an initial income
payment amount using the Assumed Investment Return ("AIR"), your income payment
type and the age and sex of the measuring lives. We then divide that amount by
the Annuity Unit Value on the date of the transaction. When you transfer money
from an investment division, annuity units in that investment division are
liquidated.
Your payment is determined by using the AIR to benchmark the investment
experience of the investment divisions you select. The higher your AIR, the
higher your first income payment will be. Your next payments will only increase
in proportion to the amount the investment experience of your
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The AIR is stated in your contract and may range from 3% to 6%.
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chosen investment divisions exceeds the AIR and Separate Account charges.
Likewise, your payments will decrease to the extent the investment experience of
your chosen investment divisions is less than the AIR and Separate Account
charges. A lower AIR will result in a lower initial variable income payment, but
subsequent variable income payments will increase more rapidly or decline more
slowly as changes occur in the investment experience of the investment
divisions.
Your income payments are determined ten days prior to your income payment date
or your contract's issue date, if later.
This is how we calculate the Annuity Unit Value for each investment division:
o First, we determine the change in investment experience (including any
investment-related charge) for the underlying portfolio from the previous
trading day to the current trading day;
o Next, we subtract the daily equivalent of your insurance-related charge
(general administrative expenses and mortality and expense risk charges)
for each day since the last day the Annuity Unit Value was calculated;
o Then, we divide by the daily equivalent of your AIR; and
o Finally, we multiply the previous Annuity Unit Value by this result.
Transfers
You can make an unlimited number of transfers among investment divisions or from
the investment divisions to the Fixed Income Option. There is no early
withdrawal charge to make a transfer. If you reside in certain states you may be
limited to four options (including the Fixed Interest Option).
For us to process a transfer, you must tell us:
o The percentage or dollar amount of the transfer;
o The investment division (or Fixed Income Option) to which you want to
transfer; and
o The investment division from which you want to transfer.
We may require that you use our forms to make transfers.
Contract Fee
A one time $350 contract fee is taken from your purchase payment when you
purchase an Income Annuity prior to allocating the remainder of the purchase
payment to either the investment divisions and/or the Fixed Income Option. This
charge covers our administrative costs including preparation of the Income
Annuities, review of applications and recordkeeping. If you select a pay-out
option under your Deferred Annuity and you purchased that Deferred Annuity at
least two years ago, we will waive the contract fee.
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Once you transfer money into the Fixed Income Option you may not later transfer
it into an investment division.
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Charges
There are two types of charges you pay if you allocate any of your purchase
payment to the investment divisions:
o Insurance-related charge; and
o Investment-related charge.
Insurance-Related Charge
You will pay an insurance-related charge for the Separate Account that is no
more than 1.25% annually of the average value of the amount you have in the
Separate Account. This charge pays us for general administrative expenses and
for mortality and expense risk of the Income Annuity.
General administrative expenses we incur include financial, actuarial,
accounting, and legal expenses.
The mortality portion of the insurance-related charge pays us for the risk that
you may live longer than we estimated. Then, we could be obligated to pay you
more in payments than we anticipated.
We also bear the risk that our expenses in administering the Income Annuities
will be greater than we estimated (expense risk).
Investment-Related Charge
This charge pays the investment managers of the Metropolitan Fund and Calvert
Fund for managing money in the Portfolios and for investment operating expenses.
We manage the Metropolitan Fund. The percentage you pay depends on the
investment divisions you select. Amounts for each investment division are listed
in the Table of Expenses.
Premium Taxes
Some jurisdictions tax what are called "annuity considerations." We deduct money
to pay "premium" taxes (also known as "annuity" taxes) when you make the
purchase payment.
Premium taxes, if applicable, range from .5% to 5.0% depending on the Income
Annuity you purchased and your home state or jurisdiction. A chart in the
Appendix shows the jurisdictions where premium taxes are charged and the amount
of these taxes.
Free Look
You may cancel your Income Annuity within a certain time period. This is known
as a "free look." We must receive your request to cancel in writing. The number
of days for this "free look" varies from state to state. The "free look" may
also vary depending on your age and whether you purchased your Income Annuity
from us directly, through the mail or with money from another annuity or life
insurance policy. Again, depending on state law, we
- --------------------------------------------------------------------------------
The charges you pay will not reduce the number of annuity units credited to you.
Instead, we deduct the charges when calculating the Annuity Unit Value.
You do not have a "free look" if you are electing income payments in the pay-out
phase of your Deferred Annuity.
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may refund all of your purchase payment or the value of your annuity units as of
the date your refund request is received at your MetLife Designated Office.
General Information
Administration
All transactions will be processed in the manner described below.
Purchase Payments
Send your purchase payments by check or money order made payable to "MetLife" to
your MetLife Designated Office. We will provide you with all necessary forms. We
must have all completed documents to credit your purchase payments.
Usually, your initial purchase payment is credited to you within two days of
receipt at your MetLife Designated Office. However, if you fill out our forms
incorrectly or incompletely or other documentation is not completed properly, we
have up to five business days to credit the payment. If the problem cannot be
resolved by the fifth business day, we will notify you and give you the reasons
for the delay. At that time, you will be asked whether you agree to let us keep
your money until the problem is resolved. If you do not agree or we cannot reach
you by the fifth business day, your money will be returned.
Under certain group Deferred Annuities and group Income Annuities, your
employer, the trustee of the Keogh plan (if an allocated Deferred Annuity) or
the group in which you are a participant or member must identify you on their
reports to us and tell us how your money should be allocated among the
investment divisions and the Fixed Interest Account/Fixed Income Option.
Purchase payments (including any portion of your Account Balance under a
Deferred Annuity which you apply to a pay-out option) are effective and valued
as of 4:00 p.m. Eastern time, on the day we receive them in good order at your
MetLife Designated Office, except when they are received:
o On a day when the Accumulation Unit Value/Annuity Unit Value is not
calculated, or
o After 4:00 p.m. Eastern time.
In those cases, the purchase payments will be effective the next day the
Accumulation Unit Value or Annuity Unit Value, as applicable, is calculated.
Confirming Transactions
You will receive a written statement confirming that a transaction was recently
completed. Certain transactions made on a periodic basis, such as Systematic
Withdrawal Program payments and automated investment strategy transfers, may be
confirmed quarterly. Salary reduction or deduction
- --------------------------------------------------------------------------------
Generally, your requests including all subsequent purchase payments are
effective the day we receive them at your MetLife Designated Office.
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purchase payments under TSA Deferred Annuities are confirmed quarterly.
Transactions by Telephone
You may conduct a variety of transactions by telephone, unless prohibited by
state law. Some of these transactions include:
o Transfers
o Changes to investment strategies
o Changes in the allocation of future purchase payments.
Your telephone transaction must be completed by 4:00 p.m. Eastern time if you
want the transaction to take place on that day.
We have put into place reasonable security procedures to insure that
instructions communicated by telephone are genuine. For example, all telephone
calls are recorded. Also, you will be asked to provide some personalized data
prior to giving your instructions over the telephone. When someone contacts us
by telephone and follows our security procedures, we will assume that you are
authorizing us to act upon those telephone instructions. Neither we nor the
Separate Account will be liable for any loss, expense or cost arising out of any
requests that we or the Separate Account reasonably believe to be authentic. In
the unlikely event that you have trouble reaching us, requests should be made in
writing to your MetLife Designated Office.
Processing of Certain Transactions
If we are notified of your death before a requested transaction is completed, we
will cancel the request. For example, if you request a transfer or withdrawal
for a date in the future under a Deferred Annuity and then die before that date,
we simply pay the death benefit instead. For Income Annuity transfers, we will
cancel the request and continue making payments to your beneficiary if your
Income Annuity so provides. Or, depending on your Income Annuity's provisions,
we may continue making payments to a joint annuitant or pay your beneficiary a
refund.
Valuation
We separately determine the Accumulation Unit Value and Annuity Unit Value for
each investment division once each day when the New York Stock Exchange is open
for trading. If permitted by law, we may change the period between calculations
but we will give you 30 days notice.
When you request a transaction, we will process the transaction using the next
available Accumulation Unit Value for Deferred Annuities or Annuity Unit Value
for Income Annuities. Subject to our procedure, we will make withdrawals under a
Deferred Annuity and transfers under a Deferred Annuity or Income Annuity at a
later date, if you request. If your withdrawal request is to elect a variable
pay-out option under your Deferred Annuity, we base the number of annuity units
you receive on the next available Annuity Unit Value.
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You may authorize your sales representative to make telephone transactions on
your behalf. You must complete our form and we must agree. This does not apply
if you have a Keogh Deferred Annuity or Income Annuity.
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Advertising Performance
We periodically advertise the performance of the investment divisions. You may
get performance information from a variety of sources including your quarterly
statements, your MetLife representative, the internet, annual reports and
semiannual reports.
We may state performance in terms of "yield," "change in Accumulation Unit
Value/Annuity Unit Value," "average annual total return," or some combination of
these terms.
Yield is the net income generated by an investment in a particular investment
division for 30 days or a month. These figures are expressed as percentages.
This percentage yield is compounded semiannually.
Change in Accumulation/Annuity Unit Value is calculated by determining the
percentage change in the value of an accumulation (or annuity) unit for a
certain period. These numbers may also be annualized. Change in
Accumulation/Annuity Unit Value may be used to demonstrate performance for a
hypothetical investment (such as $10,000) over a specified period. These
performance numbers reflect the deduction of the total Separate Account charges;
however, yield and change in Accumulation/Annuity Unit Value performance do not
reflect the possible imposition of early withdrawal charges. Early withdrawal
charges would reduce performance experience.
Average annual total return calculations reflect all Separate Account charges
and applicable early withdrawal charges. These figures also assume a steady
annual rate of return.
Performance figures will vary among the various Deferred Annuities and Income
Annuities as a result of different Separate Account charges and early withdrawal
charges. For purposes of presentation, we may assume that certain Deferred
Annuities and Income Annuities were in existence prior to their inception date.
In these cases, we calculate performance based on the historical performance of
the underlying Metropolitan Fund and Calvert Fund Portfolios. We use the actual
accumulation unit or annuity unit data after the inception date.
We calculate performance for certain investment strategies including the
Equalizer, Equity Generator and each asset allocation model of the Index
Selector. We calculate the performance as a percentage by presuming a certain
dollar value at the beginning of a period and comparing this dollar value with
the dollar value based on historical performance at the end of that period. This
percentage return assumes that there have been no withdrawals or other unrelated
transactions.
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All performance numbers are based upon historical earnings. These numbers are
not intended to indicate future results.
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Changes to Your Deferred Annuity or Income Annuity
We have the right to make certain changes to your Deferred Annuity or Income
Annuity, but only as permitted by law. We make changes when we think they would
best serve the interest of annuity owners or would be appropriate in carrying
out the purposes of the Deferred Annuity or Income Annuity. If the law requires,
we will also get your approval and the approval of any appropriate regulatory
authorities. Examples of the changes we may make include:
o To operate the Separate Account in any form permitted by law.
o To take any action necessary to comply with or obtain and continue any
exemptions under the law.
o To transfer any assets in an investment division to another investment
division, or to one or more separate accounts, or to our general account,
or to add, combine or remove investment divisions in the Separate Account.
o To substitute for the Portfolio shares in any investment division, the
shares of another class of the Metropolitan Fund or the shares of another
investment company or any other investment permitted by law.
o To change the way we assess charges, but without increasing the aggregate
amount charged to the Separate Account and any currently available
portfolio in connection with the Deferred Annuities or Income Annuities.
o To make any necessary technical changes in the Deferred Annuities or Income
Annuities in order to conform with any of the above-described actions.
If any changes result in a material change in the underlying investments of an
investment division in which you have a balance, we will notify you of the
change. You may then make a new choice of investment divisions. For Deferred
Annuities issued in Pennsylvania (and Income Annuities where required by law),
we will ask your approval before making any technical changes.
Voting Rights
Based on our current view of applicable law, you have voting interests under
your Deferred Annuity or Income Annuity concerning Metropolitan Fund and Calvert
Fund proposals that are subject to a shareholder vote. Therefore, you are
entitled to give us instructions for the number of shares which are deemed
attributable to your Deferred Annuity or Income Annuity.
We will vote the shares of each of the underlying Portfolios held by the
Separate Account based on instructions we receive from those having a
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<PAGE>
voting interest in the corresponding investment divisions. However, if the law
or the interpretation of the law changes, we may decide to exercise the right to
vote the Portfolio's shares based on our own judgment.
You will be entitled to give instructions regarding the votes attributable to
your Deferred Annuity or Income Annuity in your sole discretion. Under the Keogh
Deferred Annuities, participants may instruct you to give us instructions
regarding shares deemed attributable to their contributions to the Deferred
Annuity. Under the Keogh Deferred Annuities, we will provide you with the number
of copies of voting instruction soliciting material that you request so that you
may furnish such materials to participants who may give you voting instructions.
Neither the Separate Account nor MetLife has any duty to inquire as to the
instructions received or your authority to give instructions; thus, as far as
the Separate Account, and any others having voting interests in respect of the
Separate Account are concerned, such instructions are valid and effective.
There are certain circumstances under which we may disregard voting
instructions. However, in this event, a summary of our action and the reasons
for such action will appear in the next semiannual report. If we do not receive
your voting instructions, we will vote your interest in the same proportion as
represented by the votes we receive from other investors. Shares of the
Metropolitan Fund that are owned by our general account or by any of our
unregistered separate accounts will be voted in the same proportion as the
aggregate of:
o The shares for which voting instructions are received, and
o The shares that are voted in proportion to such voting instructions.
However, if the law or the interpretation of the law changes, we may decide to
exercise the right to vote each Portfolio's shares based on our judgment.
Who Sells the Deferred Annuities and Income Annuities
All Deferred Annuities and Income Annuities, are sold through our licensed sales
representatives. We are registered with the Securities and Exchange Commission
as a broker-dealer under the Securities Exchange Act of 1934. We are also a
member of the National Association of Securities Dealers, Inc. Deferred
Annuities and Income Annuities are also sold through other registered
broker-dealers. They also may be sold through the mail.
The licensed sales representatives and broker-dealers who sell the annuities may
be compensated for these sales by commissions that we pay. There is no front-end
sales load deducted from purchase payments to pay sales commissions. The
Separate Account does not pay sales commissions. The commissions we pay range
from 0% to 6%.
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<PAGE>
We also make payments to our licensed sales representatives based upon the total
Account Balances of the Deferred Annuities assigned to the sales representative.
Under this compensation program, we pay an amount up to .12% of the total
Account Balances of the Deferred Annuities and, other annuity contracts, certain
mutual fund account balances and cash values of certain life insurance policies.
These asset based commissions compensate the sales representative for servicing
the Deferred Annuities. These payments are not made for Income Annuities.
From time to time,MetLife may pay organizations or associations a fee, reimburse
them for certain expenses, lease office space from them, purchase advertisement
in their publications or enter into other such arrangements in connection with
their endorsing or sponsoring MetLife's variable annuity contracts or services,
for permitting MetLife to undertake certain marketing efforts of the
organizations' members in connection with sales of MetLife variable annuities,
or some combination thereof. Additionally, MetLife has retained consultants who
are paid a fee for their efforts in establishing and maintaining relationships
between MetLife and various organizations.
Financial Statements
The financial statements and related notes for the Separate Account and MetLife
are in the SAI and are available from MetLife upon request. Deloitte & Touche,
LLP, who are independent auditors, audit these financial statements.
Your Spouse's Rights
If you received your contract through a qualified retirement plan and your plan
is subject to ERISA (the Employee Retirement Income Security Act of 1974) and
you are married, the income payments, withdrawal and loan provisions, and
methods of payment of the death benefit under your Deferred Annuity or Income
Annuity may be subject to your spouse's rights.
If your benefit is worth $5,000 or less, your plan may provide for distribution
of your entire interest in a lump sum without your spouse's consent.
For details or advice on how the law applies to your circumstances, consult your
tax advisor or attorney.
When We Can Cancel Your Deferred Annuity or Income Annuity
We may not cancel your Income Annuity.
We may cancel your Deferred Annuity only if we do not receive any purchase
payments from you for 36 consecutive months and your Account Balance is less
than $2,000, except for the unallocated Keogh Deferred Annuity. For the
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unallocated Keogh Deferred Annuity we may cancel the Deferred Annuity if we do
not receive purchase payments from you for 12 consecutive months and your
Account Balance is less than $15,000. If we cancel a Deferred Annuity delivered
in New York, we will return the full Account Balance. In all other cases, you
will receive an amount equal to what you would have received if you had
requested a total withdrawal of your Account Balance. Early withdrawal charges
may apply. Certain Deferred Annuities do not contain these cancellation
provisions.
Income Taxes
The following information on taxes is a general discussion of the subject. It is
not intended as tax advice. The Internal Revenue Code ("Code") is complex and
subject to change regularly.
You should read the general provisions and any sections relating to your type of
annuity to familiarize yourself with some of the tax rules for your particular
contract. The SAI has additional tax information.
For purposes of this section, we address Deferred Annuities and Income Annuities
together as annuities.
General
Deferred annuities are a means of setting aside money for future needs--usually
retirement. Congress recognizes how important saving for retirement is and has
provided special rules in the Internal Revenue Code (Code).
Because these products are intended for retirement, if you make withdrawals
before age 59 1/2 you may incur a tax penalty.
We are not responsible for determining if your employer's plan or arrangement
satisfies the requirements of the Code and/or ERISA.
Contributions
Generally, all contributions will be contributed on a "before-tax" basis. This
means that the purchase payments either reduce your income, entitle you to a tax
deduction or are not subject to current income tax.
Under some circumstances "after-tax" contributions can be made to certain
annuities.
These contributions do not reduce your taxable income or give you a tax
deduction.
There are different annual contribution limits for the annuities offered in this
prospectus. Purchase payments in excess of the limits may result in adverse tax
consequences.
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Consult your own tax advisor about your circumstances, any recent tax
developments, and the impact of state income taxation.
Simply stated, income tax rules for Deferred Annuities generally provide that
earnings are not subject to tax until withdrawn. This is referred to as tax
deferral.
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Withdrawals
Because your contributions are generally on a before tax basis, you pay income
taxes on the full amount of money you withdraw as well as income earned under
the contract. If you made any after tax contributions they would not be subject
to income tax.
If certain requirements are met, you may be able to transfer amounts in your
contract to another eligible retirement plan or IRA. For PEDC contracts, you can
only transfer such amounts to another PEDC plan.
Minimum Distribution Requirements
Generally, you must begin receiving withdrawals from your contract by April 1 of
the calendar year following the later of:
o The year you turn age 70 1/2 or;
o Provided you do not own 5% or more of your employer, and to the extent
permitted by your plan and contract, the year you retire.
Complex rules apply to timing and calculating these withdrawals. A tax penalty
of 50% applies to withdrawals which should have been taken but were not.
Although the minimum distribution requirements for PEDC are similar to those for
TSA, 403(a) and Keogh, there are some differences.
Please consult the section for the type of annuity you purchased to determine if
there are restrictions on withdrawals.
Withdrawals Before Age 59 1/2
If you receive a taxable distribution from your contract before you reach age
59 1/2, this amount may be subject to a 10% penalty tax in addition to ordinary
income taxes. This does not apply to PEDC annuities.
As indicated in the chart below, some taxable distributions prior to age 59 1/2
are exempt from the penalty. Some of these exceptions include any amounts
received:
Type of Contract
--------------------------
TSA Keogh 403(a)
--- ----- ------
In a series of substantially equal payments
made annually (or more frequently) for life
or life expectancy, after you have separated
from service x x x
After you die x x x
After you become totally disabled (as
defined in the Code) x x x
To pay deductible medical expenses x x x
After separation from service
if you are over age 55 x x x
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Withdrawals and income payments are included in income except for the portion
that represents a return of non-deductible purchase payments.
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Mandatory 20% Withholding (Except PEDC)
We are required to withhold 20% of the taxable portion of your withdrawal that
constitutes an "eligible rollover distribution" for Federal income taxes. This
rule does not apply to PEDC contracts. We are not required to withhold this
money if you direct us, the trustee or the custodian of the plan to directly
rollover your eligible rollover distribution to a traditional IRA, or another
eligible retirement plan.
Generally, an "eligible rollover distribution" is any taxable amount you receive
from your contract. However, it does not include taxable distributions that are:
o A series of substantially equal payments made at least annually for:
o Your life or life expectancy
o Both you and your beneficiary's lives or life expectancies
o A specified period of 10 years or more
o Withdrawals to satisfy minimum distribution requirements
Other exceptions to the definition of eligible rollover distribution exist.
For taxable withdrawals that are not "eligible rollover distributions," the Code
requires different withholding rules. The withholding amounts are determined at
the time of payment. You may elect out of these withholding requirements.
Systematic Withdrawal Program for Substantially Equal Periodic Payments (SEPP)
Except for PEDC, if you are considering using the Systematic Withdrawal Program
for the purpose of meeting the SEPP exception to the 10% tax penalty, consult
with your tax advisor.
If you receive systematic payments that you intend to qualify for the SEPP
exception, any modifications to your payment before age 59 1/2 or within five
years after beginning Systematic Withdrawal Program payments will result in the
retroactive imposition of the 10% penalty tax.
After Death
If you die before required minimum distribution withdrawals have begun, we must
make payment of your entire interest in the Contract within five years after the
year of your death or begin payments under an income annuity allowed by the Code
to your beneficiary by December 31st of the year after your death.
If your spouse is your beneficiary and if your contract permits, your spouse may
delay the start of income payments until December 31st of the year in which you
would have reached age 70 1/2.
If you die after required withdrawals begin, payments must continue at least as
rapidly as under the distribution method in effect at your death.
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TSA Annuities
General
TSAs fall under Section 403(b) of the Code which provides certain tax benefits
to eligible employees of public school systems and organizations that are tax
exempt under Section 501(c)(3) of the Code.
Your employer buys the annuity for you although you then own it.
Your Deferred Annuity is not forfeitable (e.g., not subject to claims of your
creditors) and you may not transfer it to someone else.
Withdrawals
If you are under 59 1/2, you cannot withdraw money from your contract unless the
withdrawal:
o Relates to contributions made prior to 1989 (and earnings on those
contributions).
o Is directly transferred to other Section 403(b) arrangements;
o Relates to amounts that are not salary reduction elective deferrals;
o Is after you die, leave your job or become disabled (as defined by the
Code); or
o Is for financial hardship (but only to the extent of purchase payments) if
your plan allows it.
See the general heading under Income Taxes for a brief description of the tax
rules that apply to TSA Annuities.
Keogh Annuities
General
Pension and profit-sharing plans satisfying certain Code provisions are
considered to be "Keogh" plans.
See the general heading under Income Taxes for a brief description of the tax
rules for Keogh Annuities.
PEDC
General
PEDC plans are available to state or local governments and certain tax-exempt
organizations as described in Section 457 of the Code. The plans are not
available for churches and qualified church-controlled organizations.
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You may be subject to the 10% penalty tax if you withdraw money before you turn
age 59 1/2.
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PEDC annuities maintained by a state or local government are for the exclusive
benefit of plan participants and their beneficiaries.
PEDC annuities other than those maintained by state or local governments are
solely the property of the employer and are subject to the claims of the
employer's general creditors until they are "made available" to you.
Withdrawals
Generally, monies in your contract can not be "made available" to you until you:
o Reach age 70 1/2
o Leave your job
o Have an unforeseen emergency (as defined by the Code)
Special Rules
Special rules apply to certain non-governmental PEDC plans deferring
compensation from taxable years beginning before January 1, 1987 (or beginning
later but based on an agreement in writing on August 16, 1986).
See the general heading under Income Annuities for a brief description of the
tax rules that apply to PEDC annuities.
403(a)
General
The employer adopts a 403(a) plan as a qualified retirement plan to provide
benefits to participating employees. The plan generally works in a similar
manner to a corporate qualified retirement plan except that the 403(a) plan does
not have a trust or a trustee.
See the general heading under Income Taxes for a brief description of the tax
rules that apply to 403(a) annuities.
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Table of Contents for the Statement of Additional Information
Page
Cover Page ................................................................ 1
Table of Contents ......................................................... 1
Independent Auditors ...................................................... 2
Services .................................................................. 2
Year 2000 ................................................................. 2
Distribution of Certificates and Interests in the
Deferred Annuities and Income Annuities ............................. 2
Early Withdrawal Charge ................................................... 2
Experience Factor ......................................................... 2
Variable Income Payments .................................................. 2
Investment Management Fees ................................................ 5
Performance Data and Advertisement of
the Separate Account ................................................ 6
Voting Rights ............................................................. 7
ERISA ..................................................................... 8
Taxes ..................................................................... 9
Performance Data .......................................................... 22
Financial Statements of the Separate Account .............................. 35
Financial Statements of MetLife ........................................... 61
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Appendix
Premium Tax Table
If you are a resident of one of the following jurisdictions, the percentage
amount listed by that jurisdiction is the premium tax rate which will be applied
to your Deferred Annuity or Income Annuity.
Keogh and PEDC
TSA Deferred 403(a) Deferred Deferred and
and Income and Income Income
Annuities Annuities Annuities (1)
California............ 0.5% 0.5% 2.35%
Kentucky (3).......... 2.0% 2.0% 2.0%
Maine................. -- -- --
Nevada................ -- -- --
Puerto Rico........... 1.0% 1.0% 1.0%
South Dakota.......... -- -- --
U.S. Virgin Islands... 5.0% 5.0% 5.0%
West Virginia......... 1.0% 1.0% 1.0%
Wyoming............... -- -- --
- ----------
1 Premium tax rates applicable to Deferred and Income Annuities purchased
under retirement plans of public employers meeting the requirements of
Section 401(a) of the Code are included under the column headed "Keogh
Deferred and Income Annuities."
2 The premium tax in Kentucky is repealed effective January 1, 2000.
PEANUTS (Copyright) United Feature Syndicate, Inc.
(Copyright) 1999 Metropolitan Life Insurance Company
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Appendix II
What You Need To Know If You Are A Texas Optional Retirement Program Participant
If you are a participant in the Texas Optional Retirement Program, Texas law
permits us to make withdrawals on your behalf only if you die, retire or
terminate employment in all Texas institutions of higher education, as defined
under Texas law. Any withdrawal you ask for requires a written statement from
the appropriate Texas institute of higher education verifying your vesting
status and (if applicable) termination of employment. Also, we require a written
statement from you that you are not transferring employment to another Texas
institution of higher education. If you retire or terminate employment in all
Texas institutions of higher education or die before being vested, amounts
provided by the state's matching contribution will be refunded to the
appropriate Texas institution. We may change these restrictions or add others
without your consent to the extent necessary to maintain compliance with the
law.
B-PPA-48
<PAGE>
[This page intentionally left blank]
B-PPA-49
<PAGE>
Request For a Statement of
Additional Information/Change of Address
If you would like any of the following Statements of Additional Information, or
have changed your address, please check the appropriate box below and return to
the address below.
/ / Metropolitan Life Separate Account E, Metropolitan Series Fund Inc.
/ / Calvert Social Balanced Portfolio
/ / I have changed my address. My current address is:
Name
- -------------------------------------- --------------------------------
(Contract Number)
Address
--------------------------------
- -------------------------------------- --------------------------------
(Signature) zip
Metropolitan Life Insurance Company
Attn: Brian Mack
Retirement and Savings Center, Area 2H
One Madison Avenue
New York, NY 10010
<PAGE>
MetLife (Registered)
Metropolitan Life Insurance Company
Johnstown Office, 500 Schoolhouse Road
Johnstown, PA 15904-2914
Address Service Requested
Bulk Rate
U.S. Postage Paid
Rutland, VT
Permit 220
<PAGE>
April 30, 1999
Preference Plus(Registered) Account Variable Annuity Contracts
Issued by Metropolitan Life Insurance Company
This Prospectus describes group Preference Plus contracts for deferred variable
enhanced annuities ("Enhanced Deferred Annuities") and Preference Plus immediate
variable enhanced income annuities ("Enhanced Income Annuities").
- --------------------------------------------------------------------------------
You decide how to allocate your money among the various available investment
choices. The investment choices available to you are listed in the contract for
your Enhanced Deferred Annuity or Enhanced Income Annuity. Your choices may
include the Fixed Interest Account (not described in this Prospectus) and
investment divisions available through the Metropolitan Life Separate Account E
which, in turn, invest in the following corresponding portfolios of the
Metropolitan Series Fund, Inc. ("Metropolitan Fund"):
State Street Research Aggressive Growth
State Street Research Diversified
State Street Research Growth
State Street Research Income
Harris Oakmark Large Cap Value
Janus Mid Cap
Loomis Sayles High Yield Bond
Neuberger Berman Partners Mid Cap Value
Santander International Stock
Scudder Global Equity
T. Rowe Price Large Cap Growth
T. Rowe Price Small Cap Growth
Lehman Brothers Aggregate Bond Index
MetLife Stock Index
Morgan Stanley EAFE(Registered) Index
Russell 2000(Registered) Index
How to learn more:
Before investing, read the information in this Prospectus about the Enhanced
Deferred Annuities, Enhanced Income Annuities and Metropolitan Life Separate
Account E. Keep this Prospectus for future reference. For more information,
request a copy of the Statement of Additional Information ("SAI"), dated April
30, 1999. The SAI is considered part of this Prospectus as though it were
included in the Prospectus. The Table of Contents of the SAI appears on page
C-PPA-49 of this Prospectus. To request a free copy of the SAI or to ask
questions, write or call:
Metropolitan Life Insurance Company
Retirement & Savings Center, Area 2H
One Madison Avenue
New York, NY 10010-3690
Attention: Brian Mack
Phone: (800) 553-4459
The Securities and Exchange Commission has a website (http://www.sec.gov) which
you may visit to view this Prospectus, SAI and other information. The Securities
and Exchange Commission has not approved or disapproved these securities or
determined if this Prospectus is truthful or complete. Any representation
otherwise is a criminal offense.
The current Metropolitan Fund Prospectus is attached to the back of this
Prospectus. You should also read the Metropolitan Fund Prospectus carefully
before purchasing a Enhanced Deferred Annuity or Enhanced Income Annuity. This
Prospectus is not valid unless attached to a Metropolitan Fund Prospectus.
- --------------------------------------------------------------------------------
Enhanced Deferred Annuities Available:
o Non-Qualified
o Traditional IRA
o Roth IRA
o Unallocated Keogh
Enhanced Income Annuities Available:
o Non-Qualified
o Traditional IRA
o Roth IRA
o Unallocated Keogh
A word about investment risk:
An investment in any of these variable annuities involves investment risk. You
could lose money you invest. Money invested is NOT:
o a bank deposit or obligation;
o federally insured or guaranteed; or
o endorsed by any bank or other financial institution.
- --------------------------------------------------------------------------------
MetLife(Registered)
<PAGE>
TABLE OF CONTENTS
Important Terms You Should Know.......................................C-PPA-4
Table of Expenses.....................................................C-PPA-6
Accumulation Unit Values Table........................................C-PPA-9
MetLife..............................................................C-PPA-13
Metropolitan Life Separate Account E.................................C-PPA-13
The Variable Annuities in this Prospectus ...........................C-PPA-13
An Enhanced Deferred Annuity....................................C-PPA-14
An Enhanced Income Annuity......................................C-PPA-14
Your Investment Choices..............................................C-PPA-15
Enhanced Deferred Annuities..........................................C-PPA-16
The Enhanced Deferred Annuity and Your Retirement Plan..........C-PPA-17
Automated Investment Strategies.................................C-PPA-17
Purchase Payments...............................................C-PPA-18
Allocation of Purchase Payments...............................C-PPA-18
Automated Purchase Payments...................................C-PPA-18
Limits on Purchase Payments...................................C-PPA-19
The Value of Your Investment....................................C-PPA-19
Transfers.......................................................C-PPA-20
Access to Your Money............................................C-PPA-21
Systematic Withdrawal Program.................................C-PPA-21
Minimum Distribution..........................................C-PPA-22
Contract Fee....................................................C-PPA-23
Charges.........................................................C-PPA-23
Insurance-Related Charge......................................C-PPA-23
Investment-Related Charge.....................................C-PPA-23
Premium Taxes...................................................C-PPA-23
Early Withdrawal Charges........................................C-PPA-24
When No Early Withdrawal Charge Applies.......................C-PPA-25
When Another Early Withdrawal Charge May Apply................C-PPA-27
Free Look.......................................................C-PPA-28
Death Benefit...................................................C-PPA-28
Pay-out Options (or Income Options).............................C-PPA-29
C-PPA-2
<PAGE>
Enhanced Income Annuities............................................C-PPA-30
Income Payment Types............................................C-PPA-31
Allocation .....................................................C-PPA-32
Minimum Size of Your Enhanced Income Payment ...................C-PPA-32
The Value of Your Income Payments...............................C-PPA-32
Transfers.......................................................C-PPA-33
Contract Fee....................................................C-PPA-33
Charges.........................................................C-PPA-33
Insurance-Related Charge......................................C-PPA-33
Investment-Related Charge.....................................C-PPA-34
Premium Taxes...................................................C-PPA-34
Free Look.......................................................C-PPA-34
General Information .................................................C-PPA-34
Administration .................................................C-PPA-34
Purchase Payments ............................................C-PPA-34
Confirming Transactions ......................................C-PPA-35
Transactions by Telephone ....................................C-PPA-35
Processing of Certain Transactions............................C-PPA-36
Valuation.....................................................C-PPA-36
Advertising Performance.........................................C-PPA-36
Changes to Your Enhanced Deferred Annuity or Enhanced
Income Annuity................................................C-PPA-37
Voting Rights...................................................C-PPA-38
Who Sells the Enhanced Deferred Annuities and Enhanced
Income Annuities..............................................C-PPA-39
Financial Statements............................................C-PPA-39
Your Spouse's Rights............................................C-PPA-39
When We Can Cancel Your Enhanced Deferred Annuity or
Enhanced Income Annuity.......................................C-PPA-40
Income Taxes.........................................................C-PPA-40
Table of Contents for the Statement of Additional Information........C-PPA-49
Appendix for Premium Tax Table.......................................C-PPA-50
MetLife does not intend to offer the Enhanced Deferred Annuities or Enhanced
Income Annuities anywhere they may not lawfully be offered and sold. MetLife has
not authorized any information or representations about the Enhanced Deferred
Annuities or Enhanced Income Annuities other than the information in this
Prospectus, the attached prospectus, supplements to the prospectuses or any
supplemental sales material we authorize.
C-PPA-3
<PAGE>
Important Terms You Should Know
Account Balance
When you purchase an Enhanced Deferred Annuity an account is set up for you.
Your Account Balance is the total amount of money credited to you under your
Deferred Annuity including money in the investment divisions of the Separate
Account and the Fixed Interest Account.
Accumulation Unit Value
Under an Enhanced Deferred Annuity, money paid-in or transferred into an
investment division of the Separate Account is credited to you in the form of
accumulation units. Accumulation units are established for each investment
division. We determine the value of these accumulation units each day the New
York Stock Exchange is open for regular trading. The values increase or decrease
based on the investment performance of the corresponding underlying portfolios.
Annuity Unit Value
Under an Enhanced Income Annuity or variable payout option, the money paid-in or
transferred into an investment division of the Separate Account is held in the
form of annuity units. Annuity units are established for each investment
division. We determine the value of these annuity units each day the New York
Stock Exchange is open for regular trading. The values increase or decrease
based on the investment performance of the corresponding underlying portfolios.
Assumed Investment Return (AIR)
Under an Enhanced Income Annuity, the AIR is a percentage rate of return assumed
to determine the amount of the first variable income payment. The AIR is also
the benchmark that is used to calculate the investment performance of a given
investment division to determine all subsequent payments to you.
Contract
A contract is the legal agreement between MetLife or the certificate under a
group annuity contract between MetLife and your employer, plan trustee or other
entity. You as the participant or annuitant receive a certificate under the
Contract. The contract contains relevant provisions of your Enhanced Deferred
Annuity or Enhanced Income Annuity. MetLife issues contracts for each of the
annuities described in this Prospectus.
Contract Year
Generally, the Contract Year for an Enhanced Deferred Annuity is the period
ending on the last day of the month in which the anniversary of when we issue
the annuity occurs and each following 12 month period. However, for the
unallocated Keogh Enhanced Deferred Annuity depending on underwriting and plan
requirements, the first Contract Year may range from the initial three to 15
month period after the contract is issued.
C-PPA-4
<PAGE>
Early Withdrawal Charge
The early withdrawal charge is the amount we deduct from your Account Balance in
addition to your requested withdrawal amount if you withdraw money prematurely
from an Enhanced Deferred Annuity. This charge is often referred to as a
deferred sales load or back-end sales load.
Investment Division
Investment divisions are subdivisions of the Separate Account. When you allocate
or transfer money to an investment division, the investment division purchases
shares of a portfolio (with the same name) within the Metropolitan Fund.
MetLife
Metropolitan Life Insurance Company is the company that issues the Enhanced
Deferred Annuities and Enhanced Income Annuities. Throughout this Prospectus,
MetLife is also referred to as "we," "us" or "our."
MetLife Designated Office
The MetLife Designated Office is the MetLife office that will generally handle
the processing of all your requests concerning your Enhanced Deferred Annuity or
Enhanced Income Annuity. MetLife will notify you and provide you with the
address of your MetLife Designated Office.
Separate Account
A separate account is an investment account. All assets contributed to
investment divisions under the Enhanced Deferred Annuities and Enhanced Income
Annuities are pooled in the Separate Account and maintained for the benefit of
investors in Enhanced Deferred Annuities and Enhanced Income Annuities.
You
In this Prospectus, depending on the context, "you" may mean either the
purchaser of the Deferred Annuity or Income Annuity or the participant or
annuitant for whom money is invested under group arrangements. In cases where we
are referring to giving instructions or making payments to us for the
unallocated Keogh Enhanced Deferred Annuity, "you" means the trustee of the
Keogh plan.
Variable Annuity
An annuity in which returns/income payments are based upon the performance of
investments such as stocks and bonds held by one or more underlying portfolios.
You assume the investment risk for any amounts allocated to the investment
divisions in a variable annuity.
C-PPA-5
<PAGE>
TABLE OF EXPENSES--PREFERENCE PLUS ENHANCED DEFERRED ANNUITIES AND ENHANCED
INCOME ANNUITIES
The following table shows the Separate Account and Metropolitan Fund charges and
expenses you will incur. The table is based on past experience and is subject to
change. It is not intended to show your actual expenses which may be higher or
lower. The table does not show fees for the Fixed Interest Account or premium
taxes which may apply. We have provided examples to show you the impact of
Separate Account and Metropolitan Fund charges and expenses on a hypothetical
investment of $1,000 that has an assumed 5% return on the investment.
- -------------------------------------------------------------------------------
Separate Account and Metropolitan Fund expenses for the fiscal year ending
December 31, 1998:
Contractowner Transaction Expenses For All Investment Divisions Currently
Offered
<TABLE>
<S> <C>
Sales Load Imposed on Purchases.......................................................... None
Deferred Sales Load (as a percentage of the purchase payment funding the withdrawal
during the accumulation period)(1)...................................................... From 0% to 7%
Exchange Fee............................................................................. None
Surrender Fee............................................................................ None
Annual Contract Fee (2)..................................................................... None
Separate Account Annual Expenses (as a percentage of average account value) (3)
General Administrative Expenses Charge................................................... .20%
Mortality and Expense Risk Charge........................................................ .75%
Total Separate Account Annual Expenses................................................... .95%
Metropolitan Fund Annual Expenses (as a percentage of average net assets)
<CAPTION>
MANAGE- OTHER EXPENSES TOTAL EXPENSES OTHER EXPENSES TOTAL EXPENSES
MENT WITHOUT WITHOUT AFTER EXPENSE AFTER EXPENSE
FEES REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT
<S> <C> <C> <C> <C> <C>
State Street Research Aggressive Growth Portfolio (4)(5) 71 .04 .75 .04 .75
State Street Research Diversified Portfolio (4)(5)....... .43 .05 .48 .05 .48
State Street Research Growth Portfolio (4)(5) ........... .48 .05 .53 .05 .53
State Street Research Income Portfolio (4)(5)............ .33 .06 .39 .06 .39
Harris Oakmark Large Cap Value Portfolio (5)(7).......... .75 .80 1.55 .20 .95
Janus Mid Cap Portfolio (5)(6).......................... .72 .09 .81 .09 .81
Loomis Sayles High Yield Bond Portfolio (6).............. .70 .35 1.05 .31 1.01
Neuberger Berman Partners Mid Cap Value Portfolio (5)(7). .70 .89 1.59 .20 .90
Santander International Stock Portfolio (4)(5) .......... .75 .27 1.02 .27 1.02
Scudder Global Equity Portfolio (5)(6)................... .74 .28 1.02 .28 1.02
T. Rowe Price Large Cap Growth Portfolio (5)(7).......... .70 1.18 1.88 .20 .90
T. Rowe Price Small Cap Growth Portfolio (5)(6).......... .53 .14 .67 .14 .67
Lehman Brothers Aggregate Bond Index Portfolio (7)....... .25 .32 .57 .23 .48
Met Stock Index Portfolio (4)........................ .25 .05 .30 .05 .30
Morgan Stanley EAFE(Registered)Index Portfolio (7)....... .30 .99 1.29 .25 .55
Russell 2000 Index Portfolio (7)......................... .25 .70 .95 .20 .45
</TABLE>
C-PPA-6
<PAGE>
Example
If you surrender your Enhanced Deferred Annuity (withdraw all your money) at
the end of the time periods listed below, you would pay the following expenses
on a $1,000 investment in each investment division listed below, assuming a 5%
annual return on assets:
1 3 5 10
YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------
State Street Research Aggressive Growth Portfolio. $80 $98 $119 $202
State Street Research Diversified Portfolio....... 77 90 105 172
State Street Research Growth Portfolio .......... 78 92 108 178
State Street Research Income Portfolio............ 76 87 100 162
Harris Oakmark Large Cap Value Portfolio.......... 88 123 161 286
Janus Mid Cap Portfolio........................... 81 100 123 209
Loomis Sayles High Yield Bond Portfolio........... 83 108 135 234
Neuberger Berman Partners Mid Cap Value Portfolio. 89 125 163 291
Santander International Stock Portfolio .......... 83 107 134 231
Scudder Global Equity Portfolio .................. 83 107 134 231
T. Rowe Price Large Cap Growth Portfolio ......... 92 134 178 319
T. Rowe Price Small Cap Growth Portfolio.......... 79 96 115 193
Lehman Brothers Aggregate Bond Index Portfolio.... 78 93 110 182
MetLife Stock Index Portfolio..................... 76 84 95 152
Morgan Stanley EAFE(Registered)Index Portfolio.... 86 115 148 260
Russell 2000 Index Portfolio...................... 82 105 130 224
If you annuitize (elect a pay-out option under your Enhanced Deferred Annuity)
or do not surrender your Enhanced Deferred Annuity at the end of the time
periods listed below, you would pay the following expenses on a $1,000
investment in each investment division listed below, assuming a 5% annual
return on assets (8):
1 3 5 10
YEAR YEARS YEARS YEARS
- -------------------------------------------------------------------------------
State Street Research Aggressive Growth Portfolio . $17 $54 $93 $202
State Street Research Diversified Portfolio ....... 15 46 79 172
State Street Research Growth Portfolio ............ 15 47 81 178
State Street Research Income Portfolio ............ 14 43 74 162
Harris Oakmark Large Cap Value Portfolio .......... 26 79 135 286
Janus Mid Cap Portfolio ........................... 18 56 96 209
Loomis Sayles High Yield Bond Portfolio ........... 20 63 108 234
Neuberger Berman Partners Mid Cap Value Portfolio.. 26 80 137 291
Santander International Stock Portfolio............ 20 62 107 231
Scudder Global Equity Portfolio.................... 20 62 107 231
T. Rowe Price Large Cap Growth Portfolio .......... 29 89 151 319
T. Rowe Price Small Cap Growth Portfolio........... 17 51 89 193
Lehman Brothers Aggregate Bond Index Portfolio..... 16 48 83 182
MetLife Stock Index Portfolio ..................... 13 40 69 152
Morgan Stanley EAFE(Registered)Index Portfolio..... 23 71 121 260
Russell 2000 Index Portfolio....................... 19 60 103 224
C-PPA-7
<PAGE>
TABLE OF EXPENSES (continued)
1 There are times when the early withdrawal charge does not apply to amounts
that are withdrawn from an Enhanced Deferred Annuity. Each Contract Year
you may take the greater of 10% (20% under certain Enhanced Deferred
Annuities) of your Account Balance or your purchase payments made over 7
years ago free of early withdrawal charges.
2 A $20 annual contract fee may be imposed on money in the Fixed Interest
Account. This fee may be waived under certain circumstances.
3 Our total Separate Account Annual Expenses will not exceed .95% of your
average balance in the investment divisions. For purposes of presentation
here, we estimated the allocation between general administrative expenses
and the mortality and expense risk charge.
4 Prior to May 16, 1993, we paid all expenses of the Metropolitan Fund
(other than management fees, brokerage commissions, taxes, interest and
extraordinary or non-recurring expenses).
5 Each Portfolio's management fee decreases when its assets grow to certain
dollar amounts. The "break point" dollar amounts at which the management
fee declines are more fully explained in the prospectus for the
Metropolitan Fund.
6 These Portfolios began operations on March 3, 1997. We paid all expenses
(other than management fees, brokerage commissions, taxes, interest and
extraordinary or non-recurring expenses) in excess of .20% of the average
net assets for each of the following Portfolios until the Portfolio's
total assets reached $100 million, or until March 2, 1999, whichever came
first. The expense information in the Table has been restated to reflect
current expenses as if they had been in effect during the entire prior
year.
7 These Portfolios began operations on November 9, 1998. We pay all expenses
(other than management fees, brokerage commissions, taxes, interest and
extraordinary or non-recurring expenses) in excess of .20% (.25% for the
Morgan Stanley EAFE(Registered) Index Portfolio) of the average net assets
for each of the following Portfolios until the Portfolio's total assets
reach $100 million, or until November 8, 2000, whichever comes first. The
expense information in the Table has been restated to reflect current
expenses as if they had been in effect during the entire prior year.
8 This example assumes no early withdrawal charges are applicable. In order
to make this assumption for a pay-out option under your Deferred Annuity,
we also assumed that you selected an income payment type under which you
will receive payments over your lifetime or for a period of at least five
full years.
C-PPA-8
<PAGE>
ACCUMULATION UNIT VALUES FOR EACH INVESTMENT DIVISION
(For an accumulation unit outstanding throughout the period)
These tables and bar charts show fluctuations in the Accumulation Unit Values
for each investment division from year end to year end. The information in this
table has been derived from the Separate Account's full financial statements or
other reports (such as the annual report).
<TABLE>
<CAPTION>
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
ENHANCED PREFERENCE PLUS CONTRACTS YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Aggressive Growth Division.. 1998 $38.02 $42.82 321
[YEAR END ACCUMULATION UNIT VALUE 1997 35.98 38.02 340
BAR CHARTS OMITTED FOR THIS DIVISION 1996 33.72 35.98 341
AND EACH OF THE NINE FOLLOWING DIVISIONS] 1995 26.29 33.72 254
1994 27.05 26.29 189
1993 22.26 27.05 163
1992 20.37 22.26 1
1991 12.35 20.37 0
1990 14.85(a) 12.35 0
State Street Research Diversified Division........ 1998 33.57 39.79 415
1997 28.11 33.57 390
1996 24.78 28.11 371
1995 19.69 24.78 346
1994 20.51 19.69 341
1993 18.36 20.51 360
1992 16.93 18.36 50
1991 13.68 16.93 0
1990 14.34(a) 13.68 0
</TABLE>
C-PPA-9
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
ENHANCED PREFERENCE PLUS CONTRACTS YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Growth Division.... 1998 $60.00 $76.19 445
1997 47.19 60.00 443
1996 38.99 47.19 402
1995 29.57 38.99 334
1994 30.85 29.57 296
1993 27.22 30.85 258
1992 24.63 27.22 5
1991 18.67 24.63 0
1990 21.66(a) 18.67 0
State Street Research Income Division.... 1998 32.77 35.52 161
1997 30.13 32.77 139
1996 29.36 30.13 128
1995 24.79 29.36 123
1994 25.83 24.79 125
1993 23.43 25.83 151
1992 22.12 23.43 0
1991 19.02 22.12 0
1990 17.91(a) 19.02 0
Janus Mid Cap Division................... 1998 12.72 17.29 100
1997 10.00(b) 12.72 54
Loomis Sayles High Yield Bond Division... 1998 10.53 9.65 33
1997 10.00(b) 10.53 15
</TABLE>
C-PPA-10
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
PREFERENCE PLUS ENHANCED DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Santander International Stock Division..... 1998 $13.54 $16.43 318
1997 13.99 13.54 324
1996 14.38 13.99 368
1995 14.40 14.38 396
1994 13.84 14.40 446
1993 9.45 13.84 339
1992 10.63 9.45 1
1991 10.00(c) 10.63 0
Scudder Global Equity Division............. 1998 10.88 12.49 88
1997 10.00(b) 10.88 62
T. Rowe Price Small Cap Growth Division.... 1998 11.79 12.08 94
1997 10.00(b) 11.79 85
MetLife Stock Index Division............... 1998 32.50 41.28 748
1997 24.83 32.50 701
1996 20.44 24.83 629
1995 15.07 20.44 518
1994 15.04 15.07 432
1993 13.86 15.04 399
1992 13.02 13.86 12
1991 10.13 13.02 0
1990 10.85(a) 10.13 0
</TABLE>
C-PPA-11
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
ENHANCED PREFERENCE PLUS CONTRACTS YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Harris Oakmark Large Cap Value Division............ 1998 $10.00(d) $9.72 2
Lehman Brothers Aggregate Bond Division............ 1998 10.00(d) 10.12 11
Morgan Stanley EAFE(Registered)Index Division...... 1998 10.00(d) 10.80 13
Neuberger Berman Partners Mid Cap Value Division... 1998 10.00(d) 10.73 5
Russell 2000 Index Division........................ 1998 10.00(d) 10.53 16
T. Rowe Price Large Cap Growth Division............ 1998 10.00(d) 11.01 3
</TABLE>
In addition to the above mentioned Accumulation Units, there were cash reserves
of $22,530,195 as of December 31, 1998, applicable to Income Annuities
(including those not described in this Prospectus) receiving annuity payouts.
(a) Inception Date July 2, 1990.
(b) Inception Date March 3, 1997.
(c) Inception Date July 1, 1991.
(d) Inception Date November 9, 1998. A bar chart does not appear for this
investment division because there is less than one calendar year of
performance history.
C-PPA-12
<PAGE>
MetLife
Our main office is located at One Madison Avenue, New York, New York 10010.
MetLife was formed under the laws of New York State in 1868. Headquartered in
New York City, MetLife is a leading provider of insurance and financial
services to a broad spectrum of individual and institutional customers. With
approximately $359 billion worth of assets under management as of December 31,
1998, MetLife provides individual insurance and investment products to
approximately 9 million households in the United States. MetLife also provides
group insurance and investment products to corporations and other institutions
employing over 33 million people.
We are a mutual life insurance company. In November 1998, MetLife announced its
intention to convert to a stock company from a mutual company. MetLife's board
of directors authorized the development of a plan to "demutualize." The plan
will be subject to approval by the board of directors, the State of New York
Insurance Department and policyholders. As of April 30, 1999, we do not know
the details of the plan or when or if it will take effect.
Metropolitan Life Separate Account E
We established Metropolitan Life Separate Account E on September 27, 1983. The
purpose of the Separate Account is to hold the variable assets that underlie
the Preference Plus Account Variable Enhanced Annuity Contracts and some other
variable annuity contracts we issue. We have registered the Separate Account
with the Securities and Exchange Commission as a unit investment trust under
the Investment Company Act of 1940.
The Separate Account's assets are solely for the benefit of those who invest in
the Separate Account and no one else, including our creditors. We are obligated
to pay all money we owe under the Enhanced Deferred Annuities and Enhanced
Income Annuities even if that amount exceeds the assets in the Separate
Account. The assets of the Separate Account are held in our name on behalf of
the Separate Account and legally belong to us. All the income, gains, and
losses (realized or unrealized) resulting from these assets are credited to or
charged against the contracts issued from this Separate Account without regard
to our other business.
The Variable Annuities in this Prospectus
There are two types of variable annuities described in this Prospectus:
Enhanced Deferred Annuities and Enhanced Income Annuities. These annuities are
"variable" because the value of your account or income
C-PPA-13
<PAGE>
payment varies based on the investment performance of the investment divisions
you choose. In short, the value of your Enhanced Deferred Annuity, your income
payments under a variable pay-out option of your Enhanced Deferred Annuity, or
your income payments under your Enhanced Income Annuity, may go up or down.
Since the investment performance is not guaranteed, your money is at risk. The
degree of risk will depend on the investment divisions you select. The
Accumulation Unit Value or Annuity Unit Value for each investment division
rises or falls based on the investment performance (or "experience") of the
Portfolio with the same name.
The Enhanced Deferred Annuities have a fixed interest rate option called the
Fixed Interest Account. With the Fixed Interest Account, your money earns a
rate of interest that we guarantee. Enhanced Income Annuities and the variable
pay-out options under the Enhanced Deferred Annuities have a fixed payment
option called the Fixed Income Option. Under the Fixed Income Option, we
guarantee the amount of your fixed income payments. These fixed options are not
described in this Prospectus although we occasionally refer to them.
An Enhanced Deferred Annuity
You accumulate money in your account during the pay-in phase by making one or
more purchase payments. MetLife will hold your money and credit any investment
returns as long as the money remains in your account.
The pay-out phase begins when you either take all of your money out of the
account or elect to have us pay you "income" payments using the money in your
account. The number and the amount of the income payments you receive will
depend on such things as the type of pay-out option you choose, your investment
choices, and the amount used to provide your income payments. Because Enhanced
Deferred Annuities offer various insurance benefits such as of pay-out options,
including our guarantee of income for your lifetime, they are "annuities."
An Enhanced Income Annuity
An Enhanced Income Annuity, also known as an immediate annuity, only has a
"pay-out" phase. You make a single purchase payment and select the type of
pay-out option suited to your needs. Some of the pay-out options guarantee an
income stream for your lifetime or your and another's lifetimes. Some Enhanced
Income Annuities guarantee a time period of your choice over which MetLife will
make income payments. Income Annuities also have other features. The amount of
your income payments you receive will depend on such things as the type of
pay-out option you choose, your investment choices and the amount of your
purchase payment.
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The group Deferred Annuities and group Income Annuities described in this
prospectus are offered to an employer, association, trust or other group for
its employees, members or participants.
An Enhanced Deferred Annuity consists of two phases: the accumulation or
"pay-in" phase and the income annuity or "pay-out" phase.
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C-PPA-14
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Your Investment Choices
The Metropolitan Fund and each Portfolio are more fully described in the
Metropolitan Fund's prospectus and its SAI. The Metropolitan Fund's prospectus
is attached at the end of this Prospectus. You should read the Metropolitan
Fund prospectus carefully before making purchase payments to the investment
divisions. The SAI is available upon your request.
The investment choices are:
Lehman Brothers Aggregate Bond Index Portfolio
State Street Research Income Portfolio
State Street Research Diversified Portfolio
MetLife Stock Index Portfolio
Harris Oakmark Large Cap Value Portfolio
T. Rowe Price Large Cap Growth Portfolio
State Street Research Growth Portfolio
Neuberger Berman Partners Mid Cap Value Portfolio
Janus Mid Cap Portfolio
Loomis Sayles High Yield Bond Portfolio
State Street Research Aggressive Growth Portfolio
Russell 2000 Index Portfolio
T. Rowe Price Small Cap Growth Portfolio
Scudder Global Equity Portfolio
Morgan Stanley EAFE(Registered) Index Portfolio
Santander International Stock Portfolio
Some of the investment choices may not be available under the terms of the
Enhanced Deferred Annuity or Enhanced Income Annuity. The contract will
indicate the investment divisions that are available to you. Your investment
choices may be limited because:
o Some of the investment divisions are not approved in your state.
o Your employer, association or other group contractholder limits the number
of available investment divisions.
o We have restricted the available investment divisions.
o For Enhanced Income Annuities, some states limit you to four choices (four
investment divisions or three investment divisions and the Fixed Income
Option).
The investment divisions buy and sell shares of corresponding mutual fund
portfolios. These Portfolios, which are part of the Metropolitan Fund, invest
in stocks, bonds and other investments. All dividends declared by the
Portfolios are earned by the Separate Account and reinvested. Therefore, no
dividends are distributed to you under the Enhanced Deferred Annuities or
Enhanced Income Annuities. Dividends generally are reflected in an increase
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The degree of investment risk you assume will depend on the investment
divisions you choose. We have listed your choices in order of risk from the
most conservative to the most aggressive.
There is a possibility you will lose principal in the investment choices.
However, they generally offer the opportunity for greater returns over the long
term than our guaranteed fixed options.
While the investment divisions and their comparably named Portfolios may have
names, investment objectives and management which are identical or similar to
publicly available mutual funds, these are not those mutual funds. The
Metropolitan Fund Portfolios most likely will not have the same performance
experience as any publicly available mutual fund.
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C-PPA-15
<PAGE>
in the Accumulation or Annuity Unit Value. You pay no transaction expenses
(i.e., front end sales load or back-end sales load charges) as a result of the
Separate Account's purchase or sale of these mutual fund shares. The Portfolios
of the Metropolitan Fund are available only by purchasing MetLife annuities and
life insurance policies and are never sold directly to the public.
The Metropolitan Fund is a "series" type fund registered with the Securities
and Exchange Commission as an "open-end management investment company" under
the Investment Company Act of 1940 (the "1940 Act"). A "series" fund means that
each Portfolio is one of several available through the Metropolitan Fund.
Except for the Janus Mid Cap Portfolio, each Portfolio is "diversified" under
the 1940 Act.
The Portfolios of the Metropolitan Fund pay us a monthly fee for our services
as investment manager. These fees, as well as the operating expenses paid by
each Portfolio, are described in the Metropolitan Fund prospectus and SAI.
In addition, the Metropolitan Fund prospectus discusses other separate accounts
of MetLife and Metropolitan Tower Life Insurance Company that invest in the
Metropolitan Fund. The risks of these arrangements are also discussed.
Enhanced Deferred Annuities
This Prospectus describes four kinds of Enhanced Deferred Annuities under which
you can accumulate money:
o Non-Qualified
o Traditional IRA (Individual Retirement Annuities)
o Roth IRAs (Roth Individual Retirement Annuities)
o Unallocated Keogh
Certain group Enhanced Deferred Annuities may be issued to a bank that does
nothing but hold them as contractholder. Enhanced Deferred Annuities may be
either:
o Allocated (your Account Balance records are kept for you as an
individual); or
o Unallocated (Account Balance records are kept for a plan or group as a
whole).
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These Enhanced Deferred Annuities are issued to a group. You are then a
participant under the group's Enhanced Deferred Annuity.
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C-PPA-16
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The Enhanced Deferred Annuity and Your Retirement Plan
If you participate through a retirement plan, the Enhanced Deferred Annuity may
provide that all or some of your rights as described in this Prospectus are
subject to the plan's terms. Limitations on your rights may apply to investment
choices, automated investment strategies, purchase payments, withdrawals,
transfers, the death benefit and pay-out options. The Enhanced Deferred Annuity
may provide that a plan administrative fee will be paid by making a withdrawal
from your Account Balance. We may rely on your employer's or plan
administrator's statements to us as to the terms of the plan or your
entitlement to any amounts. We will not be responsible for determining what
your plan says. You should consult the Enhanced Deferred Annuity contract and
plan document to see how you may be affected.
Automated Investment Strategies
There are five automated investment strategies available to you. These
investment strategies are available to you without any additional charges.
However, the investment strategies are not available for the unallocated Keogh
Enhanced Deferred Annuities. As with any investment program, no strategy can
guarantee a gain - you can lose money. We may modify or terminate any of the
strategies at any time. You may have only one automated investment strategy in
effect at a time.
The Equity Generator(Service Mark): An amount equal to the interest earned in
the Fixed Interest Account is transferred monthly to either the MetLife Stock
Index or State Street Research Aggressive Growth investment division, based on
your selection.
As an added benefit of this strategy, you will not pay early withdrawal charges
from your purchase payments, provided that 100% of your contributions are
allocated to the Fixed Interest Account for the life of your Enhanced Deferred
Annuity and you never request allocation changes or transfers. Early withdrawal
charges may be taken from any earnings.
The Equalizer(Service Mark): You start with equal amounts of money in the Fixed
Interest Account and your choice of either the MetLife Stock Index Division or
the State Street Research Aggressive Growth Division. Each quarter amounts are
transferred between the Fixed Interest Account and, your chosen investment
division to make the value of each equal. Say you choose the MetLife Stock
Index Division. If over the quarter, it outperforms the Fixed Interest Account,
money is transferred to the Fixed Interest Account. Conversely, if the Fixed
Interest Account outperforms the MetLife Stock Index Division, money is
transferred into the MetLife Stock Index Division.
The Rebalancer(Service Mark): You select a specific asset allocation for your
entire Account Balance from among the investment divisions and the Fixed
Interest Account. Each quarter, we transfer amounts among these options to
bring the percentage of your Account Balance in each option back to your
original allocation.
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We created these investment strategies to help you manage your money. You
decide if one is appropriate for you, based upon your risk tolerance and saving
goals. These strategies were designed to help you take advantage of the
tax-deferred status of an annuity.
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C-PPA-17
<PAGE>
The Index Selector(Service Mark): You may select one of five asset allocation
models which are designed to correlate to various risk tolerance levels. Based
on the model you choose, your Account Balance is divided among the Lehman
Brothers Aggregate Bond Index, MetLife Stock Index, Morgan Stanley
EAFE(Registered) Index and Russell 2000 Index investment divisions and the Fixed
Interest Account. Each quarter, the percentage in each of these investment
divisions and the Fixed Interest Account is brought back to the original
percentage by transferring amounts among the investment divisions and the Fixed
Interest Account.
In the future, we may permit you to allocate less than 100% of your Account
Balance to this strategy. This strategy may experience more volatility than our
other strategies. The models are subject to change from time to time. We
provide the elements to formulate the models. We may rely on a third party for
its expertise in creating appropriate allocations.
The Allocator(Service Mark): Each month a dollar amount you choose is
transferred from the Fixed Interest Account to any of the investment divisions
you choose. You select the day of the month and the number of months over which
the transfers will occur. A minimum transfer of $50 is the only requirement.
The Equity Generator and the Allocator are dollar cost averaging strategies.
Dollar cost averaging involves investing at regular intervals of time. Since
this involves continuously investing regardless of fluctuating prices, you
should consider whether you can continue the strategy through periods of
fluctuating prices.
Purchase Payments
There is no minimum purchase payment except for the unallocated Keogh Enhanced
Deferred Annuity. If you have an unallocated Keogh Enhanced Deferred Annuity,
each purchase payment must be at least $2,000. In addition, your total purchase
payments must be at least $15,000 for the first Contract Year and at least
$5,000 each subsequent Contract Year.
You may continue to make purchase payments while you receive Systematic
Withdrawal Program payments, as described later in this Prospectus, unless your
purchase payments are made through automatic payroll deduction, check-o-matic,
salary reduction or salary deduction.
Allocation of Purchase Payments
You decide how your money is allocated among the Fixed Interest Account and the
investment divisions. You can change your allocations for additional purchase
payments. We will make allocation changes when we receive your request for a
change. You may also specify an effective date for the change as long as it is
within 30 days after we receive the request.
Automated Purchase Payments
If you purchase a Non-Qualified Enhanced Deferred Annuity, you may elect to
have purchase payments made automatically. With "automatic payroll
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You may make purchase payments to your Enhanced Deferred Annuity whenever you
choose, up to the date you begin receiving payments from a pay-out option.
However, Federal tax rules may limit the amount and frequency of your purchase
payments.
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C-PPA-18
<PAGE>
deduction" your employer deducts an amount from your salary and makes the
purchase payment for you. With "check-o-matic" your bank deducts money from
your checking account and makes the purchase payment for you.
Limits on Purchase Payments
Your ability to make purchase payments may be limited by:
o Federal tax laws.
o Our right to limit the total of your purchase payments to $500,000. For
the unallocated Keogh Enhanced Deferred Annuity, we limit purchase
payments to $5,000,000 per year. We may change the maximum by telling you
in writing at least 90 days in advance.
o Regulatory requirements. For example, if you reside in Washington or
Oregon, we may be required to limit your ability to make purchase payments
after you have held the Enhanced Deferred Annuity for more than three
years, if the Enhanced Deferred Annuity was issued to you after you were
age 60, or after you turn age 63, if the Enhanced Deferred Annuity was
issued before you were age 61.
o For the unallocated Keogh Enhanced Deferred Annuity, a withdrawal should
you leave your job.
o For certain Enhanced Deferred Annuities, you may no longer make purchase
payments if you retire.
o Receiving systematic termination payments (described later).
The Value of Your Investment
Accumulation Units are credited to you when you make purchase payments or
transfers into an investment division. When you withdraw or transfer money from
an investment division, accumulation units are liquidated. We determine the
number of accumulation units you have by dividing the amount of your purchase
payment, transfer or withdrawal by the Accumulation Unit Value on the date of
the transaction.
This is how we calculate the Accumulation Unit Value for each investment
division:
o First, we determine the change in investment performance (including any
investment-related charge) for the underlying Portfolio from the previous
trading day to the current trading day;
o Next, we subtract the daily equivalent of our insurance-related charge
(general administrative expenses and mortality and expense risk charges)
for each day since the last Accumulation Unit Value was calculated; and
o Finally, we multiply the previous Accumulation Unit Value by this result.
C-PPA-19
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Examples
Calculating the Accumulation Unit Value
Assume you make a purchase payment of $500 into one investment division and
that investment division's Accumulation Unit Value is currently $10.00. You
would be credited with 50 accumulation units.
$500 = 50 accumulation units
----
10
Calculating the Number of Accumulation Units
Assume yesterday's Accumulation Unit Value was $10.00 and the number we
calculate for today's investment experience (minus charges) for an underlying
portfolio is 1.05. Today's Accumulation Unit Value is $10.50. The value of your
$500 investment is then $525.
$10.00 x 1.05 = $10.50 is the new Accumulation Unit Value
However, assume that today's investment experience (minus charges) is .95
instead of 1.05. Today's Accumulation Unit Value is $9.50. The value of your
$500 investment is then $475.
$10.00 x .95 = $9.50 is the new Accumulation Unit Value
Transfers
You can make an unlimited number of transfers between investment divisions or
between the investment divisions and the Fixed Interest Account. Some
restrictions may apply to transfers from the Fixed Interest Account to the
investment divisions. For us to process a transfer, you must tell us:
o The percentage or dollar amount of the transfer;
o The investment division (or Fixed Interest Account) from which you want
the money to be transferred;
o The investment division (or Fixed Interest Account) to which you want the
money to be transferred; and
o Whether you intend to start, stop or modify an automated investment
strategy by making the transfer.
We may require you to:
o Use our forms;
o Maintain a minimum Account Balance (if the transfer is in connection with
an automated investment strategy); or
o Transfer a minimum amount if the transfer is in connection with the
Allocator.
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You may transfer money within your contract as often as you like. You will not
incur current taxes on your earnings or any early withdrawal charges as a
result of transferring your money.
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C-PPA-20
<PAGE>
Access To Your Money
You may withdraw either all or a part of your Account Balance from the Enhanced
Deferred Annuity. Withdrawals must be at least $500 (or the Account Balance, if
less). To process your request, we need the following information:
o The percentage or dollar amount of the withdrawal; and
o The investment division (or Fixed Interest Account) from which you want
the money to be withdrawn.
Generally, if you request, we will make payments directly to other investments
on a tax-free basis. You may only do so if all applicable tax and state
regulatory requirements are met and we receive all information necessary for us
to make the payment. We may require you to use our forms.
Systematic Withdrawal Program
If you have a Non-Qualified or IRA Enhanced Deferred Annuity, subject to
approval in your state, you may choose to automatically withdraw a specific
dollar amount or a percentage of your Account Balance each Contract Year. This
amount is then paid in equal portions throughout the Contract Year according to
the time frame you select, e.g., monthly, quarterly, semi-annually or annually.
Once the Systemic Withdrawal Program is initiated, the payments will
automatically renew each Contract Year.
If you elect to withdraw a dollar amount, we will pay you the dollar amount
each Contract Year. If you elect to withdraw a percentage of your Account
Balance, each Contract Year we recalculate the dollar amount you will receive
based on your new Account Balance.
Calculating Your Payment Based on a Percentage Election for the First Contract
Year You Elect the Systematic Withdrawal Program: If you choose to receive a
percentage of your Account Balance, we will determine the dollar amount payable
on the date these payments begin. When you first elect the program, we will pay
this dollar amount over the remainder of the Contract Year. For example, if you
select to receive payments on a monthly basis, the percentage of your Account
Balance you request equals $12,000, and there are six months left in the
Contract Year, we will pay you $2,000 a month.
Calculating Your Payment for Subsequent Contract Years of the Systematic
Withdrawal Program: For each subsequent year that your Systematic Withdrawal
Program remains in effect, we will deduct from your Enhanced Deferred Annuity
and pay you over the Contract Year either the dollar amount that you chose or a
dollar amount equal to the percentage of your Account Balance you chose. For
example, if you select to receive payments on a monthly basis, ask for a
percentage and that percentage equals another $12,000 at the start of a
Contract Year, we will pay you $1,000 a month.
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Income taxes, tax penalties and early withdrawal charges may apply to any
withdrawal you make.
Depending on the Enhanced Non-Qualified or Enhanced IRA Deferred Annuity, we
will withdraw the payments from the Fixed Interest Account or the investment
divisions you select either pro rata or in the proportions you request. Each
payment must be at least $50.
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C-PPA-21
<PAGE>
If you do not provide us with your desired allocation, or there are
insufficient amounts in the investment divisions or the Fixed Interest Account
that you selected, the payments will be taken out pro rata from the Fixed
Interest Account and any investment divisions in which you then have money.
Selecting a Payment Date: Your payment date is the date we make the withdrawal.
When you select or change a payment date, we must receive your request at least
10 days prior to the selected date. If we do not receive your request in time,
we will make the payment a month after the date you selected. If you do not
select a payment date, we will automatically begin systematic withdrawals
within 30 days after we receive your request. Changes in the dollar amount,
percentage, or timing of payments can be made at the beginning of any Contract
Year, once a year. However, we must receive your request at least 30 days in
advance. If you make any of these changes we will treat your request as though
you were starting a new Systematic Withdrawal Program.
Although we need your written authorization to begin this program, you may
cancel this program at any time by telephone or by writing to us at your
MetLife Designated Office.
Systematic Withdrawal Program payments may be subject to an early withdrawal
charge unless an exception to this charge applies. For purposes of determining
how much of the annual payment amount is exempt from this charge under the free
withdrawal provision (discussed later), all Systematic Withdrawal Program
payments in a Contract Year are characterized as a single lump sum withdrawal
as of your first payment date in that Contract Year. When you first elect the
program, we will calculate the percentage of your Account Balance your
Systematic Withdrawal Program payment represents based on your Account Balance
on the first Systematic Withdrawal Program payment date. For all subsequent
Contract Years, we will calculate the percentage of your Account Balance your
Systematic Withdrawal Program payment represents based on your Account Balance
on the first Systematic Withdrawal Program payment date of that Contract Year.
We will determine separately the early withdrawal charge and any relevant
factors (such as applicable exceptions) for each Systematic Withdrawal Program
payment as of the date it is withdrawn from your Enhanced Deferred Annuity.
Minimum Distribution
In order for you to comply with certain tax law provisions, you may be required
to take money out of your Enhanced Deferred Annuity. Rather than receiving your
minimum distribution in one annual lump-sum payment, you may request that we
pay it to you in installments throughout the calendar year. However, we may
require that you maintain a certain Account Balance at the time you request
these payments.
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If you would like to receive your Systematic Withdrawal payment by the first of
the month, you should request that the payment date be the 20th day of the
month.
Your Account Balance will be reduced by the amount of your Systematic
Withdrawal payments and applicable withdrawal charges. Payments under this
program are not the same as income payments you would receive from an Enhanced
Deferred Annuity pay-out option or under an Enhanced Income Annuity.
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C-PPA-22
<PAGE>
Contract Fee
There is no Separate Account annual contract fee. You may pay a $20 annual fee
from the Fixed Interest Account at the end of each Contract Year if your
Account Balance is less than a certain amount.
Charges
There are two types of charges you pay while you have money in an investment
division:
o Insurance-related charge, and
o Investment-related charge.
Insurance-Related Charge
You will pay an insurance-related charge for the Separate Account that is no
more than .95% annually of the average value of the amount you have in the
Separate Account. This charge pays us for general administrative expenses and
for the mortality and expense risk of the Enhanced Deferred Annuity.
General administrative expenses we incur include financial, actuarial,
accounting, and legal expenses.
The mortality portion of the insurance-related charge pays us for the risk that
you may live longer than we estimated. Then, we could be obligated to pay you
more in payments from a pay-out option than we anticipated. Also, we bear the
risk that the guaranteed death benefit we would pay should you die during your
"pay-in" phase is larger than your Account Balance. We also bear the risk that
our expenses in administering the Enhanced Deferred Annuities may be greater
than we estimated (expense risk).
Investment-Related Charge
This charge pays us as the investment manager of the Metropolitan Fund for
managing money in the Portfolios and investment operating expenses. The
percentage you pay depends on which investment divisions you select. Amounts
for each investment division are listed in the Table of Expenses.
Premium Taxes
Some jurisdictions tax what are called "annuity considerations." These may
apply to purchase payments, Account Balances and death benefits. In most
jurisdictions, we currently do not deduct any money from purchase payments,
Account Balances or death benefits to pay these taxes. Generally, our practice
is to deduct money to pay premium taxes (also known as "annuity" taxes) only
when you exercise a pay-out option. In certain jurisdictions, we may also
deduct money to pay premium taxes on lump sum withdrawals or when you exercise
a pay-out option. We may deduct an
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The charges you pay will not reduce the number of accumulation units credited
to you. Instead, we deduct the charges every day we calculate the Accumulation
Unit Value.
MetLife guarantees that the Separate Account insurance-related charge will not
increase while you have an Enhanced Deferred Annuity.
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C-PPA-23
<PAGE>
amount to pay premium taxes some time in the future since the laws and the
interpretation of the laws relating to annuities are subject to change.
Premium taxes, if applicable. range from .5% to 5.0% depending on the Enhanced
Deferred Annuity you purchase and your home state or jurisdiction. A chart in
the Appendix shows the jurisdictions where premium taxes are charged and the
amount of these taxes.
Early Withdrawal Charges
An early withdrawal charge of up to 7% may apply if you withdraw purchase
payments within 7 years of when they were credited to your Enhanced Deferred
Annuity. To determine the early withdrawal charge for Enhanced Deferred
Annuities, we treat your Fixed Interest Account and Separate Account as if they
were a single account and ignore both your actual allocations and the Fixed
Interest Account or investment division from which the withdrawal is actually
coming. To do this, we first assume that your withdrawal is from amounts (other
than earnings) that can be withdrawn without an early withdrawal charge, then
from other amounts (other than earnings) and then from earnings, each on a
"first-in-first-out" (oldest money first) basis. Once we have determined the
amount of the early withdrawal charge, we will actually withdraw it from the
Fixed Interest Account and the investment divisions in the same proportion as
the withdrawal is being made. In determining what the withdrawal charge is, we
do not include earnings, although the actual withdrawal to pay it may come from
earnings.
For partial withdrawals, the early withdrawal charge is determined by dividing
the amount that is subject to the early withdrawal charge by 100% minus the
applicable percentage shown in the following chart. Then we will make the
payment directed, and withdraw the early withdrawal charge.
For a full withdrawal we multiply the amount to which the withdrawal charge
applies by the percentage shown, keep the result as an early withdrawal charge
and pay you the rest. We will treat your request as a request for a full
withdrawal if your Account Balance is not sufficient to pay both the requested
withdrawal and the early withdrawal charge.
The early withdrawal charge on purchase payments withdrawn is as follows:
During Purchase Payment Year
Year 1 2 3 4 5 6 7 8 & Later
Percentage 7% 6% 5% 4% 3% 2% 1% 0%
Early withdrawal charges may be waived for certain Enhanced Deferred Annuities
because we have reduced sales costs associated with them.
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You will not pay an early withdrawal charge on any purchase payments made more
than 7 years ago.
We do not include your earnings when calculating early withdrawal charges.
However, if the early withdrawal charge is greater than the rest of your
purchase payments, then we will take the early withdrawal charges, in whole or
in part, from your earnings.
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C-PPA-24
<PAGE>
By law, your total early withdrawal charges applied to amounts in the
investment divisions will never exceed 9% of all your purchase payments in the
investment divisions.
The early withdrawal charge reimburses us for our costs in selling the Deferred
Annuities. We may use our profits (if any) from the mortality and expense risk
charge to pay for our costs to sell the Deferred Annuities which exceed the
amount of early withdrawal charges we collect. However, we believe that our
sales costs may exceed the early withdrawal charges we collect. If so, we will
pay the difference out of our general profits.
When No Early Withdrawal Charge Applies
In some cases, we will not charge you the early withdrawal charge when you make
a withdrawal. We may, however, ask you to prove that you meet any conditions
listed below.
You do not pay an early withdrawal charge:
o On transfers you make among the investment divisions or to the Fixed
Interest Account.
o On withdrawals of purchase payments you made over seven years ago.
o If you choose payments over one or more lifetimes or for a period of at
least five years (without the right to accelerate the payments).
o If you die during the pay-in phase. Your beneficiary will receive the full
death benefit without deduction.
o If you withdraw the permitted free withdrawal each Contract Year. This
total withdrawal may be taken in an unlimited number of partial
withdrawals during that Contract Year. Each time you make a withdrawal, we
calculate what percentage your withdrawal represents at that time. Only
when the total of these percentages exceeds the specified percentage will
you have to pay early withdrawal charges. For the unallocated Keogh and
certain other Enhanced Deferred Annuities, generally you are allowed to
take the "free withdrawal" on top of any other withdrawals which are
otherwise exempt from the early withdrawal charge. This is not true if
your other withdrawals are in connection with a systematic termination or
purchase payments made over 7 years ago.
The percentage of your Account Balance you are permitted without an early
withdrawal charge is for:
o Unallocated Keogh Enhanced Deferred Annuity, 20%.
o Non-Qualified and IRA Enhanced Deferred Annuities (depending on the
contract's terms), either 10% of your Account Balance or 10% of your
Fixed Interest Account balance only.
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Early withdrawal charges never apply to transfers among investment divisions or
transfers to the Fixed Interest Account.
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C-PPA-25
<PAGE>
o If the withdrawal is required for you to avoid Federal income tax
penalties or to satisfy Federal income tax rules or Department of Labor
regulations that apply to your Enhanced Deferred Annuity.
o Except for the unallocated Keogh Enhanced Deferred Annuity, on your first
withdrawal under this provision, if this provision is approved in your
state, and either you or your spouse:
o Has been a resident of certain nursing home facilities for a minimum
of 90 consecutive days; or
o Is diagnosed with a terminal illness and not expected to live more
than a year.
o Systematic Termination. For the unallocated Keogh Enhanced Deferred
Annuity, if the contract is terminated, the Account Balance may be
systematically withdrawn in annual installments without early withdrawal
charges. You may ask to receive your money in annual installments based on
the following percentages of your Account Balance for that year's
withdrawal:
Contract Year
1* 2 3 4 5
20% 25% 33 1/3% 50% remainder
* Less that Contract Year's withdrawals
Any money you withdraw in excess of these percentages in any Contract Year
will be subject to early withdrawal charges. You may stop the systematic
termination of the contract. If you ask to restart systematic termination,
you start at the beginning of the schedule listed above.
o For the unallocated Keogh Enhanced Deferred Annuity, if you are disabled
and you request a total withdrawal. Disability is defined in the Federal
Social Security Act. If the Enhanced Deferred Annuity is issued in
connection with your retirement plan which is subject to the Employee
Retirement Income Security Act of 1974, and if your plan document defines
disability, then your plan's definition governs.
o If you retire:
o For the Non-Qualified Enhanced Deferred Annuity, if you retire and
you receive retirement benefits from your employer's qualified plan.
o For the unallocated Keogh Enhanced Deferred Annuity, if your plan
defines retirement and you retire under that definition. If you are a
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"restricted" participant, according to the terms of the Enhanced
Deferred Annuity, you must have participated in the Enhanced Deferred
Annuity for the time stated in the contract.
o If you leave your job:
o For Non-Qualified Enhanced Deferred Annuities, you must either leave
your job with the employer or you must leave your job and also be
eligible to receive retirement benefits.
o If you are a "restricted" participant, according to the terms of the
unallocated Keogh Enhanced Deferred Annuity, you also must have
participated for the time stated in the contract.
o For the unallocated Keogh Enhanced Deferred Annuity, if your plan
terminates and the Account Balance is transferred into another annuity
contract we issue.
o For the unallocated Keogh Enhanced Deferred Annuity, if you make a direct
transfer to another investment vehicle we have preapproved. If you are a
"restricted" participant, according to the terms of the Enhanced Deferred
Annuity, you also must roll over your Account Balance to a MetLife
individual retirement annuity within 120 days after you are eligible to
receive a plan distribution.
o For the unallocated Keogh Enhanced Deferrred Annuity, if you suffer an
unforeseen hardship.
When Another Early Withdrawal Charge May Apply
If you transferred money from certain eligible MetLife contracts into an
Enhanced Deferred Annuity, you may have different early withdrawal charges for
these transfer amounts. Any purchase payments made after the transfer are
subject to the usual early withdrawal charge schedule.
o Amounts transferred before January 1, 1996:
o We credit your transfer amounts with the time you held them under
your original contract or if it will produce a lower charge;
o We use the following schedule to determine early withdrawal charges
for transferred amounts from your original contract.
During Purchase Payment Year
Year 1 2 3 4 5 6 and Beyond
Percentage 5% 4% 3% 2% 1% 0%
o Transferred amounts on or after January 1, 1996:
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o For certain contracts which we issued at least two years before the
date of the transfer, we apply the withdrawal charge under your
original contract but not any of the original contract's exceptions
or reductions to the withdrawal charge percentage that do not apply
to an Enhanced Deferred Annuity, or if it will produce a lower
charge.
We use the following schedule to determine early withdrawal charges
for transferred amounts from your original contract:
After the Transfer
Year 1 2 3 4 5 6 and Beyond
Percentage 5% 4% 3% 2% 1% 0%
o If we issued the other contract less than two years before the date
of the transfer or it has a separate withdrawal charge for each
purchase payment, we treat your purchase payments under the other
contract as if they were made under the Deferred Annuity as of the
date we received them under that contract.
o Alternatively, if provided for in the Enhanced Deferred Annuity, we credit
your purchase payments with the time you held them under your original
contract.
Free Look
You may cancel the Enhanced Deferred Annuity within a certain time period. This
is known as a "free look." We must receive your request to cancel in writing.
The number of days for this "free look" varies from state to state. The time
period may also vary depending on whether you purchased the Enhanced Deferred
Annuity through the mail. Again, depending on state law, we may refund all of
your purchase payments or your Account Balance as of the date your refund
request is received at your MetLife Designated Office.
Death Benefit
One of the insurance guarantees we provide you under the Enhanced Deferred
Annuity is that your beneficiaries will be protected against market downturns.
You name your beneficiary(ies) under the Non-Qualified and IRA Enhanced
Deferred Annuities.
If you die during the pay-in phase, the death benefit your beneficiary receives
will be the greatest of:
o Your Account Balance;
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o Your highest Account Balance as of the end of any fifth calendar year in
which you have the Deferred Annuity and as of each later five year period.
In any case, less any later partial withdrawals, fees and charges; or
o The total of all of your purchase payments less any partial withdrawals.
Your death benefit for the unallocated Keogh Enhanced Deferred Annuity is no
more than the Account Balance and is paid to the Keogh trustee.
We will only pay the death benefit when we receive both proof of your death and
appropriate instructions for payment.
Your beneficiary has the option to apply the death benefit (less any applicable
premium taxes) to a pay-out option offered under your Enhanced Deferred
Annuity. Your beneficiary may, however, decide to take a lump sum cash payment.
Pay-out Options (or Income Options)
You may convert your Enhanced Deferred Annuity into a regular stream of income
after your "pay-in" or "accumulation" phase. When you are selecting your
pay-out option, you will be able to choose from the range of options we then
have available. You have the flexibility to select a stream of income to meet
your needs. If you decide you want a pay-out option, we withdraw some or all of
your Account Balance (less any premium taxes and applicable contract fees).
Then, we apply the remainder to the option. You are not required to hold your
Enhanced Deferred Annuity for any minimum time period before you may annuitize.
Generally, you may defer receiving payments for up to one year after you have
chosen your pay-out option.
When considering a pay-out option, you should think about whether you want:
o Payments guaranteed by us for the rest of your life (or for the rest of
two lives) or for a specified period;
o A fixed dollar payment or a variable payment;
o A refund feature.
Your income payment amount will depend upon your choices. For lifetime options,
the age and sex of the measuring lives (annuitants) will also be considered.
For example, if you select a pay-out option guaranteeing payments for your and
your spouse's lifetimes, your payments will typically be lower than if you
select a pay-out option with payments over only your lifetime.
By the date specified in your contract, if you do not either elect to continue
the contract, select a pay-out option or withdraw your entire Account Balance,
and your Enhanced Deferred Annuity was not issued under a retirement plan, we
will automatically issue you a life annuity with a 10 year guarantee. In that
case, if you do not tell us otherwise, your Fixed Interest
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The pay-out phase is often referred to as either "annuitizing" your contract or
taking an income annuity.
Should our current immediate annuity rates for a fixed pay-out option provide
for greater payments than those quoted in your contract, we will use the
current rates.
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Account Balance will be used to provide a Fixed Income Option and your Separate
Account Balance will be used to provide a variable pay-out option. However, if
we do ask you what you want us to do and you do not respond, then we may treat
your silence as a request to continue your Enhanced Deferred Annuity.
Because the features of variable pay-out options under the Enhanced Deferred
Annuities are identical to the features of Enhanced Income Annuities, please
read the sections under the "Enhanced Income Annuities" heading for more
information.
Enhanced Income Annuities
Enhanced Income Annuities provide you with a regular stream of payments for
either your lifetime or a specific period. You have the flexibility to select a
stream of income to meet your needs. Enhanced Income Annuities can be purchased
so that you begin receiving payments immediately or you can apply the Account
Balance of the Enhanced Deferred Annuity to a pay-out option to receive
payments during your "pay-out" phase. With an Enhanced Income Annuity, you must
start receiving payments within the first year after the annuity is issued.
We do not guarantee that your variable payments will be a specific amount of
money. You may choose to have a portion of the payment fixed and guaranteed
under the Fixed Income Option.
Using proceeds from the following types of arrangements, you may purchase
Enhanced Income Annuities to receive immediate payments:
o Non-Qualified
o Traditional IRAs
o Roth IRAs
o Unallocated Keogh
If you have accumulated amounts in any of the listed investment vehicles, your
lump sum withdrawal from that investment vehicle may be used to purchase an
appropriate Income Annuity as long as income tax requirements are met
If your retirement plan has purchased an Enhanced Income Annuity, your choice
of pay-out options may be subject to the terms of the plan. We may rely on your
employer's or plan administrator's statements to us as to the terms of the plan
or your entitlement to any payments. We will not be responsible for
interpreting the terms of your plan. You should review your plan document to
see how you may be affected.
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You may choose the frequency of your income payments. For example, you may
receive your payments on a monthly, quarterly, semiannual or annual basis.
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Income Payment Types
Currently, we provide you with a wide variety of income payment types to suit a
range of personal preferences.
There are three people who are involved in payments under your Income Annuity:
o Owner: the person or entity which has all rights under the Income Annuity
including the right to direct who receives payment.
o Annuitant: the person whose life is the measure for determining the timing
and sometimes the dollar amount of payments.
o Beneficiary: the person who receives continuing payments or a lump sum if
the owner dies.
Your income payment amount will depend in large part on the type of income
payment type you choose. For example, if you select an "Income for Two Lives
Annuity," your payments will typically be lower than if select a "Your Lifetime
Annuity." The following income payment types are available:
Your Lifetime Annuity: A variable income payable during the annuitant's life.
Your Lifetime with a Guaranteed Period Annuity: A variable income payable
during the annuitant's life with a guaranteed number of years. If, at the death
of the annuitant, payments have been made for less than the guaranteed period,
payments are made to the owner of the annuity (or the beneficiary if the owner
dies before the end of the guaranteed period) for the rest of the guaranteed
period.
Your Lifetime With a Refund Annuity: A variable income payable during the
annuitant's life with a refund provision. If, at the death of the annuitant,
the total of all of income payments is less than the purchase payment that we
received, we will pay to the owner of the annuity (or to the beneficiary if the
owner is not alive) an amount equal to the difference.
Income for Two Lives Annuity: A variable income payable while either of two
annuitants is alive. After one annuitant dies payments continue if the other
annuitant is alive. Payments stop once both annuitants are no longer alive.
Payments after one annuitant dies may be the same as those paid while both were
alive or may be a lower percentage that is selected when the annuity is
purchased (e.g. 75%, 66 2/3% or 50%).
Income for Two Lives with a Guaranteed Period Annuity: This is the same as the
Income for Two Lives Annuity described above, but we guarantee to pay the full
amount (not a reduced percentage) for the guaranteed period even if one or both
annuitants die. If, upon the death of both annuitants, payments have been made
for less than the guaranteed period, payments are made to the owner of the
annuity (or the beneficiary if the owner dies before the end of the guaranteed
period) for the rest of the guaranteed period.
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Many times the Owner and the Annuitant are the same person.
When deciding how to receive income, consider:
o The amount of income you need;
o The amount you expect to receive from other sources;
o The growth potential of other investments; and
o How long you would like your income to last.
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Income for Two Lives with a Refund Annuity: This is the same as the Income for
Two Lives Annuity described above, but if, upon the death of both annuitants,
the total of all of our payments is less than the purchase payment that we
received, we will pay the owner of the annuity (or to the beneficiary if the
owner is not alive) an amount equal to the difference.
Income for a Guaranteed Period Annuity: A variable income payable for a
guaranteed period (5-30 years). Payments cease at the end of the guaranteed
period (which is often called a "term certain" period) even if the annuitant is
still alive. If the annuitant dies before the end of the guaranteed period,
payments are made to the owner of the annuity (or to the beneficiary if the
owner dies before the end of the guaranteed period) for the rest of the
guaranteed period.
Allocation
You decide how your money is allocated among the Fixed Income Option and the
investment divisions.
Minimum Size of Your Enhanced Income Payment
Your initial income payment must be at least $50. If you live in Massachusetts,
the initial income payment must be at least $20. This means that the amount of
our purchase payment or the amount used from a Deferred Annuity to provice a
pay-out option must be large enough to produce this minimum initial income
payment.
The Value of Your Income Payments
Annuity units are credited to you when you make a purchase payment or transfer
into an investment division. Before we determine the number of annuity units to
credit to you, we reduce a purchase payment (but not a transfer) by any premium
taxes and the contract fee, if applicable. We then compute an initial income
payment amount using the Assumed Investment Return ("AIR"), your income payment
type and the age and sex of the measuring lives. We then divide that amount by
the Annuity Unit Value on the date of the transaction. When you transfer money
from an investment division, annuity units in that investment division are
liquidated.
Your payment is determined by using the AIR to benchmark the investment
experience of the investment divisions you select. The higher your AIR, the
higher your first income payment will be. Your next payments will only increase
in proportion to the amount the investment experience of your chosen investment
divisions exceeds the AIR and Separate Account charges. Likewise, your payments
will decrease to the extent the investment experience of your chosen investment
divisions is less than the AIR and Separate Account charges. A lower AIR will
result in a lower initial variable income payment, but subsequent variable
income payments will increase more rapidly or decline more slowly as changes
occur in the investment experience of the investment divisions.
Your income payments are determined ten days prior to your income payment date
or your contract's issue date, if later.
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The AIR is stated in your contract and may range from 3% to 6%.
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This is how we calculate the Annuity Unit Value for each investment division:
o First, we determine the change in investment experience (including any
investment-related charge) for the underlying portfolio from the previous
trading day to the current trading day;
o Next, we subtract by the daily equivalent of your insurance-related charge
(general administrative expense and mortality and expense risk charges)
for each day since the last day the Annuity Unit Value was calculated;
o Then, we divide by the daily equivalent of your AIR; and
o Finally, we multiply the previous Annuity Unit Value by this result.
Transfers
You can make an unlimited number of transfers among investment divisions or
from the investment divisions to the Fixed Income Option. There is no early
withdrawal charge to make a transfer. If you reside in certain states you may
be limited to four options (including the Fixed Interest Option).
For us to process a transfer, you must tell us:
o The percentage or dollar amount of the transfer;
o The investment division (or Fixed Income Option) to which you want to
transfer; and
o The investment division from which you want to transfer.
We may require that you use our forms to make transfers.
Contract Fee
There is no contract fee.
Charges
There are two types of charges you pay if you allocate any of your purchase
payment to the investment divisions:
o Insurance-related charge; and
o Investment-related charge.
Insurance-Related Charge
You will pay an insurance-related charge for the Separate Account that is no
more than .95% annually of the average value of the amount you have in the
Separate Account. This charge pays us for general administrative expenses and
for mortality and expense risk of the Enhanced Income Annuity.
General administrative expenses we incur include financial, actuarial,
accounting, and legal expenses.
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Once you transfer money into the Fixed Income Option you may not later transfer
it into an investment division.
The charges you pay will not reduce the number of annuity units credited to
you. Instead, we deduct the charges when calculating the Annuity Unit Value.
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The mortality portion of the insurance-related charge pays us for the risk that
you may live longer than we estimated. Then, we could be obligated to pay you
more in payments than we anticipated.
We also bear the risk that our expenses in administering the Enhanced Income
Annuities will be greater than we estimated (expense risk).
Investment-Related Charge
This charge pays us as the investment manager of the Metropolitan Fund for
managing money in the Portfolios and investment operating expenses. The
percentage you pay depends on the investment divisions you select. Amounts for
each investment division are listed in the Table of Expenses.
Premium Taxes
Some jurisdictions tax what are called "annuity considerations." We deduct
money to pay "premium" taxes (also known as "annuity" taxes) when you make the
purchase payment.
Premium taxes, if applicable, range from .5% to 5.0% depending on the Enhanced
Income Annuity you purchased and your home state or jurisdiction. A chart in
the Appendix shows the jurisdictions where premium taxes are charged and the
amount of these taxes.
Free Look
You may cancel your Enhanced Income Annuity within a certain time period. This
is known as a "free look." We must receive your request to cancel in writing.
The number of days for this "free look" varies from state to state. The "free
look" may also vary depending on whether you purchased your Enhanced Income
Annuity through the mail. Again, depending on state law, we may refund all of
your purchase payment or the value of your annuity units as of the date your
refund request is received at your MetLife Designated Office.
General Information
Administration
All transactions will be processed in the manner described below.
Purchase Payments
Send your purchase payments by check or money order made payable to "MetLife"
to your MetLife Designated Office. We will provide you with all necessary
forms. We must have all completed documents to credit your initial purchase
payments.
Usually, your initial purchase payment is credited to you within two days of
receipt at your MetLife Designated Office. However, if you fill out our forms
incorrectly or incompletely or other documentation is not completed properly,
we have up to five business days to credit the payment. If the problem cannot
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You do not have a free look if you are electing income payments in the pay-out
phase of your Enhanced Deferred Annuity.
Generally, your requests including all subsequent purchase payments are
effective the day we receive them at your MetLife Designated Office.
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<PAGE>
be resolved by the fifth business day, we will notify you and give you the
reasons for the delay. At that time, you will be asked whether you agree to let
us keep your money until the problem is resolved. If you do not agree or we
cannot reach you by the fifth business day, your money will be returned.
Under certain group Enhanced Deferred Annuities and group Enhanced Income
Annuities, your employer, or the group in which you are a participant or member
must identify you on their reports to us and tell us how your money should be
allocated among the investment divisions and the Fixed Interest Account/Fixed
Income Option.
Purchase payments (including any portion of your Account Balance under a
Enhanced Deferred Annuity which you apply to a pay-out option) are effective
and valued as of 4:00 p.m. Eastern time, on the day we receive them in good
order at your MetLife Designated Office, except when they are received:
o On a day when the Accumulation Unit Value/Annuity Unit Value is not
calculated, or
o After 4:00 p.m. Eastern time.
In those cases, the purchase payments will be effective the next day the
Accumulation Unit Value or Annuity Unit Value, as applicable, is calculated.
Confirming Transactions
You will receive a written statement confirming that a transaction was recently
completed. Certain transactions made a periodic basis, such as check-o-matic,
Systematic Withdrawal Program payments, and automated investment strategy
transfers, may be confirmed quarterly.
Transactions by Telephone
You may conduct a variety of transactions by telephone, unless prohibited by
state law. Some of these transactions include:
o Transfers
o Changes to investment strategies
o Changes in the allocation of future purchase payments.
Your telephone transaction must be completed by 4:00 p.m. Eastern time if you
want the transaction to take place on that day.
We have put into place reasonable security procedures to insure that
instructions communicated by telephone are genuine. For example, all telephone
calls are recorded. Also, you will be asked to provide some personalized data
prior to giving your instructions over the telephone. When someone contacts us
by telephone and follows our security procedures, we will assume that you are
authorizing us to act upon those telephone instructions. Neither we nor the
Separate Account will be liable for any loss, expense or cost arising out of
any requests that we or the Separate Account reasonably believe to be
authentic. In the unlikely event that you have trouble reaching us, requests
should be made in writing to your MetLife Designated Office.
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Except for the unallocated Keogh Enhanced Deferred Annuities, you may authorize
your sales representative to make telephone transactions on your behalf. You
must complete our form and we must agree.
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Processing of Certain Transactions
If we are notified of your death before a requested transaction is completed,
we will cancel the request. For example, if you request a transfer or
withdrawal for a date in the future under an Enhanced Deferred Annuity and then
die before that date, we simply pay the death benefit instead. For Enhanced
Income Annuity transfers, we will cancel the request and continue making
payments to your beneficiary if your Income Annuity so provides. Or, depending
on your Income Annuity's provisions, we may continue making payments to a joint
annuitant or pay your beneficiary a refund.
Valuation
We separately determine the Accumulation Unit Value and Annuity Unit Value for
each investment division once each day when the New York Stock Exchange is open
for trading. If permitted by law, we may change the period between calculations
but we will give you 30 days notice.
When you request a transaction, we will process the transaction using the next
available Accumulation Unit Value for Enhanced Deferred Annuities or Annuity
Unit Value for Enhanced Income Annuities. Subject to our procedure, we will
make withdrawals under an Enhanced Deferred Annuity and transfers under an
Enhanced Deferred Annuity or Enhanced Income Annuity at a later date, if you
request. If your withdrawal request is to elect a variable pay-out option under
your Enhanced Deferred Annuity, we base the number of annuity units you receive
on the next available Annuity Unit Value.
Advertising Performance
We periodically advertise the performance of the investment divisions. You may
get performance information from a variety of sources including your quarterly
statements, your MetLife representative, the internet, annual reports and
semiannual reports.
We may state performance in terms of "yield," "change in Accumulation Unit
Value/Annuity Unit Value," "average annual total return," or some combination of
these terms.
Yield is the net income generated by an investment in a particular investment
division for 30 days or a month. These figures are expressed as percentages.
This percentage yield is compounded semiannually.
Change in Accumulation/Annuity Unit Value is calculated by determining the
percentage change in the value of an accumulation (or annuity) unit for a
certain period. These numbers may also be annualized. Change in
Accumulation/Annuity Unit Value may be used to demonstrate performance for a
hypothetical investment (such as $10,000) over a specified period. These
performance numbers reflect the deduction of the total Separate Account
charges; however, yield and change in Accumulation/Annuity Unit Value
performance do not reflect the possible imposition of early withdrawal charges.
Early withdrawal charges would reduce performance experience.
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All performance numbers are based upon historical earnings. These numbers are
not intended to indicate future results.
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Average annual total return calculations reflect all Separate Account charges
and applicable early withdrawal charges. These figures also assume a steady
annual rate of return.
Performance figures will vary among the various Enhanced Deferred Annuities and
Enhanced Income Annuities as a result of different Separate Account charges and
early withdrawal charges. For purposes of presentation, we may assume that
certain Enhanced Deferred Annuities and Enhanced Income Annuities were in
existence prior to their inception date. In these cases, we calculate
performance based on the historical performance of the underlying Metropolitan
Fund Portfolios. We use the actual accumulation unit or annuity unit data after
the inception date.
We calculate performance for certain investment strategies including the
Equalizer, Equity Generator and each asset allocation model of the Index
Selector. We calculate the performance as a percentage by presuming a certain
dollar value at the beginning of a period and comparing this dollar value with
the dollar value based on historical performance at the end of that period.
This percentage return assumes that there have been no withdrawals or other
unrelated transactions.
Changes to Your Enhanced Deferred Annuity or Enhanced Income Annuity
We have the right to make certain changes to your Enhanced Deferred Annuity or
Enhanced Income Annuity, but only as permitted by law. We make changes when we
think they would best serve the interest of annuity owners or would be
appropriate in carrying out the purposes of the Enhanced Deferred Annuity or
Enhanced Income Annuity. If the law requires, we will also get your approval
and the approval of any appropriate regulatory authorities. Examples of the
changes we may make include:
o To operate the Separate Account in any form permitted by law.
o To take any action necessary to comply with or obtain and continue any
exemptions under the law.
o To transfer any assets in an investment division to another investment
division, or to one or more separate accounts, or to our general account,
or to add, combine or remove investment divisions in the Separate Account.
o To substitute for the Portfolio shares in any investment division, the
shares of another class of the Metropolitan Fund or the shares of another
investment company or any other investment permitted by law.
o To change the way we assess charges, but without increasing the aggregate
amount charged to the Separate Account and any currently available
portfolio in connection with the Enhanced Deferred Annuities or Enhanced
Income Annuities.
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o To make any necessary technical changes in the Enhanced Deferred Annuities
or Enhanced Income Annuities in order to conform with any of the
above-described actions.
If any changes result in a material change in the underlying investments of an
investment division in which you have a balance, we will notify you of the
change. You may then make a new choice of investment divisions. For Enhanced
Deferred Annuities issued in Pennsylvania (and Enhanced Income Annuities where
required by law), we will ask your approval before making any technical
changes.
Voting Rights
Based on our current view of applicable law, you have voting interests under
your Enhanced Deferred Annuity or Enhanced Income Annuity concerning
Metropolitan Fund proposals that are subject to a shareholder vote. Therefore,
you are entitled to give us instructions for the number of shares which are
deemed attributable to your Enhanced Deferred Annuity or Enhanced Income
Annuity.
We will vote the shares of each of the underlying Portfolios held by the
Separate Account based on instructions we receive from those having a voting
interest in the corresponding investment divisions. However, if the law or the
interpretation of the law changes, we may decide to exercise the right to vote
the Portfolio's shares based on our own judgment.
You will be entitled to give instructions regarding the votes attributable to
your Non-Qualified or IRA Enhanced Deferred Annuity or an Enhanced Income
Annuity in your sole discretion. Under the unallocated Keogh Enhanced Deferred
Annuity, participants may instruct you to give us instructions regarding shares
deemed attributable to their contributions to the Enhanced Deferred Annuity.
Under the unallocated Keogh Enhanced Deferred Annuity, we will provide you with
the number of copies of voting instruction soliciting materials that you
request so that you may furnish such materials to participants who may give you
voting instructions. Neither the Separate Account nor MetLife has any duty to
inquire as to the instructions received or your authority to give instructions;
thus, as far as the Separate Account, and any others having voting interests in
respect of the Separate Account are concerned, such instructions are valid and
effective.
There are certain circumstances under which we may disregard voting
instructions. However, in this event, a summary of our action and the reasons
for such action will appear in the next semiannual report. If we do not receive
your voting instructions, we will vote your interest in the same proportion as
represented by the votes we receive from other investors. Shares of the
Metropolitan Fund that are owned by our general account or by any of our
unregistered separate accounts will be voted in the same proportion as the
aggregate of:
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o The shares for which voting instructions are received, and
o The shares that are voted in proportion to such voting instructions.
However, if the law or the interpretation of the law changes, we may decide to
exercise the right to vote the Portfolio's shares based on our judgment.
Who Sells the Enhanced Deferred Annuities and Enhanced Income Annuities
All Enhanced Deferred Annuities and Enhanced Income Annuities are sold through
individuals who are our licensed sales representatives. We are registered with
the Securities and Exchange Commission as a broker-dealer under the Securities
Exchange Act of 1934. We are also a member of the National Association of
Securities Dealers, Inc. Enhanced Deferred Annuities and Enhanced Income
Annuities are also sold through other registered broker-dealers. They also may
be sold through the mail.
The licensed sales representatives and broker-dealers who sell the annuities
may be compensated for these sales by commissions that we pay. There is no
front-end sales load deducted from purchase payments to pay sales commissions.
The Separate Account does not pay sales commissions. The commissions we pay
range from 0% to 6%.
We also make payments to our licensed sales representatives based upon the
total Account Balances of the Enhanced Deferred Annuities assigned to the sales
representative. Under this compensation program, we pay an amount up to .12% of
the total Account Balances of the Enhanced Deferred Annuities and other annuity
contracts, certain mutual fund account balances and cash values of certain life
insurance policies. These asset based commissions compensate the sales
representative for servicing the Enhanced Deferred Annuities. These payments
are not made for Enhanced Income Annuities.
Financial Statements
The financial statements and related notes for the Separate Account and MetLife
are in the SAI and are available from MetLife upon request. Deloitte & Touche,
LLP, who are independant auditors, audit these financial statements.
Your Spouse's Rights
If you received your contract through a qualified retirement plan and your plan
is subject to ERISA (the Employee Retirement Income Security Act of 1974) and
you are married, the income payments, withdrawal provisions, and methods of
payment of the death benefit under your Enhanced Deferred Annuity or Enhanced
Income Annuity may be subject to your spouse's rights.
If your benefit is worth $5,000 or less, your plan may provide for distribution
of your entire interest in a lump sum without your spouse's consent.
C-PPA-39
<PAGE>
For details or advice on how the law applies to your circumstances, consult
your tax advisor or attorney.
When We Can Cancel Your Enhanced Deferred Annuity or Enhanced Income Annuity
We may not cancel your Enhanced Income Annuity.
We may cancel your Enhanced Deferred Annuity only if we do not receive any
purchase payments from you for 36 consecutive months and your Account Balance
is less than $2,000 (except for the unallocated Keogh Enhanced Deferred
Annuity). We may only cancel the unallocated Keogh Enhanced Deferred Annuity if
we do not receive any purchase payments for you for 12 consecutive months and
your Account Balance is less than $15,000. We will only do so to the extent
allowed by law. Certain Enhanced Deferred Annuities do not contain these
cancellation provisions.
If we do cancel your Enhanced Deferred Annuity delivered in New York, we will
return the full Account Balance. In all other cases, you will receive an amount
equal to what you would have received if you had requested a total withdrawal
of your Account Balance. Early withdrawal charges may apply.
Income Taxes
The following information on taxes is a general discussion of the subject. It
is not intended as tax advice. The Internal Revenue Code ("Code") is complex
and subject to change regularly. Consult your own tax advisor about your
circumstances, any recent tax developments, and the impact of state income
taxation. The SAI has additional tax information. For purposes of this section,
we address Deferred Annuities and Income Annuities together as annuities. In
addition, because the tax treatment of Income Annuities and the pay-out option
under Deferred Annuities is generally the same, they are discussed together as
income payments.
General
Deferred annuities are a means of setting aside money for future needs --
usually retirement. Congress recognizes how important saving for retirement is
and has provided special rules in the Internal Revenue Code (Code).
All IRAs receive tax deferral under the Code. Although there are no additional
tax benefits by funding your IRA with an annuity, it does provide you
additional insurance benefits such as guaranteed income for life.
- -------------------------------------------------------------------------------
Simply stated, income tax rules for Enhanced Deferred Annuities generally
provide that earnings are not subject to tax until withdrawn. This is referred
to as tax deferral.
- -------------------------------------------------------------------------------
C-PPA-40
<PAGE>
Withdrawals
Because these products are intended for retirement, if you make a taxable
withdrawal before age 591/2 you may incur a tax penalty.
When you withdraw money from your contract, the amount reported as income
differs depending on the type of:
o annuity you purchase (e.g., Non-Qualified or IRA), and
o pay-out option you elect.
We are not responsible for determining if your employer's plan or arrangement
satisfies the requirements of the Code and/or ERISA.
If you meet certain requirements, your Roth IRA earnings are free from Federal
income taxes
Withdrawals Before Age 59 1/2
If you receive a taxable distribution from your contract before you reach age
591/2, this amount may be subject to a 10% penalty tax, in addition to ordinary
income taxes.
As indicated in the chart below, some taxable distributions prior to age 591/2
are exempt from the penalty. Some of these exceptions include amounts received:
Type of Contract
-------------------------------
Non Trad. Roth
Qualified IRA Keogh IRA
--------- --- ----- ----
In a series of substantially equal payments
made annually (or more frequently) for life
or life expectancy (SEPP) X X X(1) X
After you die X X X X
After you become totally disabled (as
defined in the Code) X X X X
To pay deductible medical expenses X X X
To pay medical insurance premiums if you
are unemployed X X
After December 31, 1997 to pay for
qualified higher education expenses, or X X
After December 31, 1997 for qualified first
time home purchases up to $10,000 X X
After separation from service if you are
over age 55 X
(1) You must also be separated from service
C-PPA-41
<PAGE>
Systematic Withdrawal Program for Substantially Equal Periodic Payments (SEPP)
If you are considering using the Systematic Withdrawal Program for the purpose
of meeting the SEPP exception to the 10% tax penalty, consult with your tax
advisor.
If you receive systematic payments that you intend to qualify for the SEPP
exception, any modifications to your payment before age 591/2 or within five
years after beginning Systematic Withdrawal Program payments will result in the
retroactive imposition of the 10% penalty.
Non-Qualified Annuities
o Contributions to Non-Qualified annuities are on an "after-tax" basis, so
you only pay income taxes on your earnings. Generally, these earnings are
taxed when you receive them from the contract.
o Your Non-Qualified annuity may be exchanged for another Non-Qualified
annuity without paying income taxes if certain Code requirements are met.
o When a non-natural person owns a Non-Qualified annuity the annuity will
generally not be treated as an annuity for tax purposes and thus lose the
benefit of tax deferral. Corporations and certain other entities are
generally considered non-natural persons. However, an annuity owned by a
non-natural person as agent for an individual will be treated as an
annuity for tax purposes.
o Annuities issued after October 21, 1988 by the same insurance company in
the same year are combined for tax purposes. As a result, a greater
portion of your withdrawals may be considered taxable income than you
would otherwise expect.
o In those limited situations where the annuity is beneficially owned by a
non-natural person and the annuity qualifies as such for Federal income
tax purposes, the entity may have a limited ability to deduct interest or,
in the case of an insurance company, to deduct insurance reserves or
incurred losses.
Contributions
Although the Code does not limit the amount of your purchase payments, your
contract may limit them.
Withdrawals
Generally, when you make a withdrawal from your non-qualified annuity, the Code
treats such a withdrawal as:
o First coming from earnings (and thus subject to income tax); and
o Then from your purchase payments (which are not subject to income tax).
- -------------------------------------------------------------------------------
After-tax means that your purchase payments to your annuity do not reduce your
taxable income or give you a tax deduction.
- -------------------------------------------------------------------------------
C-PPA-42
<PAGE>
Different tax rules apply to payments made pursuant to an income annuity
pay-out option under your contract. They are subject to an "exclusion ratio"
which determines how much of each payment is treated as:
o A non-taxable return of your contributions; and
o A taxable payment of earnings.
We will withhold a portion of the taxable amount of your withdrawal for income
taxes, unless you elect otherwise. The amount we withhold is determined by the
Code.
If you choose an income annuity payout option we generally will tell you how
much of each income payment is a non-taxable return of contributions.
Generally, once the total amount treated as a non-taxable return of your
purchase payments equals your purchase payments, then all remaining income
payments are fully taxable.
Under the Code, withdrawals from Non-Qualified annuities need not be made by a
particular age. However, it is possible that the Internal Revenue Service may
determine that you must take a lump sum withdrawal or elect to receive income
payments by a certain age (e.g., 85).
After Death
If you die before payments under an income annuity begin, we must make payment
of your entire interest in the Contract within five years of your death or
begin payments under an income annuity allowed by the Code to your beneficiary
within one year of your death.
If you die after income payments begin, payments must continue to be made at
least as rapidly as before your death in accordance with the income type
selected.
If you die before all purchase payments are returned, the unreturned amount may
be deductible on your final income tax return or excluded from income by your
beneficiary if income payments continue after your death.
Individual Retirement Annuities [Traditional IRAs and Roth IRAs]
General
Generally, except for Roth IRAs, your IRA can accept deductible (or pre-tax)
and non-deductible (after-tax) contributions. Deductible or pre-tax purchase
payments will be taxable when distributed from the contract.
o Your annuity is generally not forfeitable (e.g. not subject to claims of
your creditors) and you may not transfer it to someone else.
o You can transfer your IRA proceeds to a similar IRA, without incurring
Federal income taxes if certain conditions are satisfied.
- -------------------------------------------------------------------------------
If you die during the accumulation phase of a Deferred Annuity and your spouse
is your beneficiary or a co-owner he or she may elect to continue as "owner" of
the contract.
Your total annual contributions to all your Traditional and Roth IRAs may not
exceed the lesser of $2,000 or 100% of your "compensation" as defined by the
Code, except for "spousal" IRAs.
- -------------------------------------------------------------------------------
C-PPA-43
<PAGE>
Traditional IRA Annuities
Contributions
Generally:
o Contributions to Traditional and Roth IRAs are limited to the lesser of
100% of compensation or $2,000 per year. A $2,000 contribution can also be
made for a non-working spouse provided the couple's compensation is at
least equal to their aggregate contributions.
o Contributions in excess of this amount may be subject to a penalty tax.
o Contributions are generally permitted up to age 70 1/2.
o These age and dollar limits do not apply to tax-free rollovers or
transfers.
o If certain conditions are met, you can change your Traditional IRA
contribution to a Roth IRA before you file your income tax return
(including filing extensions).
Withdrawals
Withdrawals are included in income except for the portion that represents a
return of non-deductible purchase payments. This portion is determined based on
a ratio of all non-deductible contributions to the total values of all your
IRAs.
We will withhold a portion of the taxable amount of your withdrawal for income
taxes, unless you elect otherwise. The amount we withhold is determined by the
Code.
Minimum Distribution Requirements
Generally you must begin receiving withdrawals by April 1 of the calendar year
following the year in which you reach age 70 1/2.
A tax penalty of 50% applies to withdrawals which should have been taken but
were not. Complex rules apply to the timing and calculation of these
withdrawals.
After Death
Generally, if you die before required minimum distribution withdrawals have
begun we must make payment of your entire interest within five years after the
year of your death or begin income payments under an income annuity allowed by
the Code to your beneficiary by December 31st of the year after your death.
If your spouse is your beneficiary, and, if your contract permits, your spouse
may delay the start of income payments until December 31 of the year in which
the decedent would have reached age 70 1/2.
If you die after required withdrawals begin, payments must continue at least as
rapidly as under the distribution method in effect at your death.
- -------------------------------------------------------------------------------
In some cases, your purchase payments may be tax deductible.
You may combine the money required to be withdrawn from each of your
Traditional IRAs and withdraw this amount from any one or more of them.
If your spouse is your beneficiary and if your contract permits, he or she may
elect to continue as "owner" of the contract.
- -------------------------------------------------------------------------------
C-PPA-44
<PAGE>
Roth IRA Annuities
General
Roth IRAs are different from other IRAs because you have the opportunity to
enjoy tax-free earnings. However, you can only make after-tax contributions to
a Roth IRA.
Contributions
Roth IRA contributions are non-deductible and are limited to the lesser of 100%
of compensation or $2,000 per year. You may contribute up to the annual
contribution limit in 1999 if your adjusted gross income does not exceed
$95,000 ($150,000 for married couples filing jointly). Contribution limits are
phased out if your income is between:
Status Income
---------- -----------
Individual $95,000--$110,000
Married filing jointly $150,000--$160,000
Married filing separately $0--$10,000
o Annual contribution limits do not apply to a rollover from a Roth IRA to
another Roth IRA or a conversion from a Traditional IRA to a Roth IRA.
o You can contribute to a Roth IRA after age 70 1/2.
o If you exceed the contribution limits you may be subject to a tax penalty.
o If certain conditions are met, you can change your Roth IRA contribution
to a Traditional IRA before you file your income return (including filing
extensions).
Withdrawals
Generally withdrawals of earnings from Roth IRAs are free from federal income
tax if they meet the following two requirements:
1) The withdrawal is:
o At least five taxable years after your first contribution to a Roth IRA,
and
2) made:
o When you reach age 591/2;
o Upon your death or disability; or
o For a qualified first-time home purchase (up to $10,000).
Withdrawals of earnings which do not meet these requirements are taxable and a
10% penalty tax may apply if made before age 59 1/2.
- -------------------------------------------------------------------------------
Annual contributions to your IRAs, including Roth IRAs, may not exceed the
lesser of $2,000 or 100% of your "compensation" as defined by the Code, except
for "spousal" IRAs.
- -------------------------------------------------------------------------------
C-PPA-45
<PAGE>
Withdrawals from a Roth IRA are made first from purchase payments and then from
earnings. Generally, you do not pay income tax on withdrawals of purchase
payments. However, withdrawals of taxable converted amounts prior to age 591/2
will be subject to the 10% penalty tax (unless you meet an exception) if made
within 5 taxable years of such conversion.
In addition, if you withdraw converted money in 1998, 1999 or 2000 which
received the special four year income inclusion treatment discussed later, the
withdrawal will be included in income in the year of the withdrawal (in
addition to the amounts to be included under the four year income inclusion
election). The total aggregate amount to be included in income shall not exceed
the total taxable amount of the conversion.
The order in which money is withdrawn from a Roth IRA is as follows:
(All Roth IRAs owned by a taxpayer are combined for withdrawal purposes.)
o The first money withdrawn is any annual (non-conversion/rollover)
contributions to the Roth IRA. These are received tax and penalty free.
o The next money withdrawn is from conversion/rollover contributions from a
non-Roth IRA, on a first-in, first-out basis. For these purposes,
distributions are treated as coming first from the taxable portion of the
conversion/rollover contribution. As previously discussed, depending upon
when it occurs, withdrawals of taxable converted amounts may be subject to
a penalty tax, or result in the acceleration of inclusion of income.
o The next money withdrawn is from earnings in the Roth IRA. This is
received tax-free if it meets the requirements previously discussed,
otherwise it is subject to federal income tax and an additional 10%
penalty tax may apply if you are under age 591/2.
o We may be required to withhold a portion of your withdrawal for income
taxes, unless you elect otherwise. The amount withheld is determined by
the Code.
Conversion
You may convert/rollover an existing IRA to a Roth IRA if your adjusted gross
income does not exceed $100,000 in the year you convert.
Except to the extent you have non-deductible IRA contributions, the amount
converted from an existing IRA into a Roth IRA is taxable. Generally, the 10%
early withdrawal penalty does not apply to conversions/rollovers. (See
exception discussed previously.) For conversions that occurred in 1998, you
could have elected to include the taxable amount in income over a four year
period beginning in 1998.
If you mistakenly convert or otherwise wish to change your Roth IRA
contribution to a Traditional IRA contribution, the tax law now allows you to
- -------------------------------------------------------------------------------
If you are married but file separately, you may not convert an existing IRA
into a Roth IRA.
- -------------------------------------------------------------------------------
C-PPA-46
<PAGE>
reverse your conversion provided you do so before you file your tax return for
the year of the contribution and if certain conditions are met.
Unless you elect otherwise, the amount converted from a Traditional IRA to a
Roth IRA will be subject to income tax withholding. The amount withheld is
determined by the Code.
After Death
Generally, when you die we must make payment of your entire interest within
five years after the year of your death or begin income payments under an
income annuity allowed by the Code to your beneficiary by December 31st of the
year after your death.
If your spouse is your beneficiary and if your contract permits, he or she may
elect to continue as "owner" of the contract.
Keogh Annuities
General
Pension and profit-sharing plans satisfying certain Code provisions are
considered to be "Keogh" plans.
Contributions
Generally, all contributions will be contributed on a "before-tax" basis. This
means that the purchase payments either reduce your income, entitle you to a
tax deduction or are not subject to current income tax.
Under some circumstances, "after-tax" contributions can be made to certain
annuities. These contributions do not reduce your taxable income or give you a
tax deduction.
There are annual contribution limits for your Keogh annuities. Purchase
payments in excess of these limits may result in adverse tax consequences.
Withdrawals
If certain requirements are met, you may be able to transfer amounts in your
contract to another eligible retirement plan or IRA.
Withdrawals and income payment are included in income except for the portion
that represents a return of non-deductible purchase payments.
Minimum Distribution Requirements
Generally, you must begin receiving withdrawals from your contract by April 1
of the calendar year following the later of:
o The year you turn age 70 1/2 or
o Provided you do not own 5% or more of your employer, and to the extent
permitted by your plan and contract, the year you retire.
C-PPA-47
<PAGE>
Complex rules apply to timing and calculating these withdrawals. A tax penalty
of 50% applies to withdrawals, which should have been taken but were not.
Mandatory 20% Withholding
We are required to withhold 20% of the taxable portion of your withdrawal that
constitutes an "eligible rollover distribution" for Federal income taxes. We
are not required to withhold this money if you direct us, the trustee or the
custodian of the plan to directly rollover your "eligible rollover
distribution" to a traditional IRA or another eligible retirement plan.
Generally, an "eligible rollover distribution" is any taxable amount you
receive from your contract. However, it does not include taxable distributions
that are:
o A series of substantially equal payments made at least annually for:
o Your life or life expectancy
o Both you and your beneficiary's lives or life expectancies
o A specified period of 10 years or more
o To satisfy minimum distribution requirements
Other exceptions to the definition of "eligible rollover distributions" exist.
For taxable withdrawals that are not "eligible rollover distributions" the Code
requires different withholding rules which are determined at the time of
payment. You may elect out of these withholding requirements.
After Death
If you die before required minimum distribution withdrawals have begun, we must
make payment of your entire interest in the Contract within the five years
after the year of your death or begin payments under an income annuity allowed
by the Code to your beneficiary by December 31st of the year after your death.
If your spouse is your beneficiary and if your contract permits, your spouse
may delay the start of income payments until December 31st of the year in which
you would have reached age 70 1/2.
If you die after required withdrawals begin, payments must continue at least as
rapidly as under the distribution method in effect at your death.
C-PPA-48
<PAGE>
Table of Contents for the Statement of Additional Information
Page
Cover Page..................................................................1
Table of Contents...........................................................1
Independent Auditors........................................................2
Services ...................................................................2
Year 2000...................................................................2
Distribution of Certificates and Interests in the
Deferred Annuities and Income Annuities.....................................2
Early Withdrawal Charge.....................................................2
Experience Factor...........................................................2
Variable Income Payments....................................................2
Investment Management Fees..................................................5
Performance Data and Advertisement of the Separate Account..................6
Voting Rights...............................................................7
ERISA.......................................................................8
Taxes.......................................................................9
Performance Data...........................................................22
Financial Statements of the Separate Account...............................35
Financial Statements of MetLife............................................61
C-PPA-49
<PAGE>
Appendix
Premium Tax Table
If you are a resident of one of the following jurisdictions, the percentage
amount listed by that jurisdiction is the premium tax rate which will be applied
to your Deferred Annuity or Income Annuity.
Traditional IRA Unallocated Non-Qualified
Enhanced Deferred Keogh Enhanced Enhanced
and Income Deferred and Deferred and
Annuities (1) Income Annuities Income Annuities
California 0.5%(2) 0.5% 2.35%
Kentucky(3) 2.0% 2.0% 2.0%
Maine -- -- 2.0%
Nevada -- -- 3.5%
Puerto Rico 1.0% 1.0% 1.0%
South Dakota -- -- 1.25%
U.S. Virgin Islands 5.0% 5.0% 5.0%
West Virginia 1.0% 1.0% 1.0%
Wyoming -- -- 1.0%
- -------------
1 Premium tax rates applicable to Traditional IRA, SIMPLE IRA and SEP
Deferred Annuities and Income Annuities purchased for use in connection
with individual retirement trust or custodial accounts meeting the
requirements of Section 408(a) of the Code are included under the column
heading "Traditional IRA, SIMPLE IRA and SEP Deferred Annuities and Income
Annuities."
2 With respect to Deferred Annuities and Income Annuities purchased for use
in connection with individual retirement trust or custodial accounts
meeting the requirements of Section 408(a) of the Code, the annuity tax
rate in California is 2.35% instead of 0.5%.
3 The premium tax in Kentucky is repealed effective January 1, 2000.
PEANUTS (Copyright) United Feature Syndicate, Inc.
(Copyright) 1999 Metropolitan Life Insurance Company
C-PPA-50
<PAGE>
MetLife(Registered)
Bulk Rate
Metropolitan Life Insurance Company U.S. Postage Paid
Johnstown Office, 500 Schoolhouse Road Rutland, VT
Johnstown, PA 15904-2914 Permit 220
Address Service Requested
<PAGE>
Request For a Statement of
Additional Information/Change of Address
If you would like any of the following Statements of Additional Information, or
have changed your address, please check the appropriate box below and return to
the address below.
|_| Metropolitan Life Separate Account E, Metropolitan Series
Fund Inc.
| | I have changed my address. My current address is:
Name
- ---------------------------------- ------------------------------------
(Contract Number)
Address
---------------------------------
- --------------------------------- ---------------------------------
(Signature) zip
Metropolitan Life Insurance Company
Attn: Brian Mack
Retirement and Savings Center, Area 2H
One Madison Avenue
New York, NY 10010
<PAGE>
April 30, 1999
Financial Freedom Account Variable Annuity Contracts
Issued by Metropolitan Life Insurance Company
This Prospectus describes group Financial Freedom contracts for deferred
variable annuities ("Financial Freedom Deferred Annuities") and Financial
Freedom immediate variable income annuities ("Financial Freedom Income
Annuities").
- --------------------------------------------------------------------------------
You decide how to allocate your money among the various available investment
choices. The investment choices available to you are listed in the contract for
your Financial Freedom Deferred Annuity or Financial Freedom Income Annuity.
Your choices may include the Fixed Interest Account (not described in this
Prospectus) and investment divisions available through Metropolitan Life
Separate Account E which, in turn, invest in the following corresponding
portfolios of the Metropolitan Series Fund, Inc. ("Metropolitan Fund"), two
portfolios of the Calvert Variable Series, Inc. ("Calvert Fund") and portfolios
of the Variable Insurance Products Fund and Variable Insurance Products Fund II
("Fidelity VIP and VIP II Funds").
State Street Research Aggressive Growth
State Street Research Diversified
State Street Research Growth
State Street Research Income
Harris Oakmark Large Cap Value
Janus Mid Cap
Loomis Sayles High Yield Bond
Neuberger Berman Partners Mid Cap Value
Santander International Stock
Scudder Global Equity
T. Rowe Price Large Cap Growth
T. Rowe Price Small Cap Growth
Lehman Brothers Aggregate Bond Index
MetLife Stock Index
Morgan Stanley EAFE(Registered) Index
Russell 2000(Registered) Index
Calvert Social Balanced
Calvert Social Mid Cap Growth
Fidelity VIP Equity-Income
Fidelity VIP Growth
Fidelity VIP Money Market
Fidelity VIP Overseas
Fidelity VIP II Asset Manager
Fidelity VIP II Investment Grade Bond
How to learn more:
Before investing, read the information in this Prospectus about the Financial
Freedom Deferred Annuities, Financial Freedom Income Annuities and Metropolitan
Life Separate Account E. Keep this Prospectus for future reference. For more
information, request a copy of the Statement of Additional Information ("SAI"),
dated April 30, 1999. The SAI is considered part of this Prospectus as though it
were included in the Prospectus. The Table of Contents of the SAI appears on
page FFA-72 of this Prospectus. To request a free copy of the SAI or to ask
questions, write or call:
Metropolitan Life Insurance Company
Retirement and Savings Center, Area 2H
One Madison Avenue
New York, NY 10010-3690
Attention: Brian Mack
Phone: (800) 553-4459
The Securities and Exchange Commission has a website (http://www.sec.gov) which
you may visit to view this Prospectus, SAI and other information. The Securities
and Exchange Commission has not approved or disapproved these securities or
determined if this Prospectus is truthful or complete. Any representation
otherwise is a criminal offense.
The current Metropolitan Fund prospectus, and, if applicable, the Calvert Fund
and Fidelity VIP and Fidelity VIP II Funds prospectuses are attached to the back
of this Prospectus. You should also read these prospectuses carefully before
purchasing a Financial Freedom Deferred Annuity or Financial Freedom Income
Annuity. This Prospectus is not valid unless attached to Metropolitan Fund,
Calvert Fund and Fidelity VIP and Fidelity VIP II Funds prospectuses, as
applicable.
- --------------------------------------------------------------------------------
Financial Freedom Deferred Annuities Available:
o TSA
o 403(a)
o Non-Qualified (for certain deferred arrangements and plans)
Financial Freedom Income Annuities Available:
o TSA
o 403(a)
o Non-Qualified (for certain deferred arrangements and plans)
A word about investment risk:
An investment in any of these variable annuities involves investment risk. You
could lose money you invest. Money invested is NOT:
o a bank deposit or obligation;
o federally insured or guaranteed; or
o endorsed by any bank or other financial institution.
- --------------------------------------------------------------------------------
MetLife (Registered)
<PAGE>
April 30, 1999
Enhanced Preference Plus(R) Account Variable Annuity Contracts Issued by
Metropolitan Life Insurance Company
This Prospectus describes group Enhanced Preference Plus contracts for deferred
variable annuities ("Enhanced Deferred Annuities") and Enhanced Preference Plus
immediate variable income annuities ("Enhanced Income Annuities").
- --------------------------------------------------------------------------------
You decide how to allocate your money among the various available investment
choices. The investment choices available to you are listed in your Enhanced
Deferred Annuity or Enhanced Income Annuity. Your choices may include the Fixed
Interest Account (not described in this Prospectus) and investment divisions
available through Metropolitan Life Separate Account E which, in turn, invest in
the following corresponding portfolios of the Metropolitan Series Fund, Inc.
("Metropolitan Fund"), two portfolios of the Calvert Variable Series, Inc.
("Calvert Fund") and portfolios of the Variable Insurance Products Fund and
Valuable Insurance Products Fund II ("Fidelity VIP and VIP II Funds"):
State Street Research Aggressive Growth
State Street Research Diversified
State Street Research Growth
State Street Research Income
Harris Oakmark Large Cap Value
Janus Mid Cap
Loomis Sayles High Yield Bond
Neuberger Berman Partners Mid Cap Value
Santander International Stock
Scudder Global Equity
T. Rowe Price Large Cap Growth
T. Rowe Price Small Cap Growth
Lehman Brothers Aggregate Bond Index
MetLife Stock Index
Morgan Stanley EAFE(Registered) Index
Russell 2000(Registered) Index
Calvert Social Balanced
Calvert Social Mid Cap Growth
Fidelity VIP Equity-Income
Fidelity VIP Growth
Fidelity VIP Overseas
Fidelity VIP II Asset Manager
Fidelity VIP II Investment Grade Bond
How to learn more:
Before investing, read the information in this Prospectus about the Enhanced
Deferred Annuities, Enhanced Income Annuities and Metropolitan Life Separate
Account E. Keep this Prospectus for future reference. For more information,
request a copy of the Statement of Additional Information ("SAI"), dated April
30, 1999. The SAI is considered part of this Prospectus as though it were
included in the Prospectus. The Table of Contents of the SAI appears on page
FFA-72 of this Prospectus. To request a free copy of the SAI or to ask
questions, write or call:
Metropolitan Life Insurance Company
Retirement and Savings Center, Area 2H
One Madison Avenue
New York, NY 10010-3690
Attention: Brian Mack
Phone: (800) 553-4459
The Securities and Exchange Commission has a website (http://www.sec.gov) which
you may visit to view this Prospectus, SAI and other information. The Securities
and Exchange Commission has not approved or disapproved these securities or
determined if this Prospectus is truthful or complete. Any representation
otherwise is a criminal offense.
The current Metropolitan Fund prospectus, and, if applicable, the Calvert Fund
and Fidelity VIP and VIP II Funds prospectuses are attached to the back of this
Prospectus. You should also read these prospectuses carefully before purchasing
an Enhanced Deferred Annuity or Enhanced Income Annuity. This Prospectus is not
valid unless attached to Metropolitan Fund, Calvert Fund and Fidelity VIP and
VIP II Funds Prospectuses, as applicable.
- --------------------------------------------------------------------------------
Enhanced Deferred Annuities Available:
o TSA
o 403(a)
o PEDC
o Traditional IRA
o Non-Qualified
o Non-Qualified (for certain deferred arrangements or plans)
Enhanced Income Annuities Available:
o TSA
o 403(a)
o PEDC
o Traditional IRA
o Non-Qualified
o Non-Qualified (for certain deferred arrangements or plans)
A word about investment risk:
An investment in any of these variable annuities involves investment risk. You
could lose money you invest. Money invested is NOT:
o a bank deposit or obligation;
o federally insured or guaranteed; or
o endorsed by any bank or other financial institution.
- --------------------------------------------------------------------------------
MetLife (Registered)
<PAGE>
TABLE OF CONTENTS
Important Terms You Should Know .................................... FFA-4
Table of Expenses .................................................. FFA-7
Accumulation Unit Values Table ..................................... FFA-10
MetLife ............................................................ FFA-28
Metropolitan Life Separate Account E ............................... FFA-28
The Variable Annuities in this Prospectus .......................... FFA-29
A Deferred Annuity ............................................ FFA-29
An Income Annuity ............................................. FFA-29
Your Investment Choices ............................................ FFA-30
Deferred Annuities ................................................. FFA-32
The Deferred Annuity and Your Retirement Plan ................. FFA-33
Automated Investment Strategies ............................... FFA-33
Purchase Payments ............................................. FFA-34
Allocation of Purchase Payments ............................. FFA-34
Limits on Purchase Payments ................................. FFA-35
The Value of Your Investment .................................. FFA-35
Transfers ..................................................... FFA-36
Access to Your Money .......................................... FFA-37
Systematic Withdrawal Program for
Enhanced TSA and IRA Deferred Annuities ................ FFA-37
Minimum Distribution ........................................ FFA-39
Contract Fee .................................................. FFA-39
Charges ....................................................... FFA-39
Insurance-Related Charge .................................... FFA-39
Investment-Related Charge ................................... FFA-39
Premium Taxes ................................................. FFA-40
Early Withdrawal Charges ...................................... FFA-40
When No Early Withdrawal Charge Applies ..................... FFA-41
When Another Early Withdrawal Charge May Apply .............. FFA-43
Free Look ..................................................... FFA-44
Death Benefit ................................................. FFA-44
Pay-out Options (or Income Options) ........................... FFA-45
FFA-2
<PAGE>
Income Annuities .............................................. FFA-46
Income Payment Types .......................................... FFA-47
Allocation .................................................... FFA-48
Minimum Size of Your Income Payment ........................... FFA-48
The Value of Your Income Payments ............................. FFA-48
Transfers ..................................................... FFA-49
Contract Fee .................................................. FFA-49
Charges ....................................................... FFA-49
Insurance-Related Charge .................................... FFA-50
Investment-Related Charge ................................... FFA-50
Premium Taxes ................................................. FFA-50
Free Look ..................................................... FFA-50
General Information ................................................ FFA-51
Administration ................................................ FFA-51
Purchase Payments ........................................... FFA-51
Confirming Transactions ..................................... FFA-51
Transactions by Telephone ................................... FFA-52
Processing of Certain Transactions .......................... FFA-52
Valuation ................................................... FFA-52
Advertising Performance ....................................... FFA-53
Changes to Your Deferred Annuity or Income Annuity ............ FFA-54
Voting Rights ................................................. FFA-54
Who Sells the Deferred Annuities and Income Annuities ......... FFA-55
Financial Statements .......................................... FFA-56
Your Spouse's Rights .......................................... FFA-56
When We Can Cancel Your Deferred Annuity
or Income Annuity ........................................ FFA-57
Income Taxes ....................................................... FFA-58
Table of Contents for the Statement of
Additional Information ............................................. FFA-72
Appendix for Premium Tax Table ..................................... FFA-73
Appendix II for Texas Optional Retirement Program .................. FFA-74
MetLife does not intend to offer the Deferred Annuities or Income Annuities
anywhere they may not lawfully be offered and sold. MetLife has not authorized
any information or representations about the Deferred Annuities or Income
Annuities other than the information in this Prospectus, any attached
prospectus, supplements to the prospectuses or any supplemental sales material
we authorize.
FFA-3
<PAGE>
Important Terms You Should Know
Account Balance
When you purchase a Deferred Annuity an account is set up for you. Your Account
Balance is the total amount of money credited to you under your Deferred Annuity
including money in the investment divisions of the Separate Account and the
Fixed Interest Account.
Accumulation Unit Value
Under a Deferred Annuity, money paid-in or transferred into an investment
division of the Separate Account is credited to you in the form of accumulation
units. Accumulation units are established for each investment division. We
determine the value of these accumulation units each day the New York Stock
Exchange is open for regular trading. The values increase or decrease based on
the investment performance of the corresponding underlying portfolios.
Annuity Unit Value
Under an Income Annuity or variable payout option, the money paid-in or
transferred into an investment division of the Separate Account is held in the
form of annuity units. Annuity units are established for each investment
division. We determine the value of these annuity units each day the New York
Stock Exchange is open for regular trading. The values increase or decrease
based on the investment performance of the corresponding underlying portfolios.
Assumed Investment Return (AIR)
Under an income annuity, the AIR is a percentage rate of return assumed to
determine the amount of the first variable income payment. The AIR is also the
benchmark that is used to calculate the investment performance of a given
investment division to determine all subsequent payments to you.
Contract
A contract is the legal agreement between your employer or plan trustee and
MetLife or the certificate you receive under a group annuity contract between
MetLife and your employer, plan trustee or other entity. The contract and
certificate contains relevant provisions of your Deferred Annuity or Income
Annuity. MetLife issues contracts for each of the annuities described in this
Prospectus.
FFA-4
<PAGE>
Contract Year
Generally, the Contract Year for a Deferred Annuity is the period ending on the
last day of the month in which the anniversary of when we issue the annuity
occurs and each following 12 month period. However, depending on underwriting
and plan requirements, the first Contract Year may range from the initial three
to fifteen months the Deferred Annuity is issued.
Deferred Annuity
This term is used throughout this Prospectus when we are referring to both
Enhanced Deferred Annuities and Financial Freedom Deferred Annuities.
Early Withdrawal Charge
The early withdrawal charge is the amount we deduct from your Account Balance in
addition to your requested withdrawal amount if you withdraw money prematurely
from a Deferred Annuity. This charge is often referred to as a deferred sales
load or back-end sales load.
Income Annuity
This term is used throughout this Prospectus when we are referring to both
Enhanced Income Annuities and Financial Freedom Income Annuities.
Investment Division
Investment divisions are subdivisions of the Separate Account. When you allocate
or transfer money to an investment division, the investment division purchases
shares of a portfolio (with the same name) within the Metropolitan Fund, Calvert
Fund, Fidelity VIP or VIP II Funds.
MetLife
Metropolitan Life Insurance Company is the company that issues the Deferred
Annuities and Income Annuities. Throughout this Prospectus, MetLife is also
referred to as "we," "us" or "our."
MetLife Designated Office
The MetLife Designated Office is the MetLife office that will generally handle
the processing of all your requests concerning your Deferred Annuity or Income
Annuity. MetLife will notify you and provide you with the address of your
MetLife Designated Office.
FFA-5
<PAGE>
Separate Account
A separate account is an investment account. All assets contributed to
investment divisions under the Deferred Annuities and Income Annuities are
pooled in the Separate Account and maintained for the benefit of investors in
Deferred Annuities and Income Annuities.
You
In this Prospectus, depending on the context, "you" may mean either the
purchaser of the Deferred Annuity or Income Annuity, the annuitant under an
Income Annuity, the participant or annuitant for whom money is invested under
certain group arrangements. In cases where we are referring to giving
instructions or making payments to us, for PEDC, Section 403(b) tax sheltered
annuities, Section 451 deferred fee arrangements, Section 451 deferred
compensation plans, Section 457(f) deferred compensation plans, Section
457(e)(11) severance and death benefit plans and Section 415(m) qualified
governmental excess benefit arrangements, "you" means such trustee or employer.
Variable Annuity
An annuity in which returns/income payments are based upon the performance of
investments such as stocks and bonds held by one or more underlying portfolios.
You assume the investment risk for amounts allocated to the investment divisions
in a variable annuity.
FFA-6
<PAGE>
TABLE OF EXPENSES--ENHANCED PREFERENCE PLUS DEFERRED ANNUITIES AND INCOME
ANNUITIES
The following table shows the Separate Account, Metropolitan Fund, Calvert Fund
and Fidelity VIP and VIP II Funds charges and expenses you will incur. The table
is based on past experience and is subject to change. It is not intended to show
your actual expenses which may be higher or lower. The table does not show fees
for the Fixed Interest Account or premium taxes which may apply. We have
provided examples to show you the impact of Separate Account, Metropolitan Fund,
Calvert Fund and Fidelity VIP and VIP II Funds charges and expenses on a
hypothetical investment of $1,000 and an assumed 5% return on the investment.
<TABLE>
<S> <C>
Separate Account, Metropolitan Fund, Calvert Fund and Fidelity VIP and VIP II
Funds expenses for the fiscal year ending December 31, 1998:
Contractowner Transaction Expenses For All Investment Divisions
Currently Offered
Sales Load Imposed on Purchases........................................................ None
Deferred Sales Load (as a percentage of the purchase payment funding the
withdrawal during the accumulation period)(1)........................................ From 0% to 7%
Exchange Fee........................................................................... None
Surrender Fee.......................................................................... None
Annual Contract Fee (2)................................................................... None
Separate Account Annual Expenses (as a percentage of average account value) (3)
General Administrative Expenses Charge................................................. .20%
Mortality and Expense Risk Charge...................................................... .75%
Total Separate Account Annual Expenses................................................. .95%
Metropolitan Fund Annual Expenses (as a percentage of average net assets)
</TABLE>
<TABLE>
<CAPTION>
MANAGE- OTHER EXPENSES TOTAL EXPENSES OTHER EXPENSES TOTAL EXPENSES
MENT WITHOUT WITHOUT AFTER EXPENSE AFTER EXPENSE
FEES REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
State Street Research Aggressive Growth Portfolio (4)(5) .71 .04 .75 .04 .75
State Street Research Diversified Portfolio (4)(5) .43 .05 .48 .05 .48
State Street Research Growth Portfolio (4)(5) .48 .05 .53 .05 .53
State Street Research Income Portfolio (4)(5) .33 .06 .39 .06 .39
Harris Oakmark Large Cap Value Portfolio (5)(7) .75 .80 1.55 .20 .95
Janus Mid Cap Portfolio (5)(6) .72 .09 .81 .09 .81
Loomis Sayles High Yield Bond Portfolio (6) .70 .35 1.05 .31 1.01
Neuberger Berman Partners Mid Cap Value Portfolio (5)(7) .70 .89 1.59 .20 .90
Santander International Stock Portfolio (4)(5) .75 .27 1.02 .27 1.02
Scudder Global Equity Portfolio (5)(6) .74 .28 1.02 .28 1.02
T. Rowe Price Large Cap Growth Portfolio (5)(7) .70 1.18 1.88 .20 .90
T. Rowe Price Small Cap Growth Portfolio (5)(6) .53 .14 .67 .14 .67
Lehman Brothers Aggregate Bond Index Portfolio (7) .25 .32 .57 .23 .48
MetLife Stock Index Portfolio (4) .25 .05 .30 .05 .30
Morgan Stanley EAFE(Registered)Index Portfolio (7) .30 .99 1.29 .25 .55
Russell 2000 Index Portfolio (7) .25 .70 .95 .20 .45
</TABLE>
FFA-7
<PAGE>
TABLE OF EXPENSES (continued)
<TABLE>
<CAPTION>
MANAGE- OTHER EXPENSES TOTAL EXPENSES OTHER EXPENSES TOTAL EXPENSES
MENT WITHOUT WITHOUT AFTER EXPENSE AFTER EXPENSE
Calvert Fund (as a percentage of average net assets) FEES REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Calvert Social Balanced Portfolio (8) .70 .18 .88 .16 .86
Calvert Social Mid Cap Growth Portfolio (8) .90 .16 1.06 .11 1.01
<CAPTION>
MANAGE- OTHER EXPENSES TOTAL EXPENSES OTHER EXPENSES TOTAL EXPENSES
MENT WITHOUT WITHOUT AFTER EXPENSE AFTER EXPENSE
Fidelity VIP and VIP II Funds FEES REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fidelity VIP II Asset Manager Portfolio (10) .54 .10 .64 .09 .63
Fidelity VIP Equity-Income Portfolio (10) .49 .09 .58 .08 .57
Fidelity VIP Growth Portfolio (10) .59 .09 .68 .07 .66
Fidelity VIP II Investment Grade Bond Portfolio .43 .14 .57 .14 .57
Fidelity VIP Overseas Portfolio (10) .74 .17 .91 .15 .89
</TABLE>
Example
If you surrender your Deferred Annuity (withdraw all your money) at the end
of the time periods listed below, you would pay the following expenses on a
$1,000 investment in each investment division listed below, assuming a 5%
annual return on assets:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Aggressive Growth Portfolio $ 73 $ 93 $ 116 $ 202
State Street Research Diversified Portfolio 70 84 102 172
State Street Research Growth Portfolio 71 86 104 178
State Street Research Income Portfolio 69 82 97 162
Calvert Social Balanced Portfolio 74 97 123 216
Calvert Social Mid Cap Growth Portfolio 76 103 132 236
Fidelity VIP II Asset Manager Portfolio 72 90 110 190
Fidelity VIP Equity-Income Portfolio 71 88 107 183
Fidelity VIP Growth Portfolio 72 91 112 194
Fidelity VIP II Investment Grade Bond Portfolio 71 87 106 182
Fidelity VIP Overseas Portfolio 75 98 124 220
Harris Oakmark Large Cap Value Portfolio 81 118 158 286
Janus Mid Cap Portfolio 74 95 119 209
Loomis Sayles High Yield Bond Portfolio 76 102 132 234
Neuberger Berman Partners Mid Cap Value Portfolio 82 119 160 291
Santander International Stock Portfolio 76 101 130 231
Scudder Global Equity Portfolio 76 101 130 231
T. Rowe Price Large Cap Growth Portfolio 85 128 175 319
T. Rowe Price Small Cap Growth Portfolio 72 90 112 193
Lehman Brothers Aggregate Bond Index Portfolio 71 87 106 182
MetLife Stock Index Portfolio 68 79 92 152
Morgan Stanley EAFE(Registered)Index Portfolio 79 110 144 260
Russell 2000 Index Portfolio 75 99 126 224
</TABLE>
FFA-8
<PAGE>
If you annuitize (elect a pay-out option under your Deferred Annuity) or do
not surrender your Deferred Annuity at the end of the time periods listed below,
you would pay the following expenses on a $1,000 investment in each investment
division listed below, assuming a 5% annual return on assets (11):
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Aggressive Growth Portfolio $ 17 $ 54 $ 93 $ 202
State Street Research Diversified Portfolio 15 46 79 172
State Street Research Growth Portfolio 15 47 81 178
State Street Research Income Portfolio 14 43 74 162
Calvert Social Balanced Portfolio 19 58 100 216
Calvert Social Mid Cap Growth Portfolio 21 64 109 236
Fidelity VIP II Asset Manager Portfolio 16 51 87 190
Fidelity Vip Equity-Income Portfolio 16 49 84 183
Fidelity VIP Growth Portfolio 17 52 89 194
Fidelity VIP II Investment Grade Bond Portfolio 16 48 83 182
Fidelity VIP Overseas Portfolio 19 59 101 220
Harris Oakmark Large Cap Value Portfolio 26 79 135 286
Janus Mid Cap Portfolio 18 56 96 209
Loomis Sayles High Yield Bond Portfolio 20 63 108 234
Neuberger Berman Partners Mid Cap Value Portfolio 26 80 137 291
Santander International Stock Portfolio 20 62 107 231
Scudder Global Equity Portfolio 20 62 107 231
T. Rowe Price Large Cap Growth Portfolio 29 89 151 319
T. Rowe Price Small Cap Growth Portfolio 17 51 89 193
Lehman Brothers Aggregate Bond Index Portfolio 16 48 83 182
MetLife Stock Index Portfolio 13 40 69 152
Morgan Stanley EAFE(Registered)Index Portfolio 23 71 121 260
Russell 2000 Index Portfolio 19 60 103 224
</TABLE>
FFA-9
<PAGE>
TABLE OF EXPENSES-FINANCIAL FREEDOM DEFERRED ANNUITIES AND INCOME ANNUITIES
The following table shows the Separate Account, Metropolitan Fund Calvert Fund
and Fidelity VIP and VIP II Funds charges and expenses you will incur. The table
is based on past experience and is subject to change. It is not intended to show
your actual expenses which may be higher or lower. The table does not show fees
for the Fixed Interest Account or the impact of annuity taxes. We have provided
examples to show you the impact of
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Separate Account, Metropolitan Fund, Calvert Fund and Fidelity VIP and VIP
II Funds expenses for the fiscal year ending December 31, 1998:
Contractowner Transaction Expenses For All Investment Divisions Currently
Offered
Sales Load Imposed on Purchases......................................................... None
Deferred Sales Load (as a percentage of the purchase payment funding the
withdrawal during the accumulation period)............................................. None
Exchange Fee............................................................................ None
Surrender Fee........................................................................... None
Annual Contract Fee(2)..................................................................... None
Separate Account Annual Expenses (as a percentage of average account value) (3)
General Administrative Expenses Charge................................................. .20%
Mortality and Expense Risk Charge...................................................... .75%
Total Separate Account Annual Expenses................................................. .95%
</TABLE>
<TABLE>
<CAPTION>
Metropolitan Fund Annual Expenses (as a percentage of average net assets)
MANAGE- OTHER EXPENSES TOTAL EXPENSES OTHER EXPENSES TOTAL EXPENSES
MENT WITHOUT WITHOUT AFTER EXPENSE AFTER EXPENSE
FEES REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
State Street Research Aggressive Growth Portfolio (4)(5) .71 .04 .75 .04 .75
State Street Research Diversified Portfolio (4)(5) .43 .05 .48 .05 .48
State Street Research Growth Portfolio (4)(5) .48 .05 .53 .05 .53
State Street Research Income Portfolio (4)(5) .33 .06 .39 .06 .39
Harris Oakmark Large Cap Value Portfolio (5)(7) .75 .80 1.55 .20 .95
Janus Mid Cap Portfolio (5)(6) .72 .09 .81 .09 .81
Loomis Sayles High Yield Bond Portfolio (6) .70 .35 1.05 .31 1.01
Neuberger Berman Partners Mid Cap Value Portfolio (5)(7) .70 .89 1.59 .20 .90
Santander International Stock Portfolio (4)(5) .75 .27 1.02 .27 1.02
Scudder Global Equity Portfolio (5)(6) .74 .28 1.02 .28 1.02
T. Rowe Price Large Cap Growth Portfolio (5)(7) .70 1.18 1.88 .20 .90
T. Rowe Price Small Cap Growth Portfolio (5)(6) .53 .14 .67 .14 .67
Lehman Brothers Aggregate Bond Index Portfolio (7) .25 .32 .57 .23 .48
MetLife Stock Index Portfolio (4) .25 .05 .30 .05 .30
Morgan Stanley EAFE(Registered)Index Portfolio (7) .30 .99 1.29 .25 .55
Russell 2000 Index Portfolio (7) .25 .70 .95 .20 .45
</TABLE>
FFA-10
<PAGE>
<TABLE>
<CAPTION>
MANAGE- OTHER EXPENSES TOTAL EXPENSES OTHER EXPENSES TOTAL EXPENSES
MENT WITHOUT WITHOUT AFTER EXPENSE AFTER EXPENSE
Calvert Fund (as a percentage of average net assets) FEES REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Calvert Social Balanced Portfolio (8) .70 .18 .88 .16 .86
Calvert Social Mid Cap Growth Portfolio (8) .90 .16 1.06 .11 1.01
Fidelity VIP and VIP II Funds
Fidelity VIP II Asset Manager Portfolio (10) .54 .10 .64 .09 .63
Fidelity VIP Equity-Income Portfolio (10) .49 .09 .58 .08 .57
Fidelity VIP Growth Portfolio (10) .59 .09 .68 .07 .66
Fidelity VIP II Investment Grade Bond Portfolio .43 .14 .57 .14 .57
Fidelity VIP Money Market Portfolio .20 .10 .30 .10 .30
Fidelity VIP Overseas Portfolio (10) .74 .17 .91 .15 .89
</TABLE>
Example
If you surrender your Deferred Annuity (withdraw all your money) at the end
of the time periods listed below, you would pay the following expenses on a
$1,000 investment in each investment division listed below, assuming a 5%
annual return on assets:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Aggressive Growth Portfolio $ 17 $ 54 $ 93 $ 202
State Street Research Diversified Portfolio 15 46 79 172
State Street Research Growth Portfolio 15 47 81 178
State Street Research Income Portfolio 14 43 74 162
Calvert Social Balanced Portfolio 19 58 100 216
Calvert Social Mid Cap Portfolio 21 64 109 236
Fidelity VIP II Asset Manager Portfolio 16 51 87 190
Fidelity VIP Equity-Income Portfolio 16 49 84 183
Fidelity VIP Growth Portfolio 17 52 89 194
Fidelity VIP II Investment Grade Bond Portfolio 16 48 83 182
Fidelity Money Market Portfolio 13 40 69 152
Fidelity Overseas Portfolio 19 59 101 220
Harris Oakmark Large Cap Value Portfolio 26 79 135 286
Janus Mid Cap Portfolio 18 56 96 209
Loomis Sayles High Yield Bond Portfolio 20 63 108 234
Neuberger Berman Partners Mid Cap Value Portfolio 26 80 137 291
Santander International Stock Portfolio 20 62 107 231
Scudder Global Equity Portfolio 20 62 107 231
T. Rowe Price Large Cap Growth Portfolio 29 89 151 319
T. Rowe Price Small Cap Growth Portfolio 17 51 89 193
Lehman Brothers Aggregate Bond Index 16 48 83 182
MetLife Stock Index Portfolio 13 40 69 152
Morgan Stanley EAFE(Registered) Index Portfolio 23 71 121 260
Russell 2000 Index Portfolio 19 60 103 224
</TABLE>
FFA-11
<PAGE>
TABLE OF EXPENSES (continued)
If you annuitize (elect a pay-out option under your Deferred Annuity) or do
not surrender your Deferred Annuity at the end of the time periods listed
below, you would pay the following expenses on a $1,000 investment in each
investment division listed below, assuming a 5% annual return on assets
(11):
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Aggressive Growth Portfolio $ 17 $ 54 $ 93 $ 202
State Street Research Diversified Portfolio 15 46 79 172
State Street Research Growth Portfolio 15 47 81 178
State Street Research Income Portfolio 14 43 74 162
Calvert Social Balanced Portfolio 19 58 100 216
Calvert Social Mid Cap Portfolio 21 64 109 236
Fidelity VIP II Asset Manager Portfolio 16 51 87 190
Fidelity VIP Equity-Income Portfolio 16 49 84 183
Fidelity VIP Growth Portfolio 17 52 89 194
Fidelity VIP II Investment Grade Bond Portfolio 16 48 83 182
Fidelity Money Market Portfolio 13 40 69 152
Fidelity Overseas Portfolio 19 59 101 220
Harris Oakmark Large Cap Value Portfolio 26 79 135 286
Janus Mid Cap Portfolio 18 56 96 209
LOOMIS SAYLES HIGH YIELD BOND PORTFOLIO 20 63 108 234
Neuberger Berman Partners Mid Cap Value Portfolio 26 80 137 291
Santander International Stock Portfolio 20 62 107 231
Scudder Global Equity Portfolio 20 62 107 231
T. Rowe Price Large Cap Growth Portfolio 29 89 151 319
T. Rowe Price Small Cap Growth Portfolio 17 51 89 193
Lehman Brothers Aggregate Bond Index 16 48 83 182
MetLife Stock Index Portfolio 13 40 69 152
Morgan Stanley EAFE(Registered)Index Portfolio 23 71 121 260
Russell 2000 Index Portfolio 19 60 103 224
</TABLE>
FFA-12
<PAGE>
1 There are times when the early withdrawal charge does not apply to amounts
that are withdrawn from a Deferred Annuity. Each Contract Year you may take
the greater of 20% (10% for certain Enhanced Deferred Annuities) of your
Account Balance or your purchase payments made over 7 years ago free of
early withdrawal charges. There are no early withdrawal charges applied to
the Enhanced Non-Qualified Deferred Annuities for *457(f) deferred
compensation plans, *451 deferred fee arrangements, *451 deferred
compensation plans and *457(e)(11) severance and death benefit plans.
2 A $20 annual contract fee may be imposed on money in the Fixed Interest
Account. This fee may be waived under certain circumstances.
3 Our total Separate Account Annual Expenses will not exceed .95% of your
average balance in the investment divisions. For purposes of presentation
here, we estimated the allocation between general administrative expenses
and the mortality and expense risk charge.
4 Prior to May 16, 1993, we paid all expenses of the Metropolitan Fund (other
than management fees, brokerage commissions, taxes, interest and
extraordinary or non-recurring expenses).
5 Each Portfolio's management fee decreases when its assets grow to certain
dollar amounts. The "break point" dollar amounts at which the management
fee declines are more fully explained in the prospectus for the
Metropolitan Fund.
6 These Portfolios began operations on March 3, 1997. We paid all expenses
(other than management fees, brokerage commissions, taxes, interest and
extraordinary or non-recurring expenses) in excess of .20% of the average
net assets for each of the following Portfolios until the Portfolio's total
assets reached $100 million, or until March 2, 1999, whichever came first.
The expense information in the Table has been restated to reflect current
expenses as if they had been in effect during the entire prior year.
7 These Portfolios began operations on November 9, 1998. We pay all expenses
(other than management fees, brokerage commissions, taxes, interest and
extraordinary or non-recurring expenses) in excess of .20% (.25% for the
Morgan Stanley EAFE(Registered) Index Portfolio) of the average net assets
for each of the following Portfolios until the Portfolio's total assets
reach $100 million, or until November 8, 2000, whichever comes first. The
expense information in the Table has been restated to reflect current
expenses as if they had been in effect during the entire prior year.
8 The Calvert Fund Portfolio's management fees reflect an increase of .01%
which is attributed to an increase in transfer agency expenses. Part of the
Portfolio's other expenses are paid by a third party. The expense
information in the Table has been restated to reflect current expenses as
if they had been in effect during the entire prior year.
9 The Fidelity VIP and VIP II Funds each have a Distribution and Service Plan
to help pay distribution costs (commonly known as a Rule 12b-1 plan). These
plans prevent the Fidelity VIP and VIP II Funds Portfolios from paying any
such costs. Rather, Fidelity & Management Research Company ("FMR") may use
its management fee or other assets to pay expenses for selling shares of
the Fidelity VIP and VIP II Funds Portfolios, including expenses of third
parties. FMR or Fidelity Distributors Corp. pays MetLife for providing
certain distribution and shareholder services. Fidelity Investments
Institutional Operations Company, Inc. also pays MetLife for providing
administrative services. You are not responsible for these fees. FMR and
its affiliates absorb the fees paid to MetLife.
10 Some of the brokerage commissions received have been used to pay the
Portfolios' expenses. This has the effect of reducing the Portfolios'
expenses. Also, the Portfolios' custodian and transfer agent may use
interest earned on uninvested cash to reduce the Portfolios' expenses. The
expense information in the Table has been restated to reflect current
expenses as if they had been in effect during the entire prior year.
11 This example assumes no early withdrawal charges are applicable. In order
to make this assumption for a pay-out option under your Deferred Annuity,
we also assumed that you selected an income payment type under which you
will receive payments over your lifetime or for a period of at least five
full years.
FFA-13
<PAGE>
[This page intentionally left blank]
FFA-14
<PAGE>
ACCUMULATION UNIT VALUES FOR EACH INVESTMENT DIVISION
(For an accumulation unit outstanding throughout the period)
These tables and bar charts show fluctuations in the Accumulation Unit Values
for Enhanced Deferred Annuities for each investment division from year end to
year end. The information in this table has been derived from the Separate
Account's full financial statements or other reports (such as the annual
report).
<TABLE>
<CAPTION>
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
ENHANCED PREFERENCE PLUS DEFERRED ANNUITIES (a) YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Aggressive Growth Division 1998 $38.02 $42.82 1,533
[YEAR END ACCUMULATION UNIT VALUE 1997 35.98 38.02 1,572
BAR CHARTS OMITTED FOR THIS DIVISION 1996 33.72 35.98 1,396
AND EACH OF THE 17 FOLLOWING DIVISIONS] 1995 26.29 33.72 997
1994 27.05 26.29 625
1993 22.26 27.05 358
1992 20.37 22.26 134
1991 12.35 20.37 7
1990 14.85(b) 12.35 0
State Street Research Diversified Division 1998 33.57 39.79 710
1997 28.11 33.57 515
1996 24.78 28.11 365
1995 19.69 24.78 333
1994 20.51 19.69 241
1993 18.36 20.51 125
1992 16.93 18.36 28
1991 13.68 16.93 3
1990 14.34(b) 13.68 0
</TABLE>
FFA-15
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
ENHANCED PREFERENCE PLUS DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Growth Division 1998 $60.00 $76.19 803
1997 47.19 60.00 656
1996 38.99 47.19 436
1995 29.57 38.99 324
1994 30.85 29.57 197
1993 27.22 30.85 123
1992 24.63 27.22 47
1991 18.67 24.63 7
1990 21.66(b) 18.67 0
State Street Research Income Division 1998 32.77 35.52 387
1997 30.13 32.77 314
1996 29.36 30.13 272
1995 24.79 29.36 213
1994 25.83 24.79 155
1993 23.43 25.83 111
1992 22.12 23.43 51
1991 19.02 22.12 3
1990 17.91(b) 19.02 0
Calvert Social Balanced Division 1998 20.32 23.40 250
1997 17.08 20.32 225
1996 15.31 17.08 179
1995 11.91 15.31 129
1994 12.43 11.91 90
1993 11.62 12.43 66
1992 10.90 11.62 27
1991 10.00(c) 10.90 2
</TABLE>
FFA-16
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
ENHANCED PREFERENCE PLUS DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Calvert Social Mid Cap Growth Division 1998 $20.58 $26.46 127
1997 16.81 20.58 80
1996 15.80 16.81 57
1995 11.43 15.80 18
1994 12.81 11.43 2
1993 12.03 12.81 1
1992 10.78(d) 12.03 0
Fidelity Investment Grade Bond Division 1998 15.62 16.84 339
1997 14.46 15.62 235
1996 14.15 14.46 165
1995 12.17 14.15 89
1994 12.77 12.17 24
1993 11.62 12.77 7
1992 10.99(d) 11.62 1
Fidelity Asset Manager Division 1998 20.94 23.87 1,439
1997 17.52 20.94 1,346
1996 15.44 17.52 1,118
1995 13.32 15.44 1,066
1994 14.32 13.32 728
1993 11.94 14.32 292
1992 11.23(d) 11.94 81
</TABLE>
FFA-17
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
ENHANCED PREFERENCE PLUS DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity Money Market Division (e) 1998 $12.24 $12.62 0
1997 11.85 12.24 0
1996 11.46 11.85 0
1995 11.02 11.46 0
1994 10.72 11.02 12
1993 10.50 10.72 657
1992 10.33 10.50 0
Fidelity Equity-Income Division 1998 30.45 33.67 2,790
1997 23.99 30.45 2,476
1996 21.19 23.99 1,775
1995 15.84 21.19 1,200
1994 15.02 15.84 513
1993 12.83 15.02 195
1992 11.75(d) 12.83 27
Fidelity Growth Division 1998 29.30 40.49 2,484
1997 23.95 29.30 2,249
1996 21.08 23.95 1,757
1995 15.72 21.08 1,218
1994 15.87 15.72 641
1993 13.43 15.87 290
1992 12.05(d) 13.43 93
</TABLE>
FFA-18
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
ENHANCED PREFERENCE PLUS DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity Overseas Division 1998 $17.77 $19.85 656
1997 16.08 17.77 647
1996 14.34 16.08 397
1995 13.20 14.34 197
1994 13.10 13.20 93
1993 9.63 13.10 27
1992 11.22(d) 9.63 4
JANUS MID CAP DIVISION 1998 12.72 17.29 523
1997 10.00(f) 12.72 167
Loomis Sayles High Yield Bond Division 1998 10.53 9.65 89
1997 10.00(f) 10.53 49
Santander International Stock Division 1998 13.54 16.43 837
1997 13.99 13.54 853
1996 14.38 13.99 868
1995 14.40 14.38 814
1994 13.84 14.40 558
1993 9.45 13.84 191
1992 10.63 9.45 50
1991 10.00(g) 10.63 4
</TABLE>
FFA-19
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
ENHANCED PREFERENCE PLUS DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SCUDDER GLOBAL EQUITY DIVISION 1998 $10.88 $12.49 256
1997 10.00(f) 10.88 120
T. Rowe Price Small Cap Growth Division 1998 11.79 12.08 657
1997 10.00(f) 11.79 279
MetLife Stock Index Division 1998 32.50 41.28 3,077
1997 24.83 32.50 2,504
1996 20.44 24.83 1,648
1995 15.07 20.44 1,062
1994 15.04 15.07 631
1993 13.86 15.04 507
1992 13.02 13.86 260
1991 10.13 13.02 0
1990 10.85(b) 10.13 0
Harris Oakmark Large Cap Value Division 1998 10.00(h) 9.72 0
LEHMAN BROTHERS AGGREGATE BOND DIVISION 1998 10.00(H) 10.12 0
Morgan Stanley EAFE(Registered)Index Division 1998 10.00(h) 10.80 0
Neuberger Berman Partners Mid Cap Value Division 1998 10.00(h) 10.73 0
Russell 2000 Index Division 1998 10.00(h) 10.53 0
T. Rowe Price Large Cap Growth Division 1998 10.00(h) 11.01 0
</TABLE>
FFA-20
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
In addition to the above mentioned Accumulation Units, there were cash reserves
of $22,530,195 as of December 31, 1998, applicable to Income Annuities
(including those not described in this Prospectus) receiving annuity payouts.
(a) Not all investment divisions are offered under the various Enhanced
Deferred Annuities.
(b) Inception Date July 2, 1990.
(c) Inception Date May 1, 1991.
(d) Inception Date May 1, 1992.
(e) No longer offered under the Enhanced Deferred Annuities
(f) Inception Date March 3, 1997.
(g) Inception Date July 1, 1991. Sales commenced for Non-Qualified Enhanced
Deferred Annuities for *457(f) deferred compensation plans, *451 deferred
fee arrangements, *451 deferred compensation plans and *451(e)(11)
severance and death benefit plans in 1991.
(h) Inception Date November 9, 1998. A bar chart does not appear for this
investment division because there is less than one calendar year of
performance history.
FFA-21
<PAGE>
ACCUMULATION UNIT VALUES FOR EACH INVESTMENT DIVISION
(For an accumulation unit outstanding throughout the period)
These tables and bar charts show fluctuations in the Accumulation Unit Values
for Financial Freedom Deferred Annuities for each investment division from year
end to year end. The information in this table has been derived from the
Separate Account's full financial statements, or other reports (such as the
annual report).
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
FINANCIAL FREEDOM DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Aggressive Growth Division 1998 $38.02 $42.82 22
[YEAR END ACCUMULATION UNIT VALUE 1997 35.98 38.02 14
BAR CHARTS OMITTED FOR THIS DIVISION 1996 33.72(a) 35.98 3
AND EACH OF THE 17 FOLLOWING DIVISIONS]
State Street Research Diversified Division 1998 33.57 39.79 48
1997 28.11 33.57 20
1996 24.78(a) 28.11 0
State Street Research Growth Division 1998 60.00 76.19 56
1997 47.19 60.00 32
1996 38.99(a) 47.19 0
</TABLE>
FFA-22
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
FINANCIAL FREEDOM DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State Street Research Income Division 1998 $32.77 $32.52 24
1997 30.13 32.77 5
1996 29.36(a) 30.13 0
Calvert Social Balanced Division 1998 20.35 23.44 183
1997 17.11 20.35 162
1996 15.34 17.11 120
1995 11.93 15.34 82
1994 12.45 11.93 56
1993 11.63 12.45 35
1992 10.91 11.63 22
1991 10.00(b) 10.91 0
Calvert Social Mid Cap Growth Division 1998 20.58 26.46 133
1997 16.81 20.58 118
1996 15.80 16.81 108
1995 11.43 15.80 62
1994 12.81 11.43 44
1993 12.03 12.81 29
1992 10.67 12.03 16
1991 10.00(b) 10.67 0
Fidelity Money Market Division 1998 12.24 12.62 148
1997 11.85 12.24 81
1996 11.46 11.85 101
1995 11.02 11.46 41
1994 10.72 11.02 26
1993 10.50 10.72 19
1992 10.22 10.50 12
1991 10.00(b) 10.22 1,146
</TABLE>
FFA-23
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
FINANCIAL FREEDOM DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity Equity-Income Division 1998 $ 30.45 $33.67 963
1997 23.99 30.45 906
1996 21.19 23.99 659
1995 15.84 21.19 445
1994 15.02 15.84 270
1993 12.83 15.02 165
1992 11.07 12.83 66
1991 10.00(b) 11.07 4
Fidelity Growth Division 1998 29.30 40.49 1,363
1997 23.95 29.30 1,317
1996 21.08 23.95 1,058
1995 15.72 21.08 762
1994 15.87 15.72 508
1993 13.43 15.87 317
1992 12.40 13.43 136
1991 10.00(b) 12.40 30
Fidelity Overseas Division 1998 17.77 19.85 486
1997 16.08 17.77 508
1996 14.34 16.08 365
1995 13.20 14.34 259
1994 13.10 13.20 197
1993 9.63 13.10 98
1992 10.89 9.63 24
1991 10.00(b) 10.89 4
</TABLE>
FFA-24
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
FINANCIAL FREEDOM DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity Investment Grade Bond Division 1998 $15.62 $16.84 218
1997 14.46 15.62 170
1996 14.15 14.46 133
1995 12.17 14.15 115
1994 12.77 12.17 72
1993 11.62 12.77 46
1992 11.00 11.62 25
1991 10.00(b) 11.00 2
Fidelity Asset Manager Division 1998 20.94 23.87 815
1997 17.52 20.94 816
1996 15.44 17.52 742
1995 13.32 15.44 600
1994 14.32 13.32 511
1993 11.94 14.32 309
1992 10.78 11.94 111
1991 10.00(b) 10.78 12
Janus Mid Cap Division 1998 12.72 17.29 140
1997 10.00(d) 12.72 52
</TABLE>
FFA-25
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
FINANCIAL FREEDOM DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loomis Sayles High Yield Bond Division 1998 $10.53 $9.65 37
1997 10.00(d) 10.53 8
Santander International Stock Division 1998 13.54 16.43 22
1997 13.99 13.54 10
1996 14.38(a) 13.99 0
Scudder Global Equity Division 1998 10.88 12.49 146
1997 10.00(d) 10.88 56
T. Rowe Price Small Cap Growth Division 1998 11.79 12.08 242
1997 10.00(d) 11.79 108
</TABLE>
FFA-26
<PAGE>
ACCUMULATION UNIT VALUES (continued)
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
BEGINNING OF YEAR END OF YEAR ACCUMULATION
ACCUMULATION ACCUMULATION UNITS END OF YEAR
FINANCIAL FREEDOM DEFERRED ANNUITIES YEAR UNIT VALUE UNIT VALUE (IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MetLife Stock Index Division 1998 $27.72 $35.21 942
1997 21.18 27.72 799
1996 17.43 21.18 514
1995 12.86 17.43 310
1994 12.83 12.86 226
1993 11.82 12.83 150
1992 11.11 11.82 1,999
1991 10.00(b) 11.11 2,181
Harris Oakmark Large Cap Value Division 1998 10.00(e) 9.72 0
Lehman Brothers Aggregate Bond Division 1998 10.00(e) 10.12 0
Morgan Stanley EAFE(Registered)Index Division 1998 10.00(e) 10.80 0
Neuberger Berman Partners Mid Cap Value Division 1998 10.00(e) 10.73 0
Russell 2000 Index Division 1998 10.00(e) 10.53 0
T. Rowe Price Large Cap Growth Division 1998 10.00(e) 11.01 0
</TABLE>
In addition to the above mentioned Accumulation Units, there were cash reserves
of $22,530,195 as of December 31, 1998, applicable to Income Annuities
(including those not described in this Prospectus) receiving annuity payouts.
(a) Inception Date May 1, 1996.
(b) Inception Date July 1, 1991.
(c) Inception Date May 1, 1991.
(d) Inception Date March 3, 1997.
(e) Inception Date November 9, 1998. A bar chart does not appear for this
investment division because there is less than one year of performance
history.
FFA-27
<PAGE>
MetLife
Our main office is located at One Madison Avenue, New York, New York 10010.
MetLife was formed under the laws of New York State in 1868. Headquartered in
New York City, MetLife is a leading provider of insurance and financial services
to a broad spectrum of individual and institutional customers. With
approximately $359 billion worth of assets under management as of December 31,
1998, MetLife provides individual insurance and investment products to
approximately 9 million households in the United States. MetLife also provides
group insurance and investment products to corporations and other institutions
employing over 33 million people.
We are a mutual life insurance company. In November 1998, MetLife announced its
intention to convert to a stock company from a mutual company. MetLife's board
of directors authorized the development of a plan to "demutualize." The plan
will be subject to approval by the board of directors, the State of New York
Insurance Department and policyholders. As of April 30, 1999, we do not know the
details of the plan or when or if it will take effect.
Metropolitan Life Separate Account E
We established Metropolitan Life Separate Account E on September 27, 1983. The
purpose of the Separate Account is to hold the variable assets that underlie the
Enhanced Preference Plus Account and Financial Freedom Account Variable Annuity
Contracts and some other variable annuity contracts we issue. We have registered
the Separate Account with the Securities and Exchange Commission as a unit
investment trust under the Investment Company Act of 1940.
The Separate Account's assets are solely for the benefit of those who invest in
the Separate Account and no one else, including our creditors. We are obligated
to pay all money we owe under the Deferred Annuities and Income Annuities even
if that amount exceeds the assets in the Separate Account. The assets of the
Separate Account are held in our name on behalf of the Separate Account and
legally belong to us. All the income, gains, and losses (realized or unrealized)
resulting from these assets are credited to or charged against the contracts
issued from this Separate Account without regard to our other business.
FFA-28
<PAGE>
The Variable Annuities in this Prospectus
There are two types of variable annuities described in this Prospectus: Deferred
Annuities and Income Annuities. These annuities are "variable" because the value
of your account or income varies based on the investment performance of the
investment divisions you choose. In short, the value of your Deferred Annuity,
your income payments under a variable pay-out option of your Deferred Annuity,
or your income payments under your Income Annuity, may go up or down. Since the
investment performance is not guaranteed, your money is at risk. The degree of
risk will depend on the investment divisions you select. The Accumulation Unit
Value or Annuity Unit Value for each investment division rises or falls based on
the investment performance (or "experience") of the Portfolio with the same
name.
The Deferred Annuities have a fixed interest rate option called the Fixed
Interest Account. With the Fixed Interest Account, your money earns a rate of
interest that we guarantee. Income Annuities and the variable pay-out options
under the Deferred Annuities have a fixed payment option called the Fixed Income
Option. Under the Fixed Income Option, we guarantee the amount of your fixed
income payments. These fixed options are not described in this Prospectus
although we occasionally refer to them.
A Deferred Annuity
You accumulate money in your account during the pay-in phase by making one or
more purchase payments. MetLife will hold your money and credit investment
returns as long as the money remains in your account.
The pay-out phase begins when you either take all of your money out of the
account or elect to have us pay you "income" payments using the money in your
account. The number and the amount of the income payments you receive will
depend on such things as the type of pay-out option you choose, your investment
choices, and the amount used to provide your income payments. Because Deferred
Annuities offer various insurance benefits such as pay-out options, including
our guarantee of income for your lifetime, the Deferred Annuities are
"annuities."
An Income Annuity
An Income Annuity, also known as an immediate annuity, only has a "pay-out"
phase. You make a single purchase payment and select the type of pay-out option
suited to your needs. Some of the pay-out options guarantee an income stream for
your lifetime or your and another's lifetimes. Some Income Annuities guarantee a
time period of your choice
- --------------------------------------------------------------------------------
The group Deferred Annuities and group Income Annuities described in this
Prospectus are offered to an employer, association, trust or other group for its
employees, members or participants.
A Deferred Annuity consists of two phases: the accumulation or "pay-in" phase
and the income annuity or "pay-out" phase.
- --------------------------------------------------------------------------------
FFA-29
<PAGE>
over which MetLife will make income payments. Income Annuities also have other
features. The amount of your income payments you receive will depend on such
things as the type of pay-out option you choose, your investment choices and the
amount of your purchase payment.
Your Investment Choices
The Metropolitan Fund, the Calvert Fund and Fidelity VIP and VIP II Funds and
each of their Portfolios are more fully described in their respective
prospectuses and SAIs. The Metropolitan Fund prospectus is attached at the end
of this Prospectus. If any of the Calvert Fund or Fidelity VIP and VIP II Funds'
Portfolios are available to you, then you will also receive their prospectuses
as appropriate. You should read these prospectuses carefully before making
purchase payments to the investment divisions. The SAI for each fund is
available upon your request.
The investment choices are:
Fidelity VIP Money Market Portfolio
Lehman Brothers Aggregate Bond Index Portfolio
State Street Research Income Portfolio
Fidelity VIP II Investment Grade Bond Portfolio
State Street Research Diversified Portfolio
Fidelity VIP II Asset Manager Portfolio
Calvert Social Balanced Portfolio
MetLife Stock Index Portfolio
Fidelity VIP Equity-Income Portfolio
Harris Oakmark Large Cap Value Portfolio
T. Rowe Price Large Cap Growth Portfolio
State Street Research Growth Portfolio
Neuberger Berman Partners Mid Cap Value Portfolio
Janus Mid Cap Portfolio
Calvert Social Mid Cap Growth Portfolio
Loomis Sayles High Yield Bond Portfolio
State Street Research Aggressive Growth Portfolio
Russell 2000(Registered) Index Portfolio
Fidelity VIP Growth Portfolio
T. Rowe Price Small Cap Growth Portfolio
Scudder Global Equity Portfolio
Morgan Stanley EAFE(Registered) Index Portfolio
Santander International Stock Portfolio
Fidelity VIP Overseas Portfolio
- --------------------------------------------------------------------------------
The degree of investment risk you assume will depend on the investment divisions
you choose. We have listed your choices in order of risk from the most
conservative to the most aggressive.
There is a possibility you will lose principal in the investment choices.
However, they generally offer the opportunity for greater retuns over the long
term than our guaranteed fixed options.
- --------------------------------------------------------------------------------
FFA-30
<PAGE>
Some of the investment choices may not be available under the terms of the
Deferred Annuity or Income Annuity. The contract will indicate the investment
divisions that are available to you. Your investment choices may be limited
because:
o Some of the investment divisions are not approved in your state.
o Your employer, association or other group contractholder limits the number
of available investment divisions.
o We have restricted the available investment divisions.
o For Income Annuities, some states limit you to four choices (four
investment divisions or three investment divisions and the Fixed Income
Option).
The investment divisions buy and sell shares of corresponding mutual fund
portfolios. These Portfolios, which are part of the Metropolitan Fund, Calvert
Fund or Fidelity VIP and VIP II Funds, invest in stocks, bonds and other
investments. All dividends declared by the Portfolios are earned by the Separate
Account and reinvested. Therefore, no dividends are distributed to you under the
Deferred Annuities or Income Annuities. Dividends generally are reflected in an
increase in the Accumulation or Annuity Unit Value. You pay no transaction
expenses (i.e., front end sales load or back-end sales load charges) as a result
of the Separate Account's purchase or sale of these mutual fund shares. The
Portfolios of the Metropolitan Fund are available only by purchasing MetLife
annuities and life insurance policies and are never sold directly to the public.
The Calvert Fund and Fidelity VIP and VIP II Funds Portfolios are made available
by the funds only through various insurance company annuities and life insurance
policies.
The Metropolitan Fund, Calvert Fund and Fidelity VIP and VIP II Funds are each a
"series" type fund registered with the Securities and Exchange Commission as an
"open-end management investment company" under the Investment Company Act of
1940 (the "1940 Act"). A "series" fund means that each Portfolio is one of
several available through the fund. Except for the Janus Mid Cap, Calvert Social
Balanced and Calvert Mid Cap Portfolios, each Portfolio is "diversified" under
the 1940 Act.
The Portfolios of the Metropolitan Fund pay us a monthly fee for our services as
investment manager. The Portfolios of the Calvert Fund pay Calvert Asset
Management Company, Inc. a monthly fee as its investment manager. Similarly, the
Portfolios of the Fidelity VIP and VIP II Funds pay Fidelity Management &
Research Company a monthly fee as its investment manager. These fees, as well as
the operating expenses paid by each Portfolio, are described, as applicable, in
the Metropolitan Fund, the Calvert Fund and Fidelity VIP and VIP II Funds
prospectuses and SAIs.
- -------------------------------------------------------------------------------
While the investment divisions and their comparably named Portfolios may have
names, investment objectives and management which are identical or similar to
publicly available mutual funds, these are not those mutual funds. The
Portfolios most likely will not have the same performance experience as any
publicly available mutual fund.
- -------------------------------------------------------------------------------
FFA-31
<PAGE>
In addition, the Metropolitan Fund prospectus discusses other separate accounts
of MetLife and Metropolitan Tower Life Insurance Company that invest in the
Metropolitan Fund. The Calvert Fund and the Fidelity VIP and VIP II Funds
prospectuses each discuss different separate accounts of the various insurance
companies that invest in each fund's portfolios. The risks of these arrangements
are also discussed in each fund's prospectus.
Deferred Annuities
This Prospectus describes many kinds of Deferred Annuities under which you can
accumulate money:
Financial Freedom Account: Enhanced Preference Plus Account:
- ---------------------------------- ----------------------------------------
o TSA (Tax Sheltered Annuity) o TSA (Tax Sheltered Annuity)
o 403(a) (Qualified annuity plans o 403(a) (Qualified annuity plans under
under Section 403(a)) Section 403(a))
o Non-Qualified (for certain o PEDC (Public Employee Deferred
deferred arrangements and plans) Compensation)
o Traditional IRA (Individual Retirement
Annuities)
o Non-Qualified
o Non-Qualified (for certain deferred
arrangements and plans)
These Non-Qualified Deferred Annuities (for certain deferred arrangements and
plans) include Section 457(f) deferred compensation plans, Section 451 deferred
fee arrangements, Section 451 deferred compensation plans, Section 457(e)(11)
severance and death benefits plans, and for Financial Freedom Deferred Annuities
only, Section 415(m) qualified governmental excess benefit arrangements. The
Non-Qualified Deferred Annuities for Section 457(e)(11) severance and death
benefit plans have special tax risks. We no longer offer Section 457(e)(11)
severance and death benefit plans but will accept purchase payments for those
already issued.
- --------------------------------------------------------------------------------
These Deferred Annuities are issued to a group. You are then a participant under
the group's Deferred Annuity.
- --------------------------------------------------------------------------------
FFA-32
<PAGE>
Certain group Deferred Annuities may be issued to a bank that does nothing but
hold them as contractholder. Deferred Annuities may be either:
o Allocated (your Account Balance records are kept for you as an individual);
or
o Unallocated (Account Balance records are kept for a plan or group as a
whole).
The Deferred Annuity and Your Retirement Plan
If you participate through a retirement plan, the Deferred Annuity may provide
that all or some of your rights as described in this Prospectus are subject to
the plan's terms. Limitations on your rights may apply to investment choices,
purchase payments, withdrawals, transfers, the death benefit and pay-out
options.
The Deferred Annuity may provide that a plan administrative fee will be paid by
making a withdrawal from your Account Balance. Also, the Deferred Annuity may
require that you or your beneficiary obtain a signed authorization from your
employer or plan administrator to exercise certain rights. We may rely on your
employer's or plan administrator's statements to us as to the terms of the plan
or your entitlement to any amounts. We will not be responsible for determining
what your plan says. You should consult the Deferred Annuity contract and plan
document to see how you may be affected. If you are a Texas Optional Retirement
Program participant, please see Appendix II for specific information which
applies to you.
Automated Investment Strategies
There are five automated investment strategies available to you for Enhanced
Deferred Annuities. The Equity Generator is the only investment strategy
available for Financial Freedom Deferred Annuities. These investment strategies,
if available to you, are without any additional charges. As with any investment
program, no strategy can guarantee a gain--you can lose money. We may modify or
terminate any of the strategies at any time. You may have only one automated
investment strategy in effect at a time.
The Equity Generator(Service Mark): An amount equal to the interest earned in
the Fixed Interest Account is transferred monthly to either the MetLife Stock
Index or State Street Research Aggressive Growth investment division, based on
your selection.
As an added benefit of this strategy, you will not pay early withdrawal charges
from your purchase payments, if your contributions are allocated to the Fixed
Interest Account for the life of your Deferred Annuity and you never request
allocation changes or transfers. Early withdrawal charges may be taken from any
of your earnings.
The Equalizer(Service Mark): You start with equal amounts of money in the Fixed
Interest Account and your choice of either the MetLife Stock Index Division or
the
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We created these investment strategies to help you manage your money. You decide
if one is approriate for you, based upon your risk tolerance and saving goals.
These strategies were designed to help you take advantage of the tax-deferred
status of an annuity.
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State Street Research Aggressive Growth Division. Each quarter amounts are
transferred between the Fixed Interest Account and your chosen investment
division to make the values of each equal. Say you choose the MetLife Stock
Index Division. If over the quarter, it outperforms the Fixed Interest Account
money is transferred to the Fixed Interest Account. Conversely, if the Fixed
Interest Account outperforms the MetLife Stock Index Division, money is
transferred into the MetLife Stock Index Division.
The Rebalancer(Service Mark): You select a specific asset allocation for your
entire Account Balance from among the investment divisions and the Fixed
Interest Account. Each quarter, we transfer amounts among these options to bring
the percentage of your Account Balance in each option back to your original
allocation.
The Index Selector(Service Mark): You may select one of five asset allocation
models which are designed to correlate to various risk tolerance levels. Based
on the model you choose, your entire Account Balance is divided among, the
Lehman Brothers Aggregate Bond Index, MetLife Stock Index, Morgan Stanley
EAFE(Registered) Index and Russell 2000 Index investment divisions and the
Fixed Interest Account. Each quarter, the percentage in each of these investment
divisions and the Fixed Interest Account is brought back to the original
percentage by transferring amounts among the investment divisions and the Fixed
Interest Account.
In the future, we may permit you to allocate less than 100% of your Account
Balance to this strategy. This strategy may experience more volatility than our
other strategies. The models are subject to change from time to time. We provide
the elements to formulate the models. We may rely on a third party for its
expertise in creating appropriate allocations.
The Allocator(SM): Each month a dollar amount you choose is transferred from the
Fixed Interest Account to any of the investment divisions you choose. You select
the day of the month and the number of months over which the transfers will
occur. A minimum transfer of $50 is the only requirement.
The Equity Generator and the Allocator are dollar cost averaging strategies.
Dollar cost averaging involves investing at regular intervals of time. Since
this involves continuously investing regardless of fluctuating prices, you
should consider whether you can continue the strategy through periods of
fluctuating prices.
Purchase Payments
There is no minimum purchase payment.
For Non-Qualified Deferred Annuities for certain deferred arrangements or plans
(except those for Section 415(m) arrangements), we may require that each
purchase payment be at least $2,000. In addition, we may require that your total
purchase payments must be at least $15,000 for the first Contract Year and at
least $5,000 each subsequent Contract Year.
Unless limited by tax law, you may continue to make purchase payments under
Enhanced Deferred Annuities while you receive Systematic Withdrawal Program
payments, as described later in this
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You may make purchase payments to your Deferred Annuity whenever you choose, up
to the date you begin receiving payments from a pay-out option. However, Federal
tax rules may limit the amount and frequency of your purchase payments.
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Prospectus, unless your purchase payments are made through automatic payroll
deduction, salary reduction or salary deduction.
In the case of TSA Deferred Annuity money being transferred from a fixed account
of another insurance company where you did not have access to your money because
the company was being rehabilitated or liquidated, we may add additional money
to the amount transferred to us to reflect the earlier lack of access.
Allocation of Purchase Payments
You decide how your money is allocated among the Fixed Interest Account and the
investment divisions. You can change your allocations for additional purchase
payments. We will make allocation changes when we receive your request for a
change. You may also specify an effective date for the change as long as it is
within 30 days after we receive the request.
Limits on Purchase Payments
Your ability to make purchase payments may be limited by:
o Federal tax laws.
o Our right to limit the total of your purchase payments to $500,000. We may
change the maximum by telling you in writing at least 90 days in advance.
o Regulatory requirements. For example, if you reside in Washington or
Oregon, we may be required to limit your ability to make purchase payments
after you have held the Deferred Annuity for more than three years, if the
Deferred Annuity was issued to you after you were age 60, or after you turn
age 63, if the Deferred Annuity was issued before you were age 61.
o A withdrawal based on your leaving your job.
o Receiving systematic termination payments (described later) from both the
Separate Account and Fixed Interest Account.
The Value of Your Investment
Accumulation Units are credited to you when you make purchase payments or
transfers into an investment division. When you withdraw or transfer money from
an investment division, accumulation units are liquidated. We determine the
number of accumulation units you have by dividing the amount of your purchase
payment, transfer or withdrawal by the Accumulation Unit Value on the date of
the transaction.
This is how we calculate the Accumulation Unit Value for each investment
division:
o First, we determine the change in investment performance (including any
investment-related charge) for the underlying Portfolio from the previous
trading day to the current trading day;
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o Next, we subtract the daily equivalent of our insurance-related charge
(general administrative expense and mortality and expense risk charges) for
each day since the last Accumulation Unit Value was calculated; and
o Finally, we multiply the previous Accumulation Unit Value by this result.
Examples
Calculating the Number of Accumulation Units
Assume you make a purchase payment of $500 into one investment division and that
investment division's Accumulation Unit Value is currently $10.00. You would be
credited with 50 accumulation units.
$500 = 50 accumulation units
----
10
Calculating the Accumulation Unit Value
Assume yesterday's Accumulation Unit Value was $10.00 and the number we
calculate for today's investment experience (minus charges) for an underlying
portfolio is 1.05. Today's Accumulation Unit Value is $10.50. The value of your
$500 investment is then $525.
$10.00 x 1.05 = $10.50 the new Accumulation Unit Value
However, assume that today's investment experience (minus charges) is .95
instead of 1.05. Today's Accumulation Unit Value is $9.50. The value of your
$500 investment is then $475.
$10.00 x .95 = $9.50 the new Accumulation Unit Value
Transfers
You can make an unlimited number of transfers between investment divisions or
between the investment divisions and the Fixed Interest Account. Such transfers
are free of any early withdrawal charges to you, except under certain Financial
Freedom Deferred Annuities where you may incur early withdrawal charges, if
applicable, for money transferred from the Fixed Interest Account to the
investment divisions. Some additional restrictions may also apply to transfers
from the Fixed Interest Account to the investment divisions. For us to process a
transfer, you must tell us:
o The percentage or dollar amount of the transfer;
o The investment division (or Fixed Interest Account) from which you want the
money to be transferred;
o The investment division (or Fixed Interest Account) to which you want the
money to be transferred; and
o Whether you intend to start, stop or modify an automated investment
strategy by making the transfer.
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You may transfer money within your contract as often as you like without
incurring current taxes on your earnings.
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We may require you to:
o Use our forms;
o Maintain a minimum Account Balance (if the transfer is in connection with
an automated investment strategy or if there is an outstanding loan from
the Fixed Interest Account); or
o Transfer a minimum amount if the transfer is in connection with the
Allocator.
Access To Your Money
You may withdraw either all or a part of your Account Balance from the Deferred
Annuity. Withdrawals must be at least $500 (or the Account Balance, if less). To
process your request, we need the following information:
o The percentage or dollar amount of the withdrawal; and
o The investment division (or Fixed Interest Account) from which you want the
money to be withdrawn.
Generally, if you request, we will make payments directly to other investments
on a tax-free basis. You may only do so if all applicable tax and state
regulatory requirements are met and we receive all information necessary for us
to make the payment. We may require you to use our forms.
Systematic Withdrawal Program for Enhanced TSA and IRA Deferred Annuities
Under this program, available only for Enhanced TSA and IRA Deferred Annuities
and subject to approval in your state, you may choose to automatically withdraw
a specific dollar amount or a percentage of your Account Balance each Contract
Year. This amount is then paid in equal portions throughout the Contract Year
according to the time frame you select, e.g., monthly, quarterly, semi-annually
or annually. Once the Systematic Withdrawal Program is initiated the payments
will automatically renew each Contract Year.
If you elect to withdraw a dollar amount we will pay you the dollar amount each
Contract Year. If you elect to withdraw a percentage of your Account Balance,
each Contract Year we recalculate the dollar amount you will receive based on
your new Account Balance.
Calculating Your Payment Based on a Percentage Election for the First Contract
Year You Elect the Systematic Withdrawal Program:
If you choose to receive a percentage of your Account Balance, we will determine
the dollar amount payable on the date these payments begin. When you first elect
the program, we will pay this dollar amount over the remainder of the Contract
Year. For example, if you select to receive payments on a monthly basis, the
percentage of your Account Balance you request equals $12,000, and there are six
months left in the Contract Year, we will pay you $2,000 a month.
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Income taxes, tax penalties and early withdrawal charges may apply to any
withdrawal you make. Tax law generally prohibits withdrawals from TSA Enhanced
Deferred Annuities before you reach age 59 1/2.
We will withdraw the payments from the Fixed Interest Account or investment
divisions you select, either pro rata or in the proportions you request. Each
payment must be at least $50. For the TSA Enhanced Deferred Annuity, if you
elect to receive payments through this program, you must either be 59 1/2 years
old or have left your job and you must have no loan outstanding from the Fixed
Interest Account.
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Calculating Your Payment for Subsequent Contract Years of the Systematic
Withdrawal Program: For each subsequent year that your Systematic Withdrawal
Program remains in effect, we will deduct from your Deferred Annuity and pay you
over the Contract Year either the dollar amount that you chose or a dollar
amount equal to the percentage of your Account Balance you chose. For example,
if you select to receive payments on a monthly basis, ask for a percentage and
that percentage equals $12,000 at the start of a Contract Year, we will pay you
$1,000 a month.
If you do not provide us with your desired allocation, or there are insufficient
amounts in the investment divisions or the Fixed Interest Account that you
selected, the payments will be taken out pro rata from the Fixed Interest
Account and any investment divisions in which you then have money.
Selecting a Payment Date: Your payment date is the date we make the withdrawal.
When you select or change a payment date, we must receive your request at least
10 days prior to the selected payment date. If we do not receive your request in
time, we will make the payment a month after the date you selected. If you do
not select a payment date, we will automatically begin systematic withdrawals
within 30 days after we receive your request. Changes in the dollar amount,
percentage, or timing of payments can be made at the beginning of any Contract
Year and once a year. However, we must receive your request at least 30 days in
advance. If you make any of these changes we will treat your request as though
you were starting a new Systematic Withdrawal Program.
Although we need your written authorization to begin this program, you may
cancel this program at any time by telephone or by writing to us at your MetLife
Designated Office.
Systematic Withdrawal Program payments may be subject to an early withdrawal
charge unless an exception to this charge applies. For purposes of determining
how much of the annual payment amount is exempt from this charge under the free
withdrawal provision (discussed later), all Systematic Withdrawal Program
payments in a Contract Year are characterized as a single lump sum withdrawal as
of your first payment date in that Contract Year. When you first elect the
program, we will calculate the percentage of your Account Balance your
Systematic Withdrawal Program payment represents based on your Account Balance
on the first Systematic Withdrawal Program payment date. For all subsequent
Contract Years, we will calculate the percentage of your Account Balance your
Systematic Withdrawal Program payment represents based on your Account Balance
on the first Systematic Withdrawal Program payment date of that Contract Year.
We will determine separately the early withdrawal charge and any relevant
factors (such as applicable exceptions) for each Systematic Withdrawal Program
payment as of the date it is withdrawn from your Deferred Annuity.
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If you would like to receive your systematic withdrawal payment by the first of
the month, you should request that the payment date be the 20th of the prior
month.
Your Account Balance will be reduced by the amount of your systematic withdrawal
payments and applicable withdrawal charges. Payments under this program are not
the same as income payments you would receive from a Deferred Annuity pay-out
option or under an Income Annuity.
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<PAGE>
Minimum Distribution
In order for you to comply with certain tax law provisions, you may be required
to take money out of your Deferred Annuity (i.e., the later of when you reach
70 1/2 or retire). Rather than receiving your minimum distribution in one annual
lump-sum payment, you may request that we pay it to you in installments
throughout the calendar year. However, we may require that you maintain a
certain Account Balance at the time you request these payments.
Contract Fee
There is no Separate Account annual contract fee. You may pay a $20 annual fee
from the Fixed Interest Account at the end of each Contract Year.
Charges
There are two types of charges you pay while you have money in an investment
division:
o Insurance-related charge, and
o Investment-related charge.
Insurance-Related Charge
You will pay an insurance-related charge for the Separate Account that is no
more than .95% annually of the average value of the amount you have in the
Separate Account. This charge pays us for general administrative expenses and
for the mortality and expense risk of the Deferred Annuity.
General administrative expenses we incur include financial, actuarial,
accounting, and legal expenses.
The mortality portion of the insurance-related charge pays us for the risk that
you may live longer than we estimated. Then, we could be obligated to pay you
more in payments from a pay-out option than we anticipated. Also, we bear the
risk that the guaranteed death benefit we would pay should you die during your
"pay-in" phase is larger than your Account Balance. We also bear the risk that
our expenses in administering the Deferred Annuities may be greater than we
estimated (expense risk).
Investment-Related Charge
This charge pays the investment managers of the Metropolitan Fund, Calvert Fund
and Fidelity VIP and VIP II Funds for managing money in the Portfolios and
investment operating expenses. We manage the Metropolitan Fund. The percentage
you pay depends on which investment divisions you select. Amounts for each
investment division are listed in the Table of Expenses.
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The charges you pay will not reduce the number of accumulation units credited to
you. Instead, we deduct the charges each time we calculate the Accumulation Unit
Value.
MetLife guarantees that the Separate Account insurance-related charge will not
increase while you have a Deferred Annuity.
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<PAGE>
Premium Taxes
Some jurisdictions tax what are called "annuity considerations." These may apply
to purchase payments, Account Balances and death benefits. In most
jurisdictions, we currently do not deduct any money from purchase payments,
Account Balances or death benefits to pay these taxes. Generally, our practice
is to deduct money to pay premium taxes (also known as "annuity taxes") only
when you exercise a pay-out option. In certain states, we may also deduct money
to pay premium taxes on lump sum withdrawals or when you exercise a pay-out
option. We may deduct an amount to pay premium taxes some time in the future
since the laws and the interpretation of the laws relating to annuities are
subject to change.
Premium taxes, if applicable, range from .5% to 5.0% depending on the Deferred
Annuity you purchase and your home state or jurisdiction. A chart in the
Appendix shows the states where premium taxes are charged and the amount of
these taxes.
Early Withdrawal Charges for TSA, 403(a), Non-Qualified, PEDC and IRA Enhanced
Deferred Annuities
An early withdrawal charge of up to 7% may apply if you withdraw purchase
payments within 7 years of when they were credited to your Deferred Annuity. To
determine the early withdrawal charge for the TSA, 403(a), Non-Qualified, PEDC
and IRA Enhanced Deferred Annuities, we treat your Fixed Interest Account and
Separate Account as if they were a single account and ignore both your actual
allocations and the Fixed Interest Account or investment division from which the
withdrawal is actually coming. To do this, we first assume that your withdrawal
is from amounts (other than earnings) that can be withdrawn without an early
withdrawal charge, then from other amounts (other than earnings) and then from
earnings, each on a "first-in-first-out" (oldest money first) basis. Once we
have determined the amount of the early withdrawal charge, we will actually
withdraw it from the Fixed Interest Account and the investment divisions in the
same proportion as the withdrawal is being made. In determining what the
withdrawal charge is, we do not include earnings, although the actual withdrawal
to pay it may come from earnings.
For partial withdrawals, the early withdrawal charge is determined by dividing
the amount that is subject to the early withdrawal charge by 100% minus the
applicable percentage shown in the following chart. Then we will make the
payment directed, and withdraw the early withdrawal charge.
For a full withdrawal we multiply the amount to which the withdrawal charge
applies by the percentage shown; keep the result as an early withdrawal charge
and pay you the rest. We will treat your request as a request for a full
withdrawal if your Account Balance is not sufficient to pay both the requested
withdrawal and the early withdrawal charge.
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We do not include your earnings when calculating early withdrawal charges.
However, if the early withdrawal charge is greater than the rest of your
purchase payments, then we will take the early withdrawal charges, in whole or
in part, from your earnings. You will not pay an early withdrawal charge on any
purchase payments made more than 7 years ago. For Financial Freedom and certain
Non-Qualified Enhanced Deferred Annuities, early withdrawal charges do not apply
to the Separate Account. However, these charges may apply to withdrawals from
the Fixed Interest Account and to transfers from the Fixed Interest Account into
the investment divisions.
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The early withdrawal charge on purchase payments withdrawn is as follows:
During Purchase Payment Year
Year 1 2 3 4 5 6 7 8 & Later
Percentage 7% 6% 5% 4% 3% 2% 1% 0%
By law, your total early withdrawal charges applied to amounts in the investment
divisions will never exceed 9% of all your purchase payments in the investment
divisions.
The early withdrawal charge reimburses us for our costs in selling the Deferred
Annuities. We may use our profits (if any) from the mortality and expense risk
charge to pay for our costs to sell the Deferred Annuities which exceed the
amount of early withdrawal charges we collect. However, we believe that our
sales costs may exceed the early withdrawal charges we collect. If so, we will
pay the difference out of our general profits.
Because of the reduced sales costs for certain Enhanced Deferred Annuities,
there are no early withdrawal charges.
For certain deferred arrangements and plans, you pay no early withdrawal charges
on withdrawals from Financial Freedom Deferred Annuities and Non-Qualified
Enhanced Deferred Annuities.
When No Early Withdrawal Charge Applies for TSA, 403(a), Non-Qualified, PEDC and
IRA Enhanced Deferred Annuities
In some cases, we will not charge you the early withdrawal charge when you make
a withdrawal. We may, however, ask you to prove that you meet one of the
following conditions listed below.
You do not pay an early withdrawal charge:
o On transfers you make within your Deferred Annuity.
o On withdrawals of purchase payments you made over seven years ago.
o If you choose payments over one or more lifetimes or for a period of at
least five years (without the right to accelerate the payments).
o If you die during the pay-in phase. Your beneficiary will receive the full
death benefit without deduction.
o If you withdraw up to 20% (10% for certain TSA Enhanced Deferred Annuities)
of your Account Balance each Contract Year. This 20% (or 10%) total
withdrawal may be taken in an unlimited number of partial withdrawals
during that Contract Year. Each time you make a withdrawal, we calculate
what percentage your withdrawal represents at that time. Only when the
total of these percentages exceeds 20% (or 10%) will you have to pay early
withdrawal charges.
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Early withdrawal charges never apply to transfers among investment divisions or
transfers to the Fixed Interest Account.
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<PAGE>
o If the withdrawal is required for you to avoid Federal income tax penalties
or to satisfy Federal income tax rules or Department of Labor regulations
that apply to your Deferred Annuity.
o Systematic Termination. For all Deferred Annuities except certain TSA,
Non-Qualified and IRA Enhanced Deferred Annuities, if the contract is
terminated, the Account Balance may be systematically withdrawn in annual
installments without early withdrawal charges. You may ask to receive your
money in annual installments based on the following percentages of your
Account Balance for that year's withdrawal:
Contract Year
1* 2 3 4 5
20% 25% 33 1/3% 50% remainder
* Less that Contract Year's withdrawals.
Any money you withdraw in excess of these percentages in any Contract Year
will be subject to early withdrawal charges. You may stop the systematic
termination of the contract. If you ask to restart systematic termination,
you begin at the beginning of the schedule listed above.
o If you are disabled and you request a total withdrawal. Disability is as
defined in the Federal Social Security Act.
o If you retire:
o For the Non-Qualified and certain PEDC Enhanced Deferred Annuities, if
you retire.
o For certain TSA Enhanced Deferred Annuities, if you have also
participated for at least 10 consecutive years. This does not apply
for withdrawals of money transferred into the contract from other
investment vehicles on a tax-free basis (plus earnings on such
amounts).
o For certain TSA, PEDC and 403(a) Enhanced Deferred Annuities, if you
also have participated for at least 10 consecutive years unless you
retire according to the definition of retirement stated in your plan.
o If you leave your job with the employer that bought the Deferred Annuity.
(Except for certain TSA, Non-Qualified and IRA Enhanced Deferred
Annuities.)
o If your plan terminates and the withdrawal is transferred into another
annuity contract we issue. (Except for certain TSA, Non-Qualified and IRA
Enhanced Deferred Annuities.)
o If your plan provides payment on account of hardship and you suffer from an
unforeseen hardship. (Except for certain TSA, 403(a), Non-
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Qualified and IRA Enhanced Deferred Annuities.) For certain TSA Enhanced
Deferred Annuities, you must only have suffered an unforeseen hardship.
o If you make a direct transfer to other investment vehicles we have
pre-approved. (Except for certain TSA, Non-Qualified and IRAEnhanced
Deferred Annuities.)
o If you withdraw money under a plan provision which we have pre-approved.
(Except for certain TSA, Non-Qualified, PEDC, and IRA Enhanced Deferred
Annuities.)
When Another Early Withdrawal Charge May Apply
If you transferred money from certain eligible MetLife contracts into a Deferred
Annuity, you may have different early withdrawal charges for these transfer
amounts. Any purchase payments made after the transfer are subject to the usual
early withdrawal charge schedule.
o Amounts transferred before January 1, 1996:
o We credit your transferred amounts with the time you held them under
your original contract or if it will produce a lower charge;
o We use the following schedule to determine early withdrawal charges
for transferred amounts from your original contract.
During Purchase Payment Year
Year 1 2 3 4 5 6 and Beyond
Percentage 5% 4% 3% 2% 1% 0%
o Amounts transferred on or after January 1, 1996:
o For certain contracts which we issued at least two years before the
date of the transfer, we apply the withdrawal charge under your
original contract but not any of the original contract's exceptions or
reductions to the withdrawal charge percentage that do not apply to a
Deferred Annuity, or if it will produce a lower charge.
We use the following schedule to determine early withdrawal charges
for transferred amounts from your original contract:
After the Transfer
Year 1 2 3 4 5 6 and Beyond
Percentage 5% 4% 3% 2% 1% 0%
o If we issued the other contract less than two years before the date of
the transfer or it has a separate withdrawal charge for each purchase
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payment, we treat your purchase payments under the other contract as
if they were made under the Deferred Annuity as of the date we
received them under that contract.
o Alternatively, if provided for in your Deferred Annuity, we credit your
purchase payments with the time you held them under your original contract.
Free Look
You may cancel the Deferred Annuity within a certain time period. This is known
as a "free look." We must receive your request to cancel in writing. The number
of days for this "free look" varies from state to state. The time period may
also vary depending on your age and whether you purchased the Deferred Annuity
from us directly, through the mail or with money from another annuity or life
insurance policy. Again, depending on state law, we may refund all of your
purchase payments or your Account Balance as of the date your refund request is
received at your MetLife Designated Office.
Death Benefit
One of the insurance guarantees we provide you under the Deferred Annuity is
that your beneficiaries will be protected against market downturns. You name
your beneficiary(ies)under the following Deferred Annuities:
o Enhanced TSA
o Enhanced Non-Qualified
o Enhanced 403(a)
o Enhanced Traditional IRA
o Financial Freedom TSA
o Financial Freedom 403(a)
For the following Deferred Annuities the trustee receives the death benefit:
o Non-Qualified Deferred Annuity for
o Section 457(f) deferred compensation plan
o Section 451 deferred fee arrangements
o Section 451 deferred compensation plans
o Section 457(e)(11) severance and death benefit plans
o Section 415(m) qualified governmental excess benefit arrangements
o For PEDC Deferred Annuities, the employer or trustee receives the death
benefit.
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The death benefit your beneficiary receives will be the greatest of:
o Your Account Balance;
o Your highest Account Balance as of the end of any fifth calendar year in
which you have the Deferred Annuity and as of the end of each later five
year period. In any case, less any later partial withdrawals, fees and
charges; or
o The total of all of your purchase payments less any partial withdrawals.
In each case, we deduct the amount of any outstanding loans from the death
benefit.
We will only pay the death benefit when we receive both proof of your death and
appropriate instructions for payment.
Your beneficiary has the option to apply the death benefit (less any applicable
premium taxes) to a pay-out option offered under your Deferred Annuity. Your
beneficiary may, however, decide to take a lump sum cash payment.
Pay-out Options (or Income Options)
You may convert your Deferred Annuity into a regular stream of income after your
"pay-in" or "accumulation" phase. When you are selecting your pay-out option you
will be able to choose from the range of options we then have available. You
have the flexibility to select a stream of income to meet your needs. If you
decide you want a pay-out option, we withdraw some or all of your Account
Balance (less any premium taxes, applicable contract fees and outstanding
loans). Then, we apply the remainder to the option. You are not required to hold
your Deferred Annuity for any minimum time period before you may annuitize.
Generally, you may defer receiving payments for up to one year after you have
chosen your pay-out option.
When considering whether to select a pay-out option, you should think about
whether you want:
o Payments guaranteed by us for the rest of your life (or for the rest of two
lives) or for a specified period;
o A fixed dollar payment or a variable payment;
o A refund feature.
Your income payment amount will depend upon your choices. For lifetime options,
the age and sex of the measuring lives (annuitants) will also be considered. For
example, if you select a pay-out guaranteeing payments for your and your
spouse's lifetimes, your payments will typically be lower than if you select a
pay-out option with payments over only your lifetime.
By the date specified in your contract, if you do not either select a pay-out
option or withdraw your entire Account Balance, and your Deferred Annuity was
not issued under a retirement plan, we will automatically issue you a life
annuity
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The pay-out phase is often referred to as either "annuitizing" your contract or
taking an income annuity.
Should our current immediate annuity rates for a fixed pay-out option provide
for greater payments than those quoted in your contract, we will use the current
rates.
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with a 10 year guarantee. In that case, if you do not tell us otherwise, your
Fixed Interest Account Balance will be used to provide a Fixed Income Option and
your Separate Account Balance will be used to provide a variable income option.
However, if we do ask you what you want us to do and you do not respond, we may
treat your silence as a request by you to continue your Deferred Annuity.
Because the features of variable pay-out options under the Deferred Annuities
are identical to the features of Income Annuities, please read the sections
under the "Income Annuities" heading for more information.
Income Annuities
Income Annuities provide you with a regular stream of payments for either your
lifetime or a specific period. You have the flexibility to select a stream of
income to meet your needs. Income Annuities can be purchased so that you begin
receiving payments immediately or you can apply the Account Balance of the
Deferred Annuity to a pay-out option to receive payments during your "pay-out"
phase. With an Income Annuity, you must start receiving payments within the
first year after the annuity is issued.
We do not guarantee that your variable payments will be a specific amount of
money. You may choose to have a portion of the payment fixed and guaranteed
under the Fixed Income Option.
Using proceeds from the following types of arrangements, you may purchase the
following types of Income Annuities to receive immediate payments:
Financial Freedom Account: Enhanced Preference Plus Account:
o TSA o TSA
o 403(a) o 403(a)
o Non-Qualified (for certain o PEDC
deferred arrangements o Traditional IRA
and plans) o Non-Qualified
o Non-Qualified (for certain deferred
arrangements and plans)
If you have accumulated amounts in any of the listed investment vehicles, your
lump sum withdrawal from that investment vehicle may be used to purchase an
appropriate Income Annuity as long as income tax requirements are met.
These Non-Qualified Deferred Annuities (for certain deferred
arrangements and plans) include Section 457(f) deferred compensation
plans, Section 451 deferred fee arrangements, Section 451 deferred
compensation plans, Section 457(e)(11) severance and death benefits plans,
and Section 415(m) qualified governmental excess benefit arrangements.
The Deferred Annuities for Section 457(e)(11) severance and death
benefit plans have special tax risks. We no longer offer the
Non-Qualified Deferred Annuities for Section 457(e)(11) severance and
death benefit plans but will accept a purchase payment for those already
issued.
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You may choose the frequency of your income payments. For example, you may
receive your payments on a monthly, quarterly, semi-annual or annual basis.
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If your retirement plan has purchased an Income Annuity, then your choice of
pay-out options may be subject to the terms of the plan. We may rely on your
employer's or plan administrator's statements to us as to the terms of the plan
or your entitlement to any payments. We will not be responsible for interpreting
the terms of your plan. You should review your plan document to see how you may
be affected.
Income Payment Types
Currently, we provide you with a wide variety of income payment types to suit a
range of personal preferences.
There are three people who are involved in payments under your Income Annuity:
o Owner: the person or entity which has all rights under the Income Annuity
including the right to direct who receives payment.
o Annuitant: the person whose life is the measure for determining the timing
and sometimes the dollar amount of payments.
o Beneficiary: the person who may receive continuing payments or a lump sum
payment if the owner dies.
Your income payment amount will depend in large part on the type of income
payment type you choose. For example, if you select an "Income for Two Lives
Annuity," your payments will typically be lower than if you select a "Your
Lifetime Annuity." The following income payment types are available:
Your Lifetime Annuity: A variable income payable during the annuitant's life.
Your Lifetime with a Guaranteed Period Annuity: A variable income payable during
the annuitant's life with a guaranteed number of years. If, at the death of the
annuitant, payments have been made for less than the guaranteed period, payments
are made to the owner of the annuity (or the beneficiary if the owner dies
before the end of the guaranteed period) for the rest of the guaranteed period.
Your Lifetime With a Refund Annuity: A variable income payable during the
annuitant's life with a refund provision. If, at the death of the annuitant, the
total of all income payments is less than the purchase payment that we received,
we will pay to the owner of the annuity (or to the beneficiary if the owner is
not alive) an amount equal to the difference.
Income for Two Lives Annuity: A variable income payable while either of two
annuitants is alive. After one annuitant dies, payments continue if the other
annuitant is alive. Payments stop once both annuitants are no longer alive.
Payments after one annuitant dies may be the same as those paid while both were
alive or may be a lower percentage that is selected when the annuity is
purchased (e.g. 75%, 66 2/3% or 50%).
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Many times the Owner and the Annuitant are the same person.
When deciding how to receive income, consider:
o The amount of income you need;
o The amount you expect to receive from other sources;
o The growth potential of other investments; and
o How long you would like your income to last.
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Income for Two Lives with a Guaranteed Period Annuity: This is the same as the
Income for Two Lives Annuity described above, but we guarantee to pay the full
amount (not a reduced percentage) for the guaranteed period even if one or both
annuitants die. If, upon the death of both annuitants, payments have been made
for less than the guaranteed period, payments are made to the owner of the
annuity (or the beneficiary if the owner dies before the end of the guaranteed
period) for the rest of the guaranteed period.
Income for Two Lives with a Refund Annuity: This is the same as the Income for
Two Lives Annuity described above but if, upon the death of both annuitants, the
total of all of income payments is less than the purchase payment that we
received, we will pay the owner of the annuity (or to the beneficiary if the
owner is not alive) an amount equal to the difference.
Income for a Guaranteed Period Annuity: A variable income payable for a
guaranteed period (5-30 years). Payments cease at the end of the guaranteed
period (which is often called a "term certain" period) even if the annuitant is
still alive. If the annuitant dies before the end of the guaranteed period,
payments are made to the owner of the annuity (or to the beneficiary if the
owner dies before the end of the guaranteed period) for the rest of the
guaranteed period.
Allocation
You decide how your money is allocated among the Fixed Income Option and the
investment divisions.
Minimum Size of Your Income Payment
Your initial income payment must be at least $50. If you live in Massachusetts,
the initial income payment must be at least $20. This means that the amount of
your purchase payment or the amount used from a Deferred Annuity to provide a
pay-out option must be large enough to produce this minimum initial income
payment.
The Value of Your Income Payments
Annuity units are credited to you when you make a purchase payment or transfer
into an investment division. Before we determine the number of annuity units to
credit to you, we reduce a purchase payment (but not a transfer) by any premium
taxes and the contract fee, if applicable. We then compute an initial income
payment amount using the Assumed Investment Return ("AIR"), your income payment
type and the age and sex of the measuring lives. We then divide that amount by
the Annuity Unit Value on the date of the transaction. When you transfer money
from an investment division, annuity units in that investment division are
liquidated.
Your payment is determined by using the AIR to benchmark the investment
experience of the investment divisions you select. The higher your AIR, the
higher your first income payment will be. Your next payments will only
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The AIR is stated in your contract and may range from 3% to 6%.
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increase in proportion to the amount the investment experience of your chosen
investment divisions exceeds the AIR and Separate Account charges. Likewise,
your payments will decrease to the extent the investment experience of your
chosen investment divisions is less than the AIR and Separate Account charges. A
lower AIR will result in a lower initial variable income payment, but subsequent
variable income payments will increase more rapidly or decline more slowly as
changes occur in the investment experience of the investment divisions.
Your income payments are determined on the later of either ten days prior to
your income payment date or your contract's issue date, if later.
This is how we calculate the Annuity Unit Value for each investment division:
o First, we determine the change in investment experience (including any
investment-related charge) for the underlying portfolio from the previous
trading day to the current trading day;
o Next, we subtract the daily equivalent of your insurance-related charge
(general administrative expenses and mortality and expense risk charges)
for each day since the last day the Annuity Unit Value was calculated;
o Then, we divide by the daily equivalent of your AIR; and
o Finally, we multiply the previous Annuity Unit Value by this result.
Transfers
You can make an unlimited number of transfers among investment divisions or from
the investment divisions to the Fixed Income Option. There is no early
withdrawal charge to make a transfer. If you reside in certain states you may be
limited to four options (including the Fixed Interest Option).
For us to process a transfer, you must tell us:
o The percentage or dollar amount of the transfer;
o The investment division (or Fixed Income Option) to which you want to
transfer; and
o The investment division from which you want to transfer.
We may require that you use our forms to make transfers.
Contract Fee
There is no contract fee under the Income Annuities.
Charges
There are two types of charges you pay if you allocate any of your purchase
payment to the investment divisions:
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Once you transfer money into the Fixed Income Option you may not later transfer
it into an investment division.
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o Insurance-related charge; and
o Investment-related charge.
Insurance-Related Charge
You will pay an insurance-related charge for the Separate Account that is no
more than .95% annually of the average value of the amount you have in the
Separate Account. This charge pays us for general administrative expenses and
for mortality and expense risk of the Income Annuity.
General administrative expenses we incur include financial, actuarial,
accounting, and legal expenses.
The mortality portion of the insurance-related charge pays us for the risk that
you may live longer than we estimated. Then, we could be obligated to pay you
more in payments than we anticipated.
We also bear the risk that our expenses in administering the Income Annuities
will be greater than we estimated (expense risk).
Investment-Related Charge
This charge pays the investment managers of the Metropolitan Fund, Calvert Fund
and Fidelity VIP and VIP II Funds for managing money in the Portfolios and
investment operating expenses. We are the managers for the Metropolitan Fund.
The percentage you pay depends on the investment divisions you select. Amounts
for each investment division are listed in the Table of Expenses.
Premium Taxes
Some jurisdictions tax what are called "annuity considerations." We deduct money
to pay "premium" taxes (also known as "annuity" taxes) when you make the
purchase payment.
Premium taxes, if applicable, range from .5% to 5.0% depending on the Income
Annuity you purchased and your home state or jurisdiction. A chart that shows
the states where premium taxes are charged and the amount of these taxes is in
the Appendix.
Free Look
You may cancel your Income Annuity within a certain time period. This is known
as a "free look." We must receive your request to cancel in writing. The number
of days for this "free look" varies from state to state. The "free look" may
also vary depending on your age and whether you purchased your Income Annuity
from us directly, through the mail or with money from another annuity or life
insurance policy. Again, depending on state law, we may refund all of your
purchase payment or the value of your annuity units as of the date your refund
request is received at your MetLife Designated Office.
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The charges you pay will not reduce the number of annuity units credited to you.
Instead, we deduct the charges when calculating the Annuity Unit Value.
You do not have a free look if you are electing income payments in the pay-out
phase of your Deferred Annuity.
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General Information
Administration
All transactions will be processed in the manner described below.
Purchase Payments
Send your purchase payments by check or money order made payable to "MetLife" to
your MetLife Designated Office. We will provide you with all necessary forms. We
must have all completed documents to credit your purchase payments.
Usually, your initial purchase payment is credited to you within two days of
receipt at your MetLife Designated Office. However, if you fill out our forms
incorrectly or incompletely or other documentation is not completed properly, we
have up to five business days to credit the payment. If the problem cannot be
resolved by the fifth business day, we will notify you and give you the reasons
for the delay. At that time, you will be asked whether you agree to let us keep
your money until the problem is resolved. If you do not agree or we cannot reach
you by the fifth business day, your money will be returned.
Under certain group Deferred Annuities and group Income Annuities, your
employer, or the group in which you are a participant or member must identify
you on their reports to us and tell us how your money should be allocated among
the investment divisions and the Fixed Interest Account/Fixed Income Option.
Purchase payments (including any portion of your Account Balance under a
Deferred Annuity which you apply to a pay-out option) are effective and valued
as of 4:00 p.m. Eastern time, on the day we receive them in good order at your
MetLife Designated Office, except when they are received:
o On a day when the Accumulation Unit/Annuity Unit Value is not calculated,
or
o After 4:00 p.m. Eastern time.
In those cases, the purchase payments will be effective the next day the
Accumulation Unit Value or Annuity Unit Value, as applicable, is calculated.
Confirming Transactions
You will receive a written statement confirming that a transaction was recently
completed. Certain transactions made on a periodic basis, such as Systematic
Withdrawal Program payments and automated investment strategy transfers, may be
confirmed quarterly. Salary reduction or deduction purchase payments under TSA
Deferred Annuities and the Non-Qualified Financial Freedom Deferred Annuity for
415(m) qualified governmental excess benefit arrangements are confirmed
quarterly.
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Generally, your requests including subsequent purchase payments are effective
the day we receive them at your MetLife Designated Office.
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Transactions by Telephone
You may conduct a variety of transactions by telephone, unless prohibited by
state law.
Your telephone transaction must be completed by 4:00 p.m. Eastern time if you
want the transaction to take place on that day.
We have put into place reasonable security procedures to insure that
instructions communicated by telephone are genuine. For example, all telephone
calls are recorded. Also, you will be asked to provide some personalized data
prior to giving your instructions over the telephone. When someone contacts us
by telephone and follows our security procedures, we will assume that you are
authorizing us to act upon those telephone instructions. Neither we nor the
Separate Account will be liable for any loss, expense or cost arising out of any
requests that we or the Separate Account reasonably believe to be authentic. In
the unlikely event that you have trouble reaching us, requests should be made in
writing to your MetLife Designated Office.
Processing of Certain Transactions
If we are notified of your death before a requested transaction is completed, we
will cancel the request. For example, if you request a transfer or withdrawal
for a date in the future under a Deferred Annuity and then die before that date,
we simply pay the death benefit instead. For Income Annuity transfers, we will
cancel the request and continue making payments to your beneficiary if your
Income Annuity so provides. Or, depending on your Income Annuity's provisions we
may continue making payments to a joint annuitant or pay your beneficiary a
refund.
Valuation
We separately determine the Accumulation Unit Value and Annuity Unit Value for
each investment division once each day when the New York Stock Exchange is open
for trading. If permitted by law, we may change the period between calculations
but we will give you 30 days notice.
When you request a transaction, we will process the transaction using the next
available Accumulation Unit Value for Deferred Annuities or Annuity Unit Value
for Income Annuities. Subject to our procedure, we will make withdrawals under a
Deferred Annuity and transfers under a Deferred Annuity or Income Annuity at a
later date, if you request. If your withdrawal request is to elect a variable
pay-out option under your Deferred Annuity, we base the number of annuity units
you receive on the next available Annuity Unit Value.
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You may authorize your sales representative to make telephone transactions on
your behalf. You must complete the form and we must agree.
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Advertising Performance
We periodically advertise the performance of the investment divisions. You may
get performance information from a variety of sources including your quarterly
statements, your MetLife representative. the internet, annual reports and
semi-annual reports. We may state performance in terms of "yield," "change in
Accumulation Unit Value/Annuity Unit Value," "average annual total return," or
some combination of these terms.
Yield is the net income generated by an investment in a particular investment
division for 30 days or a month. These figures are expressed as percentages.
This percentage yield is compounded semiannually.
Change in Accumulation/Annuity Unit Value is calculated by determining the
percentage change in the value of an accumulation (or annuity) unit for a
certain period. These numbers may also be annualized. Change in
Accumulation/Annuity Unit Value may be used to demonstrate performance for a
hypothetical investment (such as $10,000) over a specified period. These
performance numbers reflect the deduction of the total Separate Account charges;
however, yield and change in Accumulation/Annuity Unit Value performance do not
reflect the possible imposition of early withdrawal charges. Early withdrawal
charges would reduce performance experience.
Average annual total return calculations reflect all Separate Account charges
and applicable early withdrawal charges. These figures also assume a steady
annual rate of return.
Performance figures will vary among the various Deferred Annuities and Income
Annuities as a result of different Separate Account charges and early withdrawal
charges. For purposes of presentation, we may assume that certain Deferred
Annuities and Income Annuities were in existence prior to their inception date.
In these cases, we calculate performance based on the historical performance of
the underlying Metropolitan Fund, Calvert Fund and Fidelity VIP and VIP II Funds
Portfolios. We use the actual accumulation unit or annuity unit data after the
inception date.
We calculate performance for certain investment strategies including the
Equalizer, Equity Generator and each asset allocation model of the Index
Selector. We calculate the performance as a percentage by presuming a certain
dollar value at the beginning of a period and comparing this dollar value with
the dollar value based on historical performance at the end of that period. This
percentage return assumes that there have been no withdrawals or other unrelated
transactions.
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All performance numbers are based upon historical earnings. These numbers are
not intended to indicate future results.
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Changes to Your Deferred Annuity or
Income Annuity
We have the right to make certain changes to your Deferred Annuity or Income
Annuity, but only as permitted by law. We make changes when we think they would
best serve the interest of annuity owners or would be appropriate in carrying
out the purposes of the Deferred Annuity or Income Annuity. If the law requires,
we will also get your approval and the approval of any appropriate regulatory
authorities. Examples of the changes we may make include:
o To operate the Separate Account in any form permitted by law.
o To take any action necessary to comply with or obtain and continue any
exemptions under the law.
o To transfer any assets in an investment division to another investment
division, or to one or more separate accounts, or to our general account,
or to add, combine or remove investment divisions in the Separate Account.
o To substitute for the Portfolio shares in any investment division, the
shares of another class of the Metropolitan Fund or the shares of another
investment company or any other investment permitted by law.
o To change the way we assess charges, but without increasing the aggregate
amount charged to the Separate Account and any currently available
portfolio in connection with the Deferred Annuities or Income Annuities.
o To make any necessary technical changes in the Deferred Annuities or Income
Annuities in order to conform with any of the above-described actions.
If any changes result in a material change in the underlying investments of an
investment division in which you have a balance, we will notify you of the
change. You may then make a new choice of investment divisions. For Deferred
Annuities issued in Pennsylvania (and Income Annuities where required by law),
we will ask your approval before making any technical changes.
Voting Rights
Based on our current view of applicable law, you have voting interests under
your Deferred Annuity or Income Annuity concerning Metropolitan Fund, Calvert
Fund and Fidelity VIP and VIPII Funds proposals that are subject to a
shareholder vote. Therefore, you are entitled to give us instructions for the
number of shares which are deemed attributable to your Deferred Annuity or
Income Annuity.
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We will vote the shares of each of the underlying Portfolios held by the
Separate Account based on instructions we receive from those having a voting
interest in the corresponding investment divisions. However, if the law or the
interpretation of the law changes, we may decide to exercise the right to vote
the Portfolio's shares based on our own judgment.
You will be entitled to give instructions regarding the votes attributable to
your Deferred Annuity or Income Annuity in your sole discretion. Under Section
457(f) deferred compensation plans, Section 451 deferred fee arrangements,
Section 451 deferred compensation plans, Section 457(e)(11) severance and
death benefit plans and the TSA Deferred Annuity and Income Annuities under
which the employer retains all rights, we will provide you with the number of
copies of voting instructions soliciting materials that you request so that
you may furnish such materials to participants who may give you voting
instructions. Neither the Separate Account nor MetLife has any duty to inquire
as to the instructions received or your authority to give instructions; thus,
as far as the Separate Account, and any others having voting interests in
respect of the Separate Account are concerned, such instructions are valid and
effective.
There are certain circumstances under which we may disregard voting
instructions. However, in this event, a summary of our action and the reasons
for such action will appear in the next semiannual report. If we do not receive
your voting instructions, we will vote your interest in the same proportion as
represented by the votes we receive from other investors. Shares of the
Metropolitan Fund that are owned by our general account or by any of our
unregistered separate accounts will be voted in the same proportion as the
aggregate of:
o The shares for which voting instructions are received, and
o The shares that are voted in proportion to such voting instructions.
However, if the law or the interpretation of the law changes, we may decide to
exercise the right to vote the Portfolio's shares based on our judgment.
Who Sells the Deferred Annuities and
Income Annuities
All Deferred Annuities and Income Annuities, are sold through our licensed sales
representatives. We are registered with the Securities and Exchange Commission
as a broker-dealer under the Securities Exchange Act of 1934. We are also a
member of the National Association of Securities Dealers, Inc. Deferred
Annuities and Income Annuities are also sold through other registered
broker-dealers. They also may be sold through the mail.
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The licensed sales representatives and broker-dealers who sell the annuities may
be compensated for these sales by commissions that we pay. There is no front-end
sales load deducted from purchase payments to pay sales commissions. The
Separate Account does not pay sales commissions. The commissions we pay range
from 0% to 6%.
We also make payments to our licensed sales representatives based upon the total
Account Balances of the Deferred Annuities assigned to the sales representative.
Under this compensation program, we pay an amount up to .12% of the total
Account Balances of the Deferred Annuities, other registered variable annuity
contracts, certain mutual fund account balances and cash values of certain life
insurance policies. These asset based commissions compensate the sales
representative for servicing the Deferred Annuities. These payments are not made
for Income Annuities.
From time to time, MetLife may pay organizations or associations a fee,
reimburse them for certain expenses, lease office space from them, purchase
advertisements in their publications or enter into other such arrangements in
connection with their endorsing or sponsoring MetLife's variable annuity
contracts or services, for permitting MetLife to undertake certain marketing
efforts of the organizations' members in connection with sales of MetLIfe
variable annuities, or some combination thereof. Additionally, MetLife has
retained consultants who are paid a fee for their efforts in establishing and
maintaining relationships between MetLife and various organizations.
Financial Statements
The financial statements and related notes for the Separate Account and MetLife
are in the SAI and are available from MetLife upon request. Deloitte & Touche,
LLP, who are independent auditors, audit these financial statements.
Your Spouse's Rights
If you received your contract through a qualified retirement plan and your plan
is subject to ERISA (the Employee Retirement Income Security Act of 1974) and
you are married, the income payments, withdrawal provisions, and methods of
payment of the death benefit under your Deferred Annuity or Income Annuity may
be subject to your spouse's rights.
If your benefit is worth $5,000 or less, your plan may provide for distribution
of your entire interest in a lump sum without your spouse's consent.
For details or advice on how the law applies to your circumstances, consult your
tax advisor or attorney.
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When We Can Cancel Your Deferred Annuity
or Income Annuity
We may not cancel your Income Annuity.
We may cancel your Deferred Annuity only if we do not receive any purchase
payments from you for 36 consecutive months and your Account Balance is less
than $2,000. If we do so for a Deferred Annuity delivered in New York we will
return the full Account Balance. In all other cases, you will receive an amount
equal to what you would have received if you had requested a total withdrawal of
your Account Balance. Early withdrawal charges may apply.
We may cancel your Non-Qualified Deferred Annuity for Section 457(f)
deferred compensation plans, Section 451 deferred fee arrangements,
Section 451 deferred compensation plans and Section 457(e)(11)
severance and death benefit plans if we do not receive any purchase
payments from you for 12 consecutive months and your Account Balance is
less than $15,000. Certain Deferred Annuities do not contain these
cancellation provisions.
At our option, we may cancel certain TSA and PEDC Deferred Annuities if we
determine that changes to your retirement plan would cause MetLife to pay more
interest than we anticipated or to make more frequent payments than we
anticipated in connection with the Fixed Interest Account. We may also cancel
these Deferred Annuities, as legally permitted, if your retirement plan
terminates or no longer qualifies as a tax sheltered arrangement. Also, the
employer and MetLife may each cancel the Deferred Annuity upon 90 days notice to
the other party.
Special Charges That Apply If Your Retirement Plan Terminates Its Deferred
Annuity or Takes Other Action
Under certain TSA Deferred Annuities, amounts equal to some or all of
the early withdrawal charge imposed under a contract of another issuer
in connection with the transfer of money into a TSA Deferred Annuity may
be credited to your Account Balance. If such amounts are credited to a
TSA Deferred Annuity, special termination charges may be imposed. These
charges may also apply if the plan introduces other funding vehicles
provided by other carriers. Charges are not imposed on plan participants;
but rather are absorbed by the contractholder. Therefore, under the contract,
the participant will incur only the withdrawal charges, if applicable,
otherwise discussed in this Prospectus. The charges to the plan are imposed on
the amount initially transferred to MetLife for the first seven years
according to the schedule in the following table:
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During Contract Year
8 &
Year 1 2 3 4 5 6 7 Beyond
Percentage 5.6% 5.0% 4.5% 4.0% 3.0% 2.0% 1.0% 0%
The charge to the plan, for partial withdrawals, is determined by multiplying
the amount of the withdrawal that is subject to the charge by the applicable
percentage shown above.
Income Taxes
The following information on taxes is a general discussion of the subject. It is
not intended as tax advice. The Internal Revenue Code (Code) is complex and
subject to change on a regular basis. You should consult your own tax advisor
about your own circumstances. You should read the general provisions and any
sections relating to your type of annuity to familiarize yourself with some of
the tax rules for your particular contract. For purposes of this section, we
address Deferred Annuities and Income Annuities together as annuities. In
addition, because the tax treatment of Income Annuities and the pay-out option
under Deferred Annuities is generally the same, they are discussed together as
income payments.
Deferred Annuities in General
This section applies to TSA, 403(a), Non-Qualified, Traditional IRA and
PEDC. It does not apply to Non-Qualified Deferred Annuities for Section
451, Section 457(f) or Section 457(e)(11) plans.
Deferred annuities are a means of setting aside money for future needs-usually
retirement. Congress recognizes how important saving for retirement is and has
provided special rules in the Internal Revenue Code (Code).
Contributions to TSA, 403(a), and PEDC are generally on a "before-tax" basis.
This means that the purchase payments either reduce your income, entitle you to
a tax deduction or are not subject to current income tax. Under some
circumstances "after-tax" contributions can be made to certain of these
annuities. These contributions do not reduce your taxable income or give you a
tax deduction. There are different annual contribution limits for the annuities
offered in this prospectus. Purchase payments in excess of the limits may result
in adverse tax consequences.
Contributions to a Non-Qualified annuity are on an after-tax basis. After-tax
means that your purchase payments to your annuity do not reduce your taxable
income or give you a tax deduction. Generally, Traditional IRAs can accept
deductible (or pre-tax) and non-deductible (after-tax) contributions. Whether
you can make deductible contributions to your Traditional IRA depends on your
personal situation.
We are not responsible for determining if your employer's plan or arrangement
satisfies the requirements of the Code and/or ERISA.
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Simply stated, earnings on Deferred Annuities are generally not subject to
income tax until they are withdrawn. This is known as tax deferral.
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Because these products are intended for retirement, if you make a taxable
withdrawal before age 59 1/2 you may incur a tax penalty.
When you withdraw money from your Deferred Annuity, the amount reported
as income differs depending on the type of:
o annuity you purchase (e.g., Non-Qualified or IRA); and
o pay-out option you elect.
For your Traditional IRA, Non-Qualified and PEDC annuities we will withhold a
portion of the amount of your withdrawal for income taxes, unless you elect
otherwise. The amount we withhold is determined by the Code. For withdrawals
from a TSA or 403(a) annuity, please see the 20% mandatory withholding
discussion.
Withdrawals Before Age 59 1/2 (except PEDC)
If you receive a taxable distribution from your Deferred Annuity before you
reach age 59 1/2 this amount may be subject to a 10% penalty tax, in addition to
ordinary income taxes.
As indicated in the chart below, some taxable distributions prior to age
59 1/2 are exempt from the penalty. Some of these exceptions include
amounts received:
Type of Contract
--------------------------------
Non Trad.
Qualified IRA TSA 403(a)
----- --- --- ---
In a series of substantially
equal payments
made annually (or more frequently)
for life or life expectancy (SEPP) x x x(1) x(1)
After you die x x x x
After you become totally disabled (as
defined in the Code) x x x x
After separation from service if
you are over age 55. x x
To pay deductible medical expenses x x x
To pay medical insurance premiums if
you are unemployed x
After December 31, 1997 to pay for
qualified higher education expenses, or x
After December 31, 1997 for qualified
first time home purchases up to $10,000 x
(1) You must also be separated from service.
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Mandatory 20% Withholding [For TSA and 403(a)]
For TSA and 403(a) Deferred Annuities, we are required to withhold 20% of your
withdrawal that constitutes an "eligible rollover distribution" for Federal
income taxes. We are not required to withhold this money if you direct us, the
trustee or the custodian of the plan to directly rollover your eligible rollover
distribution to a traditional IRA, or another eligible retirement plan.
An "eligible rollover distribution" is any taxable amount you receive from your
TSA or 403(a) Deferred Annuity. It does not include taxable distributions that
are:
o A series of substantially equal payments made at least annually for:
o Your life or life expectancy
o Both you and your beneficiary's lives or life expectancies
o A specified period of 10 years or more
o Withdrawals to satisfy minimum distribution requirements
Other exceptions to the definition of eligible rollover distribution exist.
For taxable withdrawals that are not "eligible rollover distributions," the Code
requires different withholding rules. The withholding amount is determined at
the time of payment. You may elect out of these withholding requirements.
Systematic Withdrawal Program for Substantially Equal Periodic Payments (SEPP)
If you are considering using the Systematic Withdrawal Program for the purpose
of meeting the SEPP exception to the 10% tax penalty, consult with your tax
advisor.
If you receive systematic payments that you intend to qualify for the SEPP
exception, any modifications to your payment before age 59 1/2 or within five
years after beginning Systematic Withdrawal Program payments will result in the
retroactive imposition of the 10% penalty tax.
TSA
General
TSAs fall under Section 403(b) of the Code which provides certain tax
benefits to eligible employees of public school systems and
organizations that are tax exempt under Section 501(c)(3) of the Code.
Your employer buys the Annuity for you although you then own it.
Your Deferred Annuity is not forfeitable (e.g., not subject to claims of your
creditors) and you may not transfer it. However, you may transfer
FFA-60
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withdrawals to another Section 403(b) funding vehicle or (for eligible rollover
distributions) to an IRA without Federal tax consequences if Code requirements
are met.
Contributions
There are annual contribution limits to your Deferred Annuity. Purchase payments
over this amount may be subject to adverse tax consequences. Special rules apply
to the withdrawal of excess contributions.
Withdrawals
Withdrawals and income payments are included in income, except for the portion
that represents a return of non-deductible purchase payments.
If you are under age 59 1/2 you cannot withdraw money from your Deferred Annuity
unless the withdrawal:
o Relates to contributions prior to 1989 and earnings on those contributions.
o Is directly transferred to other 403(b) arrangements;
o Relates to amounts that are not salary reduction elective deferrals;
o Is after you leave your job, after you die, or become disabled (as defined
by Code); or
o Is for financial hardship (but only to the extent of purchase payments) if
your plan allows it.
If certain requirements are met, you may be able to transfer amounts in your
Deferred Annuity to another TSA or IRA.
Minimum Distribution Requirements
Generally, you must begin receiving withdrawals from your Deferred Annuity by
April 1 of the calendar year following the later of:
o The year you turn age 70 1/2 or;
o Provided you do not own 5% or more of your employer, and to the extent
permitted by your plan and Deferred Annuity, the year you retire.
Complex rules apply to timing and calculating these withdrawals. A tax penalty
of 50% applies to withdrawals which should have been taken but were not.
After Death
If you die before required minimum distribution withdrawals have begun, we must
make payment of your entire interest in the Deferred Annuity within five years
after the year of your death or begin payments under an income annuity allowed
by the Code to your beneficiary by December 31st of the year after your death.
- --------------------------------------------------------------------------------
You may be subject to the 10% penalty tax if you withdraw money before you turn
age 59 1/2.
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FFA-61
<PAGE>
If your spouse is your beneficiary and if your Deferred Annuity permits, your
spouse may delay the start of income payments until December 31st of the year in
which you would have reached age 70 1/2.
If you die after required withdrawals begin, payments must continue at least as
rapidly as under the distribution method in effect at your death.
403(a)
General
The employer adopts a 403(a) plan as a qualified retirement plan to provide
benefits to participating employees. The plan generally works in a similar
manner to a corporate qualified retirement plan except that the 403(a) plan does
not have a trust or a trustee.
Contributions
There are annual contribution limits to your Deferred Annuity. Purchase payments
over this amount may be subject to adverse tax consequences. Special rules apply
to the withdrawal of excess contributions.
Withdrawals
Because your contributions are generally on a before tax basis, you pay income
taxes on the full amount of money you withdraw as well as income earned under
the Deferred Annuity. If you made any after tax contributions they would not be
subject to income tax when withdrawn.
If certain requirements are met, you may be able to transfer amounts in your
Deferred Annuity to another eligible retirement plan or IRA.
Minimum Distribution Requirements
Generally, you must begin receiving withdrawals from your Deferred Annuity by
April 1 of the calendar year following the later of:
o The year you turn age 70 1/2 or;
o Provided you do not own 5% or more of your employer, and to the extent
permitted by your plan and Deferred Annuity, the year you retire.
Complex rules apply to timing and calculating these withdrawals. A tax penalty
of 50% applies to withdrawals which should have been taken but were not.
After Death
If you die before required minimum distribution withdrawals have begun, we must
make payment of your entire interest in the Deferred Annuity within five years
after the year of your death or begin payments under an income annuity allowed
by the Code to your beneficiary by December 31st of the year after your death.
FFA-62
<PAGE>
If your spouse is your beneficiary and if your contract permits, your spouse may
delay the start of income payments until December 31st of the year in which you
would have reached age 70 1/2.
If you die after required withdrawals begin, payments must continue at least as
rapidly as under the distribution method in effect at your death.
Traditional IRA Annuities
Generally, your IRA can accept deductible (or pre-tax) and non-deductible
(after-tax) contributions. Deductible or pre-tax purchase payments will be
taxable when distributed from the Deferred Annuity.
o Your annuity is generally not forfeitable (e.g. not subject to claims of
your creditors) and you may not transfer it to someone else.
o You can transfer your IRA proceeds to a similar IRA, without incurring
Federal income taxes if certain conditions are satisfied.
Contributions
Generally:
o Contributions to Traditional and Roth IRAs are limited to the lesser of
100% of compensation or $2,000 per year. A $2,000 contribution can also be
made for a non-working spouse provided the couple's compensation is at
least equal to their aggregate contributions.
o Contributions in excess of this amount may be subject to a penalty tax.
o Contributions are generally permitted up to age 70 1/2.
o These age and dollar limits do not apply to tax-free rollovers or
transfers.
o If certain conditions are met, you can change your Traditional IRA
contribution to a Roth IRA before you file your income tax return
(including filing extensions).
Withdrawals
Withdrawals are included in income except for the portion that represents a
return of non-deductible purchase payments. This portion is determined based on
a ratio of all non-deductible contributions to the total value of all your IRAs.
Generally you must begin receiving withdrawals by April 1 of the calendar year
following the year in which you reach age 70 1/2.
A tax penalty of 50% applies to withdrawals which should have been taken but
were not. Complex rules apply to the timing and calculation of these
withdrawals.
- --------------------------------------------------------------------------------
In some cases, your purchase payments may be tax deductible.
Annual contributions to all your Traditional and Roth IRAs may not exceed the
lesser of $2,000 or 100% of your compensation.
You may combine the money required to be withdrawn from each of your Traditional
IRAs and withdraw this amount from any one or more of them.
- --------------------------------------------------------------------------------
FFA-63
<PAGE>
After Death
Generally, if you die before required minimum distribution withdrawals have
begun we must make payment of your entire interest within five years after the
year of your death or begin income payments under an income annuity allowed by
the Code to your beneficiary by December 31st of the year after your death.
If your spouse is your beneficiary, and, if your Deferred Annuity permits, your
spouse may delay the start of income payments until December 31 of the year in
which you would have reached age 70 1/2.
If you die after required withdrawals begin, payments must continue at least as
rapidly as under the distribution method in effect at your death.
Non-Qualified Annuities
General
o Contributions to Non-Qualified annuities are on an "after-tax" basis, so
you only pay income taxes on your earnings. Generally, these earnings are
taxed when you receive them from the Deferred Annuity.
o Your Non-Qualified annuity may be exchanged for another Non-Qualified
annuity without paying income taxes if certain Code requirements are met.
o When a non-natural person owns a Non-Qualified annuity, the annuity will
generally not be treated as an annuity for tax purposes and thus loses the
benefit of tax deferral. Corporations and certain other entities are
generally considered non-natural persons. However, an annuity owned by a
non-natural person as agent for an individual will be treated as an annuity
for tax purposes.
o Annuities issued after October 21, 1988 by the same insurance company in
the same year are combined for tax purposes. As a result, a greater portion
of your withdrawals may be considered taxable income than you would
otherwise expect.
o In those limited situations where the annuity is beneficially owned by a
non-natural person and the annuity qualifies as such for Federal income tax
purposes, the entity may have a limited ability to deduct interest or, in
the case of an insurance company, to deduct insurance reserves or incurred
losses.
Contributions
Although the Code does not limit the amount of your purchase payments, your
contract may limit them.
- --------------------------------------------------------------------------------
If your spouse is your beneficiary and if your Deferred Annuity permits, he or
she may elect to continue as "owner" of the Deferred Annuity.
After-tax means that your purchase payments to your annuity do not reduce your
taxable income or give you a tax deduction.
- --------------------------------------------------------------------------------
FFA-64
<PAGE>
Withdrawals
Generally, when you make a withdrawal from your non-qualified annuity, the Code
treats such a withdrawal as:
o First coming from earnings (and thus subject to income tax); and
o Then from your purchase payments (which are not subject to income tax).
Different tax rules apply to payments made pursuant to an Income Annuity
or pay-out option under your Deferred Annuity. They are subject to an
"exclusion ratio" which determines how much of each payment is treated as:
o A non-taxable return of your contributions; and
o A taxable payment of earnings.
If you choose a payout option under your Deferred Annuity we generally will tell
you how much of each income payment is a non-taxable return of contributions.
Generally, once the total amount treated as a non-taxable return of your
purchase payments equals your purchase payments, then all remaining income
payments are fully taxable.
Under the Code, withdrawals from Non-Qualified annuities need not be made by a
particular age. However, it is possible that the Internal Revenue Service may
determine that you must take a lump sum withdrawal or elect to receive income
payments by a certain age (e.g., 85).
Systematic Withdrawal Program for Substantially Equal Periodic Payments (SEPP)
If you are considering using the Systematic Withdrawal Program for the purpose
of meeting the SEPP exception to the 10% tax penalty, consult with your tax
advisor.
If you receive systematic payments that you intend to qualify for the SEPP
exception, any modifications to your payment before age 591/2 or within five
years after beginning Systematic Withdrawal Program payments will result in the
retroactive imposition of the 10% penalty tax.
After Death
If you die before payments under a pay-out option under a Deferred Annuity
begins, we must make payment of your entire interest within five years of your
death or begin payments under an Income Annuity allowed by the Code to your
beneficiary within one year of your death.
If you die after income payments begin, payments must continue to be made at
least as rapidly as before your death in accordance with the income type
selected.
If you die before all purchase payments are returned, the unreturned amount may
be deductible on your final income tax return or excluded from income by your
beneficiary if income payments continue after your death.
- --------------------------------------------------------------------------------
If you die during the pay-in phase of a Deferred Annuity and your spouse is your
beneficiary or a co-owner, he or she may elect to continue as "owner" of the
contract.
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FFA-65
<PAGE>
Non-Qualified Annuity for Section 457(f) Deferred Compensation Plans.
These are deferred compensation arrangements generally for a select group of
management or highly compensated employees and individual independent
contractors employed or engaged by state or local governments or non-church
tax-exempt organizations. In this arrangement the tax exempt entity (e.g., a
hospital) contributes your deferred compensation amounts and earnings credited
to these amounts into a trust, which at all times is subject to the claims of
the employer's bankruptcy and insolvency creditors. The trust owns a
Non-Qualified annuity which may be subject to the rules described under
"Non-Qualified Annuities." Since the trust is a grantor trust, any tax
consequences arising out of ownership of the Non-Qualified annuity will flow to
the tax-exempt entity that is the grantor of such trust. Each tax-exempt entity
should consult its own tax advisor with respect to the tax rules governing the
annuity. You can defer taxation of compensation until the first taxable year in
which there is not a substantial risk of forfeiture to your right to such
compensation.
When deferred compensation is no longer subject to a substantial risk of
forfeiture, it is immediately includable in your income and it becomes
"after-tax" contributions for the purposes of the tax rules governing
income plan payments in calculating the "exclusion ratio." Certain
distributions made before you are age 59 1/2 may be subject to a 10% tax
penalty. It is unclear whether this penalty applies with respect to
distributions made for this type of plan. Thus, you should consult your
own tax advisor to clarify this issue. Since there is some uncertainty
as to how the Internal Revenue Service and the courts will treat the
"rolling vesting" aspect of this arrangement, you should consult your
own tax advisor to clarify this issue. Given the complexity and
uncertainty inherent in this area of the tax law, entities considering
the purchase of this annuity to fund a Section 457(f) deferred
compensation plan should consult with their own tax advisors regarding
the major Federal tax issues under Section 457. In connection with the
sale of the Non-Qualified annuity for Section 457(f) Deferred
Compensation Plans, MetLife consulted special tax counsel regarding the
major Federal tax issues under Section 457. This advice from such
counsel has not been updated to reflect changes, if any, in the law.
Such advice was rendered solely to MetLife and may not be relied upon by
any person considering the purchase of the annuity.
Non-Qualified Annuity for Section 451 Deferred Fee Arrangements.
Under Section 451 deferred fee arrangements, a third party which is a
tax-exempt entity (e.g., a hospital) enters into an arrangement with a
taxable entity, the employer, that provides services to the third party.
These deferred fees are used to fund a deferred compensation plan for
the taxable entity's employees who are a select group of management or
highly compensated employees or individual independent contractors. The
deferred fees are contributed by the tax-exempt entity into a trust that
is subject to the claims of its bankruptcy and insolvency creditors, and
when paid or made available to the taxable entity, are subject to the
claims of the taxable
FFA-66
<PAGE>
entity's bankruptcy and insolvency creditors. Such arrangement, in
accordance with the provisions of Section 451, enables the taxable
entity to defer compensation until the year in which the amounts are
paid or made available to it, and enables the employees of the taxable
entity who are participants in its deferred compensation plan to defer
compensation until the year in which the amounts are paid or made
available to them, unless under the method of accounting used in
computing taxable income, such amount is to be properly accounted for in
a different period. The taxable entity will be able to deduct as
employee compensation the amounts included in income by the participant
employees of its deferred compensation plan, subject to such sums being
reasonable compensation and not disguised dividends.
A trust established by the tax-exempt entity will own a Non-Qualified annuity
which may be subject to taxation rules as described under "Non-Qualified
Annuities." Since the trust is a grantor trust, any tax consequences arising out
of ownership of the Non-Qualified annuity will flow to the tax-exempt entity
that is the grantor of such trust. Each tax-exempt entity should consult its own
tax advisor with respect to the tax rules governing the annuity. Participants in
the taxable entity's deferred compensation plan must look to the taxable entity
for payments under the plan. These persons should consult their own tax advisor
for information on the tax treatment of these payments made under the plan.
Given the complexity and uncertainty inherent in this area of the tax law,
entities considering the purchase of this annuity to fund a Section 451 deferred
fee arrangement should consult with their own tax advisors regarding the
application of the relevant rules to their particular situation. In connection
with the sale of the Non-Qualified annuity for Section 451 Deferred Fee
Arrangements, MetLife consulted special tax counsel regarding the major Federal
tax issues under Section 451. This advice from such counsel has not been updated
to reflect changes, if any, in the law and such advice was rendered solely to
MetLife and may not be relied upon by any person considering the purchase of the
annuity.
Non-Qualified Annuity for Section 451 Deferred Compensation Plans.
Under a Section 451 deferred compensation plan, a select group of management or
highly compensated employees or individual independent contractors can defer
compensation until the year in which the amounts are paid or made available to
them unless, under the method of accounting used in computing taxable income,
such amounts are to be properly accounted for in a different period.
Participants should consult their own tax advisors for information on the tax
treatment of these payments.
A Section 451 plan could be sponsored by either a taxable entity or certain
tax-exempt entities which meet the "grandfather" requirements described below.
Taxable entities would be able to deduct, as compensation, the amounts included
in income by the participant of the deferred compensa-
FFA-67
<PAGE>
tion plan, subject to such sums being reasonable compensation and not disguised
dividends. For tax-exempt entities, if certain Tax Reform Act of 1986
"grandfather" requirements are adhered to, Section 451 rather than Section 457
should apply to their deferred compensation plans. Tax exempt entities should
consult their own tax advisors to ascertain whether these "grandfather"
requirements are met.
A trust established by either the taxable or the grandfathered tax-exempt entity
would own a Non-Qualified annuity which may be subject to taxation rules as
described under "Non-Qualified Annuities." Since the trust would be a grantor
trust, any tax consequences arising out of ownership of the Non-Qualified
annuity will flow to the tax-exempt entity or taxable entity that is the grantor
of such trust. Such entities should consult their own tax advisors with respect
to the tax rules governing the annuity.
Given the complexity and uncertainty inherent in this area of the tax law,
entities considering the purchase of this annuity to fund a Section 451 deferred
compensation plan should consult with their own tax advisors regarding the
application of the relevant rules to their particular situation. In connection
with the sale of the Non-Qualified annuity for Section 451 Deferred Compensation
Plans, MetLife consulted special tax counsel regarding the major Federal tax
issues under Section 451. This advice from such counsel has not been updated to
reflect changes, if any, in the law and such advice was rendered solely to
MetLife and may not be relied upon by any person considering the purchase of the
annuity.
Non-Qualified Annuity for Section 457(e)(11) Severance and Death Benefit Plans.
These are severance and death benefit arrangements for adoption by tax-exempt
entities. If the employer is subject to ERISA, the arrangement must be adopted
exclusively for a select group of management or highly compensated employees or
individual independent contractors. The employer deposits deferral amounts,
which will be used to provide severance and death benefits, into a trust which
is subject at all times to the claims of the employer's bankruptcy and
insolvency creditors. As the owner of a Non-Qualified annuity, the trust may be
subject to the rules described under "Non-Qualified Annuities." Since the trust
is a grantor trust, any tax consequences arising out of ownership of the
Non-Qualified annuity will flow to the employer, the grantor of such trust. Each
employer should consult with its own tax advisor with respect to the tax rules
governing the annuity.
The Federal income tax consequences to you of this arrangement depend on whether
the program qualifies as a "bona-fide severance pay" and a "bona-fide death
benefit" plan as described in Section 457(e)(11) of the Code. If the arrangement
qualifies as a "bona-fide severance pay" and a "bona-fide death benefit" plan,
Section 451 of the Code will apply and you will not be taxed on your
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deferral amounts until the tax year in which they are paid or made available to
you, unless under the method of accounting you use in computing taxable income,
such amount is to be properly accounted for in a different period. If the
arrangement does not qualify as a "bona-fide severance pay" and a "bona-fide
death benefit" plan, your deferral amounts are subject to tax in the year in
which they are deferred. In that event, if you have not reported such income, in
addition to the Federal income tax you will have to pay, you will be assessed
interest, and you may be subject to certain penalties by the Internal Revenue
Service.
Special Tax Considerations for Non-Qualified Annuity for Section 457(e)(11)
Severance and Death Benefit Plans.
There is a considerable risk that this arrangement may not qualify as a
"bona-fide severance pay" plan under 457(e)(11), the application section
of the Code. The term "bona-fide severance pay" plan is not defined in
that section. The term "severance pay" plan has, however, been construed
under other Code sections and under Department of Labor regulations issued
under the Employee Retirement Income Security Act of 1974. Subsequently, the
United States Court of Appeals for the Federal Circuit indicated that for
purposes of another Code section, a severance pay plan with features similar
to this arrangement, would not qualify as a valid severance pay plan. While
this decision addresses severance pay plans in a different Code context, it is
probable that a court would consider it in determining the tax consequences of
this arrangement. In connection with the sale of the Non-Qualified annuity for
Section 457(e)(11) Severance and Death Benefit Plans, MetLife consulted special
tax counsel regarding the major Federal tax issues under Section 457. This
advice received from such counsel has not been updated to reflect this decision
or other changes in the law, and such advice was rendered solely to MetLife and
may not be relied upon by any person considering the purchase of the annuity.
You should consult with your own tax advisor to determine if the potential
advantages to you of this arrangement outweigh the potential tax risks in view
of your individual circumstances.
Non-Qualified Annuity for Section 415(m) Qualified Governmental Excess Benefit
Plans.
Section 415(m) qualified governmental excess benefit plans are available
to state and local governments which sponsor plans subject to the Section 415
limits on the amount of annual plan contributions and benefits. If a qualified
governmental excess benefit arrangement meets certain requirements, it could
provide benefits that cannot be provided under a government plan subject to the
Section 415 limits. For purposes of the qualified governmental excess benefit
arrangement, participants are taxed the same way as if the arrangement were a
non-qualified deferred compensation plan maintained by an employer not exempt
from tax. Since qualified governmental excess benefit arragements were
introduced into the tax law in August, 1996, and since many aspects of these
arrangements have yet to
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be clarified by the IRS, entities considering the purchase of this annuity to
fund a qualified governmental excess benefit plan should consult with their own
tax advisors regarding the application of the relevant rules to their particular
situation.
PEDC
General
PEDC plans are available to State or local governments and certain tax-exempt
organizations as described in Section 457 of the Code. The plans are not
available for churches and qualified church-controlled organizations.
PEDC annuities maintained by a state or local government are for the exclusive
benefit of plan participants and their beneficiaries.
PEDC annuities other than those maintained by state or local governments are
solely the property of the employer and are subject to the claims of the
employer's general creditors until they are "made available" to you.
Withdrawals
Generally, because contributions are on a before-tax basis, withdrawals from
your annuity are subject to income tax.
Generally, monies in your annuity can not be "made available" to you until you:
o Reach age 70 1/2
o Leave your job
o Have an unforeseen emergency (as defined by the Code)
If certain requirements are met, you can transfer amounts in your PEDC annuity
to another PEDC plan.
Minimum Distribution
The minimum distribution requirements for PEDC are generally similar to those
described in the TSA section, however, there are certain differences.
After Death
If you die before required minimum distribution withdrawals have begun, we must
make payment of your entire interest in the annuity within five years after the
year of your death or begin payments under an income annuity allowed by the Code
to your beneficiary by December 31st of the year after your death.
If your spouse is your beneficiary and if your annuity permits, your spouse may
delay the start of income payments until December 31st of the year in which you
would have reached age 70 1/2.
If you die after required withdrawals begin, payments must continue at least as
rapidly as under the distribution method in effect at your death.
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Special Rules
Special rules apply to certain non-governmental PEDC plans deferring
compensation from taxable years beginning before January 1, 1987 (or beginning
later but based on an agreement in writing on August 16, 1986).
See the general heading under Income Taxes for a brief description of the tax
rules that apply to PEDC annuities.
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Table of Contents for the Statement of
Additional Information
Page
Cover Page ................................................................ 1
Table of Contents ......................................................... 1
Independent Auditors ...................................................... 2
Services .................................................................. 2
Year 2000 ................................................................. 2
Distribution of Certificates and Interests in the
Deferred Annuities and Income Annuities ............................. 2
Early Withdrawal Charge ................................................... 2
Experience Factor ......................................................... 2
Variable Income Payments .................................................. 2
Investment Management Fees ................................................ 5
Performance Data and Advertisement of
the Separate Account ................................................ 6
Voting Rights ............................................................. 7
ERISA...................................................................... 8
Taxes...................................................................... 9
Performance Data .......................................................... 22
Financial Statements of the Separate Account .............................. 35
Financial Statements of MetLife ........................................... 61
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Appendix
Premium Tax Table
If you are a resident of one of the following jurisdictions, the percentage
amount listed by that jurisdiction is the premium tax rate which will be applied
to your Deferred Annuity or Income Annuity.
TSA 403(a) PEDC Traditional Non-Qualified
Deferred Deferred Deferred IRA Deferred Deferred
and and and and and
Income Income Income Income Income
Annuities Annuities Annuities(1) Annuities(2) Annuities
California 0.5% 0.5% 2.35% 0.5%(3) 2.35%
Kentucky(4) 2.0% 2.0% 2.0% 2.0% 2.0%
Maine -- -- -- -- 2.0%
Nevada -- -- -- -- 3.5%
Puerto Rico 1.0% 1.0% 1.0% 1.0% 1.0%
South Dakota -- -- -- -- 1.25%
U.S. Virgin Islands 5.0% 5.0% 5.0% 5.0% 5.0%
West Virginia 1.0% 1.0% 1.0% 1.0% 1.0%
Wyoming -- -- -- -- 1.0%
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1 Premium tax rates applicable to Deferred Annuities and Income Annuities
purchased under retirement plans of public employers meeting the
requirements of Section 401(a) of the Code are included under the column
headed "403(a) Deferred and Income Annuities."
2 Premium tax rates applicable to Traditional IRA Deferred Annuities and
Income Annuities purchased for use in connection with individual retirement
trust or custodial accounts meeting the requirements of Section 408(a) of
the Code are included under the column headed "Traditional IRA Deferred
and Income Annuities."
3 With respect to Deferred Annuities and Income Annuities purchased for use
in connection with individual retirement trust or custodial accounts
meeting the requirements of Section 408(a) of the Code, the annuity tax
rate in California is 2.35% instead of 0.5%.
4 The premium tax in Kentucky is repealed effective January 1, 2000.
PEANUTS (C) United Feature Syndicate, Inc.(C)
1999 Metropolitan Life Insurance Company
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Appendix II
What You Need To Know If You Are A Texas Optional Retirement Program Participant
If you are a participant in the Texas Optional Retirement Program, Texas law
permits us to make withdrawals on your behalf only if you die, retire or
terminate employment in all Texas institutions of higher education, as defined
under Texas law. Any withdrawal you ask for requires a written statement from
the appropriate Texas institution of higher education verifying your vesting
status and (if applicable) termination of employment. Also, we require a written
statement from you that you are not transferring employment to another Texas
institution of higher education. If you retire or terminate employment in all
Texas institutions of higher education or die before being vested, amounts
provided by the state's matching contribution will be refunded to the
appropriate Texas institution. We may change these restrictions or add others
without your consent to the extent necessary to maintain compliance with the
law.
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Request For a Statement of
Additional Information/Change of Address
If you would like any of the following Statements of Additional Information, or
have changed your address, please check the appropriate box below and return to
the address below.
/ / Metropolitan Life Separate Account E, Metropolitan Series Fund Inc. and
Calvert Social Balanced Portfolio
/ / Calvert Social Mid Cap Growth Portfolio
/ / Fidelity Variable Insurance Products Funds
/ / I have changed my address. My current address is:
Name
- ------------------------------------- -----------------------------------
(Contract Number)
Address
-----------------------------------
- ------------------------------------- -----------------------------------
(Signature) zip
Metropolitan Life Insurance Company
Attn: Brian Mack
Retirement and Savings Center, Area 2H
One Madison Avenue
New York, NY 10010
<PAGE>
MetLife(Registered)
Metropolitan Life Insurance Company
Johnstown Office, 500 Schoolhouse Road
Johnstown, PA 15904-2914
Address Service Requested
Bulk Rate
U.S. Postage Paid
Rutland, VT
Permit 220
<PAGE>
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 304 of Regulation S-T, the following table presents fair and
accurate narrative descriptions of graphic and image material omitted from the
EDGAR filing due to ASCII-incompatibility and cross-references this material to
the location of each occurrence in the text.
INTRODUCTION
The four prospectuses included in the Form N-4 for Metropolitan Life Separate
Account E include illustrations using various characters from the
PEANUTS(Registered) gang which are copyrighted by United Feature Syndicate,
Inc. There is a list and description of characters followed by a list of
illustrations and their page location in the prospectuses (by prospectus).
CHARACTERS
Snoopy -- A Beagle dog
Charlie Brown -- A little boy with zigzag pattern on shirt
Woodstock -- A small bird
Lucy -- A little brunette girl
Linus -- A younger little boy with stripped shirt (Lucy's brother)
Marcie -- A little brunette girl with glasses
Franklin -- A curly haired little boy
Pigpen -- A little boy with dust cloud and smudged face
Peppermint Patty -- An athletic girl with freckles, page boy haircut and sandals
Sally -- A little blond girl with curls on top (Charlie Brown's sister)
A. ILLUSTRATIONS FOR PREFERENCE PLUS ACCOUNT VARIABLE
ANNUITY CONTRACTS FOR NON-QUALIFIED, TRADITIONAL
IRA, ROTH IRA, SIMPLE IRA AND SEP IRA PAGE
1. Corporate Snoopy on winding country lane which Prospectus cover
trails off into hills in distance with large
Sun above.
1a. Snoopy as MetLife Representative with briefcase A-PPA first page
straightening bow tie
2. Charlie Brown on step ladder looking at fold A-PPA-3 Table of Contents
out map
3. Snoopy in suit with pointer A-PPA-4 Important Terms
You Should Know
4. Lucy reviewing ticker tape coming from machine A-PPA-9 Accumulation
Unit Values Tables
5. Snoopy as MetLife Representative listening to A-PPA-13 MetLife
crowd of Woodstocks
6. Snoopy and Woodstock balanced on seesaw A-PPA-14 The Variable
Annuities in this
Prospectus
7. Snoopy reading menu at restaurant table A-PPA-15 Your Investment
Choices
8. Linus building sand castle A-PPA-16 Deferred
Annuities
9. The Equity Generator(Service Mark) icon--Safe A-PPA-17 The Equity
with arrow pointing to three dimensional graph Generator
<PAGE>
A. ILLUSTRATIONS FOR PREFERENCE PLUS ACCOUNT VARIABLE
ANNUITY CONTRACTS FOR NON-QUALIFIED, TRADITIONAL
IRA, ROTH IRA, SIMPLE IRA AND SEP IRA (Continued) PAGE
10. The Equalizer(Service Mark) icon--A balancing A-PPA-17 The Equalizer
scale
11. The Rebalancer(Service Mark) icon--A pie chart A-PPA-17 The Rebalancer
with arrows around circumference
12. The Index Selector(Service Mark) icon--A world A-PPA-17 The Index
globe with arrows around it Selector
13. The Allocator(Service Mark)--A hourglass with A-PPA-18 The Allocator
safe in top portion with arrow to a three
dimensional chart in the bottom portion
14. Snoopy as MetLife Representative typing at A-PPA-18 Electronic
computer Applications
15. Woodstock making calculations on paper with A-PPA-19 The Value of
pencil Your Investment
16. Marcie at desk with adding machine reviewing A-PPA-20 Examples of
tape of calculations calculating Accumulation
Units and Accumulation
Unit Value
17. Charlie Brown struggling to reach into jar of A-PPA-21 Access to Your
money Money
18. Snoopy as WWI flying ace dispatching Woodstocks A-PPA-21 Systematic
with checks Withdrawal Program
19. Woodstock with accountant's visor and adding A-PPA-23 Charges
machine
20. Franklin with magnifying glass A-PPA-25 When No Early
Withdrawal Charge Applies
21. Woodstock moving money bag from one pile of A-PPA-26 When Another
money bags to another Early Withdrawal Charge
May Apply
22. Death certificate scroll A-PPA-27 Death Benefit
23. Snoopy floating in innertube with glasses and A-PPA-28 Income Annuities
drink
24. Snoopy lounging on beach chair with sunglasses A-PPA-29 Income Payment
and drink Types
25. Woodstock writing out a check A-PPA-30 Purchasing an
Income Annuity
26. Woodstock moving money bag from one pile of A-PPA-31 Transfers
money bags to another
27. Lucy with magnifying glass studying a piece of A-PPA-32 Free Look
paper
<PAGE>
A. ILLUSTRATIONS FOR PREFERENCE PLUS ACCOUNT VARIABLE
ANNUITY CONTRACTS FOR NON-QUALIFIED, TRADITIONAL
IRA, ROTH IRA, SIMPLE IRA AND SEP IRA (Continued) PAGE
28. Charlie Brown receiving letter at mail box A-PPA-33 Confirming
Transactions
29. Charlie Brown listening on telephone A-PPA-34 Transactions by
Telephone
30. "Colonial" Snoopy as town cryer A-PPA-35 Advertising
Performance
31. Snoopy as MetLife Representative shaking paw/ A-PPA-37 Who Sells the
wing with Woodstock Deferred Annuities and
Income Annuities
32. Piggybank with "Do not open until age 59 1/2" A-PPA-38 Income Taxes--
printed on side General
33. Snoopy as "Uncle Sam" presenting a tax bill A-PPA-39 Income Taxes--
Withdrawals
34. Snoopy as "Uncle Sam" collecting taxes from A-PPA-40 Income Taxes--
Charlie Brown who is digging in his pockets Non-Qualified Annuities
for money
35. Linus "walking" the hoop with "IRAs" on side A-PPA-42 Income Taxes--
IRAs
36. Woodstock flying with check A-PPA-43 Roth IRA
Annuities--Withdrawals
37. Franklin, Snoopy, Charlie Brown, Lucy, Pigpen, A-PPA-46 Table of
Linus and Peppermint Patty Contents for the SAI
38. Lucy in her advice box with "TAXES--The Expert A-PPA-47 Annuity Tax
is in" printed on it advising Peppermint Patty Table
and Sally
<PAGE>
B. ILLUSTRATIONS FOR PREFERENCE PLUS ACCOUNT VARIABLE
ANNUITY CONTRACTS FOR TSA, PEDC, KEOGH AND 403(a) PAGE
1. Corporate Snoopy on winding country lane which Prospectus cover
trails off into hills in distance with large
Sun above.
1a. Snoopy as MetLife Representative with briefcase B-PPA first page
straightening bow tie
2. Charlie Brown on step ladder looking at fold B-PPA-3 Table of Contents
out map
3. Snoopy in suit with pointer B-PPA-4 Important Terms
You Should Know
4. Lucy reviewing ticker tape coming from machine B-PPA-9 Accumulation
Unit Values Tables
5. Snoopy as MetLife Representative listening to B-PPA-13 MetLife
crowd of Woodstocks
6. Snoopy and Woodstock balanced on seesaw B-PPA-14 The Variable
Annuities in this
Prospectus
7. Snoopy reading menu at restaurant table B-PPA-15 Your Investment
Choices
8. Linus building sand castle B-PPA-16 Deferred
Annuities
9. The Equity Generator(Service Mark) icon--Safe B-PPA-17 The Equity
with arrow pointing to three dimensional graph Generator
10. The Equalizer(Service Mark) icon--A balancing B-PPA-17 The Equalizer
scale
11. The Rebalancer(Service Mark) icon--A pie chart B-PPA-18 The Rebalancer
with arrows around circumference
12. The Index Selector(Service Mark) icon--A world B-PPA-18 The Index
globe with arrows around it Selector
13. The Allocator(Service Mark)--A hourglass with B-PPA-18 The Allocator
safe in top portion with arrow to a three
dimensional chart in the bottom portion
14. Woodstock making calculations on paper with B-PPA-19 The Value of
pencil Your Investment
15. Marcie at desk with adding machine reviewing B-PPA-20 Examples of
tape of calculations calculating Accumulation
Units and Accumulation
Unit Value
16. Charlie Brown struggling to reach into jar of B-PPA-21 Access to Your
money Money
17. Snoopy as WWI flying ace dispatching Woodstocks B-PPA-22 Systematic
with checks Withdrawal Program
18. Woodstock with accountant's visor and adding B-PPA-24 Early Withdrawal
machine Charges
<PAGE>
B. ILLUSTRATIONS FOR PREFERENCE PLUS ACCOUNT VARIABLE
ANNUITY CONTRACTS FOR TSA, PEDC, KEOGH AND 403(a)
(continued) PAGE
19. Franklin with magnifying glass B-PPA-25 When No Early
Withdrawal Charge Applies
20. Woodstock moving money bag from one pile of B-PPA-27 When Another
money bags to another Early Withdrawal Charge
May Apply
21. Death certificate scroll B-PPA-29 Death Benefit
22. Snoopy floating in innertube with glasses and B-PPA-30 Income Annuities
drink
23. Snoopy lounging on beach chair with sunglasses B-PPA-31 Income Payment
and drink Types
24. Snoopy with accountant's visor and adding B-PPA-32 The Value of
machine Your Income Payments
25. Woodstock moving money bag from one pile of B-PPA-33 Transfers
money bags to another
26. Lucy with magnifying glass studying a piece of B-PPA-34 Free Look
paper
27. Charlie Brown receiving letter at mail box B-PPA-35 Confirming
Transactions
28. Charlie Brown listening on telephone B-PPA-36 Transactions by
Telephone
29. "Colonial" Snoopy as town cryer B-PPA-37 Advertising
Performance
30. Snoopy as MetLife Representative shaking paw/ B-PPA-39 Who Sells the
wing with Woodstock Deferred Annuities and
Income Annuities
33. Piggybank with "Do not open until age 59 1/2" B-PPA-41 Income Taxes--
printed on side General
34. Snoopy as "Uncle Sam" presenting a tax bill B-PPA-42 Income Taxes--
Withdrawals Before Age
59 1/2
35. Snoopy as "Uncle Sam" collecting taxes from B-PPA-43 Income Taxes--
Charlie Brown who is digging in his pockets Mandatory 20% Withholding
for money
36. Woodstock flying with check B-PPA-44 TSA Annuities--
Withdrawals
37. Franklin, Snoopy, Charlie Brown, Lucy, Pigpen, B-PPA-46 Table of
Linus and Peppermint Patty Contents for the SAI
38. Lucy in her advice box with "TAXES--The Expert B-PPA-47 Annuity Tax
is in" printed on it advising Peppermint Patty Table
and Sally
<PAGE>
C. ILLUSTRATIONS FOR PREFERENCE PLUS ACCOUNT ENHANCED
VARIABLE CONTRACTS FOR NON-QUALIFIED, TRADITIONAL
IRA AND UNALLOCATED PAGE
1. Corporate Snoopy on winding country lane which Prospectus cover
trails off into hills in distance with large
Sun above.
1a. Snoopy as MetLife Representative with briefcase C-PPA first page
straightening bow tie
2. Charlie Brown on step ladder looking at fold C-PPA-3 Table of Contents
out map
3. Snoopy in suit with pointer C-PPA-4 Important Terms
You Should Know
4. Lucy reviewing ticker tape coming from machine C-PPA-9 Accumulation
Unit Values Tables
5. Snoopy as MetLife Representative listening to C-PPA-13 MetLife
crowd of Woodstocks
6. Snoopy and Woodstock balanced on seesaw C-PPA-14 The Enhanced
Variable Annuities in
this Prospectus
7. Snoopy reading menu at restaurant table C-PPA-15 Your Investment
Choices
8. Linus building sand castle C-PPA-16 Enhanced
Deferred Annuities
9. The Equity Generator(Service Mark) icon--Safe C-PPA-17 The Equity
with arrow pointing to three dimensional graph Generator
10. The Equalizer(Service Mark) icon--A balancing C-PPA-17 The Equalizer
scale
11. The Rebalancer(Service Mark) icon--A pie chart C-PPA-17 The Rebalancer
with arrows around circumference
12. The Index Selector(Service Mark) icon--A world C-PPA-18 The Index
globe with arrows around it Selector
13. The Allocator(Service Mark)--A hourglass with C-PPA-18 The Allocator
safe in top portion with arrow to a three
dimensional chart in the bottom portion
14. Woodstock making calculations on paper with C-PPA-19 The Value of
pencil Your Investment
15. Marcie at desk with adding machine reviewing C-PPA-20 Examples of
tape of calculations calculating Accumulation
Units and Accumulation
Unit Value
16. Charlie Brown struggling to reach into jar of C-PPA-21 Access to Your
money Money
17. Snoopy as WWI flying ace dispatching Woodstocks C-PPA-22 Systematic
with checks Withdrawal Program
18. Woodstock with accountant's visor and adding C-PPA-23 Charges
machine
<PAGE>
C. ILLUSTRATIONS FOR PREFERENCE PLUS ACCOUNT ENHANCED
VARIABLE CONTRACTS FOR NON-QUALIFIED, TRADITIONAL
IRA AND UNALLOCATED (continued) PAGE
19. Franklin with magnifying glass C-PPA-25 When No Early
Withdrawal Charge Applies
20. Woodstock moving money bag from one pile of C-PPA-27 When Another
money bags to another Early Withdrawal Charge
May Apply
21. Death certificate scroll C-PPA-28 Death Benefit
22. Snoopy floating in innertube with glasses and C-PPA-30 Enhanced Income
drink Annuities
23. Snoopy lounging on beach chair with sunglasses C-PPA-31 Income Payment
and drink Types
24. Woodstock writing out a check C-PPA-32 Purchasing an
Income Annuity
25. Woodstock moving money bag from one pile of C-PPA-33 Transfers
money bags to another
26. Lucy with magnifying glass studying a piece of C-PPA-34 Free Look
paper
27. Charlie Brown listening on telephone C-PPA-35 Transactions by
Telephone
28. "Colonial" Snoopy as town cryer C-PPA-36 Advertising
Performance
29. Snoopy as MetLife Representative shaking paw/ C-PPA-39 Who Sells the
wing with Woodstock Deferred Annuities and
Income Annuities
30. Piggybank with "Do not open until age 59 1/2" C-PPA-40 Income Taxes--
printed on side General
31. Snoopy as "Uncle Sam" presenting a tax bill C-PPA-41 Income Taxes--
Withdrawals Before Age
59 1/2
32. Woodstock flying with check C-PPA-42 Non-Qualified
Annuities--Withdrawals
33. Snoopy as "Uncle Sam" collecting taxes from C-PPA-43 Income Taxes--
Charlie Brown who is digging in his pockets Non-Qualified Annuities
for money
34. Linus "walking" the hoop with "IRAs" on side C-PPA-44 Traditional
IRA Annuities
35. Franklin, Snoopy, Charlie Brown, Lucy, Pigpen, C-PPA-49 Table of
Linus and Peppermint Patty Contents for the SAI
36. Lucy in her advice box with "TAXES--The Expert C-PPA-50 Annuity Tax
is in" printed on it advising Peppermint Patty Table
and Sally
<PAGE>
D. ILLUSTRATIONS FOR FINANCIAL FREEDOM ACCOUNT AND
ENHANCED PREFERENCE PLUS ACCOUNT VARIABLE
ANNUITIES FOR TSA, 403(a), NON-QUALIFIED AND
TRADITIONAL IRA PAGE
1. Corporate Snoopy on winding country lane which FFA Cover
trails off into hills in distance with large
Sun above.
1a. Snoopy as MetLife Representative with briefcase FFA first page
straightening bow tie
2. Corporate Snoopy on winding country lane which EPPA Cover
trails off into hills in distance with large
Sun above.
2a. Snoopy as MetLife Representative with briefcase EPPA first page
straightening bow tie
2a. Cover (FFA)
3. Charlie Brown on step ladder looking at fold FFA-3 Table of Contents
out map
4. Snoopy in suit with pointer FFA-4 Important Terms You
Should Know
5. Lucy reviewing ticker tape coming from machine FFA-15 Accumulation Unit
Values Tables For
Enhanced Preference Plus
6. Lucy reviewing ticker tape coming from machine FFA-22 Accumulation Unit
Values Tables For
Financial Freedom
7. Snoopy as MetLife Representative listening to FFA-28 MetLife
crowd of Woodstocks
8. Snoopy and Woodstock balanced on seesaw FFA-29 The Variable
Annuities in this
Prospectus
9. Snoopy reading menu at restaurant table FFA-30 Your Investment
Choices
10. Linus building sand castle FFA-32 Deferred Annuities
11. The Equity Generator(Service Mark) icon--Safe FFA-33 The Equity
with arrow pointing to three dimensional graph Generator
12. The Equalizer(Service Mark) icon--A balancing FFA-33 The Equalizer
scale
13. The Rebalancer(Service Mark) icon--A pie chart FFA-34 The Rebalancer
with arrows around circumference
14. The Index Selector(Service Mark) icon--A world FFA-34 The Index Selector
globe with arrows around it
15. The Allocator(Service Mark) icon--An hourglass FFA-34 The Allocator
with safe in top portion with arrow to a three
dimensional chart in the bottom portion
16. Woodstock making calculations on paper with FFA-35 The Value of Your
pencil Investment
17. Marcie at desk with adding machine reviewing FFA-36 Examples of
tape of calculations calculating Accumulation
Units and Accumulation
Unit Value
<PAGE>
D. ILLUSTRATIONS FOR FINANCIAL FREEDOM ACCOUNT AND
ENHANCED PREFERENCE PLUS ACCOUNT VARIABLE
ANNUITIES FOR TSA, 403(a), NON-QUALIFIED AND
TRADITIONAL IRA (continued) PAGE
18. Snoopy as WWI flying ace dispatching Woodstocks FFA-37 Systematic
with checks Withdrawal Program
19. Charlie Brown struggling to reach into jar of FFA-38 Systematic
money Withdrawal Program
20. Woodstock with accountant's visor and adding FFA-39 Charges/Annuity
machine Taxes
21. Franklin with magnifying glass FFA-41 When No Early
Withdrawal Charge Applies
for TSA, 403(a), Non-
Qualified, PEDC and IRA
Enhanced Deferred
Annuities
22. Woodstock moving money bag from one pile of FFA-43 When Another Early
money bags to another Withdrawal Charge May
Apply
23. Death certificate scroll FFA-44 Death Benefit
24. Snoopy floating in innertube with glasses and FFA-46 Income Annuities
drink
25. Snoopy lounging on beach chair with sunglasses FFA-47 Income Payment
and drink Types
26. Woodstock writing out a check FFA-48 Purchasing an
Income Annuity
27. Woodstock moving money bag from one pile of FFA-49 Transfers
money bags to another
28. Lucy with magnifying glass studying a piece of FFA-50 Free Look
paper
29. Charlie Brown receiving letter at mail box FFA-51 Confirming
Transactions
30. Charlie Brown listening on telephone FFA-52 Transactions by
Telephone
31. "Colonial" Snoopy as town cryer FFA-53 Advertising
Performance
32. Snoopy as MetLife Representative shaking paw/ FFA-55 Who Sells the
wing with Woodstock Deferred Annuities and
Income Annuities
33. Snoopy as MetLife Representative at booth with FFA-56 Who Sells the
"Your MetLife Rep is IN" printed on it holding Deferred Annuities and
brochures Income Annuities
<PAGE>
D. ILLUSTRATIONS FOR FINANCIAL FREEDOM ACCOUNT AND
ENHANCED PREFERENCE PLUS ACCOUNT VARIABLE
ANNUITIES FOR TSA, 403(a), NON-QUALIFIED AND
TRADITIONAL IRA (continued) PAGE
34. Piggybank with "Do not open until age 59 1/2" FFA-58 Income Taxes--
printed on side General
35. Snoopy as "Uncle Sam" presenting a tax bill FFA-59 Income Taxes--
Withdrawals Before Age
59 1/2 (except PEDC)
36. Snoopy as "Uncle Sam" collecting taxes from FFA-61 Income Taxes--TSA
Charlie Brown who is digging in his pockets Annuities--Withdrawals
for money
37. "Corporate" Snoopy making presentation to FFA-62 Income Taxes--
boardroom with Franklin, Charlie Brown, Sally, 403(a)
Lucy, Linus and Peppermint Patty
38. Woodstock flying with check FFA-65 Non-Qualified
Annuities--Withdrawals
39. "Corporate" Snoopy with glasses and suspenders FFA-66 Income Taxes--
non-qualified
40. Snoopy with accountant's visor and adding FFA-68 Income Taxes
machine
41. Franklin, Snoopy, Charlie Brown, Lucy, Pigpen, FFA-71 Table of Contents
Linus and Peppermint Patty for the SAI
42. Lucy in her advice box with "TAXES--The Expert FFA-73 Premium Tax Table
is in" printed on it advising Peppermint Patty
and Sally
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
METROPOLITAN LIFE SEPARATE ACCOUNT E
PREFERENCE PLUS
AND
FINANCIAL FREEDOM ACCOUNT
GROUP AND INDIVIDUAL DEFERRED ANNUITY
AND INCOME ANNUITY CONTRACTS
STATEMENT OF ADDITIONAL INFORMATION
FORM N-4 PART B
April 30, 1999
This Statement of Additional Information is not a prospectus but contains
information in addition to and more detailed than that set forth in the
Prospectuses for Preference Plus and Financial Freedom Account Deferred
Annuities and Income Annuities dated April 30, 1999 and should be read in
conjunction with the Prospectuses. Copies of the Prospectuses may be obtained
from Metropolitan Life Insurance Company, One Madison Avenue, New York, New York
10010.
A Statement of Additional Information for the Metropolitan Series Fund,
Inc. is attached at the end of this Statement of Additional Information. The
Statements of Additional Information for Calvert Social Balanced Portfolio,
Calvert Social Mid Cap Growth Portfolio and Fidelity Variable Insurance Products
Funds are distributed separately.
Unless otherwise indicated, the Statement of Additional Information
continues the use of certain terms as set forth in the Section entitled
"Important Terms You Should Know" of the Prospectuses for Preference Plus
Account and Financial Freedom Account Variable Annuity Contracts dated
April 30, 1999.
------------------------
TABLE OF CONTENTS
PAGE
----
Independent Auditors................................. 2
Services............................................. 2
Year 2000............................................ 2
Distribution of Certificates and Interests in the
Deferred Annuities and Income Annuities............ 2
Early Withdrawal Charge.............................. 2
Experience Factor.................................... 2
Variable Income Payments............................. 2
Investment Management Fees........................... 5
Performance Data and Advertisement of the Separate
Account............................................ 6
Voting Rights........................................ 8
ERISA................................................ 9
Taxes................................................ 10
Performance Data..................................... 23
Financial Statements of the Separate Account......... 35
Financial Statements of MetLife...................... 61
------------------------
<PAGE>
INDEPENDENT AUDITORS
The financial statements for the period ended December 31, 1998 included in
this Statement of Additional Information have been audited by Deloitte & Touche
LLP, 555 Seventeenth Street, Denver, Colorado, independent auditors, as stated
in their report appearing herein, and have been so included in reliance upon
such report given upon the authority of such firm as experts in auditing and
accounting.
SERVICES
MetLife has retained FASCorp. to administer some of its group contracts in
the capacity of a third party administrator. When MetLife provides
administrative services to groups, such services may be provided to a group on a
basis more favorable than that otherwise made available to other groups.
YEAR 2000
MetLife depends on the smooth functioning of its computer systems to
administer its annuity contracts. 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 and disrupt the
administration of the annuity contracts. MetLife is actively working on the
necessary changes to its computer systems to deal with this issue and expects
that its systems will be adapted in time for that event, although there cannot
be assurances of success.
DISTRIBUTION OF CERTIFICATES AND INTERESTS IN THE DEFERRED ANNUITIES AND INCOME
ANNUITIES
MetLife is both the depositor and the underwriter (issuer) of the
annuities.
The certificates and interests in the Deferred Annuities and Income
Annuities are sold through individuals who are licensed life insurance sales
representatives of MetLife. MetLife is registered with the Securities and
Exchange Commission as a broker-dealer under the Securities Exchange Act of 1934
and is a member of the National Association of Securities Dealers, Inc. They
also are sold through other registered broker-dealers. They also may be sold
through the mail and in the case of certain Enhanced Preference Plus and VestMet
Deferred Annuities and Income Annuities and Financial Freedom Account Deferred
Annuities and Income Annuities by certain qualified employees of MetLife.
From time to time, MetLife may pay organizations or associations a fee,
reimburse them for certain expenses, lease office space from them, purchase
advertisements in their publications or enter into such other arrangements in
connection with their endorsing or sponsoring MetLife's variable annuity
contracts or services, for permitting MetLife to undertake certain marketing
efforts of the organizations' members in connection with sales of MetLife
variable annuities, or some combination thereof. Additionally, MetLife has
retained consultants who are paid a fee for their efforts in establishing and
maintaining relationships between MetLife and various organizations.
The offering of all Deferred Annuities and Income Annuities is continuous.
Owners and participants under Deferred Annuities and Income Annuities may not be
offered all investment choices. Each contract will indicate those investment
choices available under the Deferred Annuity or Income Annuity.
EARLY WITHDRAWAL CHARGE
The total amount of early withdrawal charges paid to and retained by
MetLife for the years ended December 31, 1996, 1997 and 1998 were $6,200,708,
$7,593,681 and $9,151,073, respectively.
EXPERIENCE FACTOR
We use the term "experience factor" to describe the investment performance
for an investment division. The experience factor changes from Valuation Period
(described later) to Valuation Period to reflect the upward or downward
performance of the assets in the underlying Portfolios. The experience factor is
calculated as of the end of each Valuation Period using the net asset value per
share of the underlying Portfolio. The net asset value includes the per share
amount of any dividend or capital gain distribution paid by the portfolio during
the current Valuation Period, and subtracts any per share charges for taxes and
reserve for taxes. We then divide that amount by the net asset value per share
as of the end of the last Valuation Period to obtain a factor that reflects
investment performance. We then subtract a charge for each day in the valuation
period not to exceed .000034035 (the daily equivalent of an effective annual
rate of 1.25%) for certain Deferred Annuities and for certain other Deferred
Annuities .000025905 (the daily equivalent of an effective annual rate of .95%).
VARIABLE INCOME PAYMENTS
"Variable income payments" include variable income payments made under the
various Income Annuities.
ASSUMED INVESTMENT RETURN (AIR)
The following discussion concerning the amount of variable income payments
is based on an Assumed Investment Return of 4% per year. It should not be
2
<PAGE>
inferred that such rates will bear any relationship to the actual net investment
experience of the Separate Account.
AMOUNT OF INCOME PAYMENTS
The cash you receive periodically from an investment division (after your
first payment if paid within 10 days of the issue date) will depend upon the
number of annuity units held in that investment division (described below) and
the Annuity Unit Value (described later) as of the 10th day prior to a payment
date.
The Income Annuity specifies the dollar amount of the initial variable
income payment for each investment division (this equals the first payment
amount if paid within 10 days of the issue date). This initial variable income
payment is computed based on the amount of the purchase payment applied to the
specific investment division (net any applicable premium tax owed or contract
charge), the AIR, the age and/or sex of the measuring lives and the income
payment type selected. The initial payment amount is then divided by the Annuity
Unit Value for the investment division to determine the number of annuity units
held in that investment division. The number of annuity units held remains fixed
for the duration of the contract.
The dollar amount of subsequent variable income payments will vary with the
amount by which investment performance is greater or less than the AIR and
Separate Account charges.
For example, on an annual basis, if an investment division has a cumulative
net investment performance of 6% over a one year period, the first variable
income payment in the next year will be approximately 0.75% greater than the
payment on the same date in the preceding year, and subsequent payments will
continue to vary with the investment experience of the investment division. If
such investment performance return is -1% over a one year period, the first
variable income payment in the next year will be approximately 6.25% less than
the payment on the same date in the preceding year, and subsequent payments will
continue to vary with the investment performance of the applicable division.
Each Deferred Annuity provides that, when a pay-out option is chosen, the
payment to the annuitant will not be less than the payment produced by the then
current settlement option rates, which will not be less than the rates used for
a currently issued single payment immediate annuity contract. The purpose of
this provision is to assure the annuitant that, at retirement, if the Fixed
Income Option purchase rates for new single payment immediate contracts are
significantly more favorable than the rates guaranteed by a Deferred Annuity,
the annuitant will be given the benefit of the new rates.
ANNUITY UNIT VALUE
The Annuity Unit Value is calculated at the same time that the Accumulation
Unit Value for Deferred Annuities is calculated and is based on the same change
in investment performance in the Separate Account. (See "The Value of Your
Income Payment" on page A-PPA-30, B-PPA-32, C-PPA-32 and FFA-48 in the
Prospectus.)
CALCULATING THE ANNUITY UNIT VALUE
We calculate Annuity Unit Values once a day on every day the New York Stock
Exchange is open for trading. We call the time between two consecutive Annuity
Unit Value calculations the "Valuation Period." We have the right to change the
basis for the Valuation Period, on 30 days' notice, as long as it is consistent
with the law. All purchase payments and transfers are valued as of the end of
the Valuation Period during which the transaction occurred. The Annuity Unit
Values can increase or decrease, based on the investment performance of the
corresponding underlying Portfolios. If the investment performance is positive,
after payment of Separate Account expenses and the deduction for the AIR,
Annuity Unit Values will go up. Conversely, if the investment performance is
negative, after payment of Separate Account expenses and the deduction for the
AIR, Annuity Unit Values will go down.
To calculate an Annuity Unit Value, we first multiply the experience factor
for the period by a factor based on the AIR and the number of days in the
Valuation Period. For an AIR of 4% and a one day Valuation Period, the factor is
.99989255, which is the daily discount factor for an effective annual rate of
4%. (The AIR may be in the range of 3% to 6%, as defined in your Income Annuity
and the laws in your state.) The resulting number is then multiplied by the last
previously calculated Annuity Unit Value to produce the new Annuity Unit Value.
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The following illustrations show, by use of hypothetical examples, the
method of determining the Annuity Unit Value and the amount of variable income
payments upon annuitization.
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
1. Annuity Unit Value, beginning of period........................ $ 10.20000
2. "Experience factor" for period................................. 1.023558
3. Daily adjustment for 4% of Assumed Investment Rate............. .99989255
4. (2) X (3)...................................................... 1.023448
5. Annuity Unit Value, end of period (1) X (4).................... $ 10.43917
ILLUSTRATION OF ANNUITY PAYMENTS
(ASSUMES THE FIRST MONTHLY PAYMENT IS MADE WITHIN 10 DAYS OF THE ISSUE DATE OF
THE INCOME ANNUITY)
Annuitant age 65, Life Annuity with 120 Payments Guaranteed
1. Number of Accumulation Units as of Annuity Date............... 1,500.00
2. Accumulation Unit Value....................................... $ 11.80000
3. Accumulation Value of the Deferred Annuity (1) X (2).......... $17,700.00
4. First monthly income payment per $1,000 of Accumulation
Value........................................................... $ 5.63
5. First monthly income payment (3) X (4) divided by 1,000....... $ 99.65
6. Annuity Unit Value (see Illustration of Calculation of Annuity
Unit Value above as of Annuity Date)............................ $ 10.80000
7. Number of Annuity Units (5) divided by (6).................... 9.22685
8. Assume Annuity Unit Value for the second month equal to (10
days prior to payment).......................................... $ 10.97000
9. Second monthly Annuity Payment (7) X (8)...................... $ 101.22
10. Assume Annuity Unit Value for third month equal to............ $ 10.52684
11. Next monthly Annuity Payment (7) X (10)....................... $ 97.13
DETERMINING THE VARIABLE INCOME PAYMENT
Variable income payments can go up or down based upon the investment
performance of the investment divisions in the Separate Account. AIR is the rate
used to determine the first variable income payment and serves as a benchmark
against which the investment performance of the investment divisions is
compared. The higher the AIR, the higher the first variable income payment will
be. Subsequent variable income payments will increase only to the extent that
the investment performance of the investment divisions exceeds the AIR (and
Separate Account charges). Variable income payments will decline if the
investment performance of the Separate Account does not exceed the AIR (and
Separate Account charges). A lower AIR will result in a lower initial variable
income payment, but subsequent variable income payments will increase more
rapidly or decline more slowly as changes occur in the investment performance of
the investment divisions.
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INVESTMENT MANAGEMENT FEES
Each of the currently available Metropolitan Fund Portfolios pays us, the
investment manager of the Metropolitan Fund, an investment management fee. For
providing investment management services to the Lehman Brothers Aggregated Bond
Index, Metlife Stock Index and Russell 2000 Index Portfolios, we receive monthly
compensation from each Portfolio at an annual rate of .25% of the average daily
value of the aggregate net assets of each Portfolio. For providing investment
management services to the Morgan Stanley EAFE(Registered) Index Portfolio, we
receive monthly compensation from the Portfolio at an annual rate of .30% of the
average daily assets of the aggregate net assets of the Portfolio. For providing
investment management services to the State Street Research Growth Portfolio, we
receive monthly compensation from the Portfolio at an annual rate of .55% of the
average daily value of the aggregate net assets of the Portfolio up to
$500 million, .50% of such assets on the next $500 million and .45% of such
assets on amounts over $1 billion. For providing investment management services
to the State Street Research Income Portfolio, we receive monthly compensation
from the Portfolio at an annual rate of .35% of the average daily value of the
aggregate net assets up to $250 million, .30% of such assets on the next $250
million and .25% of such assets on amounts over $500 million. For providing
investment management services to the State Street Research Diversified
Portfolio, we receive monthly compensation from the Portfolio at an annual rate
of .50% of the average daily value of the aggregate net assets of the Portfolio
up to $500 million, .45% of such assets on the next $500 million and .40% of
such assets on amounts over $1 billion. For providing investment management
services to the State Street Research Aggressive Growth Portfolio, we receive
monthly compensation at an annual rate of .75% of the average daily value of the
aggregate net assets of the Portfolio up to $500 million, .70% of such assets on
the next $500 million and .65% of such assets on amounts over $1 billion. We pay
State Street Research & Management Company, one of our subsidiaries, to provide
us with sub-investment management services for the State Street Research Income,
State Street Research Diversified, State Street Research Growth and State Street
Aggressive Growth Portfolios.
For providing investment management services to the Santander International
Stock Portfolio, we receive monthly compensation from the Portfolio at an annual
rate of .75% of the average daily value of the aggregate net assets of the
Portfolio up to $500 million, .70% of such assets on the next $500 million and
.65% of such assets on amounts over $1 billion. Effective on or about November
9, 1998, Santander Global Advisors, Inc., of which MetLife owns 25% of the
outstanding common stock, became the sub-investment manager for the Santander
International Stock Portfolio.
For providing investment management services to the Loomis Sayles High
Yield Bond Portfolio, we receive monthly compensation from the Portfolio at an
annual rate of .70% of the average daily value of the aggregate net assets of
the Portfolio. Loomis, Sayles & Company, L.P., whose general partner is
indirectly owned by MetLife, is the sub-investment manager with respect to the
Loomis Sayles High Yield Bond Portfolio. For providing investment management
services to the Janus Mid Cap Portfolio, we receive monthly compensation from
the Portfolio at an annual rate of .75% of the average daily value of the
aggregate net assets of the Portfolio up to $100 million, .70% of such assets on
the next $400 million and .65% of such assets on amounts in excess of $500
million. Janus Capital Corporation is the sub-investment manager for the Janus
Mid Cap Portfolio. For providing investment management services to the T. Rowe
Price Small Cap Growth Portfolio, we receive monthly compensation from the
Portfolio at an annual rate of .55% of the average daily value of the aggregate
net assets of the Portfolio up to $100 million, .50% of such assets on the next
$300 million and .45% of such assets in excess of $400 million. For providing
investment management services to the T. Rowe Price Large Cap Growth Portfolio,
we receive monthly compensation from the Portfolio at an annual rate of .70% of
the average daily value of the aggregate net assets of the Portfolio up to
$50 million and .60% of such assets in excess of $50 million. T. Rowe Price
Associates, Inc. is the sub-investment manager for the T. Rowe Price Small Cap
Growth and T. Rowe Price Large Cap Growth Portfolios.
For providing investment management services to the Scudder Global Equity
Portfolio, we receive monthly compensation from the Portfolio at an annual rate
of .90% of the average daily value of the aggregate net assets of the Portfolio
up to $50 million, .55% of such assets on the next $400 million and .475% of
such assets on the next $50 million, .50% of such assets on the next $400
million and .475% of such assets on amounts in excess of $500 million. Scudder
Kemper Investments, Inc. is the sub-investment manager for the Scudder Global
Equity Portfolio.
For providing investment management services to the Harris Oakmark Large
Cap Value Portfolio, we receive monthly compensation from the Portfolio at an
annual rate of .75% of the average daily value of the aggregate net assets of
the Portfolio up to $250 million and .70% of such assets in excess of
$250 million. Harris Associates L.P., whose general partner is indirectly owned
by MetLife, is the sub-investment manager with respect to the Harris Oakmark
Large Cap Value Portfolio.
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For providing investment management services to the Neuberger Berman
Partners Mid Cap Value Portfolio, we receive monthly compensation from the
Portfolio at an annual rate of .70% of the average daily value of the aggregate
net assets of the Portfolio up to $100 million, .675% of such assets on the next
$250 million, .65% of such assets on the next $500 million, .625% of such assets
on the next $750 million and .60% of such assets over $1.6 billion, Neuberger
Berman Management Incorporated is the sub-investment manager for the Neuberger
Berman Partners Mid Cap Value Portfolio.
Similarly, the Calvert Social Balanced Portfolio pays Calvert, the Calvert
Social Balanced Portfolio's investment adviser, a base monthly investment
advisory fee equivalent to an annual rate of 0.425% of the Portolio's average
daily net assets.
Calvert pays sub-investment advisory fees to NCM Capital Management Group,
Inc. These fees are solely the responsibility of Calvert, not the Calvert Social
Balanced Portfolio.
The Calvert Social Mid Cap Growth Portfolio pays Calvert, the Calvert
Social Mid Cap Growth Portfolio's investment advisor, a monthly investment
advisory fee equivalent to an annual rate of 0.65% of the Portfolio's average
daily net assets.
Calvert pays sub-investment advisory fees to Brown Capital Management, Inc.
These fees are solely the responsibility of Calvert, not the Calvert Social Mid
Cap Growth Portfolio.
Fidelity's VIP Equity-Income, VIP Growth, VIP Overseas and VIP II Asset
Manager Portfolios pay FMR an investment management fee which is the sum of a
group fee rate based on the monthly average net assets of all the mutual funds
advised by FMR (this rate cannot rise above .52%, and it drops as total assets
under management increase) and an individual fee of .20% for Fidelity's VIP
Equity-Income Portfolio, .30% for Fidelity's VIP Growth Portfolio, .45% for
Fidelity's VIP Overseas Portfolio and .25% for Fidelity's VIP II Asset Manager
Portfolio of the average net assets throughout the month. FMR pays sub-advisory
fees to Fidelity Management & Research (U.K.) Inc. and Fidelity Management &
Research (Far East) Inc. for Fidelity's VIP Overseas and VIP II Asset Manager
Portfolios and to Fidelity International Investment Advisors for Fidelity's VIP
Overseas Portfolio, but these fees are the sole responsibility of FMR, not the
Fidelity VIP or VIP II Funds. Fidelity's VIP Money Market Portfolio and VIP II
Investment Grade Bond Portfolio pay FMR an investment management fee which is
also the sum of a group fee rate based on the monthly average net assets of all
the mutual funds advised by FMR and an individual rate. The group fee cannot
rise above .37% and it drops as total assets under management increase, and the
individual rate is .03% and .30%, of Fideltiy's VIP Money Market and VIP II
Investment Grade Bond Portfolios' average net assets throughout the month,
respectively. In addition to the sum of the group and individual fee rates,
Fidelity's VIP Money Market Portfolio's fee may be affected by an income
component. If the portfolio's gross yield is 5% or less, the sum of the group
and individual fee rate is the management fee. The income-based component is
added to the basic fee only when the portfolio's yield is greater than 5%. The
income-based fee is 6% of that portion of the portfolio's yield that represents
a gross yield of more than 5% per year. The maximum income-based component is
.24%. FMR pays a sub-advisory fee to Fidelity Investments Money Management, Inc.
(formerly FMR Texas Inc.) for Fidelity's VIP Money Market Portoflio. These fees
are paid by FMR, on behalf of the Fidelity VIP or VIP II Funds.
The Metropolitan Fund, the Calvert Social Balanced Portfolio, Calvert
Social Mid Cap Growth Portfolio and the Fidelity VIP and VIP II Funds are more
fully described in their respective prospectuses and the Statements of
Additional Information that the prospectuses refer to. The Metropolitan Fund's
prospectus is attached at the end of this prospectus. The Calvert Social
Balanced Portfolio, Calvert Social Mid Cap Growth Portfolio and Fidelity VIP and
VIP II Funds' prospectuses are given out separately to those investors to whom
these investment choices are offered. The SAIs are available upon request.
See the prospectus for the Metropolitan Fund for a discussion of the
different separate accounts of MetLife and Metropolitan Tower Life Insurance
Company that invest in the Metropolitan Fund and the risks related to that
arrangement. See the prospectuses for the Calvert Social Balanced Portfolio,
Calvert Social Mid Cap Growth Portfolio and the Fidelity VIP and VIP II Funds
for a discussion of the different separate accounts of the various insurance
companies that invest in these funds and the risks related to those
arrangements.
PERFORMANCE DATA AND ADVERTISEMENT OF THE SEPARATE ACCOUNT
From time to time we advertise the performance of various Separate Account
investment divisions. For the money market investment divisions, this
performance will be stated in terms of "yield" and "effective yield." For the
other investment divisions, this performance will be stated in terms of either
yield, "change in Accumulation Unit Value," "change in Annuity Unit Value" or
"average annual total return" or some combination of the foregoing. Yield,
change in Accumulation Unit Value, change in Annuity Unit Value and average
annual total return figures are based on historical earnings and are not
intended to indicate future performance. The yield of the money market
investment divisions refers to the income generated by an investment in the
investment division over a seven-day period, which will be specified in the
advertisement. This income is then annualized, by
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assuming that the same amount of income is generated each week over a 52 week
period, and the total income is shown as a percentage of the investment. The
effective yield is similarly calculated; however, when annualized, the earned
income in the investment division is assumed to be reinvested. Thus, the
effective yield figure will be slightly higher than the yield figure because of
the former's compounding effect. Other yield figures quoted in advertisements,
that is those other than the money market investment divisions, will refer to
the net income generated by an investment in a particular investment division
for a thirty-day period or month, which is specified in the advertisement, and
then expressed as a percentage yield of that investment. This percentage yield
is then compounded semiannually. Change in Accumulation Unit Value or Annuity
Unit Value refers to the comparison between values of accumulation units or
annuity units over specified periods in which an investment division has been in
operation, expressed as a percentage and may also be expressed as an annualized
figure. In addition, change in Accumulation Unit Value or Annuity Unit Value may
be used to illustrate performance for a hypothetical investment (such as
$10,000) over the time period specified. Yield, change in Accumulation Unit
Value and effective yield figures do not reflect the possible imposition of an
early withdrawal charge for the Deferred Annuities and certain Enhanced Deferred
Annuities, of up to 7% of the amount withdrawn attributable to a purchase
payment, which may result in a lower figure being experienced by the investor.
Average annual total return differs from the change in Accumulation Unit Value
and Annuity Unit Value because it assumes a steady rate of return and reflects
all expenses and applicable early withdrawal charges. Performance figures will
vary among the various Deferred Annuities and Income Annuities as a result of
different Separate Account charges and early withdrawal charges.
Enhanced Preference Plus, Enhanced VestMet and Financial Freedom Deferred
Annuities and Enhanced Preference Plus and Financial Freedom Account Income
Annuities performance figures vary from other Preference Plus and VestMet
Deferred Annuities and Income Annuities as a result of reduced Separate Account
charges. Performance may be calculated based upon historical performance of the
underlying performance portfolios of the Metropolitan Fund, Calvert Social
Balanced Portfolio, Calvert Social Mid Cap Growth Portfolio, and the Fidelity
VIP and VIP II Funds and may assume that certain Deferred Annuities were in
existence prior to their inception date. After the inception date, actual
accumulation unit or annuity unit data is used.
Advertisements regarding the Separate Account may contain comparisons of
hypothetical after-tax returns of currently taxable investments versus returns
of tax deferred investments. From time to time, the Separate Account may compare
the performance of its investment divisions with the performance of common
stocks, long-term government bonds, long-term corporate bonds, intermediate-term
government bonds, Treasury Bills, certificates of deposit and savings accounts.
The Separate Account may use the Consumer Price Index in its advertisements as a
measure of inflation for comparison purposes. From time to time, the Separate
Account may advertise its performance ranking among similar investments or
compare its performance to averages as compiled by independent organizations,
such as Lipper Analytical Services, Inc., Morningstar, Inc., VARDS(Registered)
and The Wall Street Journal. The Separate Account may also advertise its
performance in comparison to appropriate indices, such as the Standard & Poor's
500 Composite Stock Price Index, the Standard & Poor's Mid Cap 400 Index, the
Standard & Poor's Small Cap 600 Index, the Russell 2000 Index, the Russell 2000
Growth Index, the Lehman Brothers, Aggregate Bond Index, the Lehman Brothers
Government/Corporate Bond Index, the Merrill Lynch High Yield Bond Index, the
Morgan Stanley Capital International All Country World Index and the Morgan
Stanley Capital International Europe, Australasia, Far East Index.
Performance may be shown for certain investment strategies that are made
available under certain Deferred Annuities. The first is the "Equity Generator."
Under the "Equity Generator," an amount equal to the interest earned during a
specified interval (i.e., monthly, quarterly) in the Fixed Interest Account is
transferred to the MetLife Stock Index Division or the State Street Research
Aggressive Growth Division. The second technique is the "EqualizerSM." Under
this strategy, once during a specified period (i.e., monthly, quarterly), a
transfer is made from the MetLife Stock Index Division or the State Street
Research Aggressive Growth Division to the Fixed Interest Account or from the
Fixed Interest Account to the MetLife Stock Index Division or State Street
Research Aggressive Growth Division in order to make the account and the
division equal in value. The third strategy is the "Index SelectorSM". Under
this strategy, once during a specified period (i.e., quarterly, annually)
transfers are made among the Lehman Brothers Aggregate Bond Index, MetLife Stock
Index, Morgan Stanley EAFE(Registered) Index and Russell 2000 Index. Divisions
and the Fixed Interest Account in order to bring the percentage of the total
Account Balance in each of these investment divisions and Fixed Interest Account
back to the current allocation of your choice of one of several asset allocation
models. The elements which form the basis of the models are provided by MetLife
which may rely on a third party for its expertise in creating appropriate
allocations. The models are designed to correlate to various risk tolerance
levels associated with investing and are subject to change from time to time.
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An "Equity Generator Return," "Aggressive Equity Generator Return,"
"Equalizer Return," "Aggressive Equalizer Return" or "Index Selector Return" for
each asset allocation model will be calculated by presuming a certain dollar
value at the beginning of a period and comparing this dollar value with the
dollar value, based on historical performance, at the end of the period,
expressed as a percentage. The "Return" in each case will assume that no
withdrawals have occurred. We may also show performance for the Equity
Generator, Equalizer and Index Selector investment strategies using other
investment divisions for which these strategies are made available in the
future. If we do so, performance will be calculated in the same manner as
described above, using the appropriate account and/or investment divisions.
VOTING RIGHTS
In accordance with our view of the present applicable law, we will vote the
shares of each of the portfolios held by the Separate Account (which are deemed
attributable to all the Deferred Annuities or Income Annuities described in the
Prospectuses or at regular and special meetings of the shareholders of the
portfolio based on instructions received from those having the voting interest
in corresponding investment divisions of the Separate Account. However, if the
1940 Act or any rules thereunder should be amended or if the present
interpretation thereof should change, and as a result we determine that we are
permitted to vote the shares of the portfolios in our own right, we may elect to
do so.
Accordingly, you have voting interests under all the Deferred Annuities or
Income Annuities described in the Prospectuses. The number of shares held in
each Separate Account investment division deemed attributable to you is
determined by dividing the value of accumulation or annuity units attributable
to you in that investment division, if any, by the net asset value of one share
in the portfolio in which the assets in that Separate Account investment
division are invested. Fractional votes will be counted. The number of shares
for which you have the right to give instructions will be determined as of the
record date for the meeting.
Portfolio shares held in each registered separate account of MetLife or any
affiliate that are or are not attributable to life insurance policies or annuity
deferred annuities (including all the Deferred Annuities and Income Annuities
described in the Prospectuses) and for which no timely instructions are received
will be voted in the same proportion as the shares for which voting instructions
are received by that separate account. Portfolio shares held in the general
accounts or unregistered separate accounts of MetLife or its affiliates will be
voted in the same proportion as the aggregate of (i) the shares for which voting
instructions are received and (ii) the shares that are voted in proportion to
such voting instructions. However, if we or an affiliate determine that we are
permitted to vote any such shares, in our own right, we may elect to do so
subject to the then current interpretation of the 1940 Act or any rules
thereunder.
You will be entitled to give instructions regarding the votes attributable
to your Deferred Annuity or your Income Annuity, in your sole discretion.
Under the Keogh Deferred Annuities and the Enhanced unallocated Keogh
Deferred Annuity, participants may instruct you to give us instructions
regarding shares deemed attributable to their respective contributions. Under
the Keogh Deferred Annuities and the Enhanced unallocated Keogh Deferred
Annuity, we will provide you with the number of copies of voting instruction
soliciting materials that you may furnish such materials to participants who may
give you voting instructions.
Under Section 457(f) deferred compensation plans, Section 451 deferred fee
arrangements, Section 451 deferred compensation plans, Section 457(e)(11)
severance and death benefit plans and the TSA Deferred Annuities and Income
Annuities under which the Employer retains all rights, we will provide you with
the number of copies of voting instruction soliciting materials that you request
so that you may furnish such materials to participants who may give you voting
instructions. Neither the Separate Account nor MetLife has any duty to inquire
as to the instructions received or your authority to give instructions; thus, as
far as the Separate Account, and any others having voting interests in respect
of the Separate Account are concerned, such instructions are valid and
effective.
You may give instructions regarding, among other things, the election of
the board of directors, ratification of the election of independent auditors,
and the approval of investment and sub-investment managers.
DISREGARDING VOTING INSTRUCTIONS
MetLife may disregard voting instructions under the following circumstances
(1) to make or refrain from making any change in the investments or investment
policies for any portfolio if required by any insurance regulatory authority;
(2) to refrain from making any change in the investment policies or any
investment adviser or principal underwriter or any portfolio which may be
initiated by those having voting interests or the Metropolitan Fund's, Calvert
Variable Series' or Fidelity VIP or VIP II Funds' boards of directors, provided
MetLife's disapproval of the change is reasonable and, in the case of a change
in investment policies or investment manager, based on a good faith
determination that such change would be contrary to state law or otherwise
inappropriate in light of the portfolio's objective and purposes; or (3) to
enter into or refrain from entering into
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any advisory agreement or underwriting contract, if required by any insurance
regulatory authority.
In the event that MetLife does disregard voting instructions, a summary of
the action and the reasons for such action will be included in the next
semiannual report.
ERISA
If your plan is subject to ERISA (the Employee Retirement Income Security
Act of 1974) and you are married, the income payments, withdrawal provisions,
and methods of payment of the death benefit under your Deferred Annuity or
Income Annuity may be subject to your spouse's rights as described below.
Generally, the spouse must give qualified consent whenever you elect to:
a. choose income payments other than on a qualified joint and survivor
annuity basis ("QJSA") (one under which we make payments to you during your
lifetime and then make payments reduced by no more than 50% to your spouse
for his or her remaining life, if any); or choose to waive the qualified
pre-retirement survivor annuity benefit ("QPSA") (the benefit payable to
the surviving spouse of a participant who dies with a vested interest in an
accrued retirement benefit under the plan before payment of the benefit has
begun);
b. make certain withdrawals under plans for which a qualified consent
is required;
c. name someone other than the spouse as your beneficiary;
d. use your accrued benefit as security for a loan exceeding $5,000.
Generally, there is no limit to the number of your elections as long as a
qualified consent is given each time. The consent to waive the QJSA must meet
certain requirements, including that it be in writing, that it acknowledges the
identity of the designated beneficiary and the form of benefit selected, dated,
signed by your spouse, witnessed by a notary public or plan representative, and
that it be in a form satisfactory to us. The waiver of a QJSA generally must be
executed during the 90-day period ending on the date on which income payments
are to commence, or the withdrawal or the loan is to be made, as the case may
be. If you die before benefits commence, your surviving spouse will be your
beneficiary unless he or she has given a qualified consent otherwise. The
qualified consent to waive the QPSA benefit and the beneficiary designation must
be made in writing that acknowledges the designated beneficiary, dated, signed
by your spouse, witnessed by a notary public or plan representative and in a
form satisfactory to us. Generally, there is no limit to the number of
beneficiary designations as long as a qualified consent accompanies each
designation. The waiver of and the qualified consent for the QPSA benefit
generally may not be given until the plan year in which you attain age 35. The
waiver period for the QPSA ends on the date of your death.
If the present value of your benefit is worth $5,000 or less, your plan
generally may provide for distribution of your entire interest in a lump sum
without spousal consent.
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TAXES
GENERAL
Federal tax laws are complex and are subject to frequent change as well as
to judicial and administrative interpretation. The following is a general
summary intended to point out what we believe to be some general rules and
principles, and not to give specific tax or legal advice. Failure to comply with
the law may result in significant penalties. For details or for advice on how
the law applies to your individual circumstances, consult your tax advisor or
attorney. You may also get information from the Internal Revenue Service.
In the opinion of our attorneys, the Separate Account and its operations
will be treated as part of MetLife, and not taxed separately. We are taxed as a
life insurance company. Thus, although the Deferred Annuities and Income
Annuities and Enhanced Deferred Annuities and Enhanced Income Annuities allow us
to charge the Separate Account with any taxes or reserves for taxes attributable
to it, we do not expect that under current law we will do so.
DEFERRED ANNUITIES
The following discussion of the tax code provisions for the Deferred
Annuities includes the Enhanced Deferred Annuities subject to the same tax code
provisions.
Generally, all contributions under the Deferred Annuities will be made on a
before tax basis. This does not include contributions under:
o Non-Qualified and Roth IRA Deferred Annuities
And non-deductible contributions under:
o IRA and certain other qualified Deferred Annuities
This means that the purchase payments either reduce your income, entitle
you to a tax deduction or are not subject to current income tax. To the extent
contributions to your Deferred Annuity were not subject to Federal income tax,
withdrawals of these contributions will be subject to Federal income taxes.
Earnings under your Deferred Annuity are generally subject to income tax when
distributed. However, "qualified distributions" of earnings from a Roth IRA are
not subject to Federal income tax.
Contributions to Non-Qualified and Roth IRA Deferred Annuities, as well as
non-deductible contributions to IRA Deferred Annuities are made on an "after-tax
basis", so that making purchase payments does not reduce the taxes you pay.
Earnings under the Non-Qualified Deferred Annuities and IRA Deferred
Annuities, are normally not taxed until withdrawn, if you, as the owner, are an
individual. Thus, that portion of any withdrawal that represents income is taxed
when you receive it, but that portion that represents purchase payments is not,
to the extent previously taxed. For Roth IRA Deferred Annuities, "qualified
distributions" of earnings are not subject to Federal income tax. Withdrawals of
contributions are generally not subject to income tax. However, withdrawal from
a Roth IRA of taxable converted amounts may be subject to a penalty tax if made
before age 59 1/2.
Non-Qualified deferred annuities with an endorsement containing tax
provisions required for Keogh and corporate plans may be issued to Keogh and
corporate plans covering one individual. In such event, contributions under such
deferred annuities will be made on a "before tax" basis and the rules applicable
to Keogh plans will apply to such deferred annuities, notwithstanding any
provision in the deferred annuities to the contrary. Wherever the terms "Keogh
Deferred Annuity" or "Keogh plan" appear in this section, the term shall be
deemed to include non-qualified deferred annuities with an appropriate
endorsement issued to Keogh and corporate plans covering one individual.
Under some circumstances certain of the Deferred Annuities, accept both
purchase payments that entitle you or the owner to a current tax deduction or to
an exclusion from income and those that do not. Taxation of withdrawals depends
on whether or not you or the owner were entitled to deduct or exclude the
purchase payments from income in compliance with the Code.
The taxable portion of a distribution from a Keogh, Enhanced unallocated
Keogh, 403(a) and TSA Deferred Annuity to the participant or the participant's
spouse (if she/he is the beneficiary) that is an "eligible rollover
distribution," as defined in the Code, is subject to 20% mandatory Federal
income tax withholding unless the participant directs the trustee, insurer or
custodian of the plan to transfer all or any portion of his/her taxable interest
in such plan to the trustee, insurer or custodian of (1) an individual
retirement arrangement under Section 408; (2) a qualified trust or 403(a)
annuity plan, if the distribution is from a Keogh, Enhanced unallocated Keogh,
or 403(a) Deferred Annuity; or (3) a TSA, if the distribution is from a TSA
Deferred Annuity. An eligible rollover distribution generally is the taxable
portion of any distribution from a Keogh, Enhanced unallocated Keogh, 403(a) or
TSA Deferred Annuity, except the following: (a) a series of substantially equal
periodic payments over the life (or life expectancy) of the participant; (b) a
series of substantially equal periodic payments over the lives (or joint life
expectancies) of the participant and his/her beneficiary; (c) a series of
substantially equal periodic payments over a specified period of at least ten
years; (d) a minimum distribution required during the participant's lifetime or
the minimum amount to be paid after the participant's death; (e) refunds of
excess
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contributions to the plan described in Section 401(k) of the Code for
corporations and unincorporated businesses; (f) certain loans treated as
distributions under the Code; (g) the cost of life insurance coverage which is
includible in the gross income of the plan participant; and (h) any other
taxable distributions from any of these plans which are not eligible rollover
distributions.
The IRA Deferred Annuities accept both purchase payments that entitle you
or the owner to a current tax deduction or to an exclusion from income and those
that do not. Taxation of withdrawals depends on whether or not you or the owner
were entitled to deduct or exclude the purchase payments from income in
compliance with the Code. Roth IRA deferred annuities only accept "after-tax"
contributions.
All taxable distributions from Keogh, Enhanced unallocated Keogh, 403(a)
and TSA Deferred Annuities that are not eligible rollover distributions and all
taxable distributions from IRAs and Non-Qualified Deferred Annuities will be
subject to Federal income tax withholding, unless the payee elects to have no
withholding. The rate of withholding is as determined by the Code and
Regulations thereunder at the time of payment. All taxable distributions from
the PEDC Deferred Annuity will be subject to the same Federal income tax
withholding as regular wages.
Each type of Deferred Annuity is subject to various tax limitations.
Typically, except for the Non-Qualified Deferred Annuities the maximum amount of
purchase payment is limited under Federal tax law and there are limitations on
how long money can be left under the Deferred Annuities before withdrawals must
begin. A 10% tax penalty applies to certain taxable withdrawals from the
Deferred Annuity (or in some cases from the plan or arrangement that purchased
the Deferred Annuity) before you are age 59 1/2. Under a SIMPLE IRA, the tax
penalty is increased to 25% for withdrawals during the first two years of an
employee's participation in the SIMPLE IRA.
The rules as to what payments are subject to this provision are complex.
The following paragraphs will briefly summarize some of the federal tax rules on
a Deferred Annuity-by-Deferred Annuity basis, but will make no attempt to
mention or explain every single rule that may be relevant to you. We are not
responsible for determining if your plan or arrangement satisfies the
requirements of the Code.
Traditional IRA and Enhanced IRA Deferred Annuities. The tax rules
outlined in this section for both Traditional IRA and Enhanced IRA Deferred
Annuities are the same. Annual contributions to all Traditional and Roth IRAs
may not exceed the lesser of $2,000 or 100% of your "compensation" as defined by
the Code, except "spousal IRAs" discussed in the next paragraph. Generally, no
contributions are allowed during or after the tax year in which you attain age
70 1/2. Contributions other than those allowed are subject to a 6% excess
contribution tax penalty. Special rules apply to withdrawals of excess
contributions. These dollar and age limits do not apply to tax-free "rollovers"
or transfers from other IRAs or from other tax-favored plans that the Code
allows.
Annual contributions are generally deductible up to the above limits if
neither you nor your spouse was an "active participant" in another qualified
retirement plan during the taxable year. You will not be treated as married for
these purposes if you lived apart for the entire taxable year and file separate
returns. For 1999, if you are an "active participant" in another retirement plan
and if your adjusted gross income is $31,000 or less ($51,000 for married
couples filing jointly, however, never fully deductible for a married person
filing separately), annual contributions are fully deductible. However,
contributions are not deductible if your adjusted gross income is over $41,000
($61,000 for married couples filing jointly, $10,000 for a married person filing
separately). If your adjusted gross income falls between these amounts, your
maximum deduction will be phased out. For an individual who is not an "active
participant" but whose spouse is, the adjusted gross income limits for the
nonactive participant spouse is $150,000 for a full deduction (with a phase-out
between $150,000 and $160,000). If you file a joint return and you and your
spouse are under age 70 1/2, you and your spouse may be able to make annual IRA
contributions of up to $4,000 ($2,000 each) to two IRAs, one in your name and
one in your spouse's. Neither can exceed $2,000, nor can it exceed your joint
compensation.
Taxable withdrawals (other than tax-free transfers or "rollovers" to other
individual retirement arrangements) before age 59 1/2 are subject to a 10% tax
penalty. This penalty does not apply to withdrawals (1) paid to a beneficiary or
your estate after your death; (2) due to your permanent disability (as defined
in the Code); (3) made in substantially equal periodic payments (not less
frequently than annually) over the life or life expectancy of you or you and
another person named by you as your beneficiary; (4) to pay deductible medical
expense; (5) to enable certain unemployed persons to pay medical insurance
premiums; (6) made after December 31, 1997 to pay for qualified higher education
expenses; or (7) made after December 31, 1997 for qualified first time home
purchases. If you are under age 59 1/2 and are receiving Systematic Withdrawal
Program payments that you intend to qualify as a series of substantially equal
periodic payments under Section 72(t) of the Code and thus not subject to the
10% tax penalty, any modifications to your Systematic Withdrawal Program
payments before the later of age 59 1/2 or five years after beginning Systematic
Withdrawal Program payments will result in the retroactive imposition of the 10%
tax penalty. You should
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consult with your tax adviser to determine whether you are eligible to rely on
any exceptions to the 10% tax penalty before you elect to receive any Systematic
Withdrawal Program payments or make any modifications to your Systematic
Withdrawal Program payments.
If you made both deductible and non-deductible contributions, a partial
withdrawal will be treated as a pro rata withdrawal of both, based on all of
your IRAs (not just the IRA Deferred Annuities). The portion of the withdrawal
attributable to non-deductible contributions (but not the earnings on them) is a
nontaxable return of principal, which is not subject to the 10% tax penalty. You
must keep track of which contributions were deductible and which weren't, and
make annual reports to the IRS if non-deductible contributions were made.
Withdrawals may be transferred to another IRA without Federal tax
consequences if Code requirements are met. Your Deferred Annuity is not
forfeitable and you may not transfer it.
Your entire interest in the Deferred Annuity must be withdrawn or begun to
be withdrawn generally by April 1 of the calendar year following the year in
which you reach age 70 1/2 and a tax penalty of 50% applies to withdrawals which
should have been made but were not. Complex rules apply to the timing and
calculation of these withdrawals. Other complex rules apply to how rapidly
withdrawals must be made after your death. Generally, if you die before the
required withdrawals have begun, we must make payments of your entire interest
within five years of the year in which you died or begin payments under an
income annuity allowed by the Code to your beneficiary over his or her lifetime
or over a period not beyond your beneficiary's life expectancy starting by the
December 31 of the year following the year in which you die. If your spouse is
your beneficiary, and, if your Deferred Annuity permits, payments may be made
over your spouse's lifetime or over a period not beyond your spouse's life
expectancy starting by the December 31 of the year in which you would have
reached age 70 1/2, if later. If your beneficiary is your spouse, he or she may
elect to continue the Deferred Annuity as his or her own IRA Deferred Annuity
after your death. If you die after the required withdrawal has begun, payments
must continue to be made at least as rapidly as under the method of distribution
that was used as of the date of your death. The IRS allows you to aggregate the
amount required to be withdrawn from each individual retirement arrangement you
own and to withdraw this amount in total from any one or more of the individual
retirement arrangements you own.
If you satisfy certain requirements, you can change your Traditional IRA
contribution to a Roth IRA if you "recharacterize" your contribution before you
file your income tax return (including filing extensions).
Roth IRA Deferred Annuities. Annual contributions to all Traditional and
Roth IRAs may not exceed the lesser of $2,000 or 100% of your "compensation."
You could have contributed up to the annual contribution limit to a Roth IRA in
1998 if your adjusted gross income is not in excess of $95,000 ($150,000 for
married couples filing jointly). The contribution limits to a Roth IRA are
phased out ratably for individuals with income between $95,000 and $110,000 and
for married couples filing jointly with income between $150,000 and $160,000;
and for married couples filing separately between $0 and $10,000. Annual
contributions to all IRAs, including Roth IRAs, may not exceed the lesser of
$2,000 or 100% of your "compensation" as defined by the Code, except for
"spousal IRAs." These limits on annual contributions do not apply to a rollover
from a Roth IRA to another Roth IRA or a conversion from an existing IRA to a
Roth IRA. You may make contributions to a Roth IRA after age 70 1/2. Excess
contributions are subject to a 6% excess contribution tax penalty, unless such
contributions are withdrawn under rules specified in the Code.
You may convert/rollover an existing IRA to a Roth IRA if your adjusted
gross income does not exceed $100,000 in the year you convert. If you are
married but file separately, you may not convert a non-Roth IRA into a Roth IRA.
Except to the extent you have non-deductible IRA contributions, the amount
converted from a non-Roth IRA into a Roth IRA is taxable. Generally, the 10%
early withdrawal penalty does not apply to conversions/ rollovers. (See
exception discussed below.) For conversions which occurred in 1998, the taxable
amount will be included ratably in income over a four year period beginning in
1998, unless you elect otherwise.
Distributions from a Roth IRA are made first from contributions and then
from earnings. Generally, withdrawals from contributions are not subject to tax.
However, withdrawals of taxable converted amounts prior to age 59 1/2 and made
within five taxable years from such conversion will be subject to the 10%
premature penalty tax (unless you meet an exception). In addition, withdrawals
in 1998, 1999 or 2000 of converted amounts that have received four year income
inclusion treatment will be included in income in the year of the withdrawal (in
addition to the amounts to be included under the four year income inclusion
election). The total aggregate amount to be included in income shall not exceed
the total taxable amount of the conversion.
Withdrawals of earnings will not be subject to Federal income tax if they
are "qualified distributions." In order to be a qualified distribution, the
withdrawal must be: (a) made at least five taxable years from the year you
established a Roth IRA, and (b) made after age 59 1/2, or for death, disability,
or a first-time home purchase (up to
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$10,000). (Please consult your tax advisor regarding the state income tax
treatment of your withdrawal.)
The withdrawal of earnings not meeting the foregoing requirements will be
subject to income tax and possibly the 10% premature tax penalty.
Mandatory minimum distribution rules do not apply while you are alive.
Generally, when you die, we must make payment of your entire interest within
five years of the year in which you died or begin payments under an income
annuity allowed by the Code to your beneficiary over his/her lifetime or over a
period not beyond your beneficiary's life or life expectancy starting by
December 31 of the year following the year in which you die.
You should consult your tax advisor regarding the tax treatment of Roth
IRAs and the appropriateness of the Roth IRA to your particular situation.
If you satisfy certain requirements, you can change your Traditional IRA
contribution to a Roth IRA if you "recharacterize" your contribution before you
file your income tax return (including filing extensions).
SEP Deferred Annuities. Partners and sole proprietors may make purchase
payments under SEPs for themselves and their employees, and corporations may
make purchase payments under SEPs for their employees. Complex rules apply to
which employees or other persons must be allowed to participate, and what
contributions may be made for each of them. Once a contribution is made, you
(not the employer) have all rights to it. Once contributions are made (under
these SEP rules), your SEP generally operates as if it were an IRA purchased by
you under the IRA rules discussed above. An employer is not permitted to
establish a salary reduction SEP plan ("SARSEP") after December 31, 1996.
However, you may make contributions, in accordance with your plan's provisions,
to your existing SARSEP contract if your employer's SARSEP plan was established
prior to January 1, 1997.
SIMPLE IRAs. If an employer has no more than 100 employees (who earn at
least $5,000) and the SIMPLE IRA is the exclusive tax-qualified plan of the
employer, employees may make contributions on a before-tax basis of up to $6,000
(subject to indexing) and the employer must generally match employee
contributions dollar-for-dollar up to 3% of compensation. Under certain
circumstances, the employer can elect to make a lesser matching contribution or
make a contribution equal to 2% of compensation for all eligible employees.
SIMPLE IRAs are exempt from complex nondiscrimination, top-heavy and reporting
rules. Once a contribution is made, you (not the employer) have all rights to
it. Once contributions are made under these SIMPLE IRA rules, your SIMPLE IRA
generally operates as if it were an IRA purchased by you under the IRA rules
discussed above. (However, the tax penalty for early withdrawals is generally
increased for withdrawals within the first two years of an employee's
participating in the SIMPLE IRA.)
PEDC Deferred Annuity. PEDC plans are available to State or local
governments and certain tax-exempt organizations as described in Section 457 of
the Code. These plans, which must meet the requirements of Section 457(b),
provided certain tax deferral benefits to employees and independent contractors.
These plans are not available to churches and qualified church-controlled
organiz-ations. A PEDC plan maintained by a State or local government must be
held in trust (or custodial account or annuity contract) for the exclusive
benefit of plan participants and their beneficiaries. However, for state or
local government plans in existence on August 20, 1996 these requirements do not
have to be met prior to January 1, 1999. Plan benefit deferrals, contributions
and all income attributable to such amounts under PEDC plans, other than those
maintained by a State or local government as described above, are (until made
available to the participant or other beneficiary) solely the property of the
employer, subject to the claims of the employer's general creditors.
The compensation amounts that may be deferred under a PEDC plan may not
exceed certain deferral limits established under the Federal tax law. In
addition, contributions to other plans may reduce the deferral limit even
further.
Under the plan, amounts will not be made available to participants or
beneficiaries until the earliest of (1) the calendar year in which the
participant reaches age 70 1/2, (2) when the participant separates from service
with the employer, or (3) when the participant is faced with an unforeseeable
emergency as described in the income tax regulations. Amounts will not be
treated as "made available" under these rules if (i) an election to defer
commencement of a distribution is made by the participant and such election
meets certain requirements, or (ii) the total amount payable is $5,000 or less
and certain other requirements are met.
Withdrawals must conform to the complex minimum distribution requirements
of the Code, including the requirement that distributions must generally begin
no later than April 1 of the calendar year following the later of: the year in
which the participant attains age 70 1/2 or, to the extent permitted under your
plan or contract, the year the participant retires. Although the minimum
distribution rules are similar to the rules summarized above for TSAs there are
some differences. For example, for PEDC plans, any distribution payable over a
period of more than one year can only be made in substantially non-increasing
amounts, and generally distributions may not exceed 15 years.
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Special rules apply to certain non-governmental PEDC plans deferring
compensation from taxable years beginning before January 1, 1987 (or beginning
later but based on an agreement in writing on August 16, 1986 and which then
provided for deferral of fixed amounts or amounts determined by a fixed
formula).
403(a) Deferred Annuities. The employer adopts a 403(a) plan as a
qualified retirement plan to provide benefits to participating employees. The
plan generally works in a similar manner to a corporate qualified retirement
plan except that the 403(a) plan does not have a trust or a trustee.
The Code limits the amount of contributions and distributions that may be
made under 403(a) plans. Taxable withdrawals before age 59 1/2 may be subject to
a 10% tax penalty. Any amounts distributed under the 403(a) Deferred Annuities
are generally taxed according to the rules described under Section 72 of the
Code. Under rules similar to those described later for TSAs, for taxable years
after 1996, if you do not have a 5% or more ownership interest in your employer,
withdrawals of your entire interest under the Deferred Annuity must be made or
begun to be made no later than the April 1 of the calendar year following the
later of: the year in which you reach age 70 1/2 or, to the extent permitted
under your plan or contract, the year you retire. Also, if you die before
required withdrawals have begun, the entire interest in the plan generally must
be paid within five years of the year in which you died. The minimum
distribution rules for 403(a) Deferred Annuities are similar to those rules
summarized for TSAs.
If your benefit under the 403(a) plan is worth more than $5,000, the Code
requires that your income annuity protect your spouse if you die before you
receive any payments under the annuity or if you die while payments are being
made. You may waive these requirements with the written consent of your spouse.
Designating a beneficiary other than your spouse is considered a waiver. Waiving
these requirements may cause your monthly benefit to increase during your
lifetime. Excess contributions are subect to a 10% penalty. Special rules apply
to the withdrawal of excess contributions.
Keogh Deferred Annuities. Pension and profit-sharing plans satisfying
certain Code provisions are considered to be "Keogh" plans. Complex rules apply
to the establishment and operation of such plans, including the amounts that may
be contributed under them. Excess contributions are subject to a 10% penalty.
Special rules apply to the withdrawal of excess contributions.
Taxable withdrawals before age 59 1/2 are subject to a 10% tax penalty
(this does not apply to the return of any non-deductible purchase payments).
This penalty does not apply to withdrawals (1) paid to a beneficiary or your
estate after your death; (2) due to your permanent disability (as defined in the
Code); (3) made in substantially equal periodic payments (not less frequently
than annually) over the life or life expectancy of you or you and another person
named by you as your beneficiary where such payments begin after separation from
service; (4) made to you after you separate from service with your employer
after age 55; or (5) made to you on account of deductible medical expenses
(whether or not you actually itemize deductions).
Under rules similar to those described later for TSAs, for taxable years
after 1996, if you do not have a 5% or more ownership interest in your Employer,
withdrawals of your entire interest under the deferred annuities must be made or
begun to be made beginning no later than the April 1 of the calendar year
following the later of: the year in which you reach age 70 1/2 or, to the extent
permitted under your plan or deferred annuities, the year you retire. Also, if
you die before required withdrawals have begun, the entire interest in the
Deferred Annuity generally must be paid within five years of the year in which
you died.
If your benefit under the Keogh plan is worth more than $5,000, the Code
requires that your income annuity protect your spouse if you die before you
receive any payments under the annuity or if you die while payments are being
made. You may waive these requirements with the written consent of your spouse.
Designating a beneficiary other than your spouse is considered a waiver. Waiving
these requirements may cause your monthly benefit to increase during your
lifetime.
Non-Qualified deferred annuities with an endorsement containing tax
provisions required for Keogh and corporate plans may be issued to Keogh and
corporate plans covering one individual. In such event, the rules applicable to
Keogh plans as outlined above will apply to such deferred annuities,
notwithstanding any provision in the deferred annuities to the contrary.
Enhanced Unallocated Keogh Deferred Annuity. Pension and profit-sharing
plans satisfying certain Code provisions are considered to be "Keogh" plans.
Complex rules apply to the establishment and operation of such plans, including
the amounts that may be contributed under them. Excess contributions are subect
to a 10% penalty. Special rules apply to the withdrawal of excess contributions.
Taxable withdrawals before age 59 1/2 are subject to a 10% tax penalty
(this does not apply to the return of any non-deductible purchase payments).
This penalty does not apply to withdrawals (1) paid to a beneficiary or your
estate after your death; (2) due to your permanent disability (as defined in the
Code); (3) made in substantially equal periodic payments (not less frequently
than annually) over the life or life expectancy of you or you and another person
named by you where such payments begin after separation from service; (4) made
to you after you separate from service with your
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employer after age 55; or (5) made to you on account of deductible medical
expenses (whether or not you actually itemize deductions).
Withdrawals may be transferred to another qualified trust or a 403(a)
annuity plan or (for eligible rollover distributions) to an IRA without Federal
tax consequences if Code requirements are met. Your deferred annuity is not
forfeitable and you may not transfer it. Generally, for taxable years after
1996, if you do not have a 5% or more ownership interest in your employer, your
entire interest in the deferred annuity must be withdrawn or begin to be
withdrawn by April 1 of the calendar year following the later of: the year in
which you reach age 70 1/2 or, to the extent permitted under your plan or
deferred annuity, the year in which you retire. A tax penalty of 50% applies to
withdrawals which should have been made but were not. Complex rules apply to the
timing and calculation of these withdrawals. Other complex rules apply to how
rapidly withdrawals must be made after your death. Generally, if you die before
the required withdrawals have begun, we must make payment of your entire
interest under the deferred annuity within five years of the year in which you
died or begin payments under an income annuity allowed by the Code to your
beneficiary over his or her lifetime or over a period not beyond your
beneficiary's life expectancy starting by the December 31 of the year following
the year in which you die. If your spouse is your beneficiary, payments may be
made over your spouse's lifetime or over a period not beyond your spouse's life
expectancy starting by the December 31 of the year in which you would have
reached age 70 1/2, if later. If you die after income payments begin, payments
must continue to be made at least as rapidly as under the method of distribution
that was used as of the date of your death.
If your benefit under the Keogh plan is worth more than $5,000, the Code
requires that your income annuity protect your spouse if you die before you
receive any payments under the annuity or if you die while payments are being
made. You may waive these requirements with the written consent of your spouse.
Designating a beneficiary other than your spouse is considered a waiver. Waiving
these requirements may cause your monthly benefit to increase during your
lifetime.
TSA Deferred Annuities. These fall under Section 403(b) of the Code that
provides certain tax benefits to eligible employees of public school systems and
organizations that are tax exempt under Section 501(c)(3) of the Code.
Except for the TSA Deferred Annuity under which the employer retains all
rights, your employer buys the Deferred Annuity for you although you, as the
participant, then own it. The Code limits the amount of purchase payments that
can be made. Purchase payments over this amount may be subject to adverse tax
consequences. Special rules apply to the withdrawal of excess contributions.
Withdrawals before age 59 1/2 are prohibited except for (a) amounts contributed
to or earned under your Section 403(b) arrangement before January 1, 1989 that
were either paid into or earned under the Deferred Annuity or later transferred
to it in a manner satisfying applicable Code requirements (withdrawals are
deemed to come first from pre-1989 money that is not subject to these
restrictions, until all of such money is withdrawn); (b) tax-free transfers to
other Section 403(b) funding vehicles or any other withdrawals that are not
"distributions" under the Code; (c) amounts that are not attributable to salary
reduction elective deferral contributions (i.e., generally amounts not
attributable to a participant's pre-tax contributions and their earnings);
(d) after a participant dies, separates from service or becomes disabled (as
defined in Code); (e) in the case of financial hardship (as defined in the Code)
but only purchase payments may be withdrawn for hardship, not earnings; or
(f) under any other circumstances as the Code allows. Special withdrawal
restrictions under Section 403(b)(7)(A)(ii) of the Code apply to amounts that
had once been invested in mutual funds custodial arrangements even after such
amounts are transferred to a Deferred Annuity.
Taxable withdrawals (other than tax-free transfers) that are allowed before
age 59 1/2 are subject to an additional 10% tax penalty on the taxable portion
of the withdrawal. This penalty does not apply to withdrawls (1) paid to a
beneficaiary or participant's estate after the participant's death; (2) due to
permanent disability (as defined in the Code); (3) made in substantially equal
periodic payments (not less frequently than annually) over the life or life
expectancy of the participant or the participant and another person named by the
participant where such payments begin after separation from service; (4) made to
the participant after the participant separates from service with the employer
after age 55; (5) made to the participant on account of deductible medical
expenses (whether or not the participant actually itemizes deductions);
(6) made to an "alternate payee" under a "qualified domestic relations order"
(normally a spouse or ex-spouse); (7) of excess matching employer contributions
made to eliminate discrimination under the Code; or (8) timely made to reduce an
elective deferral as allowed by the Code. If you are under age 59 1/2 and are
receiving Systematic Withdrawal Program payments that you intend to qualify as a
series of substantially equal periodic payments under Section 72(t) of the Code
and thus not be subject to the 10% tax penalty, any modifications to your
Systematic Withdrawal Program payments before the later of age 59 1/2 or five
years after beginning Systematic Withdrawal Program payments will result in the
retrocative imposition of the 10% tax penalty. You should consult with your tax
adviser to determine whether you are eligible to rely on any exceptions to the
10% tax penalty before you elect to receive any
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Systematic Withdrawal Program payments or make any modifications to your
Systematic Withdrawal Program payment.
Withdrawals may be transferred to another Section 403(b) funding vehicle or
(for eligible rollover distributions) to an IRA without federal tax consequences
if Code requirements are met. The Deferred Annuity is not forfeitable and may
not be transferred. Generally, for taxable years after 1996, if you do not have
a 5% or more ownership interest in your employer, your entire interest in the
Deferred Annuity must be withdrawn or begun to be withdrawn by April 1 of the
calendar year following the later of: the year in which the participant reaches
age 70 1/2 or, to the extent permitted under your plan or contract, the year in
which the participant retires. A tax penalty of 50% applies to withdrawals which
should have been made but were not. Complex rules apply to the timing and
calculation of these withdrawals. Other complex rules apply to how rapidly
withdrawals must be made after the participant's death. Generally, if the
participant dies before the required withdrawals have begun, we must make
payment of your entire interest under the Deferred Annuity within five years of
the year in which the participant died or begin payments under an income annuity
allowed by the Code to the participant's beneficiary over his or her lifetime or
over a period not beyond the beneficiary's life expectancy starting by the
December 31 following the year in which the participant dies. If the
participant's spouse is the beneficiary, payments may be made over the spouse's
lifetime or over a period not beyond the spouse's life expectancy starting by
December 31 of the year in which the participant would have reached age 70 1/2,
if later. If the participant dies after required withdrawals have begun,
payments must continue to be made at least as rapidly as under the method of
distribution that was used as of the date of the death of the participant. If
the Deferred Annuity is subject to the Retirement Equity Act because it is part
of a plan subject to ERISA, the participant's spouse has certain rights which
may be waived with the written consent of the spouse. The IRS allows you to
aggregate the amount to be withdrawn from each TSA Deferred Annuity you own and
to withdraw this amount in total from any one or more of the TSA Deferred
Annuities you own.
Non-Qualified Deferred Annuity for Section 457(f) Deferred Compensation
Plans. These are deferred compensation agreements generally for a select group
of management or highly compensated employees and individual independent
contractors employed or engaged by State or local governments or non-church
tax-exempt organizations. In this arrangement, the tax-exempt organizations. In
this arrangement the tax-exempt entity (e.g., a hospital) deposits your deferred
compensation amounts and earnings credited to these amounts into a trust, which
at all times is subject to the claims of the employer's bankruptcy and
insolvency creditors. The trust owns a Non-Qualified Deferred Annuity which may
be subject to the Non-Qualified Deferred Annuity rules described below. Since
the trust is a grantor trust, any tax consequences arising out of ownership of
the Non-Qualified Deferred Annuity will flow to the tax-exempt entity that is
the grantor of such trust. Each tax-exempt entity should consult its own tax
advisor with respect to the tax rules governing the Deferred Annuity. You can
defer taxation of compensation until the first taxable year in which there is
not a substantial risk of forfeiture to your right to such compensation.
Any amount made available under the plan to you or your beneficiary is
generally taxed according to the annuity rules under Section 72. Thus, when
deferred compensation is no longer subject to a substantial risk of forfeiture,
it is immediately includable in your income and it becomes "after-tax"
contributions for the purposes of the tax rules governing income plan payments
in calculating the "exclusion ratio." Certain distributions made before you are
age 59 1/2 may be subject to a 10% tax penalty. It is unclear whether this
penalty applies with respect to distributions made for this type of plan. Thus,
you should consult your own tax advisor to clarify this issue. Since there is
some uncertainty as to how the Internal Revenue Service and courts will treat
the "rolling vesting" aspect of this arrangement, you should consult your own
tax advisor to clarify this issue.
Given the complexity and uncertainty inherent in this area of the tax law,
entities considering the purchase of this Deferred Annuity to fund a
Section 457(f) deferred compensation plan should consult with their own tax
advisors regarding the application of the relevant rules to their particular
situation. In connection with the sale of the Non-Qualified Deferred Annuity for
Section 457(f) Deferred Compensation Plans, MetLife consulted special tax
counsel regarding the major Federal tax issues under Section 457. MetLife
consulted special tax counsel regarding the major Federal tax issues under
Section 457. This advice from such counsel has not been updated to reflect
changes, if any, in the law and such advice was rendered solely to MetLife and
may not be relied upon by any person considering the purchase of the Deferred
Annuity.
Non-Qualified Deferred Annuity for Section 451 Deferred Fee
Arrangements. Under a Section 451 deferred fee arrangement, a third party which
is tax-exempt entity (e.g., a hospital) enters into a deferred fee arrangement
with a taxable entity, the employer, that provides services to the third party.
These deferred fees are used to fund a deferred compensation plan for the
taxable entity's employees who are a select group of management or highly
compensated employees or individual independent contractors. The deferred fees
are contributed by the tax-exempt entity into a trust that is subject to the
claims of its bankruptcy and insolvency
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creditors, and, when paid or made available to the taxable entity, are subject
to the claims of the taxable entity's bankruptcy and insolvency creditors. Such
arrangement, in accordance with the provisions of Section 451, enables the
taxable entity to defer compensation until the year in which the amounts are
paid or made available to it, and enables the employees of the taxable entity
who are participants in its deferred compensation plan to defer compensation
until the year in which the amounts are paid or made available to them, unless
under the method of accounting used in computing taxable income, such amount is
to be properly accounted for in a different period. The taxable entity will be
able to deduct as employee compensation the amounts included in income by the
participant-employees of its deferred compensation plan, subject to such sums
being reasonable compensation and not disguised dividends.
A trust established by the tax-exempt entity will own a Non-Qualified
Deferred Annuity which may be subject to taxation rules as described below under
Non-Qualified Deferred Annuities. Since the trust is a grantor trust, any tax
consequences arising out of ownership of the Non-Qualified Deferred Annuity will
flow to the tax-exempt entity that is the grantor of such trust. Each tax-exempt
entity should consult its own tax advisor with respect to the tax rules
governing the Deferred Annuity. Participants in the taxable entity's deferred
compensation plan must look to the taxable entity for payments under the plan.
These persons should consult their own tax advisor for information on the tax
treatment of these payments made under the plan.
Given the complexity and uncertainty inherent in this area of the tax law,
entities considering the purchase of this Deferred Annuity to fund a Section 451
deferred fee arrangement should consult with their own tax advisors regarding
the application of the relevant rules to their particular situation. In
connection with the sale of the Non-Qualified Deferred Annuity for Section 451
Deferred Fee Arrangements, MetLife consulted special tax counsel regarding the
major Federal tax issues under Section 451. This advice from such counsel has
not been updated to reflect changes, if any in the law and such advice was
rendered solely to MetLife and may not be relied upon by any person considering
the purchase of the Deferred Annuity.
Non-Qualified Deferred Annuity for Section 451 Deferred Compensation
Plans. Under a Section 451 deferred compensation plan, a select group of
management or highly compensated employees or individual independent contractors
can defer compensation until the year in which the amounts are paid or made
available to them, unless under the method of accounting used in computing
taxable income such amount is to be properly accounted for in a different
period. Participants should consult their own tax advisors for information on
the tax treatment of these payments.
A Section 451 plan could be sponsored by either a taxable entity or certain
tax-exempt entities which meet the "grandfather" requirements described below.
Taxable entities would be able to deduct as compensation the amounts included in
income by the participant of the deferred compensation plan, subject to such
sums being reasonable compensation and not disguised dividends. For tax-exempt
entities, if certain Tax Reform Act of 1986 "grandfather" requirements are
adhered to, Section 451 rather than Section 457 should apply to their deferred
compensation plans. Tax-exempt entities should consult their own tax advisors to
ascertain whether these "grandfather" requirements are met.
A trust established by either the taxable or the grandfathered tax-exempt
entity would own a Non-Qualified Deferred Annuity which may be subject to
taxation rules as described later under "Non-Qualified Deferred Annuities".
Since the trust would be a grantor trust, any tax consequences arising out of
ownership of the Non-Qualified Deferred Annuity will flow to the tax-exempt
entity or taxable entity that is the grantor of such trust. Such entities should
consult their own tax advisors with respect to the tax rules governing the
Deferred Annuity.
Given the complexity and uncertainty inherent in this area of the tax law,
entities considering the purchase of this Deferred Annuity to fund a Section 451
deferred compensation plan should consult with their own tax advisors regarding
the application of the relevant rules to their particular situation. In
connection with the sale of the Non-Qualified Deferred Annuity for Section 451
Deferred Compensation Plans, MetLife consulted special tax counsel regarding the
major Federal tax issues under Section 451. This advice from such counsel has
not been updated to reflect changes, if any, in the law and such advice was
rendered solely to MetLife and may not be relied upon by any person considering
the purchase of the Deferred Annuity.
Non-Qualified Deferred Annuity for Section 457(e)(11) Severance and Death
Benefit Plans. These are severance and death benefit arrangements for adoption
by tax-exempt entities. If the employer is subject to ERISA, the arrangement
must be adopted exclusively for a select group of management or highly
compensated employees or individual independent contractors. The employer
deposits deferral amounts, which will be used to provide severance and death
benefits, into a trust which is subject at all times to the claims of the
employer's bankruptcy and insolvency creditors. As the owner of a Non-Qualified
Deferred Annuity, the trust may be subject to the rules described below under
Non-Qualified Deferred Annuities. Since the trust is a grantor trust, any tax
consequences arising out of ownership of the Non-Qualified Deferred Annuity will
flow to the employer, the grantor of such trust. Each employer
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should consult with its own tax advisor with respect to the tax rules governing
the Deferred Annuity.
The Federal income tax consequences to you of this arrangement depend on
whether the program qualifies as a "bona-fide severance pay" and a "bona-fide
death benefit" plan as described in Section 457(e)(11) of the Code. If the
arrangement qualifies as a "bona-fide severance pay" and "bona-fide death
benefit" plan, Section 451 of the Code will apply and you will not be taxed on
your deferral amounts until the tax year in which they are paid or made
available to you, unless under the method of accounting you use in computing
taxable income such amount is to be properly accounted for in a different
period. If the arrangement does not qualify as a "bona-fide severance pay" and
"bona-fide death benefit" plan, your deferral amounts will be subject to tax in
the year in which they are deferred. In that event, if you have not reported
such income, in addition to the Federal income tax you will have to pay, you
will be assessed interest, and you may be subject to certain penalties by the
Internal Revenue Service.
Special Tax Considerations for Non-Qualified Deferred Annuity for
Section 457(e)(11) Severance and Death Benefit Plans. There is a considerable
risk that this arrangement may not qualify as a "bona-fide severance pay" plan
under Section 457(e)(11), the applicable section of the Code. The term
"bona-fide severance pay" plan is not defined in that section. The term
"severance pay" plan has, however, been construed under other Code sections and
under Department of Labor regulations issued under the Employee Retirement
Income Security Act of 1974. In connection with the sale of the Non-Qualified
Deferred Annuity for Section 457(e)(11) Severance and Death Benefit Plans,
MetLife consulted special tax counsel regarding the major Federal tax issues
under Section 457. Subsequently, the United States Court of Appeals for the
Federal Circuit indicated that for purposes of another Code section,
a severance pay plan with features similar to this arrangement would not qualify
as a valid severance pay plan. While this decision addresses severance pay plans
in a different Code context, it is probable that a court would consider it in
determining the tax consequences of this arrangement. This advice received from
such counsel has not been updated to reflect this decision or other changes in
the law, and such advice was rendered solely to MetLife and may not be relied
upon by any person considering the purchase of the Deferred Annuity. You should
consult with your own tax advisor to determine if the potential advantages to
you of this arrangement outweigh the potential tax risks in view of your
individual circumstances.
Non-Qualified Deferred Annuities. The tax rules outlined in this section
for both non-Qualified and Enhanced Non-Qualified Deferred Annuities are the
same. No limits apply under the Code to the amount of purchase payments that you
may make. Tax on income earned under the Deferred Annuities is generally
deferred until it is withdrawn only if you as owner of the Deferred Annuity are
an individual (or are treatable as a natural person under certain other
circumstances specified by the Code). The following discussion assumes that this
is the case.
Any withdrawal is generally treated as coming first from earnings (and thus
subject to tax) and next from your contributions (and thus a nontaxable return
of principal) only after all earnings are paid out. This rule does not apply to
payments made under income annuities, however. Such payments are subject to an
"exclusion ratio" which determines how much of each payment is a non-taxable
return of your contributions and how much is a taxable payment of earnings. Once
the total amount treated as a return of your contributions equals the amount of
such contributions, all remaining payments are fully taxable. If you die before
all contributions are returned, the unreturned amount may be deductible on your
final income tax return or deductible by your beneficiary if payments continue
after your death. We will tell the purchaser of an income annuity what your
contributions were and how much of each income payment is a non-taxable return
of contributions.
Taxable withdrawals (other than tax-free exchanges to other non-qualified
deferred annuities) before you are age 59 1/2 are subject to a 10% tax penalty.
This penalty does not apply to withdrawals (1) paid to a beneficiary or your
estate after your death; (2) due to your permanent disability (as defined in the
Code); or (3) made in substantially equal periodic payments (not less frequently
than annually) over the life or life expectancy of you or you and another person
named by you as your beneficiary.
Your Non-Qualified Deferred Annuity may be exchanged for another
non-qualified deferred annuity without incurring Federal income taxes if Code
requirements are met. Under the Code, withdrawals need not be made by a
particular age. However, it is possible that the Internal Revenue Service may
determine that the Deferred Annuity must be surrendered or income payments must
commence by a certain age, e.g., 85 or older. If you die before the payments
under an income annuity begins, we must make payment of your entire interest
under the Deferred Annuity within five years of your death or begin payments
under an income annuity allowed by the Code to your beneficiary within one year
of your death. If your spouse is your beneficiary or a co-owner of the
Non-Qualified Deferred Annuity, this rule does not apply. If you die after
income payments begin, payments must continue to be made at least as rapidly as
under the method of distribution that was used
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at the time of your death in accordance with the income type selected.
The tax law treats all non-qualified deferred annuities issued after
October 21, 1988 by the same company (or its affiliates) to the same owner
during any one calendar year as one annuity. This may cause a greater portion of
your withdrawals from the Deferred Annuity to be treated as income than would
otherwise be the case. Although the law is not clear, the aggregation rule may
also adversely affect the tax treatment of payments received under an income
annuity where the owner has purchased more than one non-qualified annuity during
the same calendar year from the same or an affiliated company after October 21,
1988, and is not receiving income payments from all annuities at the same time.
INCOME ANNUITIES
The following discussion of the tax code provisions for the Income
Annuities includes the Enhanced Income Annuities subject to the same tax code
provisions.
Generally, all purchase payments under the Income Annuities other than
purchase payments under Non-Qualified and Roth IRA Income Annuities and purchase
payments consisting of non-deductible contributions under IRA Income Annuities,
will be on a "before-tax" basis. This means that the purchase payment was either
a reduction from income, entitled you to a tax deduction or was not subject to
current income tax. Because of this, Federal income taxes are payable on the
full amount of money paid as income payments under the Income Annuity.
Generally, the Non-Qualified Income Annuities are issued on an "after-tax
basis" so that making a purchase payment does not reduce the taxes you pay. That
portion of any income payment that represents income is taxed when you receive
it, but that portion that represents the purchase payment is a nontaxable return
of principal. For the Roth IRA Income Annuity, "qualified distributions" of
earnings are not subject to tax. Withdrawals of contributions are generally not
subject to income tax. However, withdrawals from a Roth IRA of taxable converted
amounts may be subject to a penalty tax if made before age 59 1/2.
The IRA Income Annuities and under some circumstances certain Income
Annuities accept both purchase payments that have entitled you as the owner to a
current tax deduction or to a reduction in taxable income and those that do not.
Taxation of income payments depends on whether or not you as the owner were
entitled to deduct or exclude the purchase payments from income in compliance
with the Code.
All taxable income payments (other than income payments under the PEDC
Income Annuities) will be subject to Federal income tax withholding unless the
payee elects to have no withholding. The rate of withholding is as determined by
the Code at the time of payment. All taxable income payments under the PEDC
Income Annuities will be subject to the same federal income tax withholding
treatment as regular wages.
Income payments (other than tax-free transfers to other Section 403(b)
funding vehicles and payments made under a PEDC plan) that are allowed before
age 59 1/2 are generally subject to an additional 10% tax penalty on the taxable
portion of the income payment. (Under a SIMPLE IRA, the tax penalty is increased
to 25% for withdrawals during the first two years of an employee's participation
in the SIMPLE IRA.) This penalty does not apply to income payments (1) paid to
your beneficiary or your estate after your death; (2) due to your permanent
disability (as defined in the Code); or (3) made in substantially equal periodic
payments (not less frequently than annually) over your life or life expectancy
of you and another person named by you, (for TSAs, Keogh and 403(a) plans, you
must also be separated from service when payments begin); and (4) under a
Non-Qualified Income Annuity purchased with a single purchase payment which
provides for substantially equal payments (to be made not less frequently than
annually) commencing no later than one year from the purchase date.
Additionally, under TSAs, Keogh and 403(a) plans the penalty does not apply to
income payments (1) made to you after you separate from service with your
employer after age 55; (2) made to you on account of deductible medical expenses
(whether or not you actually itemize deductions); or (3) made to an "alternate
payee" under a "qualified domestic relations order" (normally a spouse or
ex-spouse). For IRAs, SIMPLE IRAs and SEPS the 10% tax penalty will also not
apply to income payments to pay deductible medical expenses (whether or not you
actually itemize your deduction) to enable certain unemployed persons to pay
medical insurance premiums; made after December 31, 1997 to pay for qualified
higher education expenses; or made after December 31, 1997, for qualified first
time home purchases. There is a possibility that if you make transfers as
described earlier in this Prospectus before age 59 1/2 or within five years of
the purchase of the Income Annuity, the exercise of the transfer provision may
cause the retroactive imposition of this tax.
Income payments from a Roth IRA Income Annuity generally will be tax-free
to the extent the payment represents the return of contributions. However,
withdrawals from a Roth IRA of taxable converted amounts may be subject to a
penalty tax if made before age 59 1/2. Distributions from earnings will not be
subject to income taxes if they are "qualified distributions." To the extent
your income payments relate to earnings that do not meet the definition of
"qualified distribution" they will be subject to income tax and may be subject
to the
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10% tax penalty if you are under 59 1/2 and do not meet one of the exceptions
previously described. However, withdrawals of taxable converted amounts prior to
age 59 1/2 and made within five taxable years from such conversion will be
subject to the 10% premature penalty tax (unless you meet an exception). In
addition, withdrawals in 1998, 1998 or 2000 of converted amounts that have
received four year income inclusion treatment will be included in income in the
year of the withdrawal (in addition to the amounts to be included under the four
year income inclusion election). The total aggregate amount to be included in
income shall not exceed the total taxable amount of the conversion. You should
consult with your tax advisor regarding the tax treatment of Roth IRAs and the
appropriateness of the Roth IRA Income Annuity to your particular situation.
The following paragraphs will briefly summarize some of the federal tax
rules, but we will make no attempt to mention or explain every single rule that
may be relevant to you. We are not responsible for determining if your plan or
arrangement satisfies the requirements of the Code.
You must generally begin receiving distributions under the IRA, SIMPLE IRA,
and SEP Income Annuities no later than the April 1 of the calendar year
following the year in which you reach age 70 1/2 and a tax penalty of 50%
applies to payments which should have been made but were not. (For taxable years
after 1996, if you do not have a 5% or more ownership interest in your employer,
distributions for Keogh Income Annuities must generally begin no later than
April 1 of the calendar year following the later of: the year in which you reach
70 1/2 or, to the extent permitted under your plan or deferred annuity, the year
you retire.) This does not apply to a Roth IRA Income Annuity. Complex rules
apply to the timing and calculation of these income payments. Other complex
rules apply to how rapidly income payments must be made after your death. If you
die before income payments begin under an Income Annuity, the Code generally
requires that your entire interest be paid within five years of the year in
which you died or over a period not exceeding your beneficiary's life or life
expectancy. If you die before income payments begin, we will pay your entire
interest under the Deferred Annuity or Income Annuity in a lump sum to your
beneficiary after we receive proof of your death. For IRA, SIMPLE IRA and SEP
Income Annuities, if you die after income payments begin, payments must continue
to be made in accordance with the income type selected. The Code requires that
payments of your remaining interest continue to be made at least as rapidly as
under the method of distribution that was used at the time of your death.
In general, the purchase of an Income Annuity will meet minimum
distribution requirements under the tax law where the payments are
non-increasing, made at least annually, and are payable over your lifetime (or a
period not exceeding your life expectancy), or over the joint lives of you and
the designated beneficiary (or over a period not exceeding the life expectancies
of you and the designated beneficiary).
Under proposed regulations, distributions under a life annuity (or a life
annuity with a period certain) will not be found to be increasing merely because
the amount of the payments vary with the investment preference of the underlying
assets.
The rules for minimum distribution are very complex and you should consult
your own tax advisor as to their applicability to the Income Annuity and the tax
consequences of transferring money between investment divisions or between
investment divisions and the Fixed Interest Option.
For the Roth IRA Income Annuity, the Code requires any remaining payment be
made to your beneficiary within five years of the year in which you died or over
a period not exceeding your beneficiary's life or life expectancy. Therefore, if
you choose a Roth IRA Income Annuity that has a period certain (e.g., an income
annuity for life with a ten year term certain), the period certain cannot exceed
the greater of five years or the life expectancy of your beneficiary.
(Subsequent changes to your beneficiary after choosing a Roth IRA Income Annuity
may cause you to be in violation of this rule.)
For taxable years after 1996, if you do not have a 5% or more ownership
interest in your employer, distributions of your entire interest under the TSA,
Keogh, PEDC and 403(a) Income Annuities must be made beginning no later than the
April 1 of the calendar year following the later of: the year in which you reach
age 70 1/2 or, to the extent permitted under your plan or deferred annuity, the
year you retire. A tax penalty of 50% applies to payments which should have been
made but were not. Complex rules apply to the timing and calculation of these
income payments. Other complex rules apply to how rapidly income payments must
be made after your death. If you die before payments begin under an Income
Annuity, the Code generally requires that your entire interest under the Income
Annuity be paid within five years of the year in which you died. If you die
before payments begin under this Income Annuity, we will pay your entire
interest under the Income Annuity in a lump sum to the beneficiary after we
receive proof of death. If you die after income payments begin, payments must
continue to be made in accordance with the income type selected. The Code
requires that payments continue to be made at least as rapidly as under the
method of distribution that was used as of the date of your death.
Any income payments distributed under 403(a) Income Annuities are generally
taxed according to the rules described under Section 72 of the Code.
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If your benefit under a plan subject to the Retirement Equity Act (REA) is
worth more than $5,000, the Code requires that your Income Annuity protect your
spouse if you die before your receive any income payments under the Income
Annuity or if you die while income payments are being made. If your Income
Annuity is subject to the REA, your spouse has certain rights which may be
waived with the written consent of your spouse. Waiving these requirements will
cause your initial monthly benefit to increase.
Non-Qualified Income Annuity for Section 457(f) Deferred Compensation
Plans. Any income payments distributed under the plan to you or your beneficiary
are generally taxed according to the annuity rules under Section 72. Thus, when
deferred compensation is no longer subject to a substantial risk of forfeiture,
it is immediately includible in your income and it becomes an "after-tax"
purchase payment for the purposes of the tax rules governing income payments in
calculating the "exclusion ratio." It is unclear whether the 10% tax penalty for
distributions made prior to age 59 1/2 applies with respect to income payments
made under this type of plan. Thus, you should consult your own tax advisor to
clarify this issue.
Given the complexity and uncertainty inherent in this area of the tax law,
entities considering the purchase
of this Income Annuity to fund a Section 457(f) deferred compensation plan
should consult with their own tax advisors regarding the application of the
relevant rules to their particular situation. In connection with the sale of the
Non-Qualified Income Annuity for Section 457(f) Deferred Compensation Plans,
MetLife consulted special tax counsel regarding the major Federal tax issues
under Section 457. This advice from such counsel has not been updated to reflect
changes, if any, in the law and such advice was rendered solely to MetLife and
may not be relied upon by any person considering the purchase of the Deferred
Annuity.
Non-Qualified Income Annuity for Section 451 Deferred Fee Arrangements. A
trust established by the tax-exempt entity will own a Non-Qualified Income
Annuity which may be subject to taxation rules as described below under
"Non-Qualified Income Annuities." Since the trust is a grantor trust, any tax
consequences arising out of ownership of the Non-Qualified Income Annuity will
flow to the tax-exempt entity that is the grantor of such trust. Each tax-exempt
entity should consult its own tax advisor with respect to the tax rules
governing the Income Annuity. Participants in the taxable entity's deferred
compensation plan must look to the taxable entity for income payments under the
plan. It is unclear whether the 10% tax penalty for distributions made prior to
age 59 1/2 applies with respect to income payments made under this type of plan.
These persons should consult their own tax advisor for information on the tax
treatment of these income payments made under the plan.
Given the complexity and uncertainty inherent in this area of the tax law,
entities considering the purchase of this Income Annuity to fund a Section 451
deferred fee arrangement should consult with their own tax advisors regarding
the application of the relevant rules to their particular situation. In
connection with the sale of the Non-Qualified Income Annuity for Section 451
Deferred Fee Arrangements, MetLife consulted special tax counsel regarding the
major Federal tax issues under Section 451. This advice from such counsel has
not been updated to reflect changes, if any, in the law and such advice was
rendered solely to MetLife and may not be relied upon by any person considering
the purchase of the Defered Annuity.
Non-Qualified Income Annuity for Section 451 Deferred Compensation Plans. A
trust established by the tax-exempt entity or the taxable entity will own a Non-
Qualified Income Annuity which may be subject to taxation rules as described
below under "Non-Qualified Income Annuities." Since the trust is a grantor
trust, any tax consequences arising out of ownership of the Non-Qualified Income
Annuity will flow to the tax-exempt entity or the taxable entity that is the
grantor of such trust. Each such entity should consult its own tax advisor with
respect to the tax rules governing the Income Annuity. Participants will not be
taxed on their tax deferred compensation amounts until the year in which they
are paid or made available to them, unless under the method of accounting the
participant uses in computing taxable income such amount is to be properly
accounted for in a different period.
It is unclear whether the 10% tax penalty for distributions made prior to
age 59 1/2 applies with respect to income payments made under this type of plan.
Thus, you should consult your own tax advisor to clarify this issue.
Given the complexity and uncertainty inherent in this area of the tax law,
entities considering the purchase of this Income Annuity to fund a Section 451
deferred compensation plan should consult with their own tax advisors regarding
the application of the relevant rules to their particular situation. In
connection with the sale of the Non-Qualified Income Annuity for Section 451
Deferred Compensation Plans MetLife consulted special tax counsel regarding the
major Federal tax issues under Section 451. This advice from such counsel has
not been updated to reflect changes, if any, in the law and such advice was
rendered solely to MetLife and may not be relied upon by any person considering
the purchase of the Deferred Annuity.
Non-Qualified Income Annuity for Section 457(e)(11) Severance and Death
Benefit Plans. As the owner of a Non-Qualified Income Annuity, the trust is
generally subject to the rules described below under "Non-Qualified Income
Annuities." Since the trust is a grantor trust, any tax consequences arising out
of ownership of
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the Non-Qualified Income Annuity will flow to the employer, the grantor of such
trust. Each employer should consult with its own tax advisor with respect to the
tax rules governing the Income Annuity.
The Federal income tax consequences to you of this arrangement depend on
whether the program qualifies as a "bona-fide severance pay" and a "bona-fide
death benefit" plan as described in Section 457(e)(11) of the Code. If the
arrangement qualifies as a "bona-fide severance pay" and "bona-fide death
benefit" plan Section 451 of the Code will apply and you will be taxed in the
tax year in which such benefits are paid or made available to you, unless under
the method of accounting you use in computing taxable income such amount is to
be properly accounted for in a different period. If the arrangement does not
qualify as a "bona-fide severance pay" and "bona-fide death benefit" plan, the
amounts which constituted your purchase payment will be subject to tax in the
year in which they are deferred. In the event, if you have not reported such
income, in addition to the Federal income tax you will have to pay, you will be
assessed interest, and you may be subject to certain penalties by the Internal
Revenue Service. It is unclear whether the 10% tax penalty of distributions made
prior to age 59 1/2 applies with respect to income payments made under this type
of plan. Thus, you should consult your own tax advisor to clarify this issue.
Special Tax Considerations for Non-Qualified Income Annuity for
Section 457(e)(11) Severance and Death Benefit Plans. There is a considerable
risk that this arrangement may not qualify as a "bona-fide severance pay" plan
under Section 457(e)(11), the applicable section of the Code. The term
"bona-fide severance pay" plan is not defined in that section. The term
"severance pay" plan has, however, been construed under other Code sections and
under Department of Labor regulations issued under the Employee Retirement
Income Security Act of 1974. In connection with the sale of the Non-Qualified
Income Annuity for Section 457(e)(11) Severance and Death Benefit Plans, MetLife
consulted special tax counsel regarding the major Federal tax issues under
Section 457. Subsequently, the United States Court of Appeals for the Federal
Circuit indicated that for purposes of another Code section, a severance pay
plan with features similar to this arrangement would not qualify as a valid
severance pay plan. While this decision addresses severance pay plans in a
different Code context, it is probable that a court would consider it in
determining the tax consequences of this arrangement. This advice received from
such counsel has not been updated to reflect this decision or other changes in
the law, and such advice was rendered solely to MetLife and may not be relied
upon by any person considering the purchase of the Income Annuity. You should
consult with your own tax advisor to determine if the potential advantages to
you of this arrangement outweigh the potential tax risks in view of your
individual circumstances.
Non-Qualified and Enhanced Non-Qualified Income Annuities. The following
discussion assumes that you are an individual (or are treated as a natural
person under certain other circumstances specified by the Code). Income payments
are subject to an "exclusion ratio" which determines how much of each income
payment is a non-taxable return of your purchase payment and how much is a
taxable payment of earnings. Generally, once the total amount treated as a
return of your purchase payment equals the amount of such purchase payment, all
remaining income payments are fully taxable. If you die before the purchase
payment is returned, the unreturned amount may be deductible on your final
income tax return or deductible by your beneficiary if income payments continue
after your death. We will tell the purchaser of an Income Annuity what your
purchase payment was and how much of each income payment is a non-taxable return
of your purchase payment.
If you die before income payments begin, the Code generally requires
payment of your entire interest in the non-qualified income annuity to be made
within five years of the date of your death. If you die before income payments
begin, we will pay your entire interest under the Income Annuity of your
beneificiary iin a lump sum after we receive proof of your death. If you die
after income payments begin, payments must continue to be made at least as
rapidly as under the method of distribution before your death, in accordance
with the income type selected.
The tax law treats two or more non-qualified deferred annuities isued after
October 21, 1988 by the same company (or its affiliates) to the same owner
during any one calendar year as one annuity. It is unclear whether this rule
adversely affects the tax treatment of income payments received under a contract
which was issued during the same calendar year in which you purchased another
annuity from the same company (or its affilates) under which your are not yet
receiving income payments.
22
<PAGE>
FOR THE PERIOD JANUARY 1, 1998 TO DECEMBER 31, 1998--PREFERENCE PLUS DEFERRED
ANNUITIES
(10% FREE CORRIDOR VERSION)
<TABLE>
<CAPTION>
CHANGE IN
ACCUMULATION AVERAGE ANNUAL
UNIT VALUE TOTAL RETURN
------------ --------------
<S> <C> <C>
State Street Research Growth Division.......... 26.57% 20.45%
State Street Research Income Division.......... 8.05% 1.81%
State Street Research Diversified Division..... 18.17% 12.00%
State Street Research Aggressive Growth
Division..................................... 12.26% 6.04%
MetLife Stock Index Division................... 26.64% 20.53%
Santander International Stock Division......... 21.01% 14.86%
Calvert Social Balanced Division............... 14.85% 8.65%
Janus Mid Cap Division......................... 35.46% 29.41%
Loomis Sayles High Yield Bond Division......... -8.66% -15.02%
T. Rowe Price Small Cap Growth Division........ 2.21% -4.07%
Scudder Global Equity Division................. 14.56% 8.36%
</TABLE>
FOR THE PERIOD JANUARY 1, 1994 TO DECEMBER 31, 1998--PREFERENCE PLUS DEFERRED
ANNUITIES
(10% FREE CORRIDOR VERSION)
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION
ACCUMULATION UNIT VALUE AVERAGE ANNUAL
UNIT VALUE ANNUALIZED TOTAL RETURN
------------ ------------ --------------
<S> <C> <C> <C>
State Street Research Growth
Division..................... 143.26% 19.45% 19.22%
State Street Research Income
Division..................... 35.46% 6.25% 5.84%
State Street Research
Diversified Division......... 91.17% 13.83% 13.54%
State Street Research
Aggressive Growth Division... 55.96% 9.29% 8.93%
MetLife Stock Index Division... 170.46% 22.00% 21.81%
Santander International Stock
Division..................... 16.96% 3.18% 2.71%
Calvert Social Balanced
Division..................... 85.63% 13.16% 12.86%
</TABLE>
FOR THE PERIOD INCEPTION TO DECEMBER 31, 1998--PREFERENCE PLUS DEFERRED
ANNUITIES
(10% FREE CORRIDOR VERSION)
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION
INCEPTION ACCUMULATION UNIT VALUE AVERAGE ANNUAL
DATE UNIT VALUE ANNUALIZED TOTAL RETURN
-------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
State Street Research Growth
Division..................... 7/2/90 243.00% 15.60% 15.60%
State Street Research Income
Division..................... 7/2/90 93.30% 8.06% 8.06%
State Street Research
Diversified Division......... 7/2/90 170.50% 12.41% 12.41%
State Street Research
Aggressive Growth Division... 7/2/90 181.20% 12.93% 12.93%
MetLife Stock Index Division... 7/2/90 270.80% 16.66% 16.66%
Santander International Stock
Division..................... 7/1/91 60.70% 6.52% 6.52%
Calvert Social Balanced
Division..................... 9/17/90 154.50% 11.92% 11.92%
Janus Mid Cap Division......... 3/3/97 71.90% 34.45% 32.31%
Loomis Sayles High Yield Bond
Division..................... 3/3/97 -4.00% -2.21% -5.26%
T. Rowe Price Small Cap Growth
Division..................... 3/3/97 20.20% 10.58% 7.90%
Scudder Global Equity
Division..................... 3/3/97 24.30% 12.62% 9.99%
Harris Oakmark Large Cap Value
Division..................... 11/9/98 -2.90% N/A -9.22%*
Lehman Brothers Aggregate Bond
Index Division............... 11/9/98 1.20% N/A -5.09%*
Morgan Stanley EAFE(Registered)
Index Division............... 11/9/98 7.90% N/A 1.66%*
Neuberger Berman Partners Mid
Cap Value Division........... 11/9/98 7.30% N/A 1.05%*
Russell 2000 Index Division.... 11/9/98 5.30% N/A -0.96%*
T. Rowe Price Large Cap Growth
Division..................... 11/9/98 10.10% N/A 3.87%*
</TABLE>
- ------------------------
* This is not an annualized number, because the Division is less than one year
old.
23
<PAGE>
FOR THE JANUARY 1, 1998 TO DECEMBER 31, 1998--PREFERENCE PLUS (20% FREE CORRIDOR
VERSION)
<TABLE>
<CAPTION>
CHANGE IN
ACCUMULATION AVERAGE ANNUAL
UNIT VALUE TOTAL RETURN
------------ --------------
<S> <C> <C>
State Street Research Growth Division.......... 26.57% 21.34%
State Street Research Income Division.......... 8.05% 2.56%
State Street Research Diversified Division..... 18.17% 12.83%
State Street Research Aggressive Growth
Division..................................... 12.26% 6.83%
MetLife Stock Index Division................... 26.64% 21.41%
Santander International Stock Division......... 21.01% 15.70%
Calvert Social Balanced Division............... 14.85% 9.45%
Janus Mid Cap Division......................... 35.46% 30.36%
Loomis Sayles High Yield Bond Division......... -8.66% -14.38%
T. Rowe Price Small Cap Growth Division........ 2.21% -3.36%
Scudder Global Equity Division................. 14.56% 9.17%
</TABLE>
FOR THE PERIOD JANUARY 1, 1994 TO DECEMBER 31, 1998--PREFERENCE PLUS (20% FREE
CORRIDOR VERSION)
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION
ACCUMULATION UNIT AVERAGE ANNUAL
UNIT VALUE ANNUALIZED TOTAL RETURN
------------ ------------ --------------
<S> <C> <C> <C>
State Street Research Growth
Division..................... 143.26% 19.45% 19.29%
State Street Research Income
Division..................... 35.46% 6.25% 5.91%
State Street Research
Diversified Division......... 91.17% 13.83% 13.61%
State Street Research
Aggressive Growth Division... 55.96% 9.29% 9.00%
MetLife Stock Index Division... 170.46% 22.00% 21.88%
Santander International Stock
Division..................... 16.96% 3.18% 2.77%
Calvert Social Balanced
Division..................... 85.63% 13.16% 12.93%
</TABLE>
FOR THE PERIOD INCEPTION TO DECEMBER 31, 1998--PREFERENCE PLUS (20% FREE
CORRIDOR VERSION)
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION
INCEPTION ACCUMULATION UNIT AVERAGE ANNUAL
DATE UNIT VALUE ANNUALIZED TOTAL RETURN
-------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
State Street Research Growth
Division..................... 7/2/90 243.00% 15.60% 15.60%
State Street Research Income
Division..................... 7/2/90 93.30% 8.06% 8.06%
State Street Research
Diversified Division......... 7/2/90 170.50% 12.41% 12.41%
State Street Research
Aggressive Growth Division... 7/2/90 181.20% 12.93% 12.93%
MetLife Stock Index Division... 7/2/90 270.80% 16.66% 16.66%
Santander International Stock
Division..................... 7/1/91 60.70% 6.52% 6.52%
Calvert Social Balanced
Division..................... 9/17/90 154.50% 11.92% 11.92%
Janus Mid Cap Division......... 3/3/97 71.90% 34.45% 32.76%
Loomis Sayles High Yield Bond
Division..................... 3/3/97 -4.00% -2.21% -4.94%
T. Rowe Price Small Cap Growth
Division..................... 3/3/97 20.20% 10.58% 8.26%
Scudder Global Equity
Division..................... 3/3/97 24.30% 12.62% 10.37%
Harris Oakmark Large Cap Value
Division..................... 11/9/98 -2.90% N/A -8.54%*
Lehman Brothers Aggregate Bond
Index Division............... 11/9/98 1.20% N/A -4.38%*
Morgan Stanley EAFE(Registered)
Index Division............... 11/9/98 7.90% N/A 2.41%*
Neuberger Berman Partners Mid
Cap Value Division........... 11/9/98 7.30% N/A 1.80%*
Russell 2000 Index Division.... 11/9/98 5.30% N/A -0.23%*
T. Rowe Price Large Cap Growth
Division..................... 11/9/98 10.10% N/A 4.64%*
</TABLE>
- ------------------------
* This is not an annualized number, because the Division is less than one year
old.
24
<PAGE>
YIELDS FOR THE 30 DAY PERIOD ENDING DECEMBER 31, 1998--PREFERENCE PLUS DEFERRED
ANNUITIES
State Street Research Growth Division..................... 0.04%
State Street Research Income Division..................... 4.67%
State Street Research Diversified Division................ 2.13%
State Street Research Aggressive Growth Division.......... -1.43%
MetLife Stock Index Division.............................. -0.15%
Santander International Stock Division.................... -0.92%
Janus Mid Cap Division.................................... -1.50%
Loomis Sayles High Yield Bond Division.................... 8.95%
T. Rowe Price Small Cap Growth Division................... -1.32%
Scudder Global Equity Division............................ -0.81%
Harris Oakmark Large Cap Value Division................... 1.25%
Lehman Brothers Aggregate Bond Index Division............. 4.63%
Morgan Stanley EAFE(Registered) Index Division............ -0.31%
Neuberger Berman Partners Mid Cap Value Division.......... 2.46%
Russell 2000 Index Division............................... 0.89%
T. Rowe Price Large Cap Growth Division................... -0.00%
FOR THE PERIOD JANUARY 1, 1998 TO DECEMBER 31, 1998--ENHANCED PREFERENCE PLUS
DEFERRED ANNUITIES
(WITH SALES LOAD) (10% FREE CORRIDOR VERSION)
<TABLE>
<CAPTION>
CHANGE IN
ACCUMULATION AVERAGE ANNUAL
UNIT VALUE TOTAL RETURN
------------ --------------
<S> <C> <C>
State Street Research Growth Division.......... 26.98% 20.87%
State Street Research Income Division.......... 8.39% 2.15%
State Street Research Diversified Division..... 18.53% 12.36%
State Street Research Aggressive Growth
Division..................................... 12.62% 6.41%
MetLife Stock Index Division................... 27.02% 20.90%
Santander International Stock Division......... 21.34% 15.19%
Calvert Social Balanced Division............... 15.16% 8.96%
Janus Mid Cap Division......................... 35.93% 29.88%
Loomis Sayles High Yield Bond Division......... -8.36% -14.72%
T. Rowe Price Small Cap Growth Division........ 2.46% -3.82%
Scudder Global Equity Division................. 14.80% 8.60%
</TABLE>
FOR THE PERIOD JANUARY 1, 1994 TO DECEMBER 31, 1998--ENHANCED PREFERENCE PLUS
DEFERRED ANNUITIES
(WITH SALES LOAD) (10% FREE CORRIDOR VERSION)
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION
ACCUMULATION UNIT VALUE AVERAGE ANNUAL
UNIT VALUE ANNUALIZED TOTAL RETURN
------------ ------------ --------------
<S> <C> <C> <C>
State Street Research Growth
Division..................... 146.97% 19.81% 19.59%
State Street Research Income
Division..................... 37.51% 6.57% 6.17%
State Street Research
Diversified Division......... 94.00% 14.16% 13.88%
State Street Research
Aggressive Growth Division... 58.30% 9.62% 9.26%
MetLife Stock Index Division... 174.47% 22.36% 22.17%
Santander International Stock
Division..................... 18.71% 3.49% 3.02%
Calvert Social Balanced
Division..................... 88.25% 13.48% 13.18%
</TABLE>
25
<PAGE>
FOR THE PERIOD INCEPTION TO DECEMBER 31, 1998--ENHANCED PREFERENCE PLUS DEFERRED
ANNUITIES
(WITH SALES LOAD) (10% FREE CORRIDOR VERSION)
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION
INCEPTION ACCUMULATION UNIT VALUE AVERAGE ANNUAL
DATE UNIT VALUE ANNUALIZED TOTAL RETURN
-------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
State Street Research Growth
Division..................... 7/2/90 251.75% 15.94% 15.94%
State Street Research Income
Division..................... 7/2/90 98.32% 8.38% 8.38%
State Street Research
Diversified Division......... 7/2/90 177.48% 12.75% 12.75%
State Street Research
Aggressive Growth Division... 7/2/90 188.35% 13.26% 13.26%
MetLife Stock Index Division... 7/2/90 280.46% 17.01% 17.01%
Santander International Stock
Division..................... 7/1/91 64.30% 6.84% 6.84%
Calvert Social Balanced
Division..................... 5/1/91 134.00% 11.72% 11.72%
Janus Mid Cap Division......... 3/3/97 72.90% 34.88% 32.75%
Loomis Sayles High Yield Bond
Division..................... 3/3/97 -3.50% -1.93% -4.98%
T. Rowe Price Small Cap Growth
Division..................... 3/3/97 20.80% 10.88% 8.20%
Scudder Global Equity
Division..................... 3/3/97 24.90% 12.92% 10.30%
Harris Oakmark Large Cap Value
Division..................... 11/9/98 -2.80% N/A -9.12%*
Lehman Brothers Aggregate Bond
Index Division............... 11/9/98 1.20% N/A -5.09%*
Morgan Stanley EAFE(Registered)
Index Division............... 11/9/98 8.00% N/A 1.76%*
Neuberger Berman Partners Mid
Cap Value Division........... 11/9/98 7.30% N/A 1.05%*
Russell 2000 Index Division.... 11/9/98 5.30% N/A -0.96%*
T. Rowe Price Large Cap Growth
Division..................... 11/9/98 10.10% N/A 3.87%*
</TABLE>
- ------------------
* This is not an annualized number because the Division is less than one year
old.
FOR THE PERIOD JANUARY 1, 1998 TO DECEMBER 31, 1998--ENHANCED PREFERENCE PLUS
DEFERRED ANNUITIES
(WITH SALES LOAD) (20% FREE CORRIDOR VERSION)
<TABLE>
<CAPTION>
CHANGE IN
ACCUMULATION AVERAGE ANNUAL
UNIT VALUE TOTAL RETURN
------------ --------------
<S> <C> <C>
State Street Research Growth Division.......... 26.98% 21.76%
State Street Research Income Division.......... 8.39% 2.91%
State Street Research Diversified Division..... 18.53% 13.19%
State Street Research Aggressive Growth
Division..................................... 12.62% 7.20%
MetLife Stock Index Division................... 27.02% 21.79%
Santander International Stock Division......... 21.34% 16.04%
Janus Mid Cap Division......................... 35.93% 30.83%
Loomis Sayles High Yield Bond Division......... -8.36% -14.07%
T. Rowe Price Small Cap Growth Division........ 2.46% -3.11%
Scudder Global Equity Division................. 14.80% 9.40%
Harris Oakmark Large Cap Value Division........ N/A N/A
Lehman Brothers Aggregate Bond Index
Division..................................... N/A N/A
Morgan Stanley EAFE(Registered) Index
Division..................................... N/A N/A
Neuberger Berman Partners Mid Cap Value
Division..................................... N/A N/A
Russell 2000 Index Division.................... N/A N/A
T. Rowe Price Large Cap Growth Division........ N/A N/A
Calvert Social Balanced Division............... 15.16% 9.77%
Calvert Social Mid Cap Growth Division......... 28.57% 23.37%
Fidelity Equity-Income Division................ 10.57% 5.12%
Fidelity Growth Division....................... 38.19% 33.13%
Fidelity Overseas Division..................... 11.71% 6.27%
Fidelity Investment Grade Bond Division........ 7.81% 2.32%
Fidelity Asset Manager Division................ 13.99% 8.59%
</TABLE>
26
<PAGE>
FOR THE PERIOD JANUARY 1, 1994 TO DECEMBER 31, 1998--
ENHANCED PREFERENCE PLUS DEFERRED ANNUITIES (WITH SALES LOAD) (20% FREE CORRIDOR
VERSION)
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION
ACCUMULATION UNIT VALUE AVERAGE ANNUAL
UNIT VALUE ANNUALIZED TOTAL RETURN
------------ ------------ --------------
<S> <C> <C> <C>
State Street Research Growth
Division..................... 146.97% 19.81% 19.66%
State Street Research Income
Division..................... 37.51% 6.57% 6.24%
State Street Research
Diversified Division......... 94.00% 14.16% 13.95%
State Street Research
Aggressive Growth Division... 58.30% 9.62% 9.33%
MetLife Stock Index Division... 174.47% 22.36% 22.24%
Santander International Stock
Division..................... 18.71% 3.49% 3.09%
Calvert Social Balanced
Division..................... 88.25% 13.48% 13.25%
Calvert Social Mid Cap Growth
Division..................... 106.56% 15.60% 15.41%
Fidelity Equity-Income
Division..................... 124.17% 17.51% 17.34%
Fidelity Growth Division....... 155.14% 20.59% 20.45%
Fidelity Overseas Division..... 51.53% 8.66% 8.36%
Fidelity Investment Grade Bond
Division..................... 31.87% 5.69% 5.33%
Fidelity Asset Manager
Division..................... 66.69% 10.75% 10.49%
</TABLE>
FOR THE PERIOD INCEPTION TO DECEMBER 31, 1998--
ENHANCED PREFERENCE PLUS DEFERRED ANNUITIES (WITH SALES LOAD) (20% FREE CORRIDOR
VERSION)
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION
INCEPTION ACCUMULATION UNIT VALUE AVERAGE ANNUAL
DATE UNIT VALUE ANNUALIZED TOTAL RETURN
-------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
State Street Research Growth
Division..................... 7/2/90 251.75% 15.94% 15.94%
State Street Research Income
Division..................... 7/2/90 98.32% 8.38% 8.38%
State Street Research
Diversified Division......... 7/2/90 177.48% 12.75% 12.75%
State Street Research
Aggressive Growth Division... 7/2/90 188.35% 13.26% 13.26%
MetLife Stock Index Division... 7/2/90 280.46% 17.01% 17.01%
Santander International Stock
Division..................... 7/1/91 64.30% 6.84% 6.84%
Janus Mid Cap Division......... 3/3/97 72.90% 34.88% 33.19%
Loomis Sayles High Yield Bond
Division..................... 3/3/97 -3.50% -1.93% -4.65%
T. Rowe Price Small Cap Growth
Division..................... 3/3/97 20.80% 10.88% 8.58%
Scudder Global Equity
Division..................... 3/3/97 24.90% 12.92% 10.68%
Harris Oakmark Large Cap Value
Division..................... 11/9/98 -2.80% N/A -8.44%*
Lehman Brothers Aggregate Bond
Index Division............... 11/9/98 1.20% N/A -4.38%*
Morgan Stanley EAFE(Registered)
Index Division............... 11/9/98 8.00% N/A 2.51%*
Neuberger Berman Partners Mid
Cap Value Division........... 11/9/98 7.30% N/A 1.80%*
Russell 2000 Index Division.... 11/9/98 5.30% N/A -0.23%*
T. Rowe Price Large Cap Growth
Division..................... 11/9/98 10.10% N/A 4.64%*
Calvert Social Balanced
Division..................... 5/1/91 134.00% 11.72% 11.72%
Calvert Social Mid Cap Growth
Division..................... 5/1/92 144.55% 14.34% 14.31%
Fidelity Equity-Income
Division..................... 5/1/92 186.07% 17.06% 17.04%
Fidelity Growth Division....... 5/1/92 235.46% 19.89% 19.87%
Fidelity Overseas Division..... 5/1/92 77.39% 8.97% 8.91%
Fidelity Investment Grade Bond
Division..................... 5/1/92 53.51% 6.64% 6.56%
Fidelity Asset Manager
Division..................... 5/1/92 112.56% 11.97% 11.92%
</TABLE>
- ------------------
* This is not an annualized number because the Division is less than one year
old.
27
<PAGE>
FOR THE PERIOD JANUARY 1, 1998 TO DECEMBER 31, 1998--
ENHANCED NON-QUALIFIED PREFERENCE PLUS DEFERRED ANNUITIES (NO SALES LOAD)
<TABLE>
<CAPTION>
CHANGE IN
ACCUMULATION AVERAGE ANNUAL
UNIT VALUE TOTAL RETURN
------------ --------------
<S> <C> <C>
State Street Research Growth Division.......... 26.98% 26.98%
State Street Research Income Division.......... 8.39% 8.39%
State Street Research Diversified Division..... 18.53% 18.53%
State Street Research Aggressive Growth
Division..................................... 12.62% 12.62%
MetLife Stock Index Division................... 27.02% 27.02%
Santander International Stock Division......... 21.34% 21.34%
Janus Mid Cap Division......................... 35.93% 35.93%
Loomis Sayles High Yield Bond Division......... -8.36% -8.36%
T. Rowe Price Small Cap Growth Division........ 2.46% 2.46%
Scudder Global Equity Division................. 14.80% 14.80%
Calvert Social Balanced Division............... 15.16% 15.16%
Calvert Social Mid Cap Growth Division......... 28.57% 28.57%
Fidelity Equity-Income Division................ 10.57% 10.57%
Fidelity Growth Division....................... 38.19% 38.19%
Fidelity Overseas Division..................... 11.71% 11.71%
Fidelity Investment Grade Bond Division........ 7.81% 7.81%
Fidelity Asset Manager Division................ 13.99% 13.99%
</TABLE>
FOR THE PERIOD JANUARY 1, 1994 THROUGH DECEMBER 31, 1998--
ENHANCED NON-QUALIFIED PREFERENCE PLUS DEFERRED ANNUITIES (NO SALES LOAD)
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION AVERAGE
ACCUMULATION UNIT VALUE ANNUAL
UNIT VALUE ANNUALIZED TOTAL RETURN
------------ ------------ ------------
<S> <C> <C> <C>
State Street Research Growth
Division..................... 146.97% 19.81% 19.81%
State Street Research Income
Division..................... 37.51% 6.57% 6.57%
State Street Research
Diversified Division......... 94.00% 14.16% 14.16%
State Street Research
Aggressive Growth Division... 58.30% 9.62% 9.62%
MetLife Stock Index Division... 174.47% 22.36% 22.36%
Santander International Stock
Division..................... 18.71% 3.49% 3.49%
Calvert Social Balanced
Division..................... 88.25% 13.48% 13.48%
Calvert Social Mid Cap
Division..................... 106.56% 15.60% 15.60%
Fidelity Equity-Income
Division..................... 124.17% 17.51% 17.51%
Fidelity Growth Division....... 155.14% 20.59% 20.59%
Fidelity Overseas Division..... 51.53% 8.66% 8.66%
Fidelity Investment Grade Bond
Division..................... 31.87% 5.69% 5.69%
Fidelity Asset Manager
Division..................... 66.69% 10.75% 10.75%
</TABLE>
28
<PAGE>
FOR THE PERIOD INCEPTION TO DECEMBER 31, 1998--
ENHANCED NON-QUALIFIED PREFERENCE PLUS DEFERRED ANNUITIES (NO SALES LOAD)
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION
INCEPTION ACCUMULATION UNIT VALUE AVERAGE ANNUAL
DATE UNIT VALUE ANNUALIZED TOTAL RETURN
-------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
State Street Research Growth
Division..................... 5/1/91 251.75% 15.94% 15.94%
State Street Research Income
Division..................... 5/1/91 98.32% 8.38% 8.38%
State Street Research
Diversified Division......... 5/1/91 177.48% 12.75% 12.75%
State Street Research
Aggressive Growth Division... 5/1/91 188.35% 13.26% 13.26%
MetLife Stock Index Division... 5/1/91 280.46% 17.01% 17.01%
Santander International Stock
Division..................... 7/1/91 64.30% 6.84% 6.84%
Janus Mid Cap Division......... 3/3/97 72.90% 34.88% 34.88%
Loomis Sayles High Yield Bond
Division..................... 3/3/97 -3.50% -1.93% -1.93%
T. Rowe Price Small Cap Growth
Division..................... 3/3/97 20.80% 10.88% 10.88%
Scudder Global Equity
Division..................... 3/3/97 24.90% 12.92% 12.92%
Harris Oakmark Large Cap Value
Division..................... 11/9/98 -2.80% N/A -2.80%*
Lehman Brothers Aggregate Bond
Index Division............... 11/9/98 1.20% N/A 1.20%*
Morgan Stanley EAFE(Registered)
Index Division............... 11/9/98 8.00% N/A 8.00%*
Neuberger Berman Partners Mid
Cap Value Division........... 11/9/98 7.30% N/A 7.30%*
Russell 2000 Index Division.... 11/9/98 5.30% N/A 5.30%*
T. Rowe Price Large Cap Growth
Division..................... 11/9/98 10.10% N/A 10.10%*
Calvert Social Balanced
Division..................... 5/1/91 134.00% 11.72% 11.72%
Calvert Social Mid Cap Growth
Division..................... 5/1/92 144.55% 14.34% 14.34%
Fidelity Equity-Income
Division..................... 5/1/92 186.07% 17.06% 17.06%
Fidelity Growth Division....... 5/1/92 235.46% 19.89% 19.89%
Fidelity Overseas Division..... 5/1/92 77.39% 8.97% 8.97%
Fidelity Investment Grade Bond
Division..................... 5/1/92 53.51% 6.64% 6.64%
Fidelity Asset Manager Division 5/1/92 112.56% 11.97% 11.97%
</TABLE>
- ------------------
* This is not an annualized number because the Division is less than one year
old.
YIELDS FOR THE 30 DAY PERIOD ENDING DECEMBER 31, 1998--
ENHANCED PREFERENCE PLUS DEFERRED ANNUITIES
State Street Research Growth Division..................... 0.33%
State Street Research Income Division..................... 4.97%
State Street Research Diversified Division................ 2.43%
State Street Research Aggressive Growth Division.......... -1.15%
MetLife Stock Index Division.............................. 0.15%
Santander International Stock Division.................... -0.62%
Janus Mid Cap Division.................................... -1.22%
Loomis Sayles High Yield Bond Division.................... 9.27%
T. Rowe Price Small Cap Growth Division................... -1.04%
Scudder Global Equity Division............................ -0.52%
Harris Oakmark Large Cap Value Division................... 1.40%
Lehman Brothers Aggregate Bond Index Division............. 4.79%
Morgan Stanley EAFE(Registered) Index Division............ -0.18%
Neuberger Berman Partners Mid Cap Value Division.......... 2.62%
Russell 2000 Index Division............................... 1.03%
T. Rowe Price Large Cap Growth Division................... 0.15%
29
<PAGE>
FOR THE PERIOD JANUARY 1, 1998 TO DECEMBER 31, 1998--
FINANCIAL FREEDOM ACCOUNT DEFERRED ANNUITIES
<TABLE>
<CAPTION>
CHANGE IN
ACCUMULATION AVERAGE ANNUAL
UNIT VALUE TOTAL RETURN
------------ --------------
<S> <C> <C>
State Street Research Growth Division.......... 26.98% 26.98%
State Street Research Income Division.......... 8.39% 8.39%
State Street Research Diversified Division..... 18.53% 18.53%
State Street Research Aggressive Growth
Division..................................... 12.62% 12.62%
Santander International Stock Division......... 27.02% 27.02%
MetLife Stock Index Division................... 21.34% 21.34%
Janus Mid Cap Division......................... 35.93% 35.93%
Loomis Sayles High Yield Bond Division......... -8.36% -8.36%
T. Rowe Price Small Cap Growth Division........ 2.46% 2.46%
Scudder Global Equity Division................. 14.80% 14.80%
Calvert Social Balanced Division............... 15.18% 15.18%
Calvert Social Mid Cap Growth Division......... 28.57% 28.57%
Fidelity Equity-Income Division................ 10.57% 10.57%
Fidelity Growth Division....................... 38.19% 38.19%
Fidelity Overseas Division..................... 11.71% 11.71%
Fidelity Investment Grade Bond Division........ 7.81% 7.81%
Fidelity Asset Manager Division................ 13.99% 13.99%
</TABLE>
FOR THE PERIOD JANUARY 1, 1994 TO DECEMBER 31, 1998--FINANCIAL FREEDOM ACCOUNT
DEFERRED ANNUITIES
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION
ACCUMULATION UNIT VALUE AVERAGE ANNUAL
UNIT VALUE ANNUALIZED TOTAL RETURN
------------ ------------ --------------
<S> <C> <C> <C>
MetLife Stock Index Division... 174.43% 22.36% 22.36%
Calvert Social Balanced
Division..................... 88.27% 13.48% 13.48%
Calvert Social Mid Cap Growth
Division..................... 106.56% 15.60% 15.60%
Fidelity Equity-Income
Division..................... 124.17% 17.51% 17.51%
Fidelity Growth Division....... 155.14% 20.59% 20.59%
Fidelity Overseas Division..... 51.53% 8.66% 8.66%
Fidelity Investment Grade Bond
Division..................... 31.87% 5.69% 5.69%
Fidelity Asset Manager
Division..................... 66.69% 10.75% 10.75%
</TABLE>
30
<PAGE>
FOR THE PERIOD INCEPTION TO DECEMBER 31, 1998--FINANCIAL FREEDOM ACCOUNT
DEFERRED ANNUITIES
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION
INCEPTION ACCUMULATION UNIT VALUE AVERAGE ANNUAL
DATE UNIT VALUE ANNUALIZED TOTAL RETURN
-------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
State Street Research Growth
Division..................... 5/1/96 82.27% 25.23% 25.23%
State Street Research Income
Division..................... 5/1/96 24.41% 8.53% 8.53%
State Street Research
Diversified Division......... 5/1/96 55.55% 18.01% 18.01%
State Street Research
Aggressive Growth Division... 5/1/96 13.55% 4.88% 4.88%
Santander International Stock
Division..................... 5/1/96 252.10% 18.26% 18.26%
MetLife Stock Index Division... 7/1/91 12.53% 4.52% 4.52%
Janus Mid Cap Division......... 3/3/97 72.90% 34.88% 34.88%
Loomis Sayles High Yield
Division..................... 3/3/97 -3.50% -1.93% -1.93%
T. Rowe Price Small Cap Growth
Division..................... 3/3/97 20.80% 10.88% 10.88%
Scudder Global Equity
Division..................... 3/3/97 24.90% 12.92% 12.92%
Harris Oakmark Large Cap Value
Division..................... 11/9/98 -2.80% N/A -2.80%*
Lehman Brothers Aggregate Bond
Index Division............... 11/9/98 1.20% N/A 1.20%*
Morgan Stanley EAFE(Registered)
Index Division............... 11/9/98 8.00% N/A 8.00%*
Neuberger Berman Partners Mid
Cap Value Division........... 11/9/98 7.30% N/A 7.30%*
Russell 2000 Index Division.... 11/9/98 5.30% N/A 5.30%*
T. Rowe Price Large Cap Growth
Division..................... 11/9/98 10.10% N/A 10.10%*
Calvert Social Balanced
Division..................... 7/1/91 134.40% 12.02% 12.02%
Calvert Social Mid Cap Growth
Division..................... 7/1/91 164.60% 13.84% 13.84%
Fidelity Equity-Income
Division..................... 7/1/91 236.70% 17.55% 17.55%
Fidelity Growth Division....... 7/1/91 304.90% 20.48% 20.48%
Fidelity Overseas Division..... 7/1/91 98.50% 9.56% 9.56%
Fidelity Investment Grade Bond
Division..................... 7/1/91 68.40% 7.19% 7.19%
Fidelity Asset Manager
Division..................... 7/1/91 138.70% 12.29% 12.29%
</TABLE>
- ------------------
* This is not an annualized number because the Division is less than one year
old.
MONEY MARKET DIVISIONS--SEVEN DAY PERIOD ENDING DECEMBER 31, 1998
<TABLE>
<CAPTION>
EFFECTIVE
YIELD YIELD
------------ ------------
<S> <C> <C>
VestMet Deferred Annuities..................... 5.51% 5.66%
Enhanced VestMet Deferred Annuities............ 6.06% 6.24%
Financial Freedom Account Deferred Annuities... 2.81% 2.85%
</TABLE>
FOR THE PERIOD JANUARY 1, 1998 TO DECEMBER 31, 1998--VESTMET DEFERRED ANNUITIES
<TABLE>
<CAPTION>
CHANGE IN AVERAGE
ACCUMULATION ANNUAL
UNIT VALUE TOTAL RETURN
------------ ------------
<S> <C> <C>
Growth Division................................ 26.28% 18.35%
Income Division................................ 7.76% 1.22%
Diversified Division........................... 17.87% 10.39%
Aggressive Growth Division..................... 12.00% 5.23%
Stock Index Division........................... 26.34% 18.83%
</TABLE>
31
<PAGE>
FOR THE PERIOD JANUARY 1, 1994 TO DECEMBER 31, 1998--VESTMET DEFERRED ANNUITIES
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION AVERAGE
ACCUMULATION UNIT VALUE ANNUAL
UNIT VALUE ANNUALIZED TOTAL RETURN
------------ ------------ ------------
<S> <C> <C> <C>
Growth Division................ 140.37% 19.17% 17.95%
Income Division................ 33.80% 6.00% 5.05%
Diversified Division........... 88.87% 13.56% 12.29%
Aggressive Growth Division..... 54.06% 9.03% 8.11%
Stock Index Division........... 167.16% 21.72% 20.94%
</TABLE>
FOR THE PERIOD JANUARY 1, 1989 TO DECEMBER 31, 1998--VESTMET DEFERRED ANNUITIES
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION AVERAGE
ACCUMULATION UNIT VALUE ANNUAL
UNIT VALUE ANNUALIZED TOTAL RETURN
------------ ------------ ------------
<S> <C> <C> <C>
Growth Division................ 374.20% 16.84% 16.57%
Income Division................ 116.29% 8.02% 7.86%
Diversified Division........... 229.28% 12.66% 12.27%
Aggressive Growth Division..... 278.37% 14.23% 14.17%
</TABLE>
FOR THE PERIOD INCEPTION TO DECEMBER 31, 1998--VESTMET DEFERRED ANNUITIES
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION AVERAGE
INCEPTION ACCUMULATION UNIT VALUE ANNUAL
DATE UNIT VALUE ANNUALIZED TOTAL RETURN
-------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Stock Index Division........... 5/1/90 293.80% 17.12% 17.10%
</TABLE>
YIELDS FOR THE 30 DAY PERIOD ENDING DECEMBER 31, 1998--VESTMET DEFERRED
ANNUITIES
Growth Division........................................... -0.21%
Income Division........................................... 4.37%
Diversified Division...................................... 1.86%
Aggressive Growth Division................................ -1.66%
Stock Index Division...................................... -0.42%
FOR THE PERIOD JANUARY 1, 1998 TO DECEMBER 31, 1998--ENHANCED VESTMET DEFERRED
ANNUITIES
<TABLE>
<CAPTION>
CHANGE IN AVERAGE
ACCUMULATION ANNUAL
UNIT VALUE TOTAL RETURN
------------ ------------
<S> <C> <C>
Growth Division................................ 26.98% 19.12%
Income Division................................ 8.39% 1.80%
Diversified Division........................... 18.53% 11.16%
Aggressive Growth Division..................... 12.62% 5.81%
Stock Index Division........................... 27.02% 19.46%
</TABLE>
32
<PAGE>
FOR THE PERIOD JANUARY 1, 1994 TO DECEMBER 31, 1998--
ENHANCED VESTMET DEFERRED ANNUITIES
<TABLE>
<CAPTION>
CHANGE IN CHANGE IN AVERAGE
ACCUMULATION ACCUMULATION ANNUAL
UNIT VALUE UNIT ANNUALIZED TOTAL RETURN
------------ --------------- ------------
<S> <C> <C> <C>
Growth Division................ 146.97% 19.82% 18.69%
Income Division................ 37.51% 6.58% 5.62%
Diversified Division........... 94.00% 14.17% 13.03%
Aggressive Growth Division..... 58.30% 9.62% 8.67%
Stock Index Division........... 174.47% 22.38% 21.60%
</TABLE>
FOR THE PERIOD JANUARY 1, 1989 TO DECEMBER 31, 1998--
ENHANCED VESTMET DEFERRED ANNUITIES
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION AVERAGE
ACCUMULATION UNIT VALUE ANNUAL
UNIT VALUE ANNUALIZED TOTAL RETURN
------------ --------------- ------------
<S> <C> <C> <C>
Growth Division................ 404.57% 17.57% 17.36%
Income Division................ 128.72% 8.63% 8.46%
Diversified Division........... 249.04% 13.31% 13.10%
Aggressive Growth Division..... 301.31% 14.91% 14.82%
</TABLE>
FOR THE PERIOD INCEPTION TO DECEMBER 31, 1998--
ENHANCED VESTMET DEFERRED ANNUITIES
<TABLE>
<CAPTION>
CHANGE IN
CHANGE IN ACCUMULATION AVERAGE
INCEPTION ACCUMULATION UNIT VALUE ANNUAL
DATE UNIT VALUE ANNUALIZED TOTAL RETURN
-------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
Stock Index Division........... 5/1/90 312.80% 17.76% 17.73%
</TABLE>
YIELDS FOR THE 30 DAY PERIOD ENDING DECEMBER 31, 1998--
ENHANCED VESTMET DEFERRED ANNUITIES
Growth Division........................................... 0.33%
Income Division........................................... 4.95%
Diversified Division...................................... 2.42%
Aggressive Growth Division................................ -1.15%
Stock Index Division...................................... 0.13%
33
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Contractholders of
Metropolitan Life Separate Account E:
We have audited the accompanying statements of assets and liabilities of the
State Street Research Growth, State Street Research Income, State Street
Research Money Market, State Street Research Diversified, State Street
Research Aggressive Growth, MetLife Stock Index, Santander International
Stock, Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe Price Small Cap
Growth, Scudder Global Equity, Harris Oakmark Large Cap Value,
Neuberger&Berman Partners Mid Cap Value, T. Rowe Price Large Cap Growth,
Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index, Russell 2000
Index, Variable B, Variable C, Variable D, Fidelity Money Market, Fidelity
Equity-Income, Fidelity Growth, Fidelity Overseas, Fidelity Investment Grade
Bond, Fidelity Asset Manager, Calvert Social Balanced and Calvert Social Mid
Cap Growth Divisions of Metropolitan Life Separate Account E (the "Separate
Account") as of December 31, 1998 and the related statements of operations for
the year then ended and of changes in net assets for the years ended December
31, 1998 and 1997. These financial statements are the responsibility of the
Separate Account's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at December 31, 1998 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets of the State Street Research Growth, State Street
Research Income, State Street Research Money Market, State Street Research
Diversified, State Street Research Aggressive Growth, MetLife Stock Index,
Santander International Stock, Loomis Sayles High Yield Bond, Janus Mid Cap,
T. Rowe Price Small Cap Growth, Scudder Global Equity, Harris Oakmark Large
Cap Value, Neuberger&Berman Partners Mid Cap Value, T. Rowe Price Large Cap
Growth, Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index,
Russell 2000 Index, Variable B, Variable C, Variable D, Fidelity Money Market,
Fidelity Equity-Income, Fidelity Growth, Fidelity Overseas, Fidelity
Investment Grade Bond, Fidelity Asset Manager, Calvert Social Balanced and
Calvert Social Mid Cap Growth Divisions of Metropolitan Life Separate Account
E at December 31, 1998 and the results of their operations for the year then
ended and the changes in their net assets for the years ended December 31,
1998 and 1997 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
March 5, 1999
15
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
State Street
State Street State Street Research State Street
Research Research Money Research
Growth Income Market Diversified
Division Division Division Division
-------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in
Metropolitan Series
Fund, Inc. at Value
(Note 1A):
State Street Research
Growth Portfolio
(70,709,443 Shares;
cost $2,037,667,170)... $2,529,998,376 -- -- --
State Street Research
Income Portfolio
(35,153,943 Shares;
cost $450,385,594)..... -- $449,267,390 -- --
State Street Research
Money Market Portfolio
(1,379,587 Shares; cost
$14,668,207)........... -- -- $14,282,179 --
State Street Research
Diversified Portfolio
(124,227,823 Shares;
cost $2,012,591,007)... -- -- -- $2,284,549,657
State Street Research
Aggressive Growth
Portfolio (41,237,965
Shares; cost
$1,044,616,591)........ -- -- -- --
MetLife Stock Index
Portfolio (81,120,925
Shares; cost
$1,863,060,135)........ -- -- -- --
Santander International
Stock Portfolio
(17,677,867 Shares;
cost $230,781,888)..... -- -- -- --
Loomis Sayles High Yield
Bond Portfolio
(4,622,343 Shares; cost
$47,480,459)........... -- -- -- --
Janus Mid Cap Portfolio
(19,530,743 Shares;
cost $265,587,440)..... -- -- -- --
T. Rowe Price Small Cap
Growth Portfolio
(13,817,278 Shares;
cost $161,927,995)..... -- -- -- --
Scudder Global Equity
Portfolio (8,237,416
Shares; cost
$96,456,139)........... -- -- -- --
Harris Oakmark Large Cap
Value Portfolio
(388,299 Shares; cost
$3,743,705)............ -- -- -- --
Neuberger&Berman
Partners Mid Cap Value
Portfolio (301,756
Shares; cost
$3,135,708)............ -- -- -- --
T. Rowe Price Large Cap
Growth Portfolio
(409,436 Shares; cost
$4,308,905)............ -- -- -- --
Lehman Brothers
Aggregate Bond Index
Portfolio (809,288
Shares; cost
$8,174,683)............ -- -- -- --
Morgan Stanley EAFE
Index Portfolio
(354,734 Shares; cost
$3,736,611)............ -- -- -- --
Russell 2000 Index
Portfolio (613,868
Shares;
cost $6,146,811)....... -- -- -- --
-------------- ------------ ----------- --------------
Total investments.... 2,529,998,376 449,267,390 14,282,179 2,284,549,657
Cash.................... -- -- -- --
-------------- ------------ ----------- --------------
Total assets......... 2,529,998,376 449,267,390 14,282,179 2,284,549,657
LIABILITIES............. -- -- -- --
-------------- ------------ ----------- --------------
NET ASSETS.............. $2,529,998,376 $449,267,390 $14,282,179 $2,284,549,657
============== ============ =========== ==============
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
<TABLE>
<CAPTION>
State Street
Research MetLife Santander Loomis Sayles
Variable Variable Variable Aggressive Stock International High Yield
B C D Growth Index Stock Bond
Division Division Division Division Division Division Division
- ----------- ---------- -------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$90,026,386 $3,260,644 $34,942 -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- $1,217,757,111 -- -- --
-- -- -- -- $2,870,058,320 -- --
-- -- -- -- -- $249,965,034 --
-- -- -- -- -- -- $38,781,459
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
- ----------- ---------- ------- -------------- -------------- ------------ -----------
90,026,386 3,260,644 34,942 1,217,757,111 2,870,058,320 249,965,034 38,781,459
-- -- -- -- -- -- --
- ----------- ---------- ------- -------------- -------------- ------------ -----------
90,026,386 3,260,644 34,942 1,217,757,111 2,870,058,320 249,965,034 38,781,459
-- -- -- -- -- -- --
- ----------- ---------- ------- -------------- -------------- ------------ -----------
$90,026,386 $3,260,644 $34,942 $1,217,757,111 $2,870,058,320 $249,965,034 $38,781,459
=========== ========== ======= ============== ============== ============ ===========
</TABLE>
19
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
T. Rowe Price
Janus Small Cap Scudder Harris Oakmark
Mid Cap Growth Global Equity Large Cap Value
Division Division Division Division
------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in
Metropolitan Series
Fund, Inc. at Value
(Note 1A):
State Street Research
Growth Portfolio
(68,194,026 Shares;
cost $2,037,667,170)... -- -- -- --
State Street Research
Income Portfolio
(35,153,943 Shares;
cost $450,385,594)..... -- -- -- --
State Street Research
Money Market Portfolio
(1,379,587 Shares; cost
$14,668,207)........... -- -- -- --
State Street Research
Diversified Portfolio
(124,227,823 Shares;
cost $2,012,591,007)... -- -- -- --
State Street Research
Aggressive Growth
Portfolio (41,237,965
Shares; cost
$1,044,616,591)........ -- -- -- --
MetLife Stock Index
Portfolio (81,120,925
Shares;
cost $1,863,060,135)... -- -- -- --
Santander International
Stock Portfolio
(17,677,867 Shares;
cost $230,781,888)..... -- -- -- --
Loomis Sayles High Yield
Bond Portfolio
(4,622,343 Shares; cost
$47,480,459)........... -- -- -- --
Janus Mid Cap Portfolio
(19,530,743 Shares;
cost $265,587,440)..... $340,420,858 -- -- --
T.Rowe Price Small Cap
Growth Portfolio
(13,817,278 Shares;
cost $161,927,995)..... -- $169,814,350 -- --
Scudder Global Equity
Portfolio (8,237,416
Shares; cost
$96,456,139)........... -- -- $101,979,213 --
Harris Oakmark Large Cap
Value Portfolio
(388,299 Shares; cost
$3,743,705)............ -- -- -- $3,766,498
Neuberger&Berman
Partners Mid Cap Value
Portfolio (301,756
Shares; cost
$3,135,708)............ -- -- -- --
T. Rowe Price Large Cap
Growth Portfolio
(409,436 Shares; cost
$4,308,905)............ -- -- -- --
Lehman Brothers
Aggregate Bond Index
Portfolio (809,288
Shares; cost
$8,174,683)............ -- -- -- --
Morgan Stanley EAFE(R)
Index Portfolio
(354,734 Shares; cost
$3,736,611)............ -- -- -- --
Russell 2000(R) Index
Portfolio (613,868
Shares;
cost $6,146,811)....... -- -- -- --
------------ ------------ ------------ ----------
Total investments.... 340,420,858 169,814,350 101,979,213 3,766,498
Cash.................... -- 4 -- --
------------ ------------ ------------ ----------
Total assets......... 340,420,858 169,814,354 101,979,213 3,766,498
LIABILITIES............. -- -- -- --
------------ ------------ ------------ ----------
NET ASSETS.............. $340,420,858 $169,814,354 $101,979,213 $3,766,498
============ ============ ============ ==========
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
<TABLE>
<CAPTION>
Neuberger& T. Rowe Price Lehman Brothers Morgan
Berman Partners Large Cap Aggregate Stanley Russell
Mid Cap Value Growth Bond Index EAFE Index 2000 Index
Division Division Division Division Division
- --------------- ------------- --------------- ---------- ----------
<S> <C> <C> <C> <C>
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
$3,237,844 -- -- -- --
-- $4,511,985 -- -- --
-- -- $8,141,437 -- --
-- -- -- $3,831,132 --
-- -- -- -- $6,464,027
---------- ---------- ---------- ---------- ----------
3,237,844 4,511,985 8,141,437 3,831,132 6,464,027
-- -- -- -- --
---------- ---------- ---------- ---------- ----------
3,237,844 4,511,985 8,141,437 3,831,132 6,464,027
-- -- -- -- --
---------- ---------- ---------- ---------- ----------
$3,237,844 $4,511,985 $8,141,437 $3,831,132 $6,464,027
========== ========== ========== ========== ==========
</TABLE>
21
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Fidelity
Fidelity Equity- Fidelity Fidelity
Money Market Income Growth Overseas
Division Division Division Division
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in Fidelity
Variable Insurance
Products Funds At Value
(Note 1A):
Fidelity Money Market
Portfolio (1,863,376
Shares; cost $1,863,376).. $1,863,376 -- -- --
Fidelity Equity-Income
Portfolio (5,012,213
Shares; cost
$101,649,666)............. -- $127,410,460 -- --
Fidelity Growth Portfolio
(3,497,446 Shares; cost
$105,858,708)............. -- -- $156,930,412 --
Fidelity Overseas Portfolio
(1,156,832 Shares; cost
$21,491,115).............. -- -- -- $23,194,484
Fidelity Investment Grade
Bond Portfolio (727,771
Shares; cost $8,880,208).. -- -- -- --
Fidelity Asset Manager
Portfolio (3,006,739
Shares; cost $46,546,485). -- -- -- --
Investments in Calvert
Variable Series, Inc. at
Value (Note 1A):
Calvert Social Balanced
Portfolio (21,133,273
Shares; cost $38,151,114). -- -- -- --
Calvert Social Mid Cap
Growth Portfolio (228,183
Shares; cost $6,073,395).. -- -- -- --
---------- ------------ ------------ -----------
Total investments....... 1,863,376 127,410,460 156,930,412 23,194,484
Cash....................... -- -- -- --
---------- ------------ ------------ -----------
Total assets............ 1,863,376 127,410,460 156,930,412 23,194,484
LIABILITIES................ -- 517 5,416 2,355
---------- ------------ ------------ -----------
NET ASSETS................. $1,863,376 $127,409,943 $156,924,996 $23,192,129
========== ============ ============ ===========
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
<TABLE>
<CAPTION>
Fidelity Calvert Calvert
Investment Fidelity Social Social Mid Cap
Grade Bond Asset Manager Balanced Growth
Division Division Division Division
- ---------- ------------- ----------- --------------
<S> <C> <C> <C>
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
$9,431,917 -- -- --
-- $54,602,386 -- --
-- -- $45,161,803 --
-- -- -- $6,943,606
- ---------- ----------- ----------- ----------
9,431,917 54,602,386 45,161,803 6,943,606
224 -- -- --
- ---------- ----------- ----------- ----------
9,432,141 54,602,386 45,161,803 6,943,606
-- 3,726 -- --
- ---------- ----------- ----------- ----------
$9,432,141 $54,598,660 $45,161,803 $6,943,606
========== =========== =========== ==========
</TABLE>
23
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
State Street
State Street State Street Research State Street
Research Research Money Research
Growth Income Market Diversified
Division Division Division Division
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends (Note 2)..... $232,551,878 $34,039,105 $730,632 $212,338,252
Expenses (Note 3)...... 27,935,551 4,956,881 221,681 25,203,998
------------ ----------- -------- ------------
Net investment income
(loss).................. 204,616,327 29,082,224 508,951 187,134,254
------------ ----------- -------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss)
from security
transactions............ 26,298,215 1,273,744 34,837 5,466,303
Change in net unrealized
appreciation
(depreciation) of
investments for the
period.................. 280,912,929 (200,044) (5,989) 134,318,516
------------ ----------- -------- ------------
Net realized and
unrealized gain (loss)
on investments (Note
1B)..................... 307,211,144 1,073,700 28,848 139,784,819
------------ ----------- -------- ------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS......... $511,827,471 $30,155,924 $537,799 $326,919,073
============ =========== ======== ============
</TABLE>
See Notes To Financial Statements.
24
<PAGE>
<TABLE>
<CAPTION>
State Street
Research MetLife Santander Loomis Sayles
Variable Variable Variable Aggressive Stock International High Yield
B C D Growth Index Stock Bond
Division Division Division Division Division Division Division
- ----------- -------- -------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 8,525,693 $312,967 $3,215 $ 70,493,184 $118,221,173 $ 2,828,105 $ 4,005,614
829,041 -- -- 14,321,888 29,095,218 2,973,351 437,463
- ----------- -------- ------ ------------ ------------ ----------- -----------
7,696,652 312,967 3,215 56,171,296 89,125,955 (145,246) 3,568,151
- ----------- -------- ------ ------------ ------------ ----------- -----------
5,782,962 441,254 -- 35,680,553 68,017,631 7,654,046 (343,705)
6,978,552 70,584 4,467 45,940,529 398,393,213 38,302,726 (7,314,238)
- ----------- -------- ------ ------------ ------------ ----------- -----------
12,761,514 511,838 4,467 81,621,082 466,410,844 45,956,772 (7,657,943)
- ----------- -------- ------ ------------ ------------ ----------- -----------
$20,458,166 $824,805 $7,682 $137,792,378 $555,536,799 $45,811,526 $(4,089,792)
=========== ======== ====== ============ ============ =========== ===========
</TABLE>
25
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
T. Rowe Price
Janus Small Cap Scudder Harris Oakmark
Mid Cap Growth Global Equity Large Cap Value
Division Division Division Division(/1/)
----------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends (Note 2).... $ 1,623,789 $ -- $1,572,951 $ 8,638
Expenses (Note 3)..... 2,531,536 1,596,579 1,021,316 1,984
----------- ----------- ---------- -------
Net investment income
(loss)................. (907,747) (1,596,579) 551,635 6,654
----------- ----------- ---------- -------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) from security
transactions......... 8,354,115 (1,844,850) 3,761,734 (192)
Change in net
unrealized
appreciation
(depreciation) of
investments for the
period............... 66,659,923 7,150,268 5,427,106 22,793
----------- ----------- ---------- -------
Net realized and
unrealized gain
(loss) on investments
(Note 1B)............ 75,014,038 5,305,418 9,188,840 22,601
----------- ----------- ---------- -------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $74,106,291 $ 3,708,839 $9,740,475 $29,255
=========== =========== ========== =======
</TABLE>
(1)For the period November 9, 1998 to December 31, 1998.
See Notes To Financial Statements.
26
<PAGE>
<TABLE>
<CAPTION>
Neuberger& T. Rowe Price Lehman Brothers Morgan Fidelity Fidelity
Berman Partners Large Cap Aggregate Stanley Russell Money Equity-
Mid Cap Value Growth Bond Index EAFE Index 2000 Index Market Income
Division(/1/) Division(/1/) Division(/1/) Division(/1/) Division(/1/) Division Division
- --------------- ------------- --------------- ------------- ------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 3,483 $ 2,348 $ 47,923 $ 2,591 $ 7,732 $87,070 $ 6,959,731
2,021 2,612 4,926 1,896 3,488 16,254 1,110,289
-------- -------- -------- ------- -------- ------- -----------
1,462 (264) 42,997 695 4,244 70,816 5,849,442
-------- -------- -------- ------- -------- ------- -----------
5,610 481 8,661 2,965 299 -- 2,573,653
102,136 203,080 (33,246) 94,521 317,216 -- 3,204,174
-------- -------- -------- ------- -------- ------- -----------
107,746 203,561 (24,585) 97,486 317,515 -- 5,777,827
-------- -------- -------- ------- -------- ------- -----------
$109,208 $203,297 $ 18,412 $98,181 $321,759 $70,816 $11,627,269
======== ======== ======== ======= ======== ======= ===========
</TABLE>
27
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Calvert
Fidelity Fidelity Calvert Social
Fidelity Fidelity Investment Asset Social Mid Cap
Growth Overseas Grade Bond Manager Balanced Growth
Division Division Division Division Division Division
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends (Note 2).... $14,813,607 $1,598,275 $354,170 $6,182,265 $3,265,563 $ 813,211
Expenses (Note 3)..... 1,180,765 208,936 74,755 463,773 461,646 50,060
----------- ---------- -------- ---------- ---------- ----------
Net investment income
(loss)................. 13,632,842 1,389,339 279,415 5,718,492 2,803,917 763,151
----------- ---------- -------- ---------- ---------- ----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss)
from security
transactions........... 3,491,143 924,598 84,679 860,649 404,517 200,832
Change in net unrealized
appreciation
(depreciation) of
investments for the
period................. 24,850,739 42,139 234,217 149,631 2,341,578 395,768
----------- ---------- -------- ---------- ---------- ----------
Net realized and
unrealized gain (loss)
on investments
(Note 1B).............. 28,341,882 966,737 318,896 1,010,280 2,746,095 596,600
----------- ---------- -------- ---------- ---------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $41,974,724 $2,356,076 $598,311 $6,728,772 $5,550,012 $1,359,751
=========== ========== ======== ========== ========== ==========
</TABLE>
See Notes To Financial Statements.
28
<PAGE>
[INTENTIONALLY LEFT BLANK]
29
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
State Street Research State Street Research
Growth Division Income Division
------------------------------ --------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ 204,616,327 $ 312,436,131 $ 29,082,224 $ 19,362,568
Net realized gain
(loss) from security
transactions.......... 26,298,215 6,497,968 1,273,744 (126,809)
Change in net
unrealized
appreciation
(depreciation) of
investments........... 280,912,929 48,676,440 (200,044) 7,592,639
-------------- -------------- ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 511,827,471 367,610,539 30,155,924 26,828,398
-------------- -------------- ------------ ------------
From capital
transactions:
Purchases.............. 271,042,284 249,917,031 64,640,719 39,798,504
Redemptions............ (122,272,961) (77,812,386) (28,530,070) (24,359,461)
-------------- -------------- ------------ ------------
Total net purchase
payments
(redemptions)........ 148,769,323 172,104,645 36,110,649 15,439,043
Net portfolio
transfers............. (26,963,363) 95,147,417 33,277,896 (24,010,205)
Net other transfers.... (508,271) (546,518) (77,316) (143,664)
-------------- -------------- ------------ ------------
Net increase (decrease)
in net assets
resulting from capital
transactions.......... 121,297,689 266,705,544 69,311,229 (8,714,826)
-------------- -------------- ------------ ------------
NET CHANGE IN NET
ASSETS................. 633,125,160 634,316,083 99,467,153 18,113,572
NET ASSETS--BEGINNING OF
PERIOD................. 1,896,873,216 1,262,557,133 349,800,237 331,686,665
-------------- -------------- ------------ ------------
NET ASSETS--END OF
PERIOD................. $2,529,998,376 $1,896,873,216 $449,267,390 $349,800,237
============== ============== ============ ============
</TABLE>
See Notes To Financial Statements.
30
<PAGE>
<TABLE>
<CAPTION>
State Street Research State Street Research
Money Market Division Diversified Division Variable B Division
- -------------------------- ------------------------------ --------------------------
For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1998 1997 1998 1997 1998 1997
- ------------ ------------ -------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 508,951 $ 570,806 $ 187,134,254 $ 234,482,772 $ 7,696,652 $14,044,039
34,837 (61,502) 5,466,303 1,893,876 5,782,962 3,829,803
(5,989) 113,994 134,318,516 11,070,885 6,978,552 534,415
---------- ----------- -------------- -------------- ------------ -----------
537,799 623,298 326,919,073 247,447,533 20,458,166 18,408,257
---------- ----------- -------------- -------------- ------------ -----------
255,102 397,750 333,211,219 238,990,700 226,228 326,373
(3,418,636) (6,154,143) (117,752,204) (81,574,039) (11,306,407) (7,677,640)
---------- ----------- -------------- -------------- ------------ -----------
(3,163,534) (5,756,393) 215,459,015 157,416,661 (11,080,179) (7,351,267)
1,749,990 2,578,299 61,274,635 58,667,151 22 1,983
(3,315) (3,158) (673,377) (236,355) (2,764) (170,031)
---------- ----------- -------------- -------------- ------------ -----------
(1,416,859) (3,181,252) 276,060,273 215,847,457 (11,082,921) (7,519,315)
---------- ----------- -------------- -------------- ------------ -----------
(879,060) (2,557,954) 602,979,346 463,294,990 9,375,245 10,888,942
15,161,239 17,719,193 1,681,570,311 1,218,275,321 80,651,141 69,762,199
---------- ----------- -------------- -------------- ------------ -----------
$
14,282,179 $15,161,239 $2,284,549,657 $1,681,570,311 $ 90,026,386 $80,651,141
========== =========== ============== ============== ============ ===========
</TABLE>
31
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Variable C Division Variable D Division
------------------------- -------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss).................... $ 312,967 $ 611,101 $ 3,215 $ 4,904
Net realized gain (loss)
from security
transactions.............. 441,254 137,612 -- --
Change in net unrealized
appreciation
(depreciation) of
investments............... 70,584 36,345 4,467 1,175
---------- ---------- ------- -------
Net increase in net assets
resulting from operations. 824,805 785,058 7,682 6,079
---------- ---------- ------- -------
From capital transactions:
Purchases.................. 25,268 300 -- --
Redemptions................ (935,863) (319,697) -- --
---------- ---------- ------- -------
Total net purchase
payments (redemptions)... (910,595) (319,397) -- --
Net portfolio transfers.... (309) -- -- --
Net other transfers........ (11,069) 466 -- --
---------- ---------- ------- -------
Net increase (decrease) in
net assets resulting from
capital transactions...... (921,973) (318,931) -- --
---------- ---------- ------- -------
NET CHANGE IN NET ASSETS.... (97,168) 466,127 7,682 6,079
NET ASSETS--BEGINNING OF
PERIOD..................... 3,357,812 2,891,685 27,260 21,181
---------- ---------- ------- -------
NET ASSETS--END OF PERIOD... $3,260,644 $3,357,812 $34,942 $27,260
========== ========== ======= =======
</TABLE>
See Notes To Financial Statements.
32
<PAGE>
<TABLE>
<CAPTION>
State Street Research MetLife Santander
Aggressive Growth Division Stock Index Division International Stock Division
- ------------------------------ ------------------------------ ------------------------------
For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1998 1997 1998 1997 1998 1997
- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$ 56,171,296 $ 34,085,531 $ 89,125,955 $ 18,962,143 $ (145,246) $ (3,164,216)
35,680,553 15,321,830 68,017,631 8,877,389 7,654,046 (2,561,487)
45,940,529 13,987,705 398,393,213 342,650,486 38,302,726 (1,434,374)
- -------------- -------------- -------------- -------------- -------------- --------------
137,792,378 63,395,066 555,536,799 370,490,018 45,811,526 (7,160,077)
- -------------- -------------- -------------- -------------- -------------- --------------
108,436,372 171,573,548 403,472,148 308,799,941 25,765,813 33,496,666
(78,737,642) (72,387,858) (122,924,047) (68,325,409) (16,037,510) (15,919,233)
- -------------- -------------- -------------- -------------- -------------- --------------
29,698,730 99,185,690 280,548,101 240,474,532 9,728,303 17,577,433
(158,421,934) (119,817,089) 159,663,776 212,625,487 (33,426,187) (45,918,018)
(363,723) 63,854 (770,595) (335,284) (84,341) 60,592
- -------------- -------------- -------------- -------------- -------------- --------------
(129,086,927) (20,567,545) 439,441,282 452,764,735 (23,782,225) (28,279,993)
- -------------- -------------- -------------- -------------- -------------- --------------
8,705,451 42,827,521 994,978,081 823,254,753 22,029,301 (35,440,070)
1,209,051,660 1,166,224,139 1,875,080,239 1,051,825,486 227,935,733 263,375,803
- -------------- -------------- -------------- -------------- -------------- --------------
$1,217,757,111 $1,209,051,660 $2,870,058,320 $1,875,080,239 $ 249,965,034 $ 227,935,733
============== ============== ============== ============== ============== ==============
</TABLE>
33
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Loomis Sayles High Yield Janus Mid Cap
Bond Division Division
----------------------------- -----------------------------
For the Year For the Period For the Year For the Period
Ended March 3, 1997 Ended March 3, 1997
December 31, to December 31, December 31, to December 31,
1998 1997 1998 1997
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ 3,568,151 $ 1,019,806 $ (907,747) $ 2,109
Net realized gain
(loss) from security
transactions.......... (343,705) 184,410 8,354,115 57,975
Change in net
unrealized
appreciation
(depreciation) of
investments........... (7,314,238) (1,384,762) 66,659,923 8,173,495
----------- ----------- ------------ -----------
Net increase (decrease)
in net assets
resulting from
operations............ (4,089,792) (180,546) 74,106,291 8,233,579
----------- ----------- ------------ -----------
From capital
transactions:
Purchases.............. 14,100,048 9,038,204 103,125,247 31,188,159
Redemptions............ (1,956,958) (326,516) (7,555,010) (611,183)
----------- ----------- ------------ -----------
Total net purchase
payments
(redemptions)........ 12,143,090 8,711,688 95,570,237 30,576,976
Net portfolio
transfers............. 5,001,434 17,193,951 73,431,163 58,809,887
Net other transfers.... 4,283 (2,649) (307,458) 183
----------- ----------- ------------ -----------
Net increase (decrease)
in net assets
resulting from capital
transactions.......... 17,148,807 25,902,990 168,693,942 89,387,046
----------- ----------- ------------ -----------
NET CHANGE IN NET
ASSETS................. 13,059,015 25,722,444 242,800,233 97,620,625
NET ASSETS--BEGINNING OF
PERIOD................. 25,722,444 -- 97,620,625 --
----------- ----------- ------------ -----------
NET ASSETS--END OF
PERIOD................. $38,781,459 $25,722,444 $340,420,858 $97,620,625
=========== =========== ============ ===========
</TABLE>
See Notes To Financial Statements.
34
<PAGE>
<TABLE>
<CAPTION>
Neuberger&
Harris Oakmark Berman Partners
T. Rowe Price Scudder Global Large Cap Mid Cap Value
Small Cap Growth Division Equity Division Value Division Division
- ------------------------------ ----------------------------- --------------- ---------------
For the Year For the Period For the Year For the Period For the Period For the Period
Ended March 3, 1997 Ended March 3, 1997 Nov. 9, 1998 to Nov. 9, 1998 to
December 31, to December 31, December 31, to December 31, December 31, December 31,
1998 1997 1998 1997 1998 1998
- ------------ --------------- ------------ --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$ (1,596,579) $ (353,457) $ 551,635 $ 285,663 $ 6,654 $ 1,462
(1,844,850) 2,457,885 3,761,734 719,374 (192) 5,610
7,150,268 736,087 5,427,106 95,969 22,793 102,136
- ------------ ----------- ------------ ----------- ---------- ----------
3,708,839 2,840,515 9,740,475 1,101,006 29,255 109,208
- ------------ ----------- ------------ ----------- ---------- ----------
59,726,669 24,330,706 27,935,594 17,723,159 1,011,345 528,225
(5,689,823) (606,809) (2,923,122) (497,060) (12,703) (8,079)
- ------------ ----------- ------------ ----------- ---------- ----------
54,036,846 23,723,897 25,012,472 17,226,099 998,642 520,146
24,916,661 60,568,369 12,284,725 36,602,047 2,738,739 2,608,509
(16,742) 35,969 14,374 (1,985) (138) (19)
- ------------ ----------- ------------ ----------- ---------- ----------
78,936,765 84,328,235 37,311,571 53,826,161 3,737,243 3,128,636
- ------------ ----------- ------------ ----------- ---------- ----------
82,645,604 87,168,750 47,052,046 54,927,167 3,766,498 3,237,844
87,168,750 -- 54,927,167 -- -- --
- ------------ ----------- ------------ ----------- ---------- ----------
$169,814,354 $87,168,750 $101,979,213 $54,927,167 $3,766,498 $3,237,844
============ =========== ============ =========== ========== ==========
</TABLE>
35
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
T. Rowe Price Lehman Brothers Morgan
Large Cap Aggregate Bond Stanley EAFE Russell 2000
Growth Division Index Division Index Division Index Division
--------------- --------------- --------------- ---------------
For the Period For the Period For the Period For the Period
Nov. 9, 1998 to Nov. 9, 1998 to Nov. 9, 1998 to Nov. 9, 1998 to
December 31, December 31, December 31, December 31,
1998 1998 1998 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ (264) $ 42,997 $ 695 $ 4,244
Net realized gain
(loss) from security
transactions.......... 481 8,661 2,965 299
Change in net
unrealized
appreciation
(depreciation) of
investments........... 203,080 (33,246) 94,521 317,216
---------- ---------- ---------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 203,297 18,412 98,181 321,759
---------- ---------- ---------- -----------
From capital
transactions:
Purchases.............. 1,011,671 2,383,753 939,109 1,458,407
Redemptions............ (15,197) (16,786) (4,888) (10,084)
---------- ---------- ---------- -----------
Total net purchase
payments
(redemptions)........ 996,474 2,366,967 934,221 1,448,323
Net portfolio
transfers............. 3,312,056 5,756,044 2,798,711 4,694,140
Net other transfers.... 158 14 19 (195)
---------- ---------- ---------- -----------
Net increase (decrease)
in net assets
resulting from capital
transactions.......... 4,308,688 8,123,025 3,732,951 6,142,268
---------- ---------- ---------- -----------
NET CHANGE IN NET
ASSETS................. 4,511,985 8,141,437 3,831,132 6,464,027
NET ASSETS--BEGINNING OF
PERIOD................. -- -- -- --
---------- ---------- ---------- -----------
NET ASSETS--END OF
PERIOD................. $4,511,985 $8,141,437 $3,831,132 $ 6,464,027
========== ========== ========== ===========
</TABLE>
See Notes To Financial Statements.
36
<PAGE>
<TABLE>
<CAPTION>
Fidelity Equity-
Fidelity Money Market Division Income Division Fidelity Growth Division
----------------------------------- -------------------------- --------------------------
For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1998 1997 1998 1997 1998 1997
------------ --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 70,816 $ 51,686 $ 5,849,442 $ 5,880,062 $ 13,632,842 $ 1,847,830
-- -- 2,573,653 902,758 3,491,143 944,696
-- -- 3,204,174 12,283,740 24,850,739 14,542,481
--------------- --------------- ------------ ------------ ------------ ------------
70,816 51,686 11,627,269 19,066,560 41,974,724 17,335,007
--------------- --------------- ------------ ------------ ------------ ------------
1,265,510 1,709,406 24,530,054 25,190,127 23,670,952 24,392,152
(1,516,869) (625,611) (9,385,105) (3,436,986) (11,519,342) (4,446,973)
--------------- --------------- ------------ ------------ ------------ ------------
(251,359) 1,083,795 15,144,949 21,753,141 12,151,610 19,945,179
1,078,004 (1,377,016) (5,053,322) 3,353,825 (3,683,855) (655,169)
(571) (157) (64,670) (136,781) (105,446) (196,055)
--------------- --------------- ------------ ------------ ------------ ------------
826,074 (293,378) 10,026,957 24,970,185 8,362,309 19,093,955
--------------- --------------- ------------ ------------ ------------ ------------
896,890 (241,692) 21,654,226 44,036,745 50,337,033 36,428,962
966,486 1,208,178 105,755,717 61,718,972 106,587,963 70,159,001
--------------- --------------- ------------ ------------ ------------ ------------
$ 1,863,376 $ 966,486 $127,409,943 $105,755,717 $156,924,996 $106,587,963
=============== =============== ============ ============ ============ ============
</TABLE>
37
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Fidelity Investment
Fidelity Overseas Division Grade Bond Division
----------------------------- -------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)............... $ 1,389,339 $ 1,002,185 $ 279,415 $ 227,522
Net realized gain
(loss) from security
transactions......... 924,598 216,812 84,679 3,852
Change in net
unrealized
appreciation
(depreciation) of
investments.......... 42,139 257,625 234,217 189,479
------------- ------------- ---------- ----------
Net increase
(decrease) in net
assets resulting from
operations........... 2,356,076 1,476,622 598,311 420,853
------------- ------------- ---------- ----------
From capital
transactions:
Purchases............. 5,122,845 5,937,652 2,187,773 1,709,517
Redemptions........... (1,927,541) (998,231) (810,073) (322,055)
------------- ------------- ---------- ----------
Total net purchase
payments
(redemptions)....... 3,195,304 4,939,421 1,377,700 1,387,462
Net portfolio
transfers............ (3,286,287) 1,713,260 1,086,486 146,741
Net other transfers... (8,379) (55,988) (7,460) (6,024)
------------- ------------- ---------- ----------
Net increase
(decrease) in net
assets resulting from
capital transactions. (99,362) 6,596,693 2,456,726 1,528,179
------------- ------------- ---------- ----------
NET CHANGE IN NET
ASSETS................ 2,256,714 8,073,315 3,055,037 1,949,032
NET ASSETS--BEGINNING
OF PERIOD............. 20,935,415 12,862,100 6,377,104 4,428,072
------------- ------------- ---------- ----------
NET ASSETS--END OF
PERIOD................ $ 23,192,129 $ 20,935,415 $9,432,141 $6,377,104
============= ============= ========== ==========
</TABLE>
See Notes To Financial Statements.
38
<PAGE>
<TABLE>
<CAPTION>
Fidelity Calvert Social Calvert Social
Asset Manager Division Balanced Division Mid Cap Growth Division
---------------------------- -------------------------- -------------------------
For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1998 1997 1998 1997 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 5,718,492 $ 4,056,664 $ 2,803,917 $ 2,035,676 $ 763,151 $ 400,329
860,649 347,820 404,517 151,820 200,832 100,397
149,631 3,041,696 2,341,578 2,646,711 395,768 209,797
----------- ----------- ----------- ----------- ---------- ----------
6,728,772 7,446,180 5,550,012 4,834,207 1,359,751 710,523
----------- ----------- ----------- ----------- ---------- ----------
8,448,368 8,743,739 7,171,631 6,187,385 1,423,352 1,282,313
(3,988,838) (2,253,580) (1,653,370) (788,932) (451,262) (249,576)
----------- ----------- ----------- ----------- ---------- ----------
4,459,530 6,490,159 5,518,261 5,398,453 972,090 1,032,737
(2,379,056) (1,142,965) 80,963 153,472 485,270 (416,766)
(2,755,577) (216,127) (149,713) (38,181) (61,198) (7,471)
----------- ----------- ----------- ----------- ---------- ----------
(675,103) 5,131,067 5,449,511 5,513,744 1,396,162 608,500
----------- ----------- ----------- ----------- ---------- ----------
6,053,669 12,577,247 10,999,523 10,347,951 2,755,913 1,319,023
48,544,991 35,967,744 34,162,280 23,814,329 4,187,693 2,868,670
----------- ----------- ----------- ----------- ---------- ----------
$54,598,660 $48,544,991 $45,161,803 $34,162,280 $6,943,606 $4,187,693
=========== =========== =========== =========== ========== ==========
</TABLE>
39
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
Metropolitan Life Separate Account E (the "Separate Account") is a multi-
division unit investment trust registered under the Investment Company Act of
1940. Seventeen investment divisions correspond to the State Street Research
Growth, State Street Research Income, State Street Research Money Market,
State Street Research Diversified, State Street Research Aggressive Growth,
MetLife Stock Index, Santander International Stock, Loomis Sayles High Yield
Bond, Janus Mid Cap, T. Rowe Price Small Cap Growth, Scudder Global Equity,
Harris Oakmark Large Cap Value, Neuberger&Berman Partners Mid Cap, T. Rowe
Price Large Cap Growth, Lehman Brothers Aggregate Bond Index, Morgan Stanley
EAFE Index, and Russell 2000 Index Portfolios of the Metropolitan Series Fund,
Inc. (the "Fund"). The assets in the Variable B, Variable C, and Variable D
Divisions are restricted to investing in the Growth Portfolio of the Fund. The
Fidelity Money Market, Fidelity Equity-Income, Fidelity Growth, Fidelity
Overseas, Fidelity Investment Grade Bond, and Fidelity Asset Manager Divisions
correspond to the Fidelity Money Market, Fidelity Equity-Income, Fidelity
Growth, Fidelity Overseas, Fidelity Investment Grade Bond, and Fidelity Asset
Manager Portfolios of Fidelity's Variable Insurance Products Fund and
Fidelity's Variable Insurance Products Fund II ("Fidelity"). The Calvert
Social Balanced Division and Calvert Social Mid Cap Growth Division correspond
to the Calvert Social Balanced Portfolio and Calvert Social Mid Cap Growth
Portfolio, respectively, of the Calvert Variable Series, Inc. ("Calvert").
Each portfolio has specific objectives relative to growth of capital and
income.
The Separate Account was formed by Metropolitan Life Insurance Company
("Metropolitan Life") on September 27, 1983, and registered as a unit
investment trust on April 6, 1984. The assets of the Separate Account are the
property of Metropolitan Life.
A summary of significant accounting policies, all of which are in accordance
with generally accepted accounting principals, is set forth below:
1. SIGNIFICANT ACCOUNTING POLICIES
A. Valuation of Investments
Investments in shares of the Fund are valued at the reported net asset
values of the respective portfolios. The method used to value the Fund's
investments at December 31, 1998 are described in the Fund's 1998 Annual
Report.
Investments in shares of Fidelity are valued at the reported net asset
values of the respective portfolios. The methods used to value Fidelity's
investments at December 31, 1998 are described in Fidelity's 1998 Annual
Report.
Investments in shares of Calvert are valued at the reported net asset value
of the Calvert Social Balanced Portfolio and Calvert Social Mid Cap Growth
Portfolio. The methods used to value Calvert's investments at December 31,
1998 are described in Calvert's 1998 Annual Report.
B. Security Transactions
Purchases and sales are recorded on the trade date. Realized gains and
losses on sales of investments are determined on the basis of identified cost.
C. Federal Income Taxes
In the opinion of counsel of Metropolitan Life, the Separate Account will be
treated as a part of Metropolitan Life and its operations, and the Separate
Account will not be taxed separately as a "regulated investment company" under
existing law. Metropolitan Life is taxed as a life insurance company. The
contracts permit Metropolitan Life to charge against the Separate Account any
taxes, attributable to the maintenance or operation of the Separate Account.
Metropolitan Life does not anticipate, under existing law, that any federal
income taxes will be charged against the Separate Account in determining the
value of amounts under a contract.
D. Purchase Payments
Purchase payments received by Metropolitan Life are credited as Accumulation
Units as of the end of the valuation period in which received, as provided in
the prospectus.
40
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
NOTES TO FINANCIAL STATEMENTS--(Continued)
DECEMBER 31, 1998
E. Accumulation Units
As of December 31, 1998, there were 365,726,292 Accumulation Units
outstanding, which consisted of 67,846,362 Accumulation Units in the State
Street Research Growth Division, 21,746,604 Accumulation Units in the State
Street Research Income Division, 789,036 Accumulation Units in the State
Street Research Money Market Division, 80,677,388 Accumulation Units in the
State Street Research Diversified Division, 41,476,716 Accumulation Units in
the State Street Research Aggressive Growth Division, 76,083,334 Accumulation
Units in the MetLife Stock Index Division, 15,405,742 Accumulation Units in
the Santander International Stock Division, 3,990,831 Accumulation Units in
the Loomis Sayles High Yield Bond Division, 19,247,722 Accumulation Units in
the Janus Mid Cap Division, 13,772,403 Accumulation Units in the T. Rowe Price
Small Cap Growth Division, 8,046,645 Accumulation Units in the Scudder Global
Equity Division, 376,751 Accumulation Units in the Harris Oakmark Large Cap
Value Division, 291,806 Accumulation Units in the Neuberger&Berman Partners
Mid Cap Division, 396,403 Accumulation Units in the T. Rowe Price Large Cap
Growth Division, 773,140 Accumulation Units in the Lehman Brothers Aggregate
Bond Index Division, 328,147 Accumulation Units in the Morgan Stanley EAFE
Index Division, 582,684 Accumulation Units in the Russell 2000 Index Division,
166,575 Accumulation Units in the Fidelity Money Market Division, 3,748,774
Accumulation Units in the Fidelity Equity-Income Division, 3,887,397
Accumulation Units in the Fidelity Growth Division, 1,163,136 Accumulation
Units in the Fidelity Overseas Division, 559,943 Accumulation Units in the
Fidelity Investment Grade Bond Division, 2,296,553 Accumulation Units in the
Fidelity Asset Manager Division, 1,809,577 Accumulation Units in the Calvert
Social Balanced Division and 262,623 Accumulation Units in the Calvert Social
Mid Cap Growth Division. In addition to the above mentioned Accumulation
Units, there were cash reserves of $3,344,048 and $34,942 applicable to
contracts receiving annuity payout under the Variable Account B Division and
Variable Account D Division, respectively, and $19,151,205 in cash reserves
for Preference Plus (PPA) Immediate Annuities.
2. DIVIDENDS
On May 5, 1998, and December 16, 1998, the Fund declared dividends for all
shareholders of record on May 7, 1998, and December 23, 1998. The amount of
dividends received by the Separate Account from the Fund was $687,319,273. The
dividends were paid to MetLife on May 8, 1998, and December 24, 1998 and were
immediately reinvested in additional shares of the portfolio in which each of
the investment divisions invest. As a result of these reinvestments, number of
shares of the Fund held by each of the nineteen investment divisions increased
by the following: State Street Research Growth Division 6,352,586 Shares,
State Street Research Income Division 2,686,983 Shares, State Street Research
Money Market Division 70,679 Shares, State Street Research Diversified
Division 11,639,768 Shares, Variable B Division 233,006 Shares, Variable C
Division 8,556 Shares, Variable D Division 88 Shares, State Street Research
Aggressive Growth Division 2,489,225 Shares, MetLife Stock Index Division
3,349,242 Shares, Santander International Stock Division 202,065 Shares,
Loomis Sayles High Yield Bond Division 480,652 Shares, Janus Mid Cap Division
100,049 Shares, Scudder Global Equity Division 128,680 Shares, Harris Oakmark
Large Cap Value Division 905 Shares, Neuberger&Berman Partners Mid Cap Value
Division 330 Shares, T. Rowe Price Large Cap Value Division 216 Shares, Lehman
Brothers Aggregate Bond Index Division 4,802 Shares, Morgan Stanley EAFE Index
Division 242 Shares, and Russell 2000 Index Division 766 Shares.
On the last working day of each month, Fidelity paid Metropolitan Life
dividends for the Fidelity Money Market Division. For 1998 the dividends
aggregated to $87,070. They were immediately reinvested and increased the
number of shares owned by the Fidelity Money Market Division by 87,070 shares.
On February 6, 1998, Fidelity paid Metropolitan Life a dividend of
$29,908,048 for the Fidelity Growth, Fidelity Overseas, Fidelity Investment
Grade Bond and Fidelity Asset Manager, and Fidelity Equity-Income Divisions.
The dividends were immediately reinvested and increased the number of shares
owned as follows: Fidelity Growth Division 440,226 shares, Fidelity Overseas
Division 84,924 shares, Fidelity Investment Grade Bond Division 29,441 shares,
Fidelity Asset Manager Division 382,329 shares, and Fidelity Equity-Income
Division 297,297 shares.
On December 30, 1998, Calvert paid Metropolitan Life dividends of $4,078,774
for the Calvert Social Balanced Division and for the Calvert Social Mid Cap
Growth Division, which were immediately reinvested, increasing the
41
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
NOTES TO FINANCIAL STATEMENTS--(Continued)
DECEMBER 31, 1998
number of shares owned by the Calvert Social Balanced Division and the Calvert
Social Mid Cap Growth Division by 1,536,013 and 27,344 shares, respectively.
3. EXPENSES
Metropolitan Life applies a daily charge against the Separate Account for
general administrative expenses, and for the mortality and expense risk
assumed by Metropolitan Life. This charge is equivalent to an effective annual
rate of 1.5% of the average daily values of the assets in the Separate Account
for VestMet contracts and 1.25% for Preference Plus contracts. Of this charge,
Metropolitan Life estimates .75% is for general administrative expenses for
VestMet contracts and .50% is for Preference Plus contracts and .75% is for
the mortality and expense risk on both contracts. However, for the enhanced
and Financial Freedom Account contracts, the charge is equivalent to an
effective annual rate of .95% of the average daily value of the assets for
these contracts. Of this charge, Metropolitan Life estimates .20% is for
general administrative expenses and .75% is for mortality and expense risk.
The Variable B, C, and D contracts are charged for administrative expenses and
mortality and expense risk according to the rates under their respective
contracts.
4. NEW DIVISIONS
On March 3, 1997, four divisions were added to the Separate Account: Loomis
Sayles High Yield Bond Division, Janus Mid Cap Division, T. Rowe Price Small
Cap Growth Division, and Scudder Global Equity Division.
On November 9, 1998, six divisions were added to the Separate Account:
Harris Oakmark Large Cap Value Division, Neuberger&Berman Partners Mid Cap
Value Division, T. Rowe Price Large Cap Growth Division, Lehman Brothers
Aggregate Bond Index Division, Morgan Stanley EAFE Index Division, and Russell
2000 Index Division.
5. PORTFOLIO NAME CHANGES
Effective January 1, 1998, the Acacia Capital Corporation was changed to the
Calvert Variable Series, Inc. Concurrently, the Calvert Responsibly Invested
Balanced Portfolio and the Calvert Responsibly Invested Capital Accumulation
Portfolio names were changed to the Calvert Social Balanced Portfolio and the
Calvert Social Mid Cap Growth Portfolio, respectively.
Effective November 9, 1998, the name of the State Street Research
International Stock Portfolio was changed to the Santander International Stock
Portfolio.
42
<PAGE>
Metropolitan Life Insurance Company
Consolidated Financial Statements
as of December 31, 1998 and 1997 and for the
Years Ended December 31, 1998, 1997 and 1996
and
Independent Auditors' Report
<PAGE>
Independent Auditors' Report
The Board of Directors and Policyholders of
Metropolitan Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Metropolitan
Life Insurance Company and subsidiaries (the "Company") as of December 31,
1998 and 1997, and the related consolidated statements of income, equity and
cash flows for each of the three years in the period ended December 31, 1998.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Metropolitan
Life Insurance Company and subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1997 the
Company changed the method of accounting for investment income on certain
structured securities.
DELOITTE & TOUCHE LLP
New York, New York
February 4, 1999
2
<PAGE>
Metropolitan Life Insurance Company
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1998, 1997 and 1996
(In millions)
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
REVENUES
Premiums............................................... $11,503 $11,278 $11,345
Universal life and investment-type product policy fees. 1,360 1,418 1,243
Net investment income.................................. 10,228 9,491 8,978
Other revenues......................................... 1,965 1,491 1,246
Net realized investment gains.......................... 2,021 787 231
------- ------- -------
27,077 24,465 23,043
------- ------- -------
EXPENSES
Policyholder benefits and claims....................... 12,488 12,234 12,286
Interest credited to policyholder account balances..... 2,731 2,884 2,868
Policyholder dividends................................. 1,653 1,742 1,728
Other expenses......................................... 8,118 5,934 4,755
------- ------- -------
24,990 22,794 21,637
------- ------- -------
Income before provision for income taxes, discontinued
operations and extraordinary item..................... 2,087 1,671 1,406
Provision for income taxes............................. 740 468 482
------- ------- -------
Income before discontinued operations and extraordinary
item.................................................. 1,347 1,203 924
Loss from discontinued operations...................... -- -- 71
------- ------- -------
Income before extraordinary item....................... 1,347 1,203 853
Extraordinary item--demutualization expense............ 4 -- --
------- ------- -------
Net income............................................. $ 1,343 $ 1,203 $ 853
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Metropolitan Life Insurance Company
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997 (In millions)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value......... $100,767 $ 92,630
Equity securities, at fair value........................... 2,340 4,250
Mortgage loans on real estate.............................. 16,827 20,193
Real estate and real estate joint ventures................. 6,287 7,080
Policy loans............................................... 5,600 5,846
Other limited partnership interests........................ 964 855
Short-term investments..................................... 1,369 679
Other invested assets...................................... 1,567 4,456
-------- --------
135,721 135,989
Cash and cash equivalents.................................... 3,301 2,911
Accrued investment income.................................... 1,994 1,860
Premiums and other receivables............................... 5,972 3,319
Deferred policy acquisition costs............................ 6,560 6,436
Other........................................................ 3,448 3,641
Separate account assets...................................... 58,350 48,620
-------- --------
$215,346 $202,776
======== ========
LIABILITIES AND EQUITY
Liabilities:
Future policy benefits....................................... $ 72,701 $ 73,848
Policyholder account balances................................ 46,494 48,543
Other policyholder funds..................................... 4,061 3,998
Policyholder dividends payable............................... 947 969
Short-term debt.............................................. 3,585 4,587
Long-term debt............................................... 2,903 2,884
Income taxes payable, current and deferred................... 948 952
Other........................................................ 10,772 4,650
Separate account liabilities................................. 58,068 48,338
-------- --------
200,479 188,769
-------- --------
Commitments and contingencies (Note 9)
Equity:
Retained earnings............................................ 13,483 12,140
Accumulated other comprehensive income....................... 1,384 1,867
-------- --------
14,867 14,007
-------- --------
$215,346 $202,776
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
Metropolitan Life Insurance Company
CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED)
For the Years Ended December 31, 1998, 1997 and 1996
(In millions)
<TABLE>
<CAPTION>
Accumulated Other Comprehensive Income
----------------------------------------------
Net Foreign Minimum
Unrealized Currency Pension
Comprehensive Retained Investment Translation Liability
Total Income Earnings Gains Adjustment Adjustment
------- ------------- -------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1996................... $11,754 $10,084 $ 1,646 $ 24 $ --
Comprehensive income:
Net income............. 853 $ 853 853
------
Other comprehensive
loss:
Unrealized investment
losses, net of
related offsets,
reclassification
adjustments and
income taxes........ (618) (618)
Foreign currency
translation
adjustments......... (6) (6)
------
Other comprehensive
loss.................. (624) (624)
------
Comprehensive income. $ 229
------- ====== ------- ------------- ------------ ------------
Balance at December 31,
1996................... 11,983 10,937 1,028 18 --
Comprehensive income:
Net income............. 1,203 $1,203 1,203
------
Other comprehensive
income:
Unrealized investment
gains, net of
related offsets,
reclassification
adjustments and
income taxes........ 870 870
Foreign currency
translation
adjustments......... (49) (49)
------
Other comprehensive
income................ 821 821
------
Comprehensive income. $2,024
------- ====== ------- ------------- ------------ ------------
Balance at December 31,
1997................... 14,007 12,140 1,898 (31) --
Comprehensive income:
Net income............. 1,343 $1,343 1,343
Other comprehensive
loss:
Unrealized investment
losses, net of
related offsets,
reclassification
adjustments and
income taxes........ (358) (358)
Foreign currency
translation
adjustments......... (113) (113)
Minimum pension
liability
adjustment.......... (12) (12)
------
Other comprehensive
loss.................. (483) (483)
-------
------
Comprehensive income. $ 860
------- ------- ------------- ------------ ------------
======
Balance at December 31,
1998................... $14,867 $13,483 $ 1,540 $ (144) $ (12)
======= ======= ============= ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
Metropolitan Life Insurance Company
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997 and 1996
(In millions)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities
Net income....................................... $ 1,343 $ 1,203 $ 853
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expenses....... 56 (36) (18)
Gains from sales of investments and
businesses, net............................. (2,629) (1,018) (428)
Change in undistributed income of real estate
joint ventures and other limited partnership
interests................................... (91) 157 (45)
Interest credited to policyholder account
balances.................................... 2,731 2,884 2,868
Universal life and investment-type product
policy fees................................. (1,360) (1,418) (1,243)
Change in accrued investment income.......... (181) (215) 350
Change in premiums and other receivables..... (2,681) (792) (125)
Change in deferred policy acquisition costs,
net......................................... (188) (159) (391)
Change in insurance related liabilities...... 1,493 2,364 2,349
Change in income taxes payable............... 211 (99) (134)
Change in other liabilities.................. 2,390 (206) 902
Other, net................................... (253) 207 (1,250)
-------- -------- --------
Net cash provided by operating activities........ 841 2,872 3,688
-------- -------- --------
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturities............................. 57,857 75,346 76,117
Equity securities............................ 3,085 1,821 2,069
Mortgage loans on real estate................ 2,296 2,784 2,380
Real estate and real estate joint ventures... 1,122 2,046 2,358
Other limited partnership interests.......... 146 166 178
Purchases of:
Fixed maturities............................. (67,543) (76,603) (76,225)
Equity securities............................ (854) (2,121) (2,742)
Mortgage loans on real estate................ (2,610) (4,119) (4,225)
Real estate and real estate joint ventures... (423) (624) (989)
Other limited partnership interests.......... (723) (338) (307)
Net change in short-term investments........... (761) 63 1,028
Net change in policy loans..................... 133 17 (128)
Proceeds from sales of businesses.............. 7,372 274 --
Net change in investment collateral............ 3,769 -- --
Other, net..................................... (183) (378) (438)
-------- -------- --------
Net cash provided by (used in) investing
activities...................................... 2,683 (1,666) (924)
-------- -------- --------
Cash flows from financing activities
Policyholder account balances:
Deposits..................................... $ 19,361 $ 16,061 $ 17,167
Withdrawals.................................. (21,706) (18,831) (19,321)
Short-term debt, net........................... (1,001) 1,265 69
Long-term debt issued.......................... 693 989 --
Long-term debt repaid.......................... (481) (104) (284)
-------- -------- --------
Net cash used in financing activities............ (3,134) (620) (2,369)
-------- -------- --------
Change in cash and cash equivalents.............. 390 586 395
Cash and cash equivalents, beginning of year..... 2,911 2,325 1,930
-------- -------- --------
Cash and cash equivalents, end of year........... $ 3,301 $ 2,911 $ 2,325
======== ======== ========
Supplemental disclosures of cash flow
information:
Interest....................................... $ 367 $ 422 $ 310
======== ======== ========
Income taxes................................... $ 579 $ 589 $ 497
======== ======== ========
</TABLE>
Cash paid during the year for:
See accompanying notes to consolidated financial statements.
6
<PAGE>
Metropolitan Life Insurance Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts are in millions unless otherwise stated)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Metropolitan Life Insurance Company ("MetLife") and its subsidiaries (the
"Company") is a leading provider of insurance and financial services to a
broad section of institutional and individual customers. The Company offers
life insurance, annuities and mutual funds to individuals and group insurance
and retirement and savings products and services to corporations and other
institutions.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP"). The New
York State Insurance Department (the "Department") recognizes only statutory
accounting practices for determining and reporting the financial condition and
results of operations of an insurance company for determining solvency under
the New York Insurance Law. No consideration is given by the Department to
financial statements prepared in accordance with GAAP in making such
determination.
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The most significant estimates include those used
in determining deferred policy acquisition costs, investment allowances and
the liability for future policyholder benefits. Actual results could differ
from those estimates.
During 1997, management changed to the retrospective interest method of
accounting for investment income on structured notes in accordance with
authoritative guidance issued in late 1996. As a result, net investment income
increased by $175. The cumulative effect of this accounting change on prior
years' income was not material.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
MetLife and its subsidiaries, partnerships and joint ventures in which MetLife
has a controlling interest. All material intercompany accounts and
transactions have been eliminated.
The Company accounts for its investments in real estate joint ventures and
other limited partnership interests in which it does not have a controlling
interest, but more than a minimal interest, under the equity method of
accounting.
Minority interest relating to consolidated entities included in other
liabilities was $274 and $277 at December 31, 1998 and 1997, respectively.
Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform with the 1998 presentation.
Investments
The Company's fixed maturity and equity securities are classified as
available-for-sale and are reported at their estimated fair value. Unrealized
investment gains and losses on securities are recorded as a separate component
of other comprehensive income, net of policyholder related amounts and
deferred income taxes. The cost of fixed maturity and equity securities is
adjusted for impairments in value deemed to be other than temporary. These
adjustments are recorded as realized losses on investments. Realized gains and
losses on sales of securities are determined on a specific identification
basis. All security transactions are recorded on a trade date basis.
Mortgage loans on real estate are stated at amortized cost, net of valuation
allowances. Valuation allowances are established for the excess carrying value
of the mortgage loan over its estimated fair value when it is probable that,
based upon current information and events, the Company will be unable to
collect all amounts due under the
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
contractual terms of the loan agreement. Valuation allowances are based upon
the present value of expected future cash flows discounted at the loan's
original effective interest rate or the collateral value if the loan is
collateral dependent. Interest income earned on impaired loans is accrued on
the net carrying value amount of the loan based on the loan's effective
interest rate.
Real estate, including related improvements, is stated at cost less
accumulated depreciation. Depreciation is provided on a straight-line basis
over the estimated useful life of the asset (typically 20 to 40 years). Cost
is adjusted for impairment whenever events or changes in circumstances
indicate the carrying amount of the asset may not be recoverable. Impaired
real estate is written down to estimated fair value with the impairment loss
being included in realized losses on investments. Impairment losses are based
upon the estimated fair value of real estate, which is generally computed
using the present value of expected future cash flows from the real estate
discounted at a rate commensurate with the underlying risks. Real estate
acquired in satisfaction of debt is recorded at estimated fair value at the
date of foreclosure. Valuation allowances on real estate held-for-sale are
computed using the lower of depreciated cost or estimated fair value, net of
disposition costs.
Policy loans are stated at unpaid principal balances.
Short-term investments are stated at amortized cost, which approximates fair
value.
Derivative Instruments
The Company uses derivative instruments to manage market risk through one of
four principal risk management strategies: the hedging of invested assets,
liabilities, portfolios of assets or liabilities and anticipated transactions.
The Company's derivative strategy employs a variety of instruments including
financial futures, financial forwards, interest rate and foreign currency
swaps, floors, foreign exchange contracts, caps and options.
The Company's derivative program is monitored by senior management. The
Company's risk of loss is typically limited to the fair value of its
derivative instruments and not to the notional or contractual amounts of these
derivatives. Risk arises from changes in the fair value of the underlying
instruments and, with respect to over-the-counter transactions, from the
possible inability of counterparties to meet the terms of the contracts. The
Company has strict policies regarding the financial stability and credit
standing of its major counterparties.
The Company's derivative instruments are designated as hedges and are highly
correlated to the underlying risk at contract inception. The Company monitors
the effectiveness of its hedges throughout the contract term using an offset
ratio of 80 to 125 percent as its minimum acceptable threshold for hedge
effectiveness. Derivative instruments that lose their effectiveness are marked
to market through net investment income.
Gains or losses on financial futures contracts entered into in anticipation
of investment transactions are deferred and, at the time of the ultimate
investment purchase or disposition, recorded as an adjustment to the basis of
the purchased assets or to the proceeds on disposition. Gains or losses on
financial futures used in asset risk management are deferred and amortized
into net investment income over the remaining term of the investment. Gains or
losses on financial futures used in portfolio risk management are deferred and
amortized into net investment income or policyholder benefits over the
remaining life of the hedged sector of the underlying portfolio.
Financial forward contracts that are entered into to purchase securities are
marked to fair value through other comprehensive income, similar to the
accounting for the investment security. Such contracts are accounted for at
settlement by recording the purchase of the specified securities at fair
value. Gains or losses resulting from the termination of forward contracts are
recognized immediately as a component of net investment income.
Interest rate and certain foreign currency swaps involve the periodic
exchange of payments without the exchange of underlying principal or notional
amounts. Net receipts or payments are accrued and recognized over the term of
the swap agreement as an adjustment to net investment income or other expense.
Gains or losses resulting from swap terminations are amortized over the
remaining term of the underlying asset or liability. Gains and losses on swaps
and certain foreign forward exchange contracts entered into in anticipation of
investment transactions are deferred and, at the time of the ultimate
investment purchase or disposition, reflected as an adjustment to the basis of
the purchased
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
assets or to the proceeds of disposition. In the event the asset or liability
underlying a swap is disposed of, the swap position is closed immediately and
any gain or loss is recorded as an adjustment to the proceeds from
disposition.
The Company periodically enters into collars, which consist of purchased put
and written call options, to lock in unrealized gains on equity securities.
Collars are marked to market through other comprehensive income, similar to
the accounting for the underlying equity securities. Purchased interest rate
caps and floors are used to offset the risk of interest rate changes related
to insurance liabilities. Premiums paid on floors, caps and options are split
into two components, time value and intrinsic value. Time value is amortized
over the life of the applicable derivative instrument. The intrinsic value and
any gains or losses relating to these derivative instruments adjust the basis
of the underlying asset or liability and are recognized as a component of net
investment income over the term of the underlying asset or liability being
hedged as an adjustment to the yield.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Property, Equipment and Leasehold Improvements
Property, equipment and leasehold improvements, which are included in other
assets, are stated at cost, less accumulated depreciation and amortization.
Depreciation is determined using either the straight-line or sum-of-the-years-
digits method over the estimated useful lives of the assets. Estimated lives
range from 20 to 40 years for real estate and 5 to 15 years for all other
property and equipment. Accumulated depreciation on property and equipment and
accumulated amortization of leasehold improvements was $1,048 at both December
31, 1998 and 1997. Related depreciation and amortization expense was $95, $103
and $78 for the years ended December 31, 1998, 1997 and 1996, respectively.
Deferred Policy Acquisition Costs
The costs of acquiring new insurance business that vary with, and are
primarily related to, the production of new business are deferred. Such costs,
which consist principally of commissions, agency and policy issue expenses,
are amortized over the expected life of the contract for participating
traditional life, universal life and investment-type products. Generally,
deferred policy acquisition costs are amortized in proportion to the present
value of estimated gross margins or profits from investment, mortality,
expense margins and surrender charges. Actual gross margins or profits can
vary from management's estimates resulting in increases or decreases in the
rate of amortization. Management periodically updates these estimates and
evaluates the recoverability of deferred policy acquisition costs. When
appropriate, management revises its assumptions of the estimated gross margins
or profits of these contracts, and the cumulative amortization is re-estimated
and adjusted by a cumulative charge or credit to current operations.
Deferred policy acquisition costs for non-participating traditional life,
non-medical health and annuity policies with life contingencies are amortized
in proportion to anticipated premiums. Assumptions as to anticipated premiums
are made at the date of policy issuance and are consistently applied during
the life of the contracts. Deviations from estimated experience are reflected
in operations when they occur. For these contracts, the amortization period is
typically the estimated life of the policy.
Deferred policy acquisition costs for property and liability insurance
contracts, which are primarily comprised of commissions and certain
underwriting expenses, are deferred and amortized on a pro rata basis over the
applicable contract term or reinsurance treaty.
Other Intangible Assets
The excess of cost over the fair value of net assets acquired ("goodwill")
and the value of business acquired are included in other assets. Goodwill is
amortized on a straight-line basis over a period ranging from 10 to 30 years.
The Company continually reviews goodwill to assess recoverability from future
operations using undiscounted cash flows.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Impairments are recognized in operating results if a permanent diminution in
value is deemed to have occurred. The value of business acquired is amortized
over the expected policy or contract duration in relation to the present value
of estimated gross profits from such policies and contracts.
<TABLE>
<CAPTION>
Value of Business Acquired Goodwill
-------------------------- ----------------
Years Ended December 31 1998 1997 1996 1998 1997 1996
- ----------------------- -------- -------- -------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Balance at January 1........ $ 498 $ 358 $ 381 $884 $544 $377
Acquisitions.................... 32 176 7 80 387 197
Amortization.................... (55) (36) (30) (59) (47) (30)
-------- -------- -------- ---- ---- ----
Net Balance at December 31...... $ 475 $ 498 $ 358 $905 $884 $544
======== ======== ======== ==== ==== ====
<CAPTION>
December 31 1998 1997 1998 1997
- ----------- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulated Amortization........ $ 142 $ 87 $207 $148
======== ======== ==== ====
</TABLE>
Future Policy Benefits and Policyholder Account Balances
Future policy benefit liabilities for participating traditional life
insurance policies are equal to the aggregate of (a) net level premium
reserves for death and endowment policy benefits (calculated based upon the
nonforfeiture interest rate, ranging from 2% to 7%, and mortality rates
guaranteed in calculating the cash surrender values described in such
contracts), (b) the liability for terminal dividends, and (c) premium
deficiency reserves, which are established when the liabilities for future
policy benefits plus the present value of expected future gross premiums are
insufficient to provide for expected future policy benefits and expenses after
deferred policy acquisition costs are written off.
Future policy benefit liabilities for traditional annuities are equal to
accumulated contractholder fund balances during the accumulation period and
the present value of expected future payments after annuitization. Interest
rates used in establishing such liabilities range from 5% to 8%. Future policy
benefit liabilities for non-medical health insurance are calculated using the
net level premium method and assumptions as to future morbidity, withdrawals
and interest, which provide a margin for adverse deviation. Interest rates
used in establishing such liabilities range from 4% to 7%. Future policy
benefit liabilities for disabled lives are estimated using the present value
of benefits method and experience assumptions as to claim terminations,
expenses and interest. Interest rates used in establishing such liabilities
range from 4% to 8%.
Policyholder account balances for universal life and investment-type
contracts are equal to the policy account values, which consist of an
accumulation of gross premium payments plus credited interest, ranging from 3%
to 17%, less expenses, mortality charges and withdrawals.
The liability for unpaid claims and claim expenses for property and casualty
insurance represents the amount estimated for claims that have been reported
but not settled and claims incurred but not reported. Liabilities for unpaid
claims are estimated based upon the Company's historical experience and other
actuarial assumptions that consider the effects of current developments,
anticipated trends and risk management programs. Revisions of these estimates
are reflected in operations in the year such refinements are made.
Recognition of Insurance Revenue and Related Benefits
Premiums related to traditional life and annuity policies with life
contingencies are recognized as revenues when due. Benefits and expenses are
provided against such revenues to recognize profits over the estimated lives
of the policies. When premiums are due over a significantly shorter period
than the period over which benefits are provided, any excess profit is
deferred and recognized into operations in a constant relationship to
insurance in-force or, for annuities, the amount of expected future policy
benefit payments.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Premiums related to non-medical health contracts are recognized on a pro
rata basis over the applicable contract term.
Premiums related to universal life and investment-type contracts are
credited to policyholder account balances. Revenues from such contracts
consist of amounts assessed against policyholder account balances for
mortality, policy administration and surrender charges. Amounts that are
charged to operations include interest credited and benefit claims incurred in
excess of related policyholder account balances.
Premiums related to property and casualty contracts are recognized as
revenue on a pro rata basis over the applicable contract term. Unearned
premiums are included in other liabilities.
Dividends to Policyholders
Dividends to policyholders are determined annually by the Board of
Directors. The aggregate amount of policyholders' dividends is related to
actual interest, mortality, morbidity and expense experience for the year, as
well as management's judgment as to the appropriate level of statutory surplus
to be retained by the Company.
Participating Business
Participating business represented approximately 21% and 22% of the
Company's life insurance in-force, and 81% and 87% of the number of life
insurance policies in-force, at December 31, 1998 and 1997, respectively.
Participating policies represented approximately 39% and 40%, 41% and 41%, and
40% and 44% of gross and net life insurance premiums for the years ended
December 31, 1998, 1997 and 1996, respectively.
Income Taxes
MetLife and its includable life insurance and non-life insurance
subsidiaries file a consolidated U.S. Federal income tax return in accordance
with the provisions of the Internal Revenue Code, as amended ("the Code").
Under the Code, the amount of Federal income tax expense incurred by mutual
life insurance companies includes an equity tax calculated based upon a
prescribed formula that incorporates a differential earnings rate between
stock and mutual life insurance companies. The future tax consequences of
temporary differences between financial reporting and tax bases of assets and
liabilities are measured as of the balance sheet dates and are recorded as
deferred income tax assets and liabilities.
Reinsurance
The Company has reinsured certain of its life insurance and property and
casualty insurance contracts with other insurance companies under various
agreements. Amounts due from reinsurers are estimated based upon assumptions
consistent with those used in establishing the liabilities related to the
underlying reinsured contracts. Policy and contract liabilities are reported
gross of reinsurance credits.
Separate Accounts
Separate accounts are established in conformity with insurance laws and are
generally not chargeable with liabilities that arise from any other business
of the Company. Separate account assets are subject to general account claims
only to the extent the value of such assets exceeds the separate account
liabilities. Investments (stated at estimated fair value) and liabilities of
the separate accounts are reported separately as assets and liabilities.
Deposits to separate accounts, investment income and realized and unrealized
gains and losses on the investments of the separate accounts accrue directly
to contractholders and, accordingly, are not reflected in the Company's
consolidated statements of income and cash flows. Mortality, policy
administration and surrender charges to all separate accounts are included in
revenues.
Foreign Currency Translation
Balance sheet accounts of foreign operations are translated at the exchange
rates in effect at each year-end and income and expense accounts are
translated at the average rates of exchange prevailing during the year. The
local currencies of foreign operations are generally the functional
currencies. Translation adjustments are charged or
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
credited directly to other comprehensive income. Gains and losses from foreign
currency transactions are reported in other expenses and were insignificant
for all years presented.
Extraordinary Item--Demutualization Expense
On November 24, 1998, the Board of Directors authorized management to
develop a plan to convert from a mutual life insurance company to a stock life
insurance company (the "demutualization"). A final plan to convert to a
publicly traded stock company is subject to the approval of the Board of
Directors, the policyholders and the New York Superintendent of Insurance
("Superintendent"). The Department has not yet reviewed or approved any
materials relating to the demutualization.
The accompanying consolidated statements of income reflect an extraordinary
charge of $4 (net of income taxes of $2) for the year ended December 31, 1998
related to costs associated with the demutualization.
Application of Accounting Pronouncements
In October 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-7, Accounting for Insurance
and Reinsurance Contracts That Do Not Transfer Insurance Risk ("SOP 98-7").
SOP 98-7 provides guidance on the method of accounting for insurance and
reinsurance contracts that do not transfer insurance risk, defined in the SOP
as the deposit method. SOP 98-7 classifies insurance and reinsurance contracts
for which the deposit method is appropriate into those that 1) transfer only
significant timing risk, 2) transfer only significant underwriting risk, 3)
transfer neither significant timing or underwriting risk and 4) have an
indeterminate risk. The Company is required to adopt SOP 98-7 as of January 1,
2000. Adoption of SOP 98-7 is not expected to have a material effect on the
Company's consolidated financial statements.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 requires,
among other things, that all derivatives be recognized in the consolidated
balance sheets as either assets or liabilities and measured at fair value. The
corresponding derivative gains and losses should be reported based upon the
hedge relationship, if such a relationship exists. Changes in the fair value
of derivatives that are not designated as hedges or that do not meet the hedge
accounting criteria in SFAS 133 are required to be reported in income. The
Company is required to adopt SFAS 133 as of January 1, 2000. The Company is in
the process of quantifying the impact of SFAS 133 on its consolidated
financial statements.
In April 1998, the AICPA issued SOP 98-5, Reporting on the Costs of Start-Up
Activities ("SOP 98-5"). SOP 98-5 broadly defines start-up activities. SOP 98-
5 requires costs of start-up activities and organization costs to be expensed
as incurred. The Company is required to adopt SOP 98-5 as of January 1, 1999.
Adoption of SOP 98-5 is not expected to have a material effect on the
Company's consolidated financial statements.
In March 1998, the AICPA issued SOP 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-
1 provides guidance for determining when an entity should capitalize or
expense external and internal costs of computer software developed or obtained
for internal use. The Company is required to adopt SOP 98-1 as of January 1,
1999. Adoption of SOP 98-1 is not expected to have a material effect on the
Company's consolidated financial statements.
In December 1997, the AICPA issued SOP 97-3, Accounting for Insurance and
Other Enterprises for Insurance Related Assessments ("SOP 97-3"). SOP 97-3
provides guidance on accounting by insurance and other enterprises for
assessments related to insurance activities including recognition, measurement
and disclosure of guaranty fund and other insurance related assessments. The
Company is required to adopt SOP 97-3 as of January 1, 1999. Adoption of SOP
97-3 is not expected to have a material effect on the Company's consolidated
financial statements.
In 1998, the Company adopted SFAS 131, Disclosures About Segments of an
Enterprise and Related Information ("SFAS 131"). SFAS 131 establishes
standards for reporting financial information and related disclosures about
products and services, geographic areas and major customers relating to
operating segments in annual financial statements. Adoption of SFAS 131 had no
effect on the Company's consolidated financial statements.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
In 1998, the Company adopted SFAS 130, Reporting Comprehensive Income ("SFAS
130"). SFAS 130 establishes standards for reporting and displaying
comprehensive income and its components in a financial statement that is
displayed with the same prominence as other financial statements. Adoption of
SFAS 130 had no effect on the Company's consolidated financial statements.
In 1998, the Company adopted the provisions of SFAS 125 which were deferred
by SFAS No. 127, Deferral of the Effective Date of Certain Provisions of FASB
Statement No. 125. The deferred provisions provide accounting and reporting
standards related to repurchase agreements, dollar rolls, securities lending
and similar transactions. Adoption of the provisions had the effect of
increasing assets and liabilities by $3,769 at December 31, 1998 and
increasing revenues and expenses by $266 for the year ended December 31, 1998.
2. INVESTMENTS
The components of net investment income were as follows:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Fixed maturities........................... $ 6,563 $ 6,445 $ 6,042
Equity securities.......................... 78 50 60
Mortgage loans on real estate.............. 1,572 1,684 1,523
Real estate and real estate joint ventures. 1,529 1,718 1,668
Policy loans............................... 387 368 399
Other limited partnership interests........ 196 302 215
Cash, cash equivalents and short-term
investments 187 169 214
Other...................................... 841 368 401
-------- ------- --------
11,353 11,104 10,522
Less: Investment expenses.................. 1,125 1,613 1,544
-------- ------- --------
$10,228 $ 9,491 $ 8,978
======== ======= ========
Net realized investment gains, including changes in valuation allowances,
were as follows:
<CAPTION>
Years ended December 31,
---------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Fixed maturities........................... $ 573 $ 118 $ 234
Equity securities.......................... 994 224 101
Mortgage loans on real estate.............. 23 56 (86)
Real estate and real estate joint ventures. 424 446 371
Other limited partnership interests........ 13 12 (129)
Sale of subsidiaries....................... 531 139 --
Other...................................... 71 23 (33)
-------- ------- --------
2,629 1,018 458
Amounts allocable to:
Future policy benefit loss recognition... (300) (126) (203)
Deferred policy acquisition costs........ (240) (70) (4)
Participating pension contracts.......... (68) (35) (20)
-------- ------- --------
$ 2,021 $ 787 $ 231
======== ======= ========
</TABLE>
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The components of net unrealized investment gains, included in accumulated
other comprehensive income, were as follows:
<TABLE>
<CAPTION>
Years ended December
31,
-------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Fixed maturities............................. $ 4,809 $ 4,766 $ 2,226
Equity securities............................ 832 1,605 563
Other invested assets........................ 125 294 474
------- ------- -------
5,766 6,665 3,263
------- ------- -------
Amounts allocable to:
Future policy benefit loss recognition..... (2,248) (2,189) (1,219)
Deferred policy acquisition costs.......... (902) (1,147) (420)
Participating pension contracts............ (212) (312) (9)
Deferred income taxes........................ (864) (1,119) (587)
------- ------- -------
(4,226) (4,767) (2,235)
------- ------- -------
$ 1,540 $ 1,898 $ 1,028
======= ======= =======
The changes in net unrealized investment gains were as follows:
<CAPTION>
Years ended December
31,
-------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Balance at January 1......................... $ 1,898 $ 1,028 $ 1,646
Unrealized investment gains (losses) during
the year.................................... (899) 3,402 (2,493)
Unrealized investment (gains) losses relating
to:
Future policy benefit loss recognition..... (59) (970) 845
Deferred policy acquisition costs.......... 245 (727) 328
Participating pension contracts............ 100 (303) 341
Deferred income taxes........................ 255 (532) 361
------- ------- -------
Balance at December 31....................... $ 1,540 $ 1,898 $ 1,028
======= ======= =======
Net change in unrealized investment gains.... $ (358) $ 870 $ (618)
======= ======= =======
</TABLE>
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Fixed Maturities and Equity Securities
Fixed maturities and equity securities at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Gross
Cost or Unrealized Estimated
Amortized ------------ Fair
Cost Gain Loss Value
--------- ------- ---- ---------
<S> <C> <C> <C> <C>
Fixed Maturities:
Bonds:
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies................................. $ 6,640 $ 1,117 $ 10 $ 7,747
States and political subdivisions......... 597 26 -- 623
Foreign governments....................... 3,435 254 88 3,601
Corporate................................. 46,377 2,471 260 48,588
Mortgage and asset-backed securities 26,456 569 46 26,979
Other..................................... 12,438 1,069 293 13,214
------- ------- ---- --------
95,943 5,506 697 100,752
Redeemable preferred stocks............... 15 -- -- 15
------- ------- ---- --------
$95,958 $ 5,506 $697 $100,767
======= ======= ==== ========
Equity Securities:
Common stocks............................. $ 1,286 $ 923 $ 77 $ 2,132
Nonredeemable preferred stocks............ 222 4 18 208
------- ------- ---- --------
$ 1,508 $ 927 $ 95 $ 2,340
======= ======= ==== ========
Fixed maturities and equity securities at December 31, 1997 were as follows:
<CAPTION>
Gross
Cost or Unrealized Estimated
Amortized ------------ Fair
Cost Gain Loss Value
--------- ------- ---- ---------
<S> <C> <C> <C> <C>
Fixed Maturities:
Bonds:
U.S. Treasury securities and obligations
of U. S. government
corporations and agencies................ $ 8,708 $ 1,010 $ 2 $ 9,716
States and political subdivisions......... 486 22 -- 508
Foreign governments....................... 3,420 371 52 3,739
Corporate................................. 41,012 2,337 291 43,058
Mortgage and asset-backed securities...... 22,370 579 21 22,928
Other..................................... 11,374 929 134 12,169
------- ------- ---- --------
87,370 5,248 500 92,118
Redeemable preferred stocks............... 494 19 1 512
------- ------- ---- --------
$87,864 $ 5,267 $501 $ 92,630
======= ======= ==== ========
Equity Securities:
Common stocks............................. $ 2,444 $ 1,716 $105 $ 4,055
Nonredeemable preferred stocks............ 201 5 11 195
------- ------- ---- --------
$ 2,645 $ 1,721 $116 $ 4,250
======= ======= ==== ========
</TABLE>
The Company held foreign currency derivatives with notional amounts of $716
and $408 to hedge the exchange rate risk associated with foreign bonds at
December 31, 1998 and 1997, respectively. The Company also held options with
fair values of $(11) and $33 to hedge the market value of common stocks at
December 31, 1998 and 1997, respectively.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
At December 31, 1998, fixed maturities held by the Company that were below
investment grade or not rated by an independent rating agency totaled $8,289.
At December 31, 1998, non-income producing fixed maturities were
insignificant.
The amortized cost and estimated fair value of bonds at December 31, 1998,
by contractual maturity date, are shown below:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
--------- ---------
<S> <C> <C>
Due in one year or less............................... $ 2,380 $ 2,462
Due after one year through five years................. 17,062 17,527
Due after five years through 10 years................. 23,769 24,714
Due after 10 years.................................... 26,276 29,070
-------- --------
69,487 73,773
Mortgage and asset-backed securities.................. 26,456 26,979
-------- --------
$ 95,943 $100,752
======== ========
</TABLE>
Fixed maturities not due at a single maturity date have been included in the
above table in the year of final maturity. Actual maturities may differ from
contractual maturities due to the exercise of prepayment options.
Sales of fixed maturities and equity securities were as follows:
<TABLE>
<CAPTION>
Years ended December
31,
-----------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Fixed maturities classified as available-for-
sale:
Proceeds..................................... $43,828 $67,454 $67,239
Gross realized gains......................... $ 928 $ 672 $ 1,067
Gross realized losses........................ $ 355 $ 558 $ 842
Fixed maturities classified as held-to-
maturity:
Proceeds..................................... $ -- $ 352 $ 1,281
Gross realized gains......................... $ -- $ 5 $ 10
Gross realized losses........................ $ -- $ 1 $ 1
Equity securities:
Proceeds..................................... $ 3,085 $ 1,821 $ 2,069
Gross realized gains......................... $ 1,125 $ 293 $ 150
Gross realized losses........................ $ 131 $ 69 $ 49
</TABLE>
During 1997, fixed maturities with an amortized cost of $11,682 were
transferred from held-to-maturity to available-for-sale. Other comprehensive
income at the date of reclassification was increased by $198 excluding the
effects of deferred income taxes and policyholder related amounts.
Excluding investments in U.S. governments and agencies, the Company is not
exposed to any significant concentration of credit risk in its fixed
maturities portfolio.
Securities Lending Program
The Company participates in securities lending programs whereby large blocks
of securities are loaned to third parties, primarily major brokerage firms.
The Company requires a minimum of 102% of the fair value of the loaned
securities to be separately maintained as collateral for the loans. Securities
with a cost or amortized cost of $4,005 and $6,068 and estimated fair value of
$4,552 and $6,653 were on loan under the program at December 31, 1998 and
1997, respectively. The Company is liable for cash collateral of $3,769 at
December 31, 1998. This liability is included in other liabilities. Rebates of
$266 were paid and accrued on the cash collateral for the year ended
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1998. The rebates paid and accrued during 1998 are included in
other operating costs and expenses. Security collateral is returnable on short
notice and is not reflected in the consolidated financial statements.
Statutory Deposits
The Company had investment assets on deposit with regulatory agencies of
$466 and $4,695 as of December 31, 1998 and 1997, respectively.
Mortgage Loans on Real Estate
Mortgage loans were categorized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1998 1997
---------------- ----------------
Amount Percent Amount Percent
------- ------- ------- -------
<S> <C> <C> <C> <C>
Commercial mortgage loans.................... $12,503 74% $14,945 73%
Agriculture mortgage loans................... 4,256 25% 3,753 18%
Residential mortgage loans................... 241 1% 272 1%
Other loans.................................. -- -- 1,512 8%
------- ------ ------- -----
17,000 100% 20,482 100%
====== =====
Less: Valuation allowances................... 173 289
------- -------
$16,827 $20,193
======= =======
Mortgage loans on real estate are collateralized by properties primarily
located throughout the United States. At December 31, 1998, approximately 15%,
9% and 7% of the properties were located in California, New York and Florida,
respectively. Generally, the Company (as the lender) requires that a minimum
of one-fourth of the purchase price of the underlying real estate be paid by
the borrower.
Certain of the Company's real estate joint ventures have mortgage loans with
the Company. The carrying values of such mortgages were $606 and $725 at
December 31, 1998 and 1997, respectively.
Changes in mortgage loan valuation allowances were as follows:
<CAPTION>
Years ended December
31,
-------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C> <C>
Balance at January 1......................... $ 289 $ 469 $ 491
Additions.................................... 40 61 144
Deductions for writedowns and dispositions... (130) (241) (166)
Deductions for disposition of affiliates..... (26) -- --
------- ------ -------
Balance at December 31....................... $ 173 $ 289 $ 469
======= ====== =======
A portion of the Company's mortgage loans on real estate was impaired and
consisted of the following:
<CAPTION>
December 31,
----------------
1998 1997
------- -------
<S> <C> <C> <C> <C>
Impaired mortgage loans with valuation
allowances.................................. $ 823 $1,231
Impaired mortgage loans without valuation
allowances.................................. 375 306
------- ------
1,198 1,537
Less: Valuation allowances................... 149 250
------- ------
$ 1,049 $1,287
======= ======
</TABLE>
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The average recorded investment in impaired mortgage loans on real estate
was $1,282, $1,680 and $2,113 for the years ended December 31, 1998, 1997 and
1996, respectively. Interest income on impaired mortgages was $109, $110 and
$119 for the years ended December 31, 1998, 1997 and 1996, respectively.
Restructured mortgage loans on real estate were $1,036 and $1,207 at
December 31, 1998 and 1997, respectively. Interest income of $74, $91 and $135
was recognized on restructured loans for the years ended December 31, 1998,
1997 and 1996, respectively. Gross interest income that would have been
recorded in accordance with the original terms of such loans amounted to $87,
$116 and $198 for the years ended December 31, 1998, 1997 and 1996,
respectively.
Mortgage loans on real estate with scheduled payments 60 days (90 days for
agriculture mortgages) or more past due or in foreclosure had an amortized
cost of $65 and $255 as of December 31, 1998 and 1997, respectively.
Real Estate and Real Estate Joint Ventures
Real estate and real estate joint ventures consisted of the following:
<TABLE>
<CAPTION>
December 31,
---------------
1998 1997
------- ------
<S> <C> <C>
Real estate and real estate joint ventures held-for-
investment............................................ $ 6,301 $6,731
Impairments............................................ (408) (407)
------- ------
5,893 6,324
------- ------
Real estate and real estate joint ventures held-for-
sale.................................................. 546 915
Impairments............................................ (119) (49)
Valuation allowance.................................... (33) (110)
------- ------
394 756
------- ------
$ 6,287 $7,080
======= ======
</TABLE>
Accumulated depreciation on real estate was $2,065 and $2,030 at December
31, 1998 and 1997, respectively. Related depreciation expense was $282, $338
and $348 for the years ended December 31, 1998, 1997 and 1996, respectively.
Real estate and real estate joint ventures were categorized as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------
1998 1997
--------------- --------------
Amount Percent Amount Percent
------- ------- ------ -------
<S> <C> <C> <C> <C>
Office..................................... $ 4,265 68% $4,730 67%
Retail..................................... 640 10% 804 11%
Apartments................................. 418 7% 406 6%
Land....................................... 313 5% 346 5%
Agriculture................................ 195 3% 214 3%
Other...................................... 456 7% 580 8%
------- --- ------ ---
$ 6,287 100% $7,080 100%
======= === ====== ===
</TABLE>
The Company's real estate holdings are primarily located throughout the
United States. At December 31, 1998, approximately 23%, 23% and 12% of the
Company's real estate holdings were located in New York, California and Texas,
respectively.
Changes in real estate and real estate joint ventures held-for-sale
valuation allowance were as follows:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Balance at January 1.... $ 110 $ 661 $ 924
Additions charged
(credited) to
operations............. (5) (76) 127
Deductions for
writedowns and
dispositions........... (72) (475) (390)
-------- -------- --------
Balance at December 31.. $ 33 $ 110 $ 661
======== ======== ========
</TABLE>
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Investment income (expense) relating to impaired real estate and real estate
joint ventures held-for-investment was $105, $28 and $(10) for the years ended
December 31, 1998, 1997 and 1996, respectively. Investment income relating to
real estate and real estate joint ventures held-for-sale was $3, $11 and $70
for the years ended December 31, 1998, 1997 and 1996, respectively. The
carrying value of non-income producing real estate and real estate joint
ventures was insignificant at December 31, 1998 and 1997, respectively.
The Company owned real estate acquired in satisfaction of debt of $154 and
$218 at December 31, 1998 and 1997, respectively.
Direct Financing and Leveraged Leases
Direct financing and leveraged leases, included in other invested assets,
consisted of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------
Direct Financing Leveraged
Leases Leases Total
----------------- -------------- --------------
1998 1997 1998 1997 1998 1997
----------------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Investment................... $ -- $ 1,137 $1,067 $ 851 $1,067 $1,988
Estimated residual values.... -- 183 607 641 607 824
------- --------- ------ ------ ------ ------
-- 1,320 1,674 1,492 1,674 2,812
Unearned income.............. -- (261) (471) (428) (471) (689)
------- --------- ------ ------ ------ ------
Net investment............... $ -- $ 1,059 $1,203 $1,064 $1,203 $2,123
======= ========= ====== ====== ====== ======
</TABLE>
The investment amounts set forth above are generally due in monthly
installments. The payment periods generally range from three to eight years,
but in certain circumstances are as long as 20 years. Average yields range
from 7% to 12%. These receivables are generally collateralized by the related
property.
3. DERIVATIVE INSTRUMENTS
The table below provides a summary of the carrying value, notional amount
and current market or fair value of derivative financial instruments (other
than equity options) held at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------------------------------- -------------------------------------
Current Market or Current Market or
Fair Value Fair Value
------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carrying Notional Carrying Notional
Value Amount Assets Liabilities Value Amount Assets Liabilities
-------- -------- ------ ----------- -------- -------- ------ -----------
Financial futures....... $ 3 $ 2,190 $ 8 $ 6 $ 10 $ 2,262 $ 17 $ 7
Foreign exchange
contracts.............. -- 136 -- 2 -- 150 2 --
Interest rate swaps..... (9) 1,621 17 50 (11) 1,464 9 28
Foreign currency swaps.. (1) 580 3 62 -- 258 3 30
Caps.................... -- 8,391 -- -- -- 1,545 13 --
Options (fixed income).. -- -- -- -- 2 275 -- 2
-------- -------- ------ ----------- -------- -------- ------ -----------
Total contractual
commitments............ $ (7) $ 12,918 $ 28 $ 120 $ 1 $ 5,954 $ 44 $ 67
======== ======== ====== =========== ======== ======== ====== ===========
</TABLE>
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following is a reconciliation of the notional amounts by derivative type
and strategy as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
December 31, 1997 Terminations/ December 31, 1998
Notional Amount Additions Maturities Notional Amount
----------------- --------- ------------- -----------------
<S> <C> <C> <C> <C>
BY DERIVATIVE TYPE
Financial futures....... $2,262 $25,073 $(25,145) $ 2,190
Foreign exchange
contracts.............. 150 1,231 (1,245) 136
Interest rate swaps..... 1,464 788 (631) 1,621
Foreign currency swaps.. 258 386 (64) 580
Caps.................... 1,545 8,250 (1,404) 8,391
Options (fixed income).. 275 -- (275) --
------ ------- -------- -------
Total contractual
commitments............ $5,954 $35,728 $(28,764) $12,918
====== ======= ======== =======
BY STRATEGY
Liability hedging....... $1,860 $ 8,419 $ (1,538) $ 8,741
Invested asset hedging.. 817 1,666 (1,619) 864
Portfolio hedging....... 2,787 25,643 (25,600) 2,830
Anticipated transaction
hedging................ 490 -- (7) 483
------ ------- -------- -------
Total contractual
commitments............ $5,954 $35,728 $(28,764) $12,918
====== ======= ======== =======
</TABLE>
The following table presents the notional amounts of derivative financial
instruments by maturity at December 31, 1998:
<TABLE>
<CAPTION>
Remaining Life
---------------------------------------
<S> <C> <C> <C> <C> <C>
After Five
After One Years After
One Year Year Through Through Ten Ten
or Less Five Years Years Years Total
-------- ------------ ----------- ----- -------
Financial futures.............. $2,190 $ -- $ -- $ -- $ 2,190
Foreign exchange contracts..... 136 -- -- -- 136
Interest rate swaps............ 470 774 162 215 1,621
Foreign currency swaps......... 39 182 343 16 580
Caps........................... 1,875 6,496 20 -- 8,391
-------- ------------ ----------- ----- -------
Total contractual commitments.. $4,710 $ 7,452 $ 525 $ 231 $12,918
======== ============ =========== ===== =======
</TABLE>
In addition to the derivative instruments above, the Company uses equity
option contracts as invested asset hedges. There were 92 thousand and 7
million equity option contracts outstanding with carrying values of $(11) and
$27 and market values of $(11) and $33, as of December 31, 1998 and 1997,
respectively. The outstanding contracts have a remaining life of one year or
less as of December 31, 1998.
4. REINSURANCE
The Company assumes and cedes insurance with other insurance companies. The
Company continually evaluates the financial condition of its reinsurers and
monitors concentration of credit risk in an effort to minimize its exposure to
significant losses from reinsurer insolvencies. The Company is contingently
liable with respect to ceded reinsurance should any reinsurer be unable to
meet its obligations under these agreements. The amounts in the consolidated
statements of income are presented net of reinsurance ceded.
The Company has exposure to catastrophes, which are an inherent risk of the
property and casualty insurance business and could contribute to material
fluctuations in the Company's results of operations. The Company uses excess
of loss and quota share reinsurance arrangements to diversify its risk
portfolio.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The effects of reinsurance were as follows:
<TABLE>
<CAPTION>
Years ended December
31,
-------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Direct premiums............................... $12,763 $12,728 $12,452
Reinsurance assumed........................... 409 360 508
Reinsurance ceded............................. (1,669) (1,810) (1,615)
------- ------- -------
Net premiums.................................. $11,503 $11,278 $11,345
======= ======= =======
Reinsurance recoveries netted against
policyholder benefits........................ $ 1,751 $ 1,648 $ 1,667
======= ======= =======
</TABLE>
Reinsurance recoverables, included in other receivables, were $2,956 and
$1,511 at December 31, 1998 and 1997, respectively. Reinsurance and ceded
commissions payables, included in other liabilities, were $105 and $158 at
December 31, 1998 and 1997, respectively.
The following provides an analysis of the activity in the liability for
benefits relating to property and casualty and group accident and non-medical
health policies and contracts:
<TABLE>
<CAPTION>
Years ended December
31,
-------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Balance at January 1........................... $ 3,655 $ 3,345 $ 3,296
Reinsurance recoverables..................... (229) (215) (214)
------- ------- -------
Net balance at January 1....................... 3,426 3,130 3,082
------- ------- -------
Incurred related to:
Current year................................. 2,726 2,855 2,951
Prior years.................................. (245) 88 (114)
------- ------- -------
2,481 2,943 2,837
------- ------- -------
Paid related to:
Current year................................. (1,967) (1,832) (1,998)
Prior years.................................. (853) (815) (791)
------- ------- -------
(2,820) (2,647) (2,789)
------- ------- -------
Balance at December 31......................... 3,087 3,426 3,130
Add: Reinsurance recoverables................ 233 229 215
------- ------- -------
Balance at December 31......................... $ 3,320 $ 3,655 $ 3,345
======= ======= =======
</TABLE>
5. INCOME TAXES
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
------------------
1998 1997 1996
------ ---- ----
<S> <C> <C> <C>
Current:
Federal............................................. $ 821 $424 $346
State and local..................................... 60 10 25
Foreign............................................. 99 26 27
------ ---- ----
980 460 398
------ ---- ----
Deferred:
Federal............................................. (178) (26) 66
State and local..................................... (8) 9 6
Foreign............................................. (54) 25 12
------ ---- ----
(240) 8 84
------ ---- ----
Provision for income taxes............................ $ 740 $468 $482
====== ==== ====
</TABLE>
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Reconciliations of the income tax provision at the U.S. statutory rate to
the provision for income taxes as reported were as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
--------------------
1998 1997 1996
------ ------ ----
<S> <C> <C> <C>
Tax provision at U.S. statutory rate................ $ 730 $ 585 $492
Tax effect of:
Tax exempt investment income...................... (40) (30) (18)
Goodwill.......................................... 5 9 --
Surplus tax....................................... 18 (40) 38
State and local income taxes...................... 31 15 23
Foreign operations................................ 12 7 (7)
Tax credits....................................... (25) (15) (15)
Prior year taxes.................................. 4 (2) (46)
Sale of subsidiaries.............................. (19) (41) --
Other, net........................................ 24 (20) 15
------ ------ ----
Provision for income taxes.......................... $ 740 $ 468 $482
====== ====== ====
Deferred income taxes represent the tax effect of the differences between
the book and tax basis of assets and liabilities. Net deferred income tax
liabilities consisted of the following:
<CAPTION>
December 31,
--------------
1998 1997
------ ------
<S> <C> <C> <C>
Deferred income tax assets:
Policyholder liabilities and receivables.......... $3,239 $3,174
Net operating losses.............................. 22 33
Employee benefits................................. 174 187
Non-deductible liabilities........................ 441 162
Other, net........................................ 158 223
------ ------
4,034 3,779
Less: Valuation allowance......................... 21 24
------ ------
4,013 3,755
------ ------
Deferred income tax liabilities:
Investments....................................... 1,417 1,118
Deferred policy acquisition costs................. 1,774 1,890
Net unrealized investment gains................... 864 1,119
Other, net........................................ 18 100
------ ------
4,073 4,227
------ ------
Net deferred income tax liability................... $ (60) $ (472)
====== ======
</TABLE>
Foreign net operating loss carryforwards generated a deferred income tax
benefit of $21. The Company has recorded a valuation allowance related to
these tax benefits. The valuation allowance reflects management's assessment,
based on available information, that it is more likely than not that the
deferred income tax asset for foreign net operating loss carryforwards will
not be realized. The benefit will be recognized at such time management
believes that it is more likely than not that the portion of the deferred
income tax asset is realizable.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The sources of deferred income tax expense (benefit) and their tax effects
were as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
-----------------
1998 1997 1996
----- ---- ----
<S> <C> <C> <C>
Policyholder liabilities and receivables............... $ (65) $(93) $ 27
Net operating losses................................... 11 5 (19)
Investments............................................ 230 245 (6)
Deferred policy acquisition costs...................... (116) (51) 55
Employee benefits...................................... 13 (40) (4)
Non-deductible liabilities............................. (279) (66) (24)
Change in valuation allowances......................... (3) 10 4
Other, net............................................. (31) (2) 51
----- ---- ----
$(240) $ 8 $ 84
===== ==== ====
</TABLE>
The Company has been audited by the Internal Revenue Service for the years
through and including 1993. The Company is being audited for the years 1994,
1995 and 1996. The Company believes that any adjustments that might be
required for open years will not have a material effect on the Company's
consolidated financial statements.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. EMPLOYEE BENEFIT PLANS
Pension Benefit and Other Benefit Plans
The Company is both the sponsor and administrator of defined benefit pension
plans covering all eligible employees and sales representatives of MetLife and
certain of its subsidiaries. Retirement benefits are based upon years of
credited service and final average earnings history.
The Company also provides certain postretirement health care and life
insurance benefits for retired employees through insurance contracts.
Substantially all of the Company's employees may, in accordance with the plans
applicable to such benefits, become eligible for these benefits if they attain
retirement age, with sufficient service, while working for the Company.
<TABLE>
<CAPTION>
December 31,
------------------------------------
Pension Benefits Other Benefits
------------------ ----------------
1998 1997 1998 1997
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Change in projected benefit obligation:
Projected benefit obligation at beginning
of year................................. $ 3,523 $ 3,268 $ 1,763 $ 1,773
Service cost............................. 88 73 31 30
Interest cost............................ 254 244 114 122
Actuarial gain........................... 205 160 (74) (57)
Divestitures, curtailments and
terminations............................ 24 (9) (13) 2
Change in benefits....................... 12 6 -- (2)
Benefits paid............................ (245) (219) (113) (105)
-------- -------- ------- -------
Projected benefit obligation at end of
year.................................... 3,861 3,523 1,708 1,763
-------- -------- ------- -------
Change in plan assets:
Contract value of plan assets at
beginning of year....................... 3,982 3,628 1,004 897
Actual return on plan assets............. 671 566 171 128
Employer contribution.................... 15 7 61 84
Benefits paid............................ (245) (219) (113) (105)
Other payments........................... (100) -- -- --
-------- -------- ------- -------
Contract value of plan assets at end of
year.................................... 4,323 3,982 1,123 1,004
-------- -------- ------- -------
Over (under) funded...................... 462 459 (585) (759)
Unrecognized net asset at transition..... (95) (140) -- --
Unrecognized net actuarial gains......... (81) (109) (322) (171)
Unrecognized prior service cost.......... 144 150 (3) (2)
-------- -------- ------- -------
Prepaid (accrued) benefit cost........... $ 430 $ 360 $ (910) $ (932)
======== ======== ======= =======
Qualified plan prepaid pension cost...... $ 546 $ 516 $ -- $ --
Non-qualified plan accrued pension cost.. (116) (156) -- --
-------- -------- ------- -------
Prepaid benefit cost..................... $ 430 $ 360 $ -- $ --
======== ======== ======= =======
</TABLE>
The aggregate projected benefit obligation and aggregate contract value of
plan assets for the pension plans were as follows:
<TABLE>
<CAPTION>
Qualified Plan Non-Qualified Plan Total
--------------- ------------------ -------------
1998 1997 1998 1997 1998 1997
------- ------- --------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Aggregate projected benefit
obligation................ $ 3,638 $ 3,170 $ 223 $ 353 $3,861 $3,523
Aggregate contract value of
plan assets (principally
Company contracts)........ 4,323 3,831 -- 151 4,323 3,982
------- ------- --------- --------- ------ ------
Over (under) funded........ $ 685 $ 661 $ (223) $ (202) $ 462 $ 459
======= ======= ========= ========= ====== ======
</TABLE>
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The assumptions used in determining the aggregate projected benefit
obligation and aggregate contract value for the pension and other benefits
were as follows:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
--------------------- --------------------
Weighted average assumptions as of
December 31, 1998 1997 1998 1997
- ---------------------------------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Discount rate...................... 7%-7.25% 7.25%-7.75% 7% 7.25%-7.75%
Expected return on plan assets..... 8.5% 8.75% 7.25%-9% 8.75%
Rate of compensation increase...... 4.5%-8.5% 4.5%-8.5% n/a n/a
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
nonpension postretirement benefit obligation was 6.5% per year for pre-
Medicare eligible claims and 6% for Medicare eligible claims in 1998. The
assumed health care cost trend rate used in measuring the accumulated
nonpension postretirement benefit obligation was generally 9% in 1997,
gradually decreasing to 5.25% over 5 years.
Assumed health care cost trend rates may have a significant effect on the
amounts reported for health care plans. A one-percentage point change in
assumed health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
One One
Percent Percent
Increase Decrease
-------- --------
<S> <C> <C>
Effect on total of service and interest cost
components........................................... $ 16 $ 18
Effect on accumulated postretirement benefit
obligation........................................... $124 $183
</TABLE>
The components of periodic benefit costs were as follows:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------- ----------------
1998 1997 1996 1998 1997 1996
----- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service cost............................ $ 88 $ 73 $ 77 $ 31 $ 30 $ 41
Interest cost........................... 254 244 232 114 122 127
Expected return on plan assets.......... (330) (318) (273) (79) (66) (58)
Amortization of prior actuarial (gain)
loss................................... (11) (5) (12) (12) (4) 2
Curtailment (credit) cost............... (10) -- -- 4 -- --
----- ----- ----- ---- ---- ----
Net periodic benefit cost (credit)...... $ (9) $ (6) $ 24 $ 58 $ 82 $112
===== ===== ===== ==== ==== ====
</TABLE>
Savings and Investment Plans
The Company sponsors savings and investment plans for substantially all
employees under which the Company matches a portion of employee contributions.
The Company contributed $43, $44 and $42 for the years ended December 31,
1998, 1997 and 1996, respectively.
7. LEASES
In accordance with industry practice, certain of the Company's income from
lease agreements with retail tenants is contingent upon the level of the
tenants' sales revenues. Additionally, the Company, as lessee, has entered
into various lease and sublease agreements for office space, data processing
and other equipment. Future minimum rental and subrental income, and minimum
gross rental payments relating to these lease agreements were as follows:
<TABLE>
<CAPTION>
Gross
Rental Sublease Rental
Income Income Payments
------ -------- --------
<S> <C> <C> <C>
1999...................................... $1,213 $10 $126
2000...................................... 1,150 11 109
2001...................................... 1,052 11 94
2002...................................... 942 10 72
2003...................................... 787 9 51
Thereafter................................ 2,636 35 242
</TABLE>
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
8. DEBT
Debt consisted of the following:
<TABLE>
<CAPTION>
December 31,
--------------
1998 1997
------- ------
<S> <C> <C>
MetLife:
6.300% surplus notes due 2003.................................. $ 397 $ 397
7.000% surplus notes due 2005.................................. 249 249
7.700% surplus notes due 2015.................................. 198 198
7.450% surplus notes due 2023.................................. 296 296
7.875% surplus notes due 2024.................................. 148 148
7.800% surplus notes due 2025.................................. 248 248
Other.......................................................... 207 436
------- ------
1,743 1,972
------- ------
Investment Related:
Exchangeable subordinated debt, interest based on LIBOR plus
factors, due 1999........................................... 212 374
Exchangeable subordinated debt, interest rates ranging from
4.90% to 6.18%, due 2001
and 2002.................................................... 371 --
------- ------
583 374
------- ------
Total MetLife.................................................... 2,326 2,346
------- ------
Nvest:
7.060% senior notes due 2003................................... 110 110
7.290% senior notes due 2007................................... 160 160
------- ------
270 270
------- ------
Other Companies:
Fixed rate notes, interest rates ranging from 6.96% to 8.51%,
maturity dates ranging from 1999 to 2008 179 --
Floating rate notes, interest based on LIBOR plus factors...... -- 146
Other.......................................................... 128 122
------- ------
307 268
------- ------
Total long-term debt............................................. 2,903 2,884
Total short-term debt............................................ 3,585 4,587
------- ------
$ 6,488 $7,471
======= ======
</TABLE>
Short-term debt consisted of commercial paper with a weighted average
interest rate of 5.31% and 5.75% and a weighted average maturity of 44 and 71
days as of December 31, 1998 and 1997, respectively.
The Company maintains an unsecured credit facility of $2,000 under which
bank loans and other short-term debt are drawn. This facility is maintained
for general corporate purposes and to provide additional support to the
Company's commercial paper program. At December 31, 1998 there were no
outstanding borrowings under the facility.
Payments of interest and principal on the surplus notes, subordinated to all
other indebtedness, may be made only with the prior approval of the
Superintendent. Subject to the prior approval of the Superintendent, the 7.45%
surplus notes may be redeemed, in whole or in part, at the election of the
Company at any time on or after November 1, 2003.
The exchangeable subordinated debt is payable in cash or by the delivery of
the underlying common stock collateral owned by the Company. The value
ascribed to the common stock at the date of delivery is the greater of the
market value at the date of the debt issuance or date of delivery. The debt
provides for additional interest if the market value of the common stock
appreciates above certain levels at the date of delivery as compared with the
market value at the date of issuance.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The aggregate maturities of long-term debt are $413 in 1999, $45 in 2000,
$191 in 2001, $221 in 2002, $527 in 2003 and $1,518 thereafter.
Interest expense related to the Company's outstanding indebtedness was $333,
$344 and $311, for the years ended December 31, 1998, 1997 and 1996,
respectively.
9. COMMITMENTS AND CONTINGENCIES
Litigation
The Company and certain of its subsidiaries are currently defendants in
approximately 400 lawsuits, including over 40 putative or certified class
action lawsuits, raising allegations of improper marketing and sales of
individual life insurance or annuities (hereafter "sales practices claims").
Two of these putative class actions are filed in Canada and the remainder are
filed in the United States. These cases are brought by or on behalf of
policyholders and others and allege, among other claims, that individual life
insurance policies were improperly sold in replacement transactions or with
inadequate or inaccurate disclosure concerning the period for which premiums
would be payable, or were misleadingly sold as savings or retirement plans.
The classes proposed in the pending class actions are defined broadly enough,
in the aggregate, to include a substantial number of active and lapsed
policyholders who purchased individual life insurance policies from the
Company during the 1980's and 1990's. In California, Ohio and West Virginia,
courts have certified or deemed certifiable classes on behalf of policyholders
in those states who allegedly did not receive proper notice of replacement. A
Federal Court in Massachusetts has certified a mandatory class involving
certain former policyholders of New England Mutual Life Insurance Company
which merged into the Company in 1996. The United States Court of Appeals
remanded the case to the trial court for further consideration. A number of
the sales practices claims pending in federal courts have been consolidated as
a multidistrict proceeding for pre-trial purposes in the United States
District Court for the Western District of Pennsylvania and, as to former New
England Mutual Life Insurance Company policyholders, in the United States
District Court in Massachusetts. In another case, a New York federal court has
certified or conditionally certified some subclasses of purchasers of the
Company's policies and annuity contracts outside the United States. While most
of these cases are in the early stages of litigation, they seek substantial
damages, including in some cases punitive and treble damages and attorneys'
fees. Additional litigation relating to the Company's marketing and sale of
individual life insurance may be commenced in the future.
Regulatory authorities in a small number of states, including both insurance
departments and attorneys general, have ongoing investigations of the
Company's sales of individual life insurance or annuities, including
investigations of alleged improper replacement transactions and alleged
improper sales of insurance with inaccurate or inadequate disclosures as to
the period for which premiums would be payable. Over the past several years, a
number of investigations by other regulatory authorities have been resolved by
the Company for monetary payments and certain other relief.
The Company is also a defendant in numerous lawsuits seeking compensatory
and punitive damages for personal injuries allegedly caused by exposure to
asbestos or asbestos-containing products. The Company has never engaged in the
business of manufacturing, producing, distributing or selling asbestos or
asbestos-containing products. Rather, these lawsuits, currently numbering in
the thousands, have principally been based upon allegations relating to
certain research, publication and other activities of one or more of the
Company's employees during the period from the 1920's through approximately
the 1950's and alleging that the Company learned or should have learned of
certain health risks posed by asbestos and, among other things, improperly
publicized or failed to disclose those health risks. Legal theories asserted
against the Company have included negligence, intentional tort claims and
conspiracy claims concerning the health risks associated with asbestos. While
the Company believes it has meritorious defenses to these claims, and has not
suffered any adverse judgments in respect thereof, most of the cases have been
resolved by settlements. The Company intends to continue to exercise its best
judgment regarding settlement or defense of such cases. The number of such
cases that may be brought or the aggregate amount of any liability that may
ultimately be incurred by the Company is uncertain. Significant portions of
amounts paid in settlement of such cases have been funded with proceeds from a
previously resolved dispute with its primary, umbrella and first level excess
liability insurance carriers. The Company is presently in litigation with
several of its excess liability insurers regarding amounts payable under the
Company's policies with respect to coverage for these claims.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company believes that the claims and the amount of damages asserted in
the aforementioned sales practices and asbestos personal injury litigations
are without merit, and it intends to continue to defend its interests
vigorously.
During 1998, the Company obtained certain excess reinsurance and insurance
policies providing coverage for risks associated primarily with sales
practices claims and claims for personal injuries caused by exposure to
asbestos or asbestos-containing products. In 1998, the Company recorded a
charge of $1,715, included in other expenses, for related insurance and
reinsurance premiums and for potential liabilities related to certain of these
claims.
Various litigation, claims and assessments against the Company, in addition
to the aforementioned and those otherwise provided for in the Company's
consolidated financial statements, have arisen in the course of the Company's
business, including in connection with its activities as an insurer, employer,
investor and taxpayer. Further, state insurance regulatory authorities and
other authorities regularly make inquiries and conduct investigations
concerning the Company's compliance with applicable insurance and other laws
and regulations.
In certain of the matters referred to above, very large and/or indeterminate
amounts, including punitive and treble damages, are sought. While it is not
feasible to predict or determine the ultimate outcome of all pending
investigations and legal proceedings, it is the opinion of the Company's
management that their outcomes, after consideration of available insurance and
reinsurance and the provisions made in the Company's consolidated financial
statements, are not likely to have a material adverse effect on the Company's
financial position. However, given the large and/or indeterminable amounts
sought in certain of these matters and the inherent unpredictability of
litigation, it is possible that an adverse outcome in certain matters could,
from time to time, have a material adverse effect on the Company's operating
results in particular quarterly or annual periods.
Year 2000
The Year 2000 issue is the result of the widespread use of computer programs
written using two digits (rather than four) to define the applicable year.
Such programming was a common industry practice designed to avoid the
significant costs associated with additional mainframe capacity necessary to
accommodate a four-digit year field. As a result, any of the Company's
computer systems that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in major
system failures or miscalculations. The Company has conducted a comprehensive
review of its computer systems to identify the systems that could be affected
by the Year 2000 issue and has developed and implemented a plan to resolve the
issue. The Company currently believes that, with modifications to existing
software and converting to new software, the Year 2000 issue will not pose
significant operational problems for the Company's computer systems. However,
if such modifications and conversions are not completed on a timely basis, the
Year 2000 issue may have a material impact on the operations of the Company.
Furthermore, even if the Company completes such modifications and conversions
on a timely basis, there can be no assurance that the failure by vendors or
other third parties to solve the Year 2000 issue will not have a material
impact on the operations of the Company. The Company estimates the total cost
to resolve its Year 2000 problem to be approximately $210 (unaudited) of which
approximately $149 has been incurred through December 31, 1998.
Guaranty Funds
Under insurance guaranty fund laws in each state, the District of Columbia
and Puerto Rico, insurers licensed to do business can be assessed by state
insurance guaranty associations for certain obligations of insolvent insurance
companies to policyholders and claimants. Recent regulatory actions against
certain large life insurers encountering financial difficulty have prompted
various state insurance guaranty associations to begin assessing life
insurance companies for the deemed losses. Most of these laws do provide,
however, that an assessment may be excused or deferred if it would threaten an
insurer's solvency and further provide annual limits on such assessments. A
large part of the assessments paid by the Company pursuant to these laws may
be used as credits for a portion of the Company's premium taxes. The Company
paid guaranty fund assessments of $35, $23 and $25 in 1998, 1997 and 1996,
respectively, of which $24, $20 and $19 were estimated to be credited against
future premium taxes.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
10. OTHER EXPENSES
Other expenses were comprised of the following:
<TABLE>
<CAPTION>
Years ended December
31,
------------------------
1998 1997 1996
------- ------ -------
<S> <C> <C> <C>
Compensation.................................. $ 2,478 $2,072 $ 1,813
Commissions................................... 902 766 722
Interest and debt issue costs................. 379 453 311
Amortization of policy acquisition costs...... 587 771 633
Capitalization of policy acquisition costs.... (1,025) (1,000) (1,028)
Rent, net of sublease......................... 155 179 183
Minority interest............................. 67 56 30
Restructuring charge.......................... 81 -- --
Other......................................... 4,494 2,637 2,091
------- ------ -------
$ 8,118 $5,934 $ 4,755
======= ====== =======
</TABLE>
11. DISCONTINUED OPERATIONS
The 1996 loss from discontinued operations resulted from the finalization of
the transfer of certain group medical contracts in connection with the
Company's disposal of its group medical benefits business during 1995. The
components of discontinued operations for the year ended December 31, 1996
were as follows:
<TABLE>
<S> <C>
Loss from discontinued operations, net of
income tax benefit of $18........................................ $ 52
Loss on disposal of discontinued operations, net of
income tax benefit of $11........................................ 19
----
Loss from discontinued operations................................. $ 71
====
</TABLE>
12. CONSOLIDATED CASH FLOW INFORMATION
During 1998, the Company sold MetLife Capital Holdings, Inc. (a commercial
financing company) and substantially all of its Canadian and Mexican insurance
operations, which resulted in realized investment gains of $531. During 1997,
the Company sold its United Kingdom insurance operations, which resulted in a
realized investment gain of $139. Such sales caused a reduction in assets by
$10,663 and $4,342 and liabilities by $3,691 and $4,207 in 1998 and 1997,
respectively.
In 1997, the Company also acquired assets of $3,777 and assumed liabilities
of $3,347, through the acquisition of certain insurance and noninsurance
companies. The aggregate purchase prices were allocated to the assets and
liabilities acquired based upon their estimated fair values.
Real estate of $69, $151 and $189 was acquired in satisfaction of debt for
the years ended December 31, 1998, 1997 and 1996, respectively.
13. FAIR VALUE INFORMATION
The estimated fair values of financial instruments have been determined by
using available market information and the valuation methodologies described
below. Considerable judgment is often required in interpreting market data to
develop estimates of fair value. Accordingly, the estimates presented herein
may not necessarily be indicative of amounts that could be realized in a
current market exchange. The use of different assumptions or valuation
methodologies may have a material effect on the estimated fair value amounts.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Amounts related to the Company's financial instruments were as follows:
<TABLE>
<CAPTION>
Estimated
Notional Carrying Fair
Amount Value Value
December 31, 1998 -------- -------- ---------
<S> <C> <C> <C>
Assets:
Fixed maturities.................................. $ $100,767 $100,767
Equity securities................................. 2,340 2,340
Mortgage loans on real estate..................... 16,827 17,793
Policy loans...................................... 5,600 6,143
Short-term investments............................ 1,369 1,369
Cash and cash equivalents......................... 3,301 3,301
Mortgage loan commitments......................... 472 -- 14
Liabilities:
Policyholder account balances..................... 37,088 37,304
Short-term debt................................... 3,585 3,585
Long-term debt.................................... 2,903 2,995
<CAPTION>
Estimated
Notional Carrying Fair
Amount Value Value
December 31, 1997 -------- -------- ---------
<S> <C> <C> <C>
Assets:
Fixed maturities.................................. $ $ 92,630 $ 92,630
Equity securities................................. 4,250 4,250
Mortgage loans on real estate..................... 20,193 21,084
Policy loans...................................... 5,846 6,110
Short-term investments............................ 679 679
Cash and cash equivalents......................... 2,911 2,911
Mortgage loan commitments......................... 334 -- 4
Liabilities:
Policyholder account balances..................... 37,034 37,265
Short-term debt................................... 4,587 4,587
Long-term debt.................................... 2,884 2,939
</TABLE>
The methods and assumptions used to estimate the fair values of financial
instruments are summarized as follows:
Fixed Maturities and Equity Securities
The fair value of fixed maturities and equity securities are based upon
quotations published by applicable stock exchanges or received from other
reliable sources. For securities in which the market values were not readily
available, fair values were estimated using quoted market prices of comparable
investments.
Mortgage Loans on Real Estate and Mortgage Loan Commitments
Fair values for mortgage loans on real estate and mortgage loan commitments
are estimated by discounting expected future cash flows using current interest
rates for similar loans with similar credit risk.
Policy Loans
Fair values for policy loans are estimated by discounting expected future
cash flows using U.S. treasury rates to approximate interest rates and the
Company's past experiences to project patterns of loan accrual and repayment
characteristics.
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Cash and Cash Equivalents and Short-term Investments
The carrying values for cash and cash equivalents and short-term investments
approximated fair market values due to the short-term maturities of these
instruments.
Policyholder Account Balances
The fair value of policyholder account balances are estimated by discounting
expected future cash flows, based upon interest rates currently being offered
for similar contracts with maturities consistent with those remaining for the
agreements being valued.
Short-term and Long-term Debt
The fair values of short-term and long-term debt are determined by
discounting expected future cash flows, using risk rates currently available
for debt with similar terms and remaining maturities.
Derivative Instruments
The fair value of derivative instruments, including financial futures,
financial forwards, interest rate and foreign currency swaps, floors, foreign
exchange contracts, caps and options are based upon quotations obtained from
dealers or other reliable sources. See Note 3 for derivative fair value
disclosures.
14. STATUTORY FINANCIAL INFORMATION
The reconciliation of MetLife's statutory surplus and net change in
statutory surplus, determined in accordance with accounting practices
prescribed or permitted by insurance regulatory authorities, with equity and
net income determined in conformity with generally accepted accounting
principles were as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1998 1997
------- -------
<S> <C> <C> <C>
Statutory surplus..................................... $ 7,388 $ 7,378
GAAP adjustments for:
Future policy benefits and policyholder account
balances........................................... (6,830) (6,807)
Deferred policy acquisition costs................... 6,560 6,438
Deferred income taxes............................... 295 (242)
Valuation of investments............................ 3,981 3,474
Statutory asset valuation reserves.................. 3,381 3,854
Statutory interest maintenance reserve.............. 1,486 1,261
Surplus notes....................................... (1,595) (1,555)
Other, net.......................................... 201 206
------- -------
Equity................................................ $14,867 $14,007
======= =======
<CAPTION>
Years ended December
31,
-----------------------
1998 1997 1996
------- ------- -----
<S> <C> <C> <C>
Net change in statutory surplus....................... $ 10 $ 227 $ 366
GAAP adjustments for:
Future policy benefits and policyholder account
balances........................................... 127 (38) (165)
Deferred policy acquisition costs................... 224 149 391
Deferred income taxes............................... 234 62 (74)
Valuation of investments............................ 1,158 (387) (84)
Statutory asset valuation reserves.................. (461) 1,136 599
Statutory interest maintenance reserve.............. 312 53 19
Other, net.......................................... (261) 1 (199)
------- ------- -----
Net income............................................ $ 1,343 $ 1,203 $ 853
======= ======= =====
</TABLE>
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
15. SEPARATE ACCOUNTS
Separate accounts reflect two categories of risk assumption: non-guaranteed
separate accounts totaling $39,490 and $32,893 at December 31, 1998 and 1997,
respectively, in which the policyholder assumes the investment risk, and
guaranteed separate accounts totaling $18,578 and $15,445 at December 31, 1998
and 1997, respectively, in which MetLife contractually guarantees either a
minimum return or account value to the policyholder.
Fees charged to the separate accounts by the Company (including mortality
charges, policy administration fees and surrender charges) are reflected in
the Company's revenues as universal life and investment-type product policy
fees and totaled $413, $287 and $216 in 1998, 1997 and 1996, respectively.
Guaranteed separate accounts consisted primarily of Met Managed Guaranteed
Interest Contracts and participating close out contracts. The average interest
rate credited on these contracts was 7% at December 31, 1998. The assets that
support these liabilities were comprised of $16,639 in fixed maturities as of
December 31, 1998. The portfolios are segregated from other investments and
are managed to minimize liquidity and interest rate risk. In order to minimize
the risk of disintermediation associated with early withdrawals, these
investment products carry a graded surrender charge as well as a market value
adjustment.
16. OTHER COMPREHENSIVE INCOME
The following tables set forth the reclassification adjustments required for
the years ended December 31, 1998, 1997 and 1996 to avoid double-counting in
comprehensive income items that are included as part of net income for the
current year that have been reported as a part of other comprehensive income
in the current or prior year:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Holding gains (losses) on investments arising during
the year........................................... $ 1,556 $ 4,479 $(1,494)
Income tax effect of holding gains or losses........ (646) (1,698) 550
Transfer of securities from held-to-maturity to
available-for-sale:
Holding gains on investments...................... -- 198 --
Income tax effect................................. -- (75) --
Reclassification adjustments:
Realized holding gains included in current year
net income....................................... (2,043) (868) (367)
Amortization of premium and discount on
investments...................................... (411) (406) (631)
Realized holding gains (losses) allocated to other
policyholder amounts............................. 608 231 227
Income tax effect................................. 766 394 285
Allocation of holding (gains) losses on investments
relating to other
policyholder amounts............................... (322) (2,231) 1,286
Income tax effect of allocation of holding gains and
losses to other
policyholder amounts............................... 134 846 (474)
------- ------- -------
Net unrealized investment (losses) gains............ (358) 870 (618)
------- ------- -------
Foreign currency translation adjustments arising
during the year.................................... (115) (46) (6)
Reclassification adjustment for sale of investment
in foreign operation............................... 2 (3) --
------- ------- -------
Foreign currency translation adjustment............. (113) (49) (6)
------- ------- -------
Minimum pension liability adjustment................ (12) -- --
------- ------- -------
Other comprehensive (loss) income................... $ (483) $ 821 $ (624)
======= ======= =======
</TABLE>
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
17. RESTRUCTURING
During 1998, the Company restructured headquarters operations and
consolidated certain agencies and other operations. The impacts of these
actions on a segment basis are as follows:
<TABLE>
<CAPTION>
Severance
and Related Facility
Number of Termination Consolidation
Positions Costs Costs Total
--------- ----------- ------------- -----
<S> <C> <C> <C> <C>
Individual............................ 488 $15 $16 $31
Institutional......................... 320 8 2 10
Auto & Home........................... 357 4 -- 4
Corporate and Other................... 1,102 30 6 36
----- --- --- ---
2,267 $57 $24 $81
===== === === ===
</TABLE>
These programs are expected to be completed by the third quarter of 1999. As
of December 31, 1998, $28 of these restructuring costs had been paid and the
unpaid balance was $53.
18. BUSINESS SEGMENT INFORMATION
The Company provides insurance and financial services to customers in the
United States, Canada, Central America, South America, Europe and Asia. The
Company's business is divided into six segments: Individual, Institutional,
Auto & Home, International, Asset Management and Corporate. These segments are
managed separately because they either provide different products and
services, require different strategies or have different technology
requirements.
Individual offers a wide variety of individual insurance and investment
products, including life insurance, annuities and mutual funds. Institutional
offers a broad range of group insurance and retirement and savings products
and services, including group life insurance, non-medical health insurance
such as short and long-term disability, long-term care and dental insurance
and other insurance products and services. Auto & Home provides insurance
coverages including private passenger automobile, homeowners and personnel
excess liability insurance. International provides life insurance, accident
and health insurance, annuities and retirement and savings products to both
individuals and groups, and auto and homeowners coverage to individuals. Asset
Management provides a broad variety of asset management products and services
to individuals and institutions such as mutual funds for savings and
retirement needs, commercial real estate advisory and management services, and
institutional and retail investment management. Through its Corporate segment,
the Company reports items that are not allocated to any of the business
segments.
Set forth in the tables below is certain financial information with respect
to the Company's operating segments for the years ended December 31, 1998,
1997 and 1996. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies, except for the
method of capital allocation. The Company allocates capital to each segment
based upon an internal capital allocation system that allows the Company to
more effectively manage its capital. The Company has divested operations that
did not meet targeted rates of return, including its medical insurance
operations, commercial leasing business, and insurance operations in the
United Kingdom and substantially all of its Canadian operations. The Company
evaluates the performance of each operating segment based upon income or loss
from operations before provision for income taxes and non-recurring items
(e.g. items of unusual or infrequent nature). The Company allocates non-
recurring items to the Corporate segment.
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Auto
At or for the year ended & Asset Consolidation/
December 31, 1998 Individual Institutional Home International Management Corporate Elimination Total
- ------------------------ ---------- ------------- ------ ------------- ---------- --------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums................ $ 4,381 $ 5,101 $1,403 $ 618 $ -- $ -- $ -- $11,503
Universal life and
investment-type product
policy fees 817 475 -- 68 -- -- -- 1,360
Net investment income... 5,501 3,864 81 343 76 808 (445) 10,228
Other revenues.......... 523 574 36 33 814 35 (50) 1,965
Net realized investment
gains.................. 663 552 122 117 -- 683 (116) 2,021
Policyholder benefits
and claims............. 4,659 6,373 869 597 -- (10) -- 12,488
Interest credited to
policyholder account
balances............... 1,443 1,199 -- 89 -- -- -- 2,731
Policyholder dividends.. 1,447 142 -- 64 -- -- -- 1,653
Other expenses.......... 2,609 1,592 546 352 799 2,632 (412) 8,118
Income before provision
for income taxes....... 1,727 1,260 227 77 91 (1,096) (199) 2,087
Income after provision
for income taxes....... 1,091 833 161 56 47 (675) (166) 1,347
Total assets............ 103,974 88,356 2,771 3,432 1,165 20,652 (5,004) 215,346
Deferred policy
acquisition costs...... 6,255 43 57 205 -- -- -- 6,560
Separate account assets. 23,038 35,286 -- 26 -- -- -- 58,350
Policyholder
liabilities............ 71,989 49,045 1,477 2,043 -- 1 (352) 124,203
Separate account
liabilities............ $23,013 $35,029 $ -- $ 26 $ -- $ -- $ -- $58,068
</TABLE>
<TABLE>
<CAPTION>
Auto
At or for the year ended & Asset Consolidation/
December 31, 1997 Individual Institutional Home International Management Corporate Elimination Total
- ------------------------ ---------- ------------- ------ ------------- ---------- --------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums................ $ 4,327 $ 4,689 $1,354 $ 908 $ -- $ -- $ -- $11,278
Universal life and
investment-type product
policy fees............ 855 426 -- 137 -- -- -- 1,418
Net investment income... 4,754 3,754 71 504 87 895 (574) 9,491
Other revenues.......... 338 357 25 54 682 19 16 1,491
Net realized investment
gains.................. 356 45 9 142 -- 326 (91) 787
Policyholder benefits
and claims............. 4,597 5,934 834 869 -- -- -- 12,234
Interest credited to
policyholder account
balances............... 1,428 1,319 -- 137 -- -- -- 2,884
Policyholder dividends.. 1,340 305 -- 97 -- -- -- 1,742
Other expenses.......... 2,384 1,178 520 497 679 1,118 (442) 5,934
Income before provision
for income taxes....... 881 535 105 145 90 122 (207) 1,671
Income after provision
for income taxes....... 603 339 74 126 52 210 (201) 1,203
Total assets............ 95,990 83,481 2,542 7,412 1,147 18,494 (6,290) 202,776
Deferred policy
acquisition costs...... 5,912 40 56 428 -- -- -- 6,436
Separate account assets. 17,368 30,732 -- 520 -- -- -- 48,620
Policyholder
liabilities............ 70,686 49,550 1,509 5,615 -- 1 (3) 127,358
Separate account
liabilities............ $17,345 $30,473 $ -- $ 520 $ -- $ -- $ -- $48,338
</TABLE>
34
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Auto
At or for the year ended & Asset Consolidation/
December 31, 1996 Individual Institutional Home International Management Corporate Elimination Total
- ------------------------ ---------- ------------- ------ ------------- ---------- --------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums................ $ 4,559 $ 4,676 $1,316 $ 794 $-- $ -- $ -- $11,345
Universal life and
investment-type product
policy fees............ 729 375 -- 139 -- -- -- 1,243
Net investment income... 4,604 3,446 71 523 60 761 (487) 8,978
Other revenues.......... 74 475 26 37 495 89 50 1,246
Net realized investment
gains (losses) ....... 282 28 24 13 -- (112) (4) 231
Policyholder benefits
and claims............. 4,690 6,006 891 700 -- (1) -- 12,286
Interest credited to
policyholder account
balances 1,354 1,358 -- 156 -- -- -- 2,868
Policyholder dividends.. 1,333 284 -- 111 -- -- -- 1,728
Other expenses.......... 2,019 1,008 490 418 498 706 (384) 4,755
Income before provision
for income taxes....... 852 344 56 121 57 33 (57) 1,406
Income after provision
for income taxes....... 511 217 34 86 47 85 (56) 924
Total assets............ 86,042 75,872 2,801 11,714 901 18,900 (6,954) 189,276
Deferred policy
acquisition costs...... 6,495 29 56 647 -- -- -- 7,227
Separate account assets. 12,403 27,715 -- 3,645 -- -- -- 43,763
Policyholder
liabilities............ 67,220 48,253 1,562 6,045 -- 1 (55) 123,026
Separate account
liabilities............ $12,386 $27,368 $ -- $3,645 $-- $ -- $ -- $43,399
</TABLE>
The individual segment includes an equity ownership interest in Nvest
Companies, L.P. ("Nvest") under the equity method of accounting. Nvest has
been included within the asset management segment due to the types of products
and strategies employed by the entity. The individual segment's equity in
earnings of Nvest, which is included in net investment income, was $49, $45
and $43 for the years ended December 31, 1998, 1997 and 1996, respectively.
The investment in Nvest was $252, $216 and $152 at December 31, 1998, 1997 and
1996, respectively.
Net investment income and net realized investment gains are based upon the
actual results of each segment's specifically identifiable asset portfolio.
Other costs and operating costs were allocated to each of the segments based
upon: (i) a review of the nature of such costs, (ii) time studies analyzing
the amount of employee compensation costs incurred by each segment, and (iii)
cost estimates included in the Company's product pricing.
The consolidation/elimination column includes the elimination of all
intersegment amounts and the individual segment's ownership interest in Nvest.
The principal component of the intersegment amounts related to intersegment
loans, which bore interest at rates commensurate with related borrowings.
Revenues derived from any customer did not exceed 10% of consolidated
revenues. Revenues from U.S. operations were $25,643, $22,664 and $21,762 for
the years ended December 31, 1998, 1997 and 1996, respectively, which
represented 96%, 93% and 94%, respectively, of consolidated revenues.
35
