<PAGE>
REGISTRATION NO. 2-95019
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
POST-EFFECTIVE AMENDMENT No. 15
To
FORM S-6
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
------------
METROPOLITAN TOWER SEPARATE ACCOUNT TWO
(EXACT NAME OF TRUST)
METROPOLITAN TOWER LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
1 Madison Avenue
New York, New York 10010
(COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
------------
ALAN E. LAZARESCU, ESQ.
Vice-President
Metropolitan Tower Life Insurance Company
1 Madison Avenue
New York, New York 10010
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
------------
Copy to:
GARY O. COHEN, ESQ., and TOM LAUERMAN, ESQ.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
----------------
It is proposed that the filing will become effective (check appropriate box)
[_] immediately upon filing pursuant to paragraph (b) of Rule
485
[X] on May 1, 1997 pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a) of Rule
485
[_] on (date), pursuant to paragraph (a) of Rule 485
------------
This filing is made pursuant to Rule 6c-3 and 6e-3(T) under the Investment
Company Act of 1940 to register interests in Metropolitan Tower Separate
Account Two which funds variable universal life insurance policies.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has registered an indefinite amount of securities. The Registrant's
Rule 24f-2 Notice was filed with the Commission on February 27, 1997.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
METROPOLITAN TOWER SEPARATE ACCOUNT TWO
METROPOLITAN TOWER LIFE INSURANCE COMPANY
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
ITEMS OF
FORM N-8B-2 CAPTIONS IN PROSPECTUS
- ----------- ----------------------
<S> <C>
1....................... Cover Page
2....................... SUMMARY--Who is the Issuer of the Policies?
3....................... Inapplicable
4....................... SALES AND ADMINISTRATIVE SERVICES AGREEMENT; SUMMA-
RY--Who is the Issuer of the Policies?
5, 6, 7................. SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--The
Separate Account; STATE REGULATION
8....................... FINANCIAL STATEMENTS
9....................... Inapplicable
10(a).................... OTHER POLICY PROVISIONS--Owner; Beneficiary; Collat-
eral Assignment
10(b).................... OTHER POLICY PROVISIONS--Dividends
10(c), 10(d)............. DEFINITIONS--Valuation Date; SUMMARY--May the Policy
be Surrendered or the Cash Value Partially With-
drawn; Is There a "Free Look" Period?; POLICY BENE-
FITS--Benefit at Final Date; POLICY RIGHTS--Surren-
der and Withdrawal Privileges; Exchange Privilege;
PAYMENT AND ALLOCATION OF PREMIUMS--Allocation of
Premiums and Cash Value, Cash Value
Transfers; THE FIXED ACCOUNT--Transfers, Withdraw-
als, Surrenders, and Policy Loans; OTHER POLICY
PROVISIONS--Payment and Deferment
10(e).................... PAYMENT AND ALLOCATION OF PREMIUMS--Policy Termina-
tion and Reinstatement
10(f).................... VOTING RIGHTS
10(g)(1)-(3), 10(h)(1)-
(3)..................... RIGHTS RESERVED BY METROPOLITAN TOWER
10(g)(4), 10(h)(4)....... Inapplicable
10(i).................... POLICY BENEFITS--Death Benefits; Death Benefit Op-
tions; Cash Value; Optional Income Plans; Optional
Income Benefits; PAYMENT AND ALLOCATION OF PREMI-
UMS--Issuance of a Policy; Premiums; Allocation of
Premiums and Cash Value
11....................... SUMMARY--What are Separate Account Two, the Fixed
Account and the Metropolitan Series Fund? SEPARATE
ACCOUNT AND METROPOLITAN SERIES FUND--Metropolitan
Series Fund
12(a).................... Cover Page
12(b), 12(e)............. Inapplicable
12(c), 12(d)............. SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Met-
ropolitan Series Fund
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ITEMS OF
FORM N-8B-2 CAPTIONS IN PROSPECTUS
- ----------- ----------------------
<S> <C>
13(a), 13(b), 13(c), SUMMARY--What are Separate Account Two, the Fixed
13(d)................... Account and Metropolitan Series Fund? CHARGES AND
DEDUCTIONS; SEPARATE ACCOUNT AND METROPOLITAN SE-
RIES FUND--The Separate Account; POLICY BENEFITS--
Death Benefit Increases
13(e).................... SALES AND ADMINISTRATION SERVICES AGREEMENT
13(f), 13(g)............. Inapplicable
14....................... PAYMENT AND ALLOCATION OF PREMIUMS--Issuance of a
Policy; SALES AND ADMINISTRATIVE SERVICES AGREEMENT
15....................... PAYMENT AND ALLOCATION OF PREMIUMS
16....................... SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Met-
ropolitan Series Fund
17(a), 17(b)............. Captions referenced under Items 10(c), 10(d), 10(e)
and 10(i) above
17(c).................... Inapplicable
18(a), 18(c)............. SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND
18(b), 18(d)............. Inapplicable
19....................... SALES AND ADMINISTRATIVE SERVICES AGREEMENT; VOTING
RIGHTS; REPORTS
20(a), 20(b)............. RIGHTS RESERVED BY METROPOLITAN TOWER; SEPARATE AC-
COUNT AND METROPOLITAN SERIES FUND--The Separate
Account
20(c), 20(d), 20(e),
20(f)................... Inapplicable
21(a), 21(b)............. POLICY RIGHTS--Loan Privileges; OTHER POLICY PROVI-
SIONS--Payment and Deferment
21(c), 22................ Inapplicable
23....................... MANAGEMENT
24....................... OTHER POLICY PROVISIONS
25....................... SUMMARY--Who is the Issuer of the Policies?
26....................... Inapplicable
27....................... SUMMARY--Who is the Issuer of the Policies?
28....................... MANAGEMENT
29....................... SUMMARY--Who is the Issuer of the Policies?
30, 31, 32, 33, 34....... Inapplicable
35....................... STATE REGULATION
36, 37................... Inapplicable
38....................... SALES AND ADMINISTRATIVE SERVICES AGREEMENT; DISTRI-
BUTION OF THE POLICIES
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
ITEMS OF
FORM N-8B-2 CAPTIONS IN PROSPECTUS
- ----------- ----------------------
<S> <C>
39....................... SUMMARY--Who is the Issuer of the Policies?; SALES
AND ADMINISTRATIVE SERVICES AGREEMENT
40(a).................... Inapplicable
40(b).................... SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Met-
ropolitan Series Fund
41(a).................... SUMMARY--Who is the Issuer of the Policies?; SALES
AND ADMINISTRATIVE SERVICES AGREEMENT
41(b), 41(c), 42, 43..... Inapplicable
44(a).................... SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Met-
ropolitan Series Fund; POLICY BENEFITS--Cash Value
44(b).................... Inapplicable
44(c).................... CHARGES AND DEDUCTIONS--Monthly Deduction From Cash
Value
45....................... Inapplicable
46....................... Captions referenced under Item 44 above
47....................... Captions referenced under Items 10(c) and 16 above
48, 49................... Inapplicable
50....................... SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--The
Separate Account
51(a), 51(b)............. SUMMARY--Who is the Issuer of the Policies?; Cover
Page; POLICY BENEFITS--Optional Insurance Benefits;
POLICY RIGHTS--Exchange Privileges
51(c), 51(d), 51(e)...... Captions referenced under Item 10(i) above
51(f).................... PAYMENT AND ALLOCATION OF PREMIUMS--Policy Termina-
tion and Reinstatement
51(g).................... Captions referenced under Items 10(i) and 13 above
51(h), 51(j)............. Inapplicable
51(i).................... DISTRIBUTION OF POLICIES
52(a), 52(c)............. RIGHTS RESERVED BY METROPOLITAN TOWER
52(b), 52(d)............. Inapplicable
53(a).................... FEDERAL TAX MATTERS
53(b), 54 through 58..... Inapplicable
59....................... FINANCIAL STATEMENTS
</TABLE>
iii
<PAGE>
UL II
FLEXIBLE PREMIUM MULTIFUNDED LIFE
.SUPPLEMENT TO THE PROSPECTUS FOR
FLEXIBLE PREMIUM MULTIFUNDED
LIFE INSURANCE POLICIES
ISSUED BY
METROPOLITAN TOWER LIFE INSURANCE COMPANY
.ANNUAL REPORT
METROPOLITAN TOWER LIFE
SEPARATE ACCOUNT TWO
DECEMBER 31, 1996
.ANNUAL FINANCIAL STATEMENTS
METROPOLITAN TOWER LIFE INSURANCE COMPANY
DECEMBER 31, 1996
.PROSPECTUS
METROPOLITAN SERIES FUND, INC.
MARCH 3, 1997
[LOGO] MetLife(R)
Metropolitan Tower Life Insurance Company
MTI-SA-2-1 (5/97 EDITION) PRINTED IN U.S.A.
97041URO (EXP0598 ) MLIC-LD
<PAGE>
SUPPLEMENT DATED MAY 1, 1997
to
PROSPECTUS DATED MAY 1, 1992
(As previously supplemented on May 1, 1994 and on April 30, 1993)
for
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICIES
(Minimum Initial Specified Face Amount $50,000)
Issued by
METROPOLITAN TOWER LIFE INSURANCE COMPANY
This Supplement updates information contained in the Metropolitan Tower
Separate Account Two Prospectus dated May 1, 1992, (the "Prospectus") and its
supplements dated May 1, 1994 and April 30, 1993. Please call Metropolitan
Tower Life Insurance Company ("Metropolitan Tower") at 800-638-5000 if you need
another copy of the Prospectus, or either of the supplements.
The individual flexible premium multifunded life insurance policies
("Policies") offered by the Prospectus are issued by Metropolitan Tower and are
designed to provide lifetime insurance coverage on the insureds named in the
Policies, as well as maximum flexibility in connection with premium payments
and death benefits. This flexibility allows an owner of a Policy to provide for
changing insurance needs within the confines of a single insurance policy. The
Policies are no longer being sold by Metropolitan Tower.
The premiums paid, less premium expense charges, will be allocated at the
owner's discretion among one or more investment divisions of Metropolitan Tower
Separate Account Two ("Separate Account") and/or a fixed interest account
("Fixed Account") within the General Account of Metropolitan Tower. The assets
in each investment division are invested in shares of a corresponding portfolio
of the Metropolitan Series Fund, Inc. ("Fund"). The available portfolios of the
Fund are the State Street Research Growth, State Street Research Income, State
Street Research Diversified, State Street Research Aggressive Growth, MetLife
Money Market, MetLife Stock Index, GFM International Stock, Loomis Sayles High
Yield Bond, T. Rowe Price Small Cap Growth, Janus Mid Cap and Scudder Global
Equity Portfolios.
THIS SUPPLEMENT IS NOT VALID UNLESS ATTACHED TO THE CURRENT PROSPECTUS FOR THE
METROPOLITAN SERIES FUND, INC., WHICH CONTAINS ADDITIONAL INFORMATION ABOUT THE
FUND.
THIS SUPPLEMENT SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
1 Madison Avenue, New York, New York 10010 Telephone 800-638-5000
<PAGE>
The names of the following seven portfolios of the Fund and the corresponding
divisions of the Separate Account have been changed wherever they appear in the
Prospectus:
<TABLE>
<CAPTION>
OLD PORTFOLIO AND
DIVISION NAME NEW PORTFOLIO AND DIVISION NAME
- ----------------- -------------------------------
<S> <C>
Growth State Street Research Growth
Income State Street Research Income
Money Market MetLife Money Market
Diversified State Street Research Diversified
Aggressive Growth State Street Research Aggressive Growth
Stock Index MetLife Stock Index
International Stock GFM International Stock
</TABLE>
THE SEPARATE ACCOUNT AND THE METROPOLITAN SERIES FUND
Four new investment divisions that correspond to four new portfolios of the
Fund have been added to the Separate Account. Policy owners may also allocate
net premiums and cash value to these divisions. These divisions are the Loomis
Sayles High Yield Bond Division, the T. Rowe Price Small Cap Growth Division,
the Janus Mid Cap Division, and the Scudder Global Equity Division. The
accompanying prospectus for the Fund describes the investment objectives and
certain attendant risks of these new portfolios. These investment divisions and
corresponding portfolios may not be available in all states. Consult a sales
representative registered with Metropolitan Tower for additional information. A
brief summary of the investment objectives of these new portfolios is set forth
below:
Loomis Sayles High Yield Bond Portfolio. This portfolio seeks high total
investment return through a combination of current income and capital
appreciation. The portfolio will normally invest at least 65% of its assets in
fixed income securities of below investment grade quality.
T. Rowe Price Small Cap Growth Portfolio. This portfolio seeks long-term
capital growth by investing in small capitalization companies.
Janus Mid Cap Portfolio. This portfolio is a non-diversified portfolio whose
investment objective is to provide long-term growth of capital. It pursues this
objective by investing primarily in securities issued by medium sized
companies.
Scudder Global Equity Portfolio. This portfolio seeks long-term growth of
capital through a diversified portfolio of marketable securities, primarily
equity securities, including common stocks, preferred stocks and debt
securities convertible into common stocks. The portfolio invests on a worldwide
basis in equity securities of companies which are incorporated in the U.S. or
in foreign countries.
Metropolitan Life Insurance Company ("Metropolitan Life") is the investment
manager of each of the new portfolios of the Fund. Loomis, Sayles & Company,
L.P., whose general partner is indirectly owned by Metropolitan Life, is the
sub-investment manager of the Loomis Sayles High Yield Bond Portfolio. T. Rowe
Price Associates, Inc. is the sub-investment manager of the T. Rowe Price Small
Cap Growth Portfolio. Janus Capital Corporation is the sub-investment manager
of the Janus Mid Cap Portfolio. Scudder, Stevens & Clark, Inc. is the sub-
investment manager for the Scudder Global Equity Portfolio. Sub-investment
manager fees are paid by Metropolitan Life.
It is expected that State Street Research & Management Company ("State Street
Research") will become the sub-investment manager with respect to the MetLife
Money Market Portfolio and the GFM International Stock Portfolio on August 1,
1997. GFM International Investors Limited ("GFM") will become the sub-sub-
investment manager and will continue to have day-to-day investment
responsibility for the GFM International Stock Portfolio. In the event these
changes take place, the name of the portfolios will be
T-2
<PAGE>
changed to the State Street Research Money Market Portfolio and the State
Street Research International Stock Portfolio, respectively.
The GFM International Stock Portfolio is now available in connection with
Policies issued in all states. The Diversified Portfolio was substituted for
the Equity Income Portfolio in 1994 and the Equity Income Division therefore is
no longer available under any Policy.
FUND INVESTMENT MANAGEMENT FEES AND DIRECT EXPENSES
For providing investment management services to the Fund, Metropolitan Life
receives a fee from the Fund for providing investment management services to
each portfolio. The following chart shows the fee and other Fund expenses for
each portfolio.
METROPOLITAN SERIES FUND ANNUAL EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<TABLE>
<CAPTION>
OTHER
EXPENSES
AFTER EXPENSE
MANAGEMENT REIMBURSEMENT
FEES (A) TOTAL
---------- ------------- -----
<S> <C> <C> <C>
MetLife Stock Index Portfolio................. .25% .05% .30%
State Street Research Income Portfolio(d)..... .33% .07% .40%
MetLife Money Market Portfolio................ .25% .18% .43%
State Street Research Diversified
Portfolio(d)................................. .46% .04% .50%
State Street Research Growth Portfolio(d)..... .51% .04% .55%
State Street Research Aggressive Growth
Portfolio(d)................................. .71% .04% .75%
T. Rowe Price Small Cap Growth Portfolio(b)... .55% .20% .75%
Scudder Global Equity Portfolio(b)(c)......... .62% .20% .82%
Loomis Sayles High Yield Bond Portfolio(b).... .70% .20% .90%
Janus Mid Cap Portfolio(b).................... .75% .20% .95%
GFM International Stock Portfolio(d).......... .75% .22% .97%
</TABLE>
--------
(a) Prior to May 16, 1993, Metropolitan Life paid all expenses of the then
existing portfolios of the Fund other than management fees, brokerage
commissions, taxes, interest and any extraordinary or non-recurring
expenses.
(b) The portfolios commenced operations on March 3, 1997. Management fees
and other expenses for these Portfolios are estimated amounts for the
year ending December 31, 1997. Metropolitan Life has agreed to bear all
expenses (other than management fees, brokerage commissions, taxes,
interest and any extraordinary or non-recurring expenses) in excess of
.20% of the net assets for each of the Loomis Sayles High Yield Bond,
T. Rowe Price Small Cap Growth, Janus Mid Cap and Scudder Global Equity
Portfolios until a Portfolio's total net assets are at least $100
million, or March 2, 1999, whichever is earlier. The marginal fee rate
for the T. Rowe Price Small Cap Portfolio, Janus Mid Cap Portfolio, and
Scudder Global Equity Portfolio will decrease when the dollar amount in
each such portfolio reaches certain threshold amounts.
(c) Metropolitan Life has agreed to waive a portion of its investment
management fee for the Scudder Global Equity Portfolio during the first
year of the Portfolio's operations. The waiver of investment management
fees during the first six months of the Portfolio's operations will be
equal to .35% of the average daily value of the aggregate net assets of
the Portfolio up to $50 million, .175% of such assets on the next $50
million, .15% of such assets on the next $400 million and .1375% of
such assets on amounts in excess of $500 million. During the second six
months of the Portfolio's operations such waiver of the investment
management fee will be equal to .175% of assets up to $50 million,
.0875% of assets on the next $50 million, .075% of assets on the next
$400 million and .06875% of such assets in excess of $500 million.
Absent Metropolitan Life's waiver of its investment management fee,
Metropolitan Life estimates that the management fee and other expenses
for the Scudder Global Equity Portfolio would be .84% and .20%,
respectively, for a total of 1.04%.
(d) Reflects 1996 fees and expenses, restated for proposed management fee
revisions expected to take effect August 1, 1997.
For a full description of the Fund, see the prospectus for the Fund, which is
attached at the end of this Supplement, and the Fund's Statement of Additional
Information referred to therein.
T-3
<PAGE>
POLICY BENEFITS
DEATH BENEFIT OPTIONS
Increases. The underwriting charge for specified face amount increases has
been changed. The maximum guaranteed underwriting charge is $3 for each $1,000
of specified face amount increase. Currently the underwriting charge is a $100
for the first $100,000 of face increase (but no more than $3 per thousand), and
$3 per thousand thereafter, to an overall maximum charge of $2,500.
The information about or based on the actual investment performance of the
portfolios is deleted from the captions "Rates of Return" and "Illustrations"
in the Prospectus and the May 1, 1994 supplement.
ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES AND ACCUMULATED PREMIUMS
The addition of the new portfolios and the revisions to the older portfolios'
management fees that are expected to become effective August 1, 1997 would
affect the total cash values and total death benefits shown under
"Illustrations of Death Benefit, Cash Values, and Accumulated Premiums" in the
Prospectus and the April 30, 1993 Prospectus Supplement. Using a simple average
of the eleven available portfolios of the Fund, assuming the maximum management
fees, contemplated by the August 1, 1997 adjustment, the daily charge to the
Fund for investment management services would be increased to the equivalent of
a maximum annual rate of .57% of the average daily value of the aggregate net
assets of the Fund. The result is that the cash values would be less for both
death benefit options A and B. In addition, if the minimum death benefit
applies, the death benefit would be lower for death benefit options A and B.
Also, the death benefit will be lower for death benefit option B, even if the
minimum death benefit doesn't apply. Upon request, Metropolitan Tower will
provide a free, personalized hypothetical illustration that reflects these
changes in the investment management fees as they become effective.
EXPERTS
The financial statements included in this Supplement have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports
appearing herein, and have been so included in reliance upon such reports given
upon the authority of such firm as experts in auditing and accounting.
FINANCIAL STATEMENTS
The financial statements of Metropolitan Tower included in this Supplement
should be considered only as bearing upon the ability of Metropolitan Tower to
meet its obligations under the Policies.
T-4
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Metropolitan Tower Life Insurance Company:
We have audited the accompanying statements of assets and liabilities of the
Growth, Income, Money Market, Diversified, Aggressive Growth, Stock Index and
International Stock Divisions of Metropolitan Tower Separate Account Two (the
"Separate Account") as of December 31, 1996, and the related statements of
operations for the year then ended and of changes in net assets for each of the
two years in the period then ended. 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 misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1996 by
correspondence with the custodian and the depositor of the Separate Account. 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 Growth, Income, Money Market, Diversified,
Aggressive Growth, Stock Index and International Stock Divisions of
Metropolitan Tower Separate Account Two as of December 31, 1996, and the
results of their operations for the year then ended and the changes in their
net assets for each of the two years in the period then ended, in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 28, 1997
T-5
<PAGE>
METROPOLITAN TOWER SEPARATE ACCOUNT TWO
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY AGGRESSIVE STOCK INTERNATIONAL
GROWTH INCOME MARKET DIVERSIFIED GROWTH INDEX STOCK
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
----------- ---------- ---------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in
Metropolitan Series
Fund, Inc. at Value
(Note 1A):
Growth Portfolio
(1,185,115 shares;
cost $26,082,049)..... $36,157,867 -- -- -- -- -- --
Income Portfolio
(395,589 shares; cost
$4,760,958)........... -- $4,889,480 -- -- -- -- --
Money Market Portfolio
(135,628 shares; cost
$1,446,568)........... -- -- $1,415,385 -- -- -- --
Diversified Portfolio
(3,827,998 shares;
cost $50,313,451)..... -- -- -- $63,812,728 -- -- --
Aggressive Growth
Portfolio
(135,301 shares; cost
$3,444,411)........... -- -- -- -- $3,662,608 -- --
Stock Index Portfolio
(45,318 shares; cost
$861,878)............. -- -- -- -- -- $1,007,408 --
International Stock
Portfolio
(78,178 shares; cost
$1,002,950)........... -- -- -- -- -- -- $934,227
----------- ---------- ---------- ----------- ---------- ---------- --------
Total Investments...... 36,157,867 4,889,480 1,415,385 63,812,728 3,662,608 1,007,408 934,227
Cash and Accounts
Receivable............. 20,090 2,332 9 17,072 9,650 2,443 3,813
----------- ---------- ---------- ----------- ---------- ---------- --------
Total Assets........... 36,177,957 4,891,812 1,415,394 63,829,800 3,672,258 1,009,851 938,040
LIABILITIES............. 72,249 36,534 26,606 504,913 41,337 9,460 7,741
----------- ---------- ---------- ----------- ---------- ---------- --------
NET ASSETS.............. $36,105,708 $4,855,278 $1,388,788 $63,324,887 $3,630,921 $1,000,391 $930,299
=========== ========== ========== =========== ========== ========== ========
</TABLE>
See Notes to Financial Statements.
T-6
<PAGE>
METROPOLITAN TOWER SEPARATE ACCOUNT TWO
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------------------------
MONEY AGGRESSIVE STOCK INTERNATIONAL
GROWTH INCOME MARKET DIVERSIFIED GROWTH INDEX STOCK
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
---------- --------- -------- ----------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends (Note 2)..... $3,437,586 $ 308,397 $69,320 $5,629,752 $ 97,108 $ 23,374 $ 9,586
Expenses:
Mortality and expense
charges (Note 3)...... 263,040 37,271 10,866 462,681 23,929 5,076 6,977
---------- --------- ------- ---------- -------- -------- --------
Net investment income... 3,174,546 271,126 58,454 5,167,071 73,179 18,298 2,609
---------- --------- ------- ---------- -------- -------- --------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss)
from security
transactions........... 810,822 42,671 (5,156) 1,151,621 23,432 13,140 (5,525)
Change in unrealized
appreciation
(depreciation) of
investments............ 2,410,203 (180,569) 5,113 1,469,562 63,281 102,220 (20,777)
---------- --------- ------- ---------- -------- -------- --------
Net realized and
unrealized gain (loss)
on investments
(Note 1B).............. 3,221,025 (137,898) (43) 2,621,183 86,713 115,360 (26,302)
---------- --------- ------- ---------- -------- -------- --------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $6,395,571 $ 133,228 $58,411 $7,788,254 $159,892 $133,658 $(23,693)
========== ========= ======= ========== ======== ======== ========
</TABLE>
See Notes to Financial Statements.
T-7
<PAGE>
METROPOLITAN TOWER SEPARATE ACCOUNT TWO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
GROWTH DIVISION INCOME DIVISION MONEY MARKET DIVISION
------------------------ ---------------------- ----------------------
1996 1995 1996 1995 1996 1995
----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income.. $ 3,174,546 $ 1,224,605 $ 271,126 $ 259,668 $ 58,454 $ 68,442
Net realized gain
(loss) from security
transactions.......... 810,822 466,080 42,671 27,736 (5,156) (1,861)
Change in unrealized
appreciation
(depreciation) of
investments........... 2,410,203 5,594,419 (180,569) 496,215 5,113 (162)
----------- ----------- ---------- ---------- ---------- ----------
Net increase in net
assets resulting from
operations............ 6,395,571 7,285,104 133,228 783,619 58,411 66,419
----------- ----------- ---------- ---------- ---------- ----------
From capital
transactions:
Net premiums........... 3,669,558 3,871,700 596,692 650,096 174,311 192,856
Redemptions............ (1,600,700) (1,262,576) (255,698) (174,490) (52,111) (60,477)
Net portfolio
transfers............. 334,725 41,853 (157,607) 2,406 (70,001) 4,513
Other net transfers.... (2,979,391) (2,761,673) (434,303) (472,056) (123,459) (126,378)
----------- ----------- ---------- ---------- ---------- ----------
Net increase (decrease)
in net assets
resulting from capital
transactions.......... (575,808) (110,696) (250,916) 5,956 (71,260) 10,514
----------- ----------- ---------- ---------- ---------- ----------
NET CHANGE IN NET
ASSETS................. 5,819,763 7,174,408 (117,688) 789,575 (12,849) 76,933
NET ASSETS--BEGINNING OF
YEAR................... 30,285,945 23,111,537 4,972,966 4,183,391 1,401,637 1,324,704
----------- ----------- ---------- ---------- ---------- ----------
NET ASSETS--END OF
YEAR................... $36,105,708 $30,285,945 $4,855,278 $4,972,966 $1,388,788 $1,401,637
=========== =========== ========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
T-8
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
DIVERSIFIED DIVISION AGGRESSIVE GROWTH DIVISION STOCK INDEX DIVISION INTERNATIONAL STOCK DIVISION
- ------------------------ ---------------------------- ----------------------- ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ----------- ----------- ------------- ------------- ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$5,167,071 $ 3,249,641 73,179 $ 223,279 $ 18,298 $ 5,644 $ 2,609 $ 2,202
1,151,621 869,809 23,432 16,219 13,140 3,150 (5,525) (1,063)
1,469,562 8,093,380 63,281 164,087 102,220 45,651 (20,777) 3,144
- ----------- ----------- ------------- ------------- ----------- --------- -------------- --------------
7,788,254 12,212,830 159,892 403,585 133,658 54,445 (23,693) 4,283
- ----------- ----------- ------------- ------------- ----------- --------- -------------- --------------
6,280,422 6,856,619 546,467 394,413 84,552 35,177 180,548 184,671
(2,919,234) (2,604,739) (148,481) (77,921) (39,405) (6,625) (45,108) (36,567)
(505,718) (566,501) 800,875 793,836 552,218 155,678 9,843 75,702
(5,211,472) (5,417,926) (292,344) (222,370) (61,214) (14,476) (92,889) (61,927)
- ----------- ----------- ------------- ------------- ----------- --------- -------------- --------------
(2,356,002) (1,732,547) 906,517 887,958 536,151 169,754 52,394 161,879
- ----------- ----------- ------------- ------------- ----------- --------- -------------- --------------
5,432,252 10,480,283 1,066,409 1,291,543 669,809 224,199 28,701 166,162
57,892,635 47,412,352 2,564,512 1,272,969 330,582 106,383 901,598 735,436
- ----------- ----------- ------------- ------------- ----------- --------- -------------- --------------
$63,324,887 $57,892,635 $ 3,630,921 $ 2,564,512 $ 1,000,391 $ 330,582 $ 930,299 $ 901,598
=========== =========== ============= ============= =========== ========= ============== ==============
</TABLE>
T-9
<PAGE>
METROPOLITAN TOWER SEPARATE ACCOUNT TWO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Metropolitan Tower Separate Account Two (the "Separate Account") is a multi-
division unit investment trust registered under the Investment Company Act of
1940 and presently consists of seven investment divisions. The assets in each
division are invested in shares of the corresponding portfolio of the
Metropolitan Series Fund, Inc. (the "Fund"). Each portfolio has varying
investment objectives relative to growth of capital and income.
The Separate Account was formed by Metropolitan Tower Life Insurance Company
("Metropolitan Tower Life"), a wholly-owned subsidiary of Metropolitan Life
Insurance Company ("Metropolitan Life"), on September 18, 1984 and registered
as a unit investment trust on December 21, 1984. The assets of the Separate
Account are the property of Metropolitan Tower Life.
A summary of significant accounting policies, all of which are in accordance
with generally accepted accounting principles, 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. A summary of investments of the
seven designated portfolios of the Fund in which the seven investment
divisions of the Separate Account invest as of December 31, 1996 is
included as Note 5. The methods used to value the Fund's investments at
December 31, 1996 are described in Note 1A of the Fund's 1996 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
The operations of the Separate Account will be reported on the federal
income tax return of Metropolitan Tower Life, which is taxed as a life
insurance company under the provisions of the Internal Revenue Code.
Metropolitan Tower Life joins with Metropolitan Life and Metropolitan
Life's includable affiliates in filing a consolidated federal income tax
return. Metropolitan Tower Life is not currently charging any federal
income taxes against the Separate Account arising from the earnings or
realized capital gains attributable to the Separate Account. Such charges
may be imposed in future years depending on market fluctuations and
transactions involving the Separate Account.
D. NET PREMIUMS
Metropolitan Tower Life deducts a sales load and a state premium tax
charge from premiums before amounts are allocated to the Separate
Account.
2. DIVIDENDS
On April 25, 1996 and December 16, 1996, the Fund declared dividends for all
shareholders of record on April 25, 1996 and December 26, 1996, respectively.
The amount of dividends received by the Separate Account was $9,575,123. The
dividends were paid to Metropolitan Tower Life on April 26, 1996 and December
27, 1996, respectively, and were immediately reinvested in additional shares of
the portfolios in which the investment divisions invest. As a result of these
investments, the number of shares of the Fund held by each of the seven
investment divisions increased by the following: Growth Portfolio 111,561
shares, Income Portfolio 24,895 shares, Money Market Portfolio 6,646 shares,
Diversified Portfolio 335,679 shares, International Stock Portfolio 773 shares,
Stock Index Portfolio 1,037 shares, and Aggressive Growth Portfolio 3,571
shares.
T-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. EXPENSES
Metropolitan Tower Life applies a daily charge against the Separate Account
for the mortality and expense risks assumed by Metropolitan Tower Life. This
charge is equivalent to an effective annual rate of .75% of the average daily
value of the assets in the Separate Account which are attributable to the
policies.
4. RELATED PARTY AGREEMENTS
Metropolitan Life acts as the distributor and principal underwriter, as
defined in the Investment Company Act of 1940, of the policies issued through
the Separate Account. Metropolitan Life has entered into a sales agreement with
Metropolitan Tower Life, whereby Registered Representatives of Metropolitan
Life, authorized as variable life insurance agents under applicable state
insurance laws, sell the policies. The Registered Representatives are
compensated on a commission basis. Metropolitan Life has also entered into an
agreement with Metropolitan Tower Life under which Metropolitan Life performs
the administrative services related to the policies, including underwriting and
issue, billing and collections, and policyowner service.
T-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. A SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1996 METROPOLITAN SERIES FUND,
INC.
<TABLE>
<CAPTION>
GROWTH INCOME MONEY MARKET DIVERSIFIED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------- ------------ ------- ------------ ------- --------------
VALUE VALUE VALUE VALUE
(NOTE 1A) (NOTE 1A) (NOTE 1A) (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Aerospace.............. $ 14,697,375 (0.9%) $ 8,224,562 (0.6%)
Automotive............. 38,188,750 (2.4%) 21,290,925 (1.5%)
Banking................ 157,307,202 (9.8%) 87,632,900 (6.0%)
Broadcasting........... 19,728,750 (1.2%) 11,025,000 (0.8%)
Business Services...... 31,078,650 (1.9%) 17,361,575 (1.2%)
Chemicals.............. 105,060,638 (6.6%) 58,547,387 (4.0%)
Cosmetics.............. 20,924,887 (1.3%) 11,739,188 (0.8%)
Drugs & Health Care.... 65,432,344 (4.1%) 36,554,638 (2.5%)
Electrical Equipment... 39,896,063 (2.5%) 22,197,437 (1.5%)
Electronics............ 147,966,575 (9.3%) 82,595,572 (5.7%)
Financial Services..... 34,196,000 (2.1%) 19,078,600 (1.3%)
Food & Beverages....... 55,678,225 (3.5%) 31,081,563 (2.1%)
Hospital Management.... 26,943,900 (1.7%) 15,140,663 (1.0%)
Hospital Supply........ 64,140,600 (4.0%) 35,693,650 (2.5%)
Hotel & Restaurant..... 34,541,887 (2.2%) 19,286,312 (1.3%)
Household Products..... 27,788,750 (1.7%) 15,490,750 (1.1%)
Insurance.............. 58,992,362 (3.7%) 32,934,038 (2.3%)
Leisure................ 37,965,054 (2.4%) 21,750,587 (1.5%)
Machinery.............. 24,072,650 (1.5%) 13,385,200 (0.9%)
Metals-Aluminum........ 45,886,900 (2.9%) 25,661,113 (1.8%)
Miscellaneous.......... 17,727,000 (1.1%) 9,861,000 (0.7%)
Office & Business
Equipment............. 104,763,338 (6.6%) 58,437,513 (4.0%)
Oil.................... 27,677,510 (1.7%) 15,646,986 (1.1%)
Oil--Domestic.......... 7,318,575 (0.5%) 4,071,375 (0.3%)
Oil--International..... 32,374,200 (2.0%) 18,031,200 (1.2%)
Oil--Services.......... 46,821,401 (2.9%) 26,157,263 (1.8%)
Retail Grocery......... 23,040,750 (1.4%) 13,019,606 (0.9%)
Retail Trade........... 74,240,420 (4.7%) 41,373,775 (2.9%)
Software............... 19,964,200 (1.3%) 11,203,265 (0.8%)
Tobacco................ 22,356,062 (1.4%) 12,602,737 (0.9%)
Transportation--
Railroad.............. 8,116,800 (0.5%) 4,548,600 (0.3%)
Transportation--
Trucking.............. 0 (0.0%) 5 (0.0%)
Utilities-Gas
Distribution &
Pipelines............. 33,212,237 (2.1%) 18,517,850 (1.3%)
-------------- --------------
Total Common Stock..... 1,468,100,055 (91.9%) 820,142,835 (56.6%)
-------------- --------------
LONG-TERM DEBT
SECURITIES
Corporate Bonds:
Banking................ $ 17,291,411 (4.5%) $ 13,220,347 (0.9%)
Collateralized Mortgage
Obligations........... 8,684,394 (2.3%) 9,152,935 (0.6%)
Financial Services..... 36,834,715 (9.6%) 60,619,051 (4.2%)
Government Sponsored... 5,656,770 (1.5%) 6,496,680 (0.5%)
Industrials............ 26,858,935 (7.0%) 33,637,368 (2.3%)
Miscellaneous.......... 6,288,068 (1.6%) 8,335,834 (0.6%)
Utilities--Electric.... 7,305,058 (1.9%) 5,318,809 (0.4%)
Utilities--
Miscellaneous......... 0 (0.0%) 2,838,920 (0.2%)
Utilities--Telephone... 0 (0.0%) 5,040,000 (0.3%)
------------ --------------
Total Corporate Bonds.. 108,919,351 (28.4%) 144,659,944 (10.0%)
------------ --------------
Federal Agency
Obligations........... 19,701,551 (5.1%) 30,641,236 (2.1%)
Federal Treasury
Obligations........... 201,495,177 (52.6%) 317,610,213 (21.9%)
Foreign Obligations.... 14,393,603 (3.8%) 20,255,361 (1.4%)
Yankee Bonds........... 15,352,261 (4.0%) 21,020,607 (1.5%)
------------ --------------
Total Bonds............ 359,861,943 (93.9%) 534,187,361 (36.9%)
------------ --------------
SHORT-TERM OBLIGATIONS
Commercial Paper....... $ 125,797,417 (7.9%) $ 17,393,000 (4.5%) $25,926,227 (62.3%) $ 82,989,000 (5.7%)
Corporate Note......... 3,998,775 (9.6%)
Federal Agency
Obligations........... 11,675,628 (28.0%)
-------------- ------------ ----------- --------------
Total Short-Term
Obligations........... 125,797,417 (7.9%) 17,393,000 (4.5%) 41,600,630 (99.9%) 82,989,000 (5.7%)
-------------- ------------ ----------- --------------
TOTAL INVESTMENTS....... 1,593,897,472 (99.8%) 377,254,943 (98.4%) 41,600,630 (99.9%) 1,437,319,196 (99.2%)
Other Assets Less
Liabilities........... 3,831,003 (0.2%) 6,139,895 (1.6%) 36,001 (0.1%) 11,521,971 (0.8%)
-------------- ------------ ----------- --------------
NET ASSETS.............. $1,597,728,475 (100.0%) $383,394,838 (100.0%) $41,636,631 (100.0%) $1,448,841,167 (100.0%)
============== ============ =========== ==============
</TABLE>
T-12
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1996 METROPOLITAN SERIES FUND,
INC.--(CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL
STOCK
PORTFOLIO
-------------
VALUE
(NOTE 1A)
<S> <C> <C>
COMMON STOCK
Automotive.............................................. $ 12,042,055 (4.0%)
Banking................................................. 28,537,013 (9.4%)
Broadcasting............................................ 1,583,340 (0.5%)
Business Services....................................... 1,353,994 (0.5%)
Chemicals............................................... 15,831,034 (5.2%)
Construction Materials.................................. 4,410,671 (1.5%)
Consumer Non-Durables................................... 1,078,633 (0.4%)
Drugs & Health Care..................................... 13,669,733 (4.5%)
Electrical Equipment.................................... 4,851,913 (1.6%)
Electronics............................................. 33,670,645 (11.1%)
Financial Services...................................... 16,109,145 (5.3%)
Food & Beverages........................................ 4,475,477 (1.5%)
Forest Products & Paper................................. 1,650,874 (0.6%)
General Business........................................ 81,167 (0.0%)
Homebuilders............................................ 2,312,664 (0.8%)
Household Products...................................... 1,626,631 (0.5%)
Insurance............................................... 12,269,901 (4.0%)
Investment Companies.................................... 2,234,375 (0.7%)
Leisure................................................. 2,828,608 (0.9%)
Machinery............................................... 5,079,733 (1.7%)
Metals--Gold............................................ 59,942 (0.0%)
Metals--Non-Ferrous..................................... 4,051,349 (1.3%)
Metals--Steel & Iron.................................... 6,796,496 (2.2%)
Miscellaneous........................................... 5,656,864 (1.9%)
Multi-Industry.......................................... 14,979,104 (4.9%)
Oil & Gas Exploration................................... 6,073,231 (2.0%)
Oil--International...................................... 15,038,125 (4.9%)
Printing & Publishing................................... 3,890,524 (1.3%)
Real Estate............................................. 15,753,267 (5.2%)
Retail Trade............................................ 8,007,127 (2.6%)
Textiles & Apparel...................................... 2,385,456 (0.8%)
Toys & Amusements....................................... 976,600 (0.3%)
Transportation.......................................... 1,745,426 (0.6%)
Utilities--Electric..................................... 4,565,840 (1.5%)
Utilities--Gas Distribution & Pipelines................. 3,750,981 (1.2%)
Utilities--Miscellaneous................................ 3,130,194 (1.0%)
Utilities--Telephone.................................... 7,711,745 (2.5%)
------------
Total Common Stock...................................... 270,269,877 (88.9%)
PREFERRED STOCK
Retail Trade............................................ 518,032 (0.2%)
------------
Total Equity Securities................................. 270,787,909 (89.1%)
TOTAL LONG-TERM DEBT SECURITIES--CONVERTIBLE BONDS....... 19,499,259 (6.4%)
------------
TOTAL INVESTMENTS........................................ 290,287,168 (95.5%)
Other Assets Less Liabilities........................... 13,538,315 (4.5%)
------------
NET ASSETS............................................... $303,825,483 (100.0%)
============
</TABLE>
T-13
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1996 METROPOLITAN SERIES FUND,
INC.--(CONTINUED)
<TABLE>
<CAPTION>
STOCK
INDEX
PORTFOLIO
---------
VALUE
(NOTE 1A)
<S> <C> <C>
COMMON STOCK
Aerospace.............................................. $ 28,736,048 (2.6%)
Automotive............................................. 28,701,626 (2.6%)
Banking................................................ 93,714,830 (8.4%)
Broadcasting........................................... 11,450,367 (1.0%)
Building & Construction................................ 7,528,376 (0.7%)
Business Services...................................... 14,455,324 (1.3%)
Chemicals.............................................. 34,500,400 (3.1%)
Containers & Glass..................................... 1,693,750 (0.2%)
Cosmetics.............................................. 3,360,350 (0.3%)
Drugs & Health Care.................................... 72,616,988 (6.5%)
Electrical Equipment................................... 48,407,363 (4.3%)
Electronics............................................ 63,125,007 (5.6%)
Financial Services..................................... 35,084,926 (3.1%)
Food & Beverages....................................... 68,548,136 (6.1%)
Forest Products & Paper................................ 16,456,307 (1.5%)
Hospital Management.................................... 10,165,689 (0.9%)
Hospital Supply........................................ 30,587,031 (2.7%)
Hotel & Restaurant..................................... 10,602,137 (0.9%)
Household Appliances & Home Furnishings................ 1,995,625 (0.2%)
Household Products..................................... 34,569,100 (3.1%)
Insurance.............................................. 38,990,773 (3.5%)
Leisure................................................ 9,888,705 (0.9%)
Liquor................................................. 2,526,500 (0.2%)
Machinery.............................................. 14,790,412 (1.3%)
Metals--Aluminum....................................... 4,013,638 (0.4%)
Metals--Gold........................................... 5,642,260 (0.5%)
Metals--Non-Ferrous.................................... 2,738,985 (0.2%)
Metals--Steel & Iron................................... 1,839,738 (0.2%)
Mining................................................. 2,180,087 (0.2%)
Miscellaneous.......................................... 3,178,900 (0.3%)
Multi-Industry......................................... 9,577,826 (0.9%)
Newspapers............................................. 6,143,637 (0.5%)
Office & Business Equipment............................ 48,538,755 (4.3%)
Oil & Gas Exploration.................................. 2,800,313 (0.2%)
Oil--Domestic.......................................... 21,819,438 (1.9%)
Oil--International..................................... 65,066,563 (5.8%)
Oil--Services.......................................... 11,558,751 (1.0%)
Photography............................................ 5,953,875 (0.5%)
Printing & Publishing.................................. 3,554,968 (0.3%)
Retail Grocery......................................... 5,887,863 (0.5%)
Retail Trade........................................... 42,490,678 (3.8%)
Software............................................... 30,829,784 (2.7%)
Textiles & Apparel..................................... 6,880,088 (0.6%)
Tires & Rubber......................................... 3,116,200 (0.3%)
Tobacco................................................ 21,138,225 (1.9%)
Toys & Amusements...................................... 2,450,273 (0.2%)
Transportation--Airlines............................... 4,475,875 (0.4%)
Transportation--Railroad............................... 11,508,961 (1.0%)
Transportation--Trucking............................... 1,006,875 (0.1%)
Utilities--Electric.................................... 27,914,283 (2.5%)
Utilities--Gas Distribution & Pipelines................ 14,503,806 (1.3%)
Utilities--Telephone................................... 72,606,227 (6.5%)
--------------
Total Common Stock..................................... 1,121,912,642 (100.0%)
PREFERRED STOCK
Hospital Supply........................................ 1,774 (0.0%)
--------------
Total Equity Securities................................ 1,121,914,416 (100.0%)
TOTAL SHORT-TERM OBLIGATIONS--U.S. TREASURY BILLS....... 6,119,501 (0.5%)
--------------
TOTAL INVESTMENTS....................................... 1,128,033,917 (100.5%)
Other Assets Less Liabilities.......................... (5,736,583) (-0.5%)
--------------
NET ASSETS.............................................. $1,122,297,334 (100.0%)
==============
</TABLE>
T-14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
5. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1996 METROPOLITAN SERIES FUND,
INC.--(CONCLUDED)
<TABLE>
<CAPTION>
AGGRESSIVE
GROWTH
PORTFOLIO
----------
VALUE
(NOTE 1A)
<S> <C> <C>
COMMON STOCK
Automotive............................................. $ 8,300,475 (0.6%)
Banking................................................ 52,161,093 (4.0%)
Broadcasting........................................... 1,911,644 (0.1%)
Business Services...................................... 111,731,275 (8.5%)
Chemicals.............................................. 8,035,150 (0.6%)
Drugs & Health Care.................................... 40,531,901 (3.1%)
Electronics............................................ 159,063,920 (12.0%)
Finance................................................ 1,903,687 (0.1%)
Financial Services..................................... 36,782,250 (2.8%)
Food & Beverages....................................... 8,800,137 (0.7%)
Hospital Supply........................................ 24,680,369 (1.9%)
Hotel & Restaurant..................................... 147,865,328 (11.2%)
Insurance.............................................. 24,104,063 (1.8%)
Leisure................................................ 22,011,718 (1.7%)
Machinery.............................................. 5,305,125 (0.4%)
Office & Business Equipment............................ 46,756,744 (3.5%)
Oil.................................................... 1,795,219 (0.1%)
Oil & Gas Exploration.................................. 22,009,875 (1.7%)
Oil--Services.......................................... 115,561,562 (8.7%)
Personal Care.......................................... 2,647,288 (0.2%)
Printing & Publishing.................................. 7,947,212 (0.6%)
Retail Trade........................................... 116,932,900 (8.9%)
Software............................................... 110,257,289 (8.3%)
Textiles & Apparel..................................... 38,388,025 (2.9%)
Tobacco................................................ 1,785,938 (0.1%)
Transportation--Airlines............................... 19,139,375 (1.4%)
Utilities--Miscellaneous............................... 7,936,000 (0.6%)
Utilities--Telephone................................... 19,502,387 (1.5%)
--------------
Total Common Stock..................................... 1,163,847,949 (88.0%)
PREFERRED STOCK
Printing & Publishing.................................. 3,590,300 (0.3%)
--------------
Total Equity Securities................................ 1,167,438,249 (88.3%)
TOTAL LONG-TERM DEBT SECURITIES--CONVERTIBLE BONDS...... 2,312,500 (0.2%)
TOTAL SHORT-TERM OBLIGATIONS--COMMERCIAL PAPER.......... 142,773,021 (10.8%)
--------------
TOTAL INVESTMENTS....................................... 1,312,523,770 (99.3%)
Other Assets Less Liabilities.......................... 9,325,594 (0.7%)
--------------
NET ASSETS.............................................. $1,321,849,364 (100.0%)
==============
</TABLE>
T-15
<PAGE>
Annual Financial Statements
of
Metropolitan Tower Life Insurance Company
December 31, 1996
<PAGE>
INDEPENDENT AUDITORS' REPORT
Metropolitan Tower Life Insurance Company:
We have audited the accompanying balance sheets of Metropolitan Tower Life
Insurance Company (the "Company") as of December 31, 1996 and 1995 and the
related statements of earnings, equity and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Company'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 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 financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1996 and 1995
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
As discussed in Notes 1 and 9 to the financial statements, the Company has
retroactively adopted applicable generally accepted accounting principles
relating to life insurance subsidiaries of mutual life insurance companies and
has changed, as of December 31, 1994, the method of accounting for fixed
maturity investments.
DELOITTE & TOUCHE LLP
New York, New York
April 4, 1997
MTL-1
<PAGE>
METROPOLITAN TOWER LIFE INSURANCE COMPANY
BALANCE SHEETS, DECEMBER 31, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOTES 1996 1995
----- -------- --------
<S> <C> <C> <C>
ASSETS
Investments:
Fixed Maturities: 2,8
Available for Sale, at Estimated Fair Value.......... $ 52,322 $ 54,861
Held to Maturity, at Amortized Cost.................. 816 942
Policy Loans.......................................... 8 13,466 11,540
-------- --------
Total Investments.................................. 66,604 67,343
Cash and Cash Equivalents.............................. 2,8 11,863 4,844
Deferred Policy Acquisition Costs...................... 53,017 52,142
Accrued Investment Income.............................. 1,288 1,216
Other Receivables...................................... 133 58
Other Assets........................................... 351 312
Separate Account Assets................................ 118,207 104,141
-------- --------
Total Assets....................................... $251,463 $230,056
======== ========
LIABILITIES AND EQUITY
LIABILITIES
Policyholder Account Balances.......................... $ 37,169 $ 35,477
Future Policy Benefits................................. 1,358 1,273
Other Policyholder Liabilities......................... 721 978
Unearned revenues...................................... 12,730 12,779
Federal Income Taxes Payable: 4
Current............................................... 3,625 565
Deferred.............................................. 12,660 13,135
Other Liabilities...................................... 945 2,006
Separate Account Liabilities........................... 118,207 104,141
-------- --------
Total Liabilities.................................. 187,415 170,354
-------- --------
Contingencies (Note 7)
EQUITY
Common Stock........................................... 2,000 2,000
Paid in Capital........................................ 52,500 52,500
Retained Earnings...................................... 8,460 3,720
Net Unrealized Investment Gains........................ 3 1,088 1,482
-------- --------
Total Equity....................................... 9 64,048 59,702
-------- --------
Total Liabilities and Equity....................... $251,463 $230,056
======== ========
</TABLE>
See accompanying notes to financial statements.
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 generally
accepted accounting principles in making such determination.
MTL-2
<PAGE>
METROPOLITAN TOWER LIFE INSURANCE COMPANY
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOTES 1996 1995 1994
----- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES
Universal Life and Investment-Type Product Pol-
icy Fee Income................................ $12,787 $13,579 $14,406
Net Investment Income.......................... 3 5,158 4,332 3,171
Investment Gains (Losses), Net................. 3 67 (120) (578)
------- ------- -------
Total Revenues................................. 18,012 17,791 16,999
------- ------- -------
BENEFITS AND OTHER DEDUCTIONS
Policyholder Benefits.......................... 4,587 7,420 6,633
Interest Credited to Policyholder Account Bal-
ances......................................... 1,660 1,684 1,343
Other Operating Costs and Expenses............. 4,409 5,350 7,899
------- ------- -------
Total Benefits and Other Deductions............ 10,656 14,454 15,875
------- ------- -------
Earnings before Federal Income Taxes........... 7,356 3,337 1,124
Federal Income Taxes........................... 4 2,616 1,169 393
------- ------- -------
Net Earnings................................... 9 $ 4,740 $ 2,168 $ 731
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
MTL-3
<PAGE>
METROPOLITAN TOWER LIFE INSURANCE COMPANY
STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 ,1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOTES 1996 1995 1994
----- ------- ------- -------
<S> <C> <C> <C> <C>
COMMON STOCK--BEGINNING AND END OF YEAR....... $ 2,000 $ 2,000 $ 2,000
------- ------- -------
PAID IN CAPITAL--BEGINNING AND END OF YEAR.... 52,500 52,500 52,500
------- ------- -------
RETAINED EARNINGS, BEGINNING OF YEAR.......... 3,720 1,552 821
Net Earnings.................................. 4,740 2,168 731
------- ------- -------
RETAINED EARNINGS, END OF YEAR................ 8,460 3,720 1,552
------- ------- -------
NET UNREALIZED INVESTMENT GAINS (LOSSES), BE-
GINNING OF YEAR.............................. 1,482 (900) --
Cumulative Effect of Accounting Change........ 1 -- -- (900)
Change in Unrealized Investment (Losses)
Gains........................................ (394) 2,382 --
------- ------- -------
NET UNREALIZED INVESTMENT GAINS (LOSSES), END
OF YEAR...................................... 1,088 1,482 (900)
------- ------- -------
TOTAL EQUITY, END OF YEAR..................... 9 $64,048 $59,702 $55,152
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
MTL-4
<PAGE>
METROPOLITAN TOWER LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
NET EARNINGS.................................... $ 4,740 $ 2,168 $ 731
Adjustments to Reconcile Net Earnings to Net
Cash Provided (Used) by Operating Activities:
Change in Deferred Policy Acquisition Costs,
Net.......................................... 125 270 2,211
Change in Accrued Investment Income........... (72) (133) (29)
Change in Other Receivables................... (75) 7 244
Investment (Gains) Losses..................... (67) 120 578
Interest Credited to Policyholder Account
Balances..................................... 1,660 1,684 1,343
Universal Life and Investment-Type Product
Policy Fee Income............................ (3,163) (3,448) (3,681)
Change in Future Policy Benefits.............. 85 (136) 769
Change in Other Policyholder Liabilities...... (257) 595 (2,648)
Change in Unearned Revenues................... (49) (89) (572)
Change in Federal Income Taxes Payable........ 2,798 (1,556) (102)
Other, Net.................................... (1,353) 585 (207)
-------- -------- --------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES..................................... 4,372 67 (1,363)
-------- -------- --------
Cash Flows from Investing Activities:
Sales, Maturities and Repayments of Fixed
Maturities................................... 4,392 16,729 11,198
Purchases of Fixed Maturities................. (3,014) (24,314) (12,812)
Net Change in Policy Loans.................... (1,926) (1,611) (1,568)
-------- -------- --------
NET CASH USED BY INVESTING ACTIVITIES........... (548) (9,196) (3,182)
-------- -------- --------
Cash Flows from Financing Activities:
Policyholder Account Balances
Deposits..................................... 19,333 17,429 18,923
Withdrawals.................................. (16,138) (13,342) (13,643)
-------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES....... 3,195 4,087 5,280
-------- -------- --------
Change in Cash and Cash Equivalents............. 7,019 (5,042) 735
Cash and Cash Equivalents, Beginning of Year.... 4,844 9,886 9,151
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR.......... $ 11,863 $ 4,844 $ 9,886
======== ======== ========
Supplemental Cash Flow Information:
Income Taxes (Refunded) Paid.................. $ (180) $ 2,725 $ 497
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
MTL-5
<PAGE>
METROPOLITAN TOWER LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Metropolitan Tower Life Insurance Company (the "Company") is a wholly-owned
subsidiary of Metropolitan Life Insurance Company ("Metropolitan Life"). The
Company is domiciled in Delaware and is chartered to sell life insurance and
annuities. The Company's current business is individual variable life
insurance.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). State insurance departments
generally recognize only statutory accounting practices for determining and
reporting the financial condition and results of operations of an insurance
company for determining solvency under insurance laws.
Prior to 1996, the Company, as a subsidiary of a mutual life insurance
company, prepared its financial statements in conformity with accounting
practices prescribed or permitted by the Insurance Department of the State of
Delaware ("Department") (statutory financial statements), which accounting
practices were considered to be GAAP for a mutual life insurance company and
its life insurance subsidiaries. In 1996, the Company adopted Interpretation
No. 40, Applicability of Generally Accepted Accounting Principles to Mutual
Life Insurance and Other Enterprises (the "Interpretation") and Statement of
Financial Accounting Standards ("SFAS") No. 120, Accounting and Reporting by
Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain Long
Duration Participating Policies (the "Standard"), of the Financial Accounting
Standards Board ("FASB"). The Interpretation and the Standard required mutual
life insurance companies and their life insurance subsidiaries to adopt all
standards promulgated by the FASB in their general purpose financial
statements. The financial statements of the Company for 1995 and 1994 have been
retroactively restated to reflect the adoption of applicable authoritative GAAP
pronouncements. The effect of such adoption, except for SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities, has been
reflected in equity at January 1, 1994 (see Note 9).
As of December 31, 1994, the Company adopted SFAS No. 115 which expanded the
use of fair value accounting for those securities that a company does not have
positive intent and ability to hold to maturity. Implementation of SFAS No. 115
decreased equity at December 31, 1994, by $900,000, net of deferred income
taxes and an adjustment of deferred policy acquisition costs.
VALUATION OF INVESTMENTS
Fixed maturity securities for which the Company has the positive intent and
ability to hold to maturity are stated principally at amortized cost. All other
fixed maturity securities are classified as available for sale and are reported
at estimated fair market value. Unrealized investment gains and losses on fixed
maturity securities available for sale are reported as a separate component of
equity. Such amounts are net of related deferred income taxes and adjustments
of deferred policy acquisition costs. Costs of fixed maturity securities are
adjusted for impairments in value deemed to be other than temporary. All
security transactions are recorded on a trade date basis.
Policy loans are stated at unpaid principal balances.
INVESTMENT RESULTS
Realized investment gains and losses are determined by specific
identification and are presented as a component of revenues.
MTL-6
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
RECOGNITION OF INCOME AND EXPENSES
Premiums from universal life contracts are reported as deposits to
policyholder account balances. Revenues from these contracts consist of amounts
assessed during the period against policyholder account balances for mortality,
policy administration and surrender charges. Policy benefits and claims that
are charged to expenses include benefit claims incurred in the period in excess
of related policyholder account balances and interest credited to policyholder
account balances.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions, agency and
policy issue expenses, all of which vary with and are primarily related to the
production of new business, have been deferred. Deferred policy acquisition
costs are subject to recoverability testing at the time of policy issue and
loss recognition testing at the end of each accounting period.
Deferred policy acquisition costs are amortized over 30 years for universal
life contracts as a constant percentage of estimated gross profits arising
principally from surrender charges and interest, mortality and expense margins
based on historical and anticipated future experience, updated regularly. The
effects of revisions to experience on previous amortization of deferred policy
acquisition costs are reflected in earnings in the period estimated gross
profits are revised.
Changes in deferred policy acquisition costs are included in other operating
costs and expenses in the accompanying statements of earnings. Acquisition
costs of $116,000, $132,000 and $171,000 were capitalized in 1996, 1995 and
1994, respectively, and amortization of deferred acquisition costs was
$241,000, $402,000 and $2,382,000 in 1996, 1995 and 1994, respectively.
POLICYHOLDER ACCOUNT BALANCES
Policyholder account balances for universal life contracts are equal to the
policy account values. The policy account values represent an accumulation of
gross premium payments plus credited interest less expense and mortality
charges and withdrawals.
UNEARNED REVENUES
Unrearned revenues represent the unearned portion of front-end loads or
initiation charges that are assessed in the first policy year. The unearned
revenue is amortized over 30 years as a constant percentage of estimated gross
profits based on historical and projected experience. The effects of revisions
to estimated gross profits are adjusted by a charge or credit to the statement
of earnings in the period when such estimates are revised.
INCOME TAXES
The Company joins with Metropolitan Life and its includable affiliates in
filing a consolidated Federal income tax return. The future tax consequences of
temporary differences between financial reporting and tax basis of assets and
liabilities are measured as of the balance sheet dates and are recorded as
deferred tax assets or liabilities.
SEPARATE ACCOUNT OPERATIONS
Separate Accounts are established in conformity with the state 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.
MTL-7
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Investments held in the Separate Accounts (stated at estimated fair market
value) and liabilities of the Separate Accounts (including participants'
corresponding equity in the Separate Accounts) are reported separately as
assets and liabilities. Deposits to Separate Accounts are reported as increases
in Separate Account liabilities and are not reported in revenues. Mortality,
policy administration and surrender charges to all Separate Accounts are
included in revenues.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand, amounts due from banks and
highly liquid debt instruments purchased with an original maturity of three
months or less.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles 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.
Actual results could differ from those estimates.
2. INVESTMENTS
FIXED MATURITIES
Amortized cost, gross unrealized gain and loss and estimated fair value of
fixed maturities, by category, as of December 31, 1996 and 1995, are shown
below.
AVAILABLE FOR SALE SECURITIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED ------------------ESTIMATED
COST GAIN LOSS FAIR VALUE
--------- --------- ------------------
<S> <C> <C> <C> <C>
1996
Fixed Maturities--Bonds:
U. S. Treasury securities and
obligations of U. S. government
corporations and agencies............. $ 7,505 $ 105 $ -- $ 7,610
Corporate.............................. 26,120 668 24 26,764
Mortgage-backed securities............. 15,056 909 18 15,947
Other.................................. 1,968 33 -- 2,001
------- --------- ------- -------
Total Fixed Maturities................ $50,649 $ 1,715 $ 42 $52,322
======= ========= ======= =======
1995
Fixed Maturities--Bonds:
U. S. Treasury securities and
obligations of U. S. government
corporations and agencies............. $ 8,314 $ 264 $ 2 $ 8,576
Corporate.............................. 26,182 1,433 24 27,591
Mortgage-backed securities............. 15,138 1,480 10 16,608
Other.................................. 1,947 139 -- 2,086
------- --------- ------- -------
Total Fixed Maturities................ $51,581 $ 3,316 $ 36 $54,861
======= ========= ======= =======
</TABLE>
MTL-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
HELD TO MATURITY SECURITIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED ----------------- ESTIMATED
COST GAIN LOSS FAIR VALUE
--------- -------- -------- ----------
<S> <C> <C> <C> <C>
1996
Fixed Maturities--Corporate Bonds:....... $816 $ 39 $ -- $ 855
==== ======== ======== ======
1995
Fixed Maturities--Corporate Bonds:....... $942 $ 124 $ -- $1,066
==== ======== ======== ======
</TABLE>
Bonds classified as held to maturity at December 31, 1996 are due within five
to ten years.
The amortized cost and estimated fair value of bonds classified as available
for sale, by contractual maturity, at December 31, 1996 are shown below.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less................................. $11,993 $11,983
Due after one year through five years................... 11,366 11,555
Due after five years through 10 years................... 11,236 11,774
Due after 10 years...................................... 998 1,063
------- -------
Subtotal.............................................. 35,593 36,375
Mortgage-backed securities.............................. 15,056 15,947
------- -------
Total................................................. $50,649 $52,322
======= =======
</TABLE>
Bonds not due at a single maturity date have been included in the above table
in the year of final maturity. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without prepayment penalties
CASH AND CASH EQUIVALENTS
As of December 31, 1996 and 1995, the Company had $11.7 million and $4.8
million, respectively, invested in Metropolitan Money Market Pool (the "pool").
The pool is a New York general partnership consisting of the Company and other
wholly-owned subsidiaries of Metropolitan Life. The pool was formed as a
private pass-through investment vehicle to enable the partners to invest, on a
pooled basis, in U.S. Treasury securities and high quality corporate money
market instruments. Although for economic and administrative convenience the
pooled securities are held in the name of the pool, each member's investment
represents that company's pro rata undivided ownership interest in each of the
pooled securities.
ASSETS ON DEPOSIT
As of December 31, 1996 and 1995, the Company had assets on deposit with
regulatory agencies of $2,898,850 and $3,026,500, respectively.
MTL-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES)
The sources of investment income are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities..................................... $3,857 $3,230 $2,148
Policy loans......................................... 968 798 688
Cash and cash equivalents............................ 406 418 412
------ ------ ------
Gross investment income.............................. 5,231 4,446 3,248
Investment expenses.................................. (73) (114) (77)
------ ------ ------
Investment income, net............................... $5,158 $4,332 $3,171
====== ====== ======
</TABLE>
Proceeds from the sales of bonds classified as available for sale during
1996, 1995 and 1994 were $2,072,940, $16,081,578 and $10,304,667, respectively.
During 1996, 1995 and 1994, respectively, gross gains (losses) of $67,381,
$(120,459) and $(578,323) were realized on those sales.
Proceeds from the sales of bonds classified as held to maturity during 1996
were $124,998 and no gains or losses were incurred on such sales. Such sales
were due to prepayment and callable features on privately placed bonds. There
were no sales of held to maturity bonds in 1995 or 1994.
The unrealized investment gains (losses), which are included in the balance
sheets and statements of equity as a component of equity, and the changes for
the corresponding years are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance, end of year, comprised of:
Unrealized investment gains (losses) on fixed ma-
turities......................................... $ 1,673 $ 3,280 $(1,200)
Amounts of unrealized investment gains (losses) at-
tributable to:
Deferred policy acquisition cost allowances....... -- (1,000) (183)
Deferred income tax (expense) benefit............. (585) (798) 483
------- ------- -------
Balance, end of year................................ $ 1,088 $ 1,482 $ (900)
======= ======= =======
Balance, beginning of year.......................... $ 1,482 $ (900) $ --
Change in unrealized investment gains (losses).... (1,607) 4,480 --
Unrealized loss at date of adoption of SFAS No.
115.............................................. -- -- (1,200)
Change in unrealized investment gains (losses) at-
tributable to:
Deferred policy acquisition cost allowances..... 1,000 (817) (183)
Deferred income tax benefit (expense)........... 213 (1,281) 483
------- ------- -------
Balance, end of year................................ $ 1,088 $ 1,482 $ (900)
======= ======= =======
</TABLE>
4. FEDERAL INCOME TAXES
Federal income tax expense has been calculated in accordance with the
provisions of the Internal Revenue Code, as amended (the "Code").
The Company joins with Metropolitan Life and its includable affiliates in
filing a consolidated Federal income tax return. The consolidating companies
have executed a tax allocation agreement. Under this agreement the Federal
income tax provision is computed on a separate return basis and members receive
reimbursement to the extent their losses and other credits result in a
reduction of the consolidated tax liability.
MTL-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company uses the liability method of accounting for Federal income taxes.
Deferred Federal income taxes arise from the recognition of temporary
differences between income determined for financial reporting purposes and
income tax purposes.
A summary of Federal income tax expense (benefit) in the statements of
earnings is shown below.
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current.............................................. $2,880 $1,434 $1,287
Deferred............................................. (264) (265) (894)
------ ------ ------
Total.............................................. $2,616 $1,169 $ 393
====== ====== ======
</TABLE>
The provision for Federal income taxes approximates amounts computed by
multiplying income before Federal income taxes by the statutory rate of 35
percent.
The deferred income tax asset or liability recorded represents the net
temporary differences between the tax bases of assets and liabilities and their
amounts for financial reporting. The components of the net Federal deferred
income tax asset or liability are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax assets:
Policyholder liabilities.............................. $ 4,075 $ 4,082
Other................................................. 211 --
-------- --------
Total assets........................................ 4,286 4,082
-------- --------
Deferred income tax liabilities:
Investments........................................... 18 2
Deferred policy acquisition costs..................... 16,343 16,417
Net unrealized investment gains....................... 585 798
-------- --------
Total liabilities................................... 16,946 17,217
-------- --------
Net deferred Federal income tax liability............... $(12,660) $(13,135)
======== ========
</TABLE>
The sources of the deferred Federal income taxes and their tax effects are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Policyholder liabilities............................. $ 7 $ 71 $ 288
Investments.......................................... 16 (1) --
Deferred policy acquisition costs.................... (75) (335) (1,182)
Other, net........................................... (212) -- --
----- ----- -------
Total.............................................. $(264) $(265) $ (894)
===== ===== =======
</TABLE>
5. RELATED PARTIES
Metropolitan Life employees provide management, administrative, investment
and policyholder service functions for the Company. Metropolitan Life
establishes guidelines for reasonable determination of costs of services
provided, based on time spent or use of services, and charges its subsidiaries
for services rendered. The charges for such services to the Company were
$3,592,488, $4,156,135 and $3,927,443 million during 1996, 1995 and 1994,
respectively.
MTL-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. DIVIDEND RESTRICTIONS
Under Delaware Insurance Law, the maximum amount of distributions which can
be made to the Company's parent in any given year, without prior approval by
the Insurance Commissioner, is equal to the greater of 10 percent of the
Company's surplus as of the last calendar year, or the net gain from operations
for the last calendar year. The Company did not pay dividends in 1996, 1995 and
1994.
7. CONTINGENCIES
It is the opinion of management that any litigation, claims or assessments
against the Company that have arisen in the course of the Company's business,
in addition to those that might otherwise be provided for in the financial
statements, are not likely to have a material adverse effect on the Company's
financial position or the results of its operations.
8. FAIR VALUE INFORMATION
The estimated fair value amounts of financial instruments presented below
have been determined by the Company using market information available as of
December 31, 1996 and 1995, and appropriate valuation methodologies. However,
considerable judgment is necessarily required to interpret market data to
develop the estimates of fair value for financial instruments for which there
are no available market value quotations.
The estimates presented below are not necessarily indicative of the amounts
the Company could have realized in a market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect
on the estimated fair value amounts.
<TABLE>
<CAPTION>
CARRYING ESTIMATED
DECEMBER 31, 1996: VALUE FAIR VALUE
------------------ -------- ----------
(IN THOUSANDS)
<S> <C> <C>
Assets
Fixed maturities....................................... $53,138 53,177
Policy loans........................................... 13,466 16,269
Cash and cash equivalents.............................. 11,863 11,863
<CAPTION>
DECEMBER 31, 1995:
------------------
<S> <C> <C>
Assets
Fixed maturities....................................... $55,803 $55,927
Policy loans........................................... 11,540 11,540
Cash and cash equivalents.............................. 4,844 4,844
</TABLE>
For bonds that are publicly traded, estimated fair value was obtained from an
independent market pricing service. Publicly traded bonds represented
approximately 98 percent of the carrying value and estimated fair value of the
total bonds as of December 31, 1996 and 1995. For all other bonds, estimated
fair value was determined by management, based primarily on interest rates,
maturity, credit quality and average life. Estimated fair values of policy
loans were based on discounted projected cash flows using U.S. Treasury rates
to approximate interest rates and Company experience to project patterns of
loan accrual and repayment. For cash and cash equivalents, the carrying amount
is a reasonable estimate of fair value.
MTL-12
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
9. STATUTORY FINANCIAL INFORMATION
The Interpretation and Standard referred to in Note 1 required mutual life
insurance companies and their life insurance subsidiaries to adopt all
standards promulgated by the FASB in their general purpose financial
statements. The effect of all adjustments of initially applying the
Interpretation and Standard is as follows (in thousands):
<TABLE>
<S> <C>
DECEMBER 31, 1993, statutory capital and surplus................... $ 24,469
Future policy benefits and policyholder account balances......... 1,887
Unearned revenue................................................. (13,440)
Deferred policy acquisition costs................................ 55,623
Statutory asset valuation reserve................................ 208
Deferred Federal income taxes.................................... (13,496)
Other............................................................ 70
--------
January 1, 1994, equity............................................ $ 55,321
========
</TABLE>
The following reconciles net change in statutory capital and surplus and
statutory capital and surplus determined in accordance with accounting
practices prescribed or permitted by insurance regulatory authorities with net
earnings and equity on a GAAP basis.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net change in statutory capital and surplus...... $ 4,341 $ 2,147 $ 1,775
Future policy benefits and policyholders account
balances....................................... 183 (27) 316
Deferred policy acquisition costs............... (125) (270) (2,211)
Deferred Federal income taxes................... 264 265 894
Statutory asset valuation reserves.............. 57 58 24
Other, net...................................... 20 (5) (67)
------- ------- -------
Net Earnings..................................... $ 4,740 $ 2,168 $ 731
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Statutory capital and surplus $ 32,733 $ 28,392
Future policy benefits and policyholders account bal-
ances................................................. 2,082 1,512
Unearned revenue....................................... (12,730) (12,779)
Deferred policy acquisition costs...................... 53,017 52,142
Deferred Federal income taxes.......................... (12,660) (13,135)
Valuation of investments............................... 1,673 3,280
Statutory asset valuation reserves..................... 347 290
Other, net............................................. (414) --
-------- --------
Equity.................................................. $ 64,048 $ 59,702
======== ========
</TABLE>
MTL-13
<PAGE>
[LOGO] MetLife(R)
Bulk
MetLife Customer Service Center--Tulsa Rate
P.O. Box 21889 U.S.
Tulsa, OK 74121-1889 Postage
Paid
ADDRESS CORRECTION REQUESTED Rutland,
VT
FORWARDING AND RETURN Permit
POSTAGE GUARANTEED 220
<PAGE>
[LOGO] MetLife(R)
Bulk
MetLife Customer Service Center--Warwick Rate
P.O. Box 520 U.S.
Warwick, RI 02887-0520 Postage
Paid
ADDRESS CORRECTION REQUESTED Rutland,
VT
FORWARDING AND RETURN Permit
POSTAGE GUARANTEED 220
<PAGE>
MAY 1, 1992
PROSPECTUS
for
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICIES
(Minimum Initial Specified Face Amount $50,000)
Issued by
METROPOLITAN TOWER LIFE INSURANCE COMPANY
The individual flexible premium multifunded life insurance policies
("Policies") offered by this Prospectus are issued by Metropolitan Tower Life
Insurance Company ("Metropolitan Tower") and are designed to provide lifetime
insurance coverage on the insureds named in the Policies, as well as maximum
flexibility in connection with premium payments and death benefits. This
flexibility allows an owner of a Policy to provide for changing insurance
needs within the confines of a single insurance policy.
The Policy provides for a death benefit payable at the insured's death as
long as the Policy is still in effect. The Policy owner may choose either
Death Benefit Option A (the death benefit is fixed in amount) or Death Benefit
Option B (the death benefit includes the Policy's cash value in addition to a
fixed insurance amount). If greater than the death benefit otherwise payable
under Option A or B, a minimum death benefit equivalent to a percentage of the
cash value will be paid.
The premiums paid, less premium expense charges, will be allocated at the
owner's discretion among one or more investment divisions of Metropolitan
Tower Separate Account Two ("Separate Account") and/or a fixed interest
account ("Fixed Account") within the General Account of Metropolitan Tower.
The assets in each investment division are invested in shares of a
corresponding portfolio of the Metropolitan Series Fund, Inc. ("Fund"). The
accompanying prospectus for the Fund describes the investment objectives and
certain attendant risks of the five currently available portfolios of the
Fund: Money Market Portfolio, Growth Portfolio, Income Portfolio, Diversified
(formerly Discretionary) Portfolio and Equity Income Portfolio.
The Policy's cash value will vary with the investment experience of the
Separate Account investment divisions to which amounts are allocated and the
fixed rates of interest earned by allocations to the General Account. The cash
value will also be adjusted for other factors, including the amount of charges
imposed and the premium payments made.
The Policy owner may withdraw a portion of the Policy's cash surrender
value, or the Policy may be fully surrendered, at any time, subject to certain
limitations.
The Policy owner has the flexibility to vary the frequency and amount of
premium payments, subject to certain restrictions and conditions.
Metropolitan Life Insurance Company ("Metropolitan Life") is the investment
manager of the Fund and the distributor of its shares. Metropolitan Life also
distributes and administers the Policies. State Street Research & Management
Company ("State Street Research") is the sub-investment manager with respect
to the Growth, Income, Diversified and Equity Income Portfolios of the Fund.
Metropolitan Tower and State Street Research are wholly-owned subsidiaries of
Metropolitan Life. It is the present intention of Metropolitan Tower to
discontinue the sale of the Policies on May 1, 1992.
As in the case of other life insurance policies, it may not be advantageous
to purchase flexible premium multifunded life insurance as a replacement for
an existing life insurance policy or in addition to an existing flexible
premium multifunded life insurance policy.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS NOT VALID UNLESS ATTACHED TO THE CURRENT PROSPECTUS FOR THE
METROPOLITAN SERIES FUND, INC., WHICH CONTAINS ADDITIONAL INFORMATION ABOUT
THE FUND.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
1 Madison Avenue, New York, New York 10010 Telephone (212) 578-6862
<PAGE>
TABLE OF CONTENTS
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DEFINITIONS........................... 3
SUMMARY............................... 5
Who is the Issuer of the Policies?... 5
What are Separate Account Two, the
Fixed Account and the Metropolitan
Series Fund?........................ 5
What Death Benefits are Available
under the Policy?................... 6
What is the Policy's Cash Value?..... 6
What Flexibility Does a Policy Owner
have to Adjust the Amount of the
Death Benefit?...................... 6
What Flexibility Does a Policy Owner
have in Connection with Premium
Payments?........................... 6
How Long Will the Policy Remain in
Force?.............................. 7
How are Net Premiums Allocated?...... 7
May the Policy be Surrendered or the
Cash Value Partially Withdrawn?..... 7
Is There a "Free Look" Period?....... 8
What is the Loan Privilege?.......... 8
What Charges are Assessed in
Connection with the Policy?......... 8
What is the Tax Treatment of Cash
Value?.............................. 9
Is the Beneficiary Subject to Federal
Income Tax on the Death Benefit?.... 9
Is the Death Benefit or the Cash
Value Subject to Federal Estate
Tax?................................ 9
When are Premium Payments, Policy
Owner Requests and Other
Communications Deemed to be
Received?........................... 9
SEPARATE ACCOUNT AND METROPOLITAN
SERIES FUND.......................... 10
The Separate Account................. 10
Metropolitan Series Fund............. 11
POLICY BENEFITS....................... 12
Death Benefits....................... 12
Death Benefit Options................ 12
Cash Value........................... 15
Benefit at Final Date................ 21
Optional Income Plans................ 21
Optional Insurance Benefits.......... 21
</TABLE>
<TABLE>
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PAYMENT AND ALLOCATION OF PREMIUMS..................................... 22
Issuance of a Policy.................................................. 22
Premiums.............................................................. 22
Allocation of Premiums and Cash Value................................. 23
Policy Termination and Reinstatement.................................. 24
CHARGES AND DEDUCTIONS................................................. 25
Premium Expense Charges............................................... 25
Monthly Deduction From Cash Value..................................... 26
Charges Against the Separate Account.................................. 28
Guarantee of Certain Charges.......................................... 28
Other Charges......................................................... 28
ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES AND ACCUMULATED PREMIUMS.. 29
POLICY RIGHTS.......................................................... 38
Loan Privileges....................................................... 38
Surrender and Withdrawal Privileges................................... 39
Exchange Privilege.................................................... 40
THE FIXED ACCOUNT...................................................... 41
General Description................................................... 41
Fixed Account Benefits................................................ 41
Fixed Account Cash Value.............................................. 41
Transfers, Withdrawals, Surrenders and Policy Loans................... 42
RIGHTS RESERVED BY METROPOLITAN TOWER.................................. 42
OTHER POLICY PROVISIONS................................................ 43
SALES AND ADMINISTRATIVE SERVICES AGREEMENT............................ 44
DISTRIBUTION OF THE POLICIES........................................... 45
FEDERAL TAX MATTERS.................................................... 45
Taxation of the Policy................................................ 45
Taxation of Metropolitan Tower........................................ 47
MANAGEMENT............................................................. 48
VOTING RIGHTS.......................................................... 49
Right to Instruct Voting of Fund Shares............................... 49
Disregard of Voting Instructions...................................... 49
REPORTS................................................................ 50
STATE REGULATION....................................................... 50
REGISTRATION STATEMENT................................................. 50
LEGAL MATTERS.......................................................... 50
EXPERTS................................................................ 50
FINANCIAL STATEMENTS................................................... 51
APPENDIX A............................................................. 67
APPENDIX B............................................................. 70
</TABLE>
THE POLICY IS NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. METROPOLITAN TOWER DOES NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN
AS CONTAINED IN THIS PROSPECTUS OR ANY ATTACHED PROSPECTUS OR ANY SUPPLEMENT
THERETO OR IN ANY SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY METROPOLITAN TOWER.
2
<PAGE>
DEFINITIONS
Age--The age in full years of the insured at issue of the Policy plus the
number of full Policy years completed since issue. A full Policy year is
completed upon the commencement of the next succeeding Policy year.
Beneficiary--The beneficiary is the person or persons designated by the owner
of the Policy to receive the insurance proceeds upon the death of the insured.
Cash Surrender Value--The cash value less any indebtedness.
Cash Value--The sum of the Policy cash values in the Fixed Account, the
investment divisions of the Separate Account and the Policy Loan Account.
Date of Policy--The date set forth in the Policy that is used to determine
Policy years and Policy months. Policy anniversaries are measured from the Date
of Policy.
Designated Office--The executive office of Metropolitan Tower at 1 Madison
Avenue, New York, New York 10010, to which all Policy owner communications are
to be sent. Metropolitan Tower may, by written notice, name other locations
within the United States to serve as designated offices, in place of or in
addition to the executive office.
Final Date--The policy anniversary on which the insured is age 95.
Fixed Account--An account which is part of the General Account and to which
Metropolitan Tower will allocate net premiums as directed by the owner of a
Policy and credit certain fixed rates of interest.
General Account--The assets of Metropolitan Tower other than those allocated
to the Separate Account or any other separate account.
Guideline Annual Premium--The level annual amount of premium that would be
payable through the Final Date of a Policy for the specified face amount of the
Policy if premiums were fixed by Metropolitan Tower as to both timing and
amount and were based on 1980 Commissioners Standard Ordinary Mortality Tables,
net investment earnings at an annual effective rate of 5%, and fees and charges
as set forth in the Policy and any Policy riders.
Indebtedness--The total of any unpaid Policy loan and loan interest.
Insured--The person upon whose life the Policy is issued.
Investment Start Date--The date the first premium is applied to the Fixed
Account and/or the Separate Account. It is the later of (1) the Date of Policy
and (2) the date the first premium for a Policy is received at the Designated
Office.
Investment Division--A subdivision of the Separate Account. The assets in
each investment division are invested exclusively in the shares of a specified
portfolio.
Loan Value--The maximum amount that may be borrowed under the Policy. The
loan value equals the Policy's cash surrender value less two monthly
deductions, or, if greater, 75% (90% in Virginia and Maryland) of the cash
surrender value (or, in Texas, the policy's cash surrender value less the
monthly deductions to the end of the Policy year, if greater).
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<PAGE>
Minimum Initial Specified Face Amount--The minimum specified face amount of
insurance for which a Policy may be issued. Currently, the amount is $100,000
for insureds in the preferred rate class and $50,000 for all other insureds.
Monthly Anniversary--The same date in each month as the Date of Policy. For
purposes of the Separate Account, whenever the monthly anniversary date falls
on a date other than a valuation date, the next valuation date will be deemed
to be the monthly anniversary.
Monthly Deduction--Charges deducted monthly from the cash value of a Policy
and which include the monthly cost of term insurance, the monthly cost of any
benefits provided by riders, and the monthly policy charges.
Planned Periodic Premium--The Policy owner's self-determined level-amount
premium planned to be paid at fixed intervals over a specified period of time.
The Policy owner is not required to follow this schedule.
Policy--The flexible premium multifunded life insurance policy offered by
Metropolitan Tower and described in this Prospectus.
Policy Loan Account--An account within the General Account to which cash
value from the Separate Account and/or the Fixed Account in an amount equal to
a Policy loan requested by a Policy owner is transferred.
Policy Month--The month beginning on the monthly anniversary.
Policy owner ("Owner")--The person so designated in the application or as
subsequently changed.
Portfolio--A portfolio represents a different class (or series) of stock of
Metropolitan Series Fund, Inc., a mutual fund in which the Separate Account
assets are invested.
Separate Account--Metropolitan Tower Separate Account Two, a separate
investment account of Metropolitan Tower through which premiums paid under the
Policy are invested to the extent allocated to the Separate Account by the
Policy owner.
Specified Face Amount--The amount set forth on the face of the Policy.
Target Premium--The estimated annual amount which would keep a Policy in
force to maturity based on the insured's attained age and sex, the specified
face amount of insurance and reasonable estimates of mortality and interest.
Valuation Date--Each day on which the New York Stock Exchange is open for
trading or, on days other than when the New York Stock Exchange is open, on
which it is determined that there is a sufficient degree of trading in the
Fund's portfolio securities that the current net asset value of its redeemable
securities might be materially affected. Valuations for any date other than a
Valuation Date will be determined as of the next Valuation Date.
Valuation Period--The period between two successive Valuation Dates,
commencing at 4:00 p.m., New York City time, on each valuation date and ending
at 4:00 p.m., New York City time, on the next succeeding Valuation Date.
4
<PAGE>
This Prospectus describes only those aspects of the Policy that relate to the
Separate Account since only interests in the Separate Account are being offered
by this Prospectus. Aspects of the Fixed Account are briefly summarized in
order to give a better understanding of how the Policy functions (see "The
Fixed Account," page 41).
SUMMARY
Unless the context indicates otherwise, this summary and the discussion in
the rest of this Prospectus assume that cash surrender values are sufficient to
pay all charges deducted on monthly anniversaries and that no Policy loans have
been made (see "Loan Privileges--Effect of a Policy Loan," page 39, and
"Payment and Allocation of Premiums--Policy Termination and Reinstatement,"
page 24).
WHO IS THE ISSUER OF THE POLICIES?
Metropolitan Tower is the issuer of the Policies described in this
Prospectus. Metropolitan Tower is a stock life insurance company incorporated
under the laws of the State of Delaware in 1982. It is authorized to do
business in 49 jurisdictions. On December 31, 1991, it had total assets of over
$120 million. Metropolitan Tower is a wholly-owned subsidiary of Metropolitan
Life.
Metropolitan Life is a mutual life insurance company. It was incorporated
under the laws of the State of New York in 1866 and since 1868 it has been
engaged in the life insurance business under the name Metropolitan Life
Insurance Company. Its Home Office is located at 1 Madison Avenue, New York,
New York 10010. It is authorized to transact business in all states of the
United States, the District of Columbia, Puerto Rico and all Provinces of
Canada. On December 31, 1991, Metropolitan Life had total life insurance in
force of over $948 billion and total assets of over $110 billion.
The assets of Metropolitan Life do not back any liabilities of Metropolitan
Tower for benefits payable under the Policies. However, Metropolitan Life has
provided certain assurances to several state insurance departments that it will
make certain capital contributions to Metropolitan Tower to enable Metropolitan
Tower to maintain a sufficient level of surplus.
WHAT ARE SEPARATE ACCOUNT TWO, THE FIXED ACCOUNT AND THE METROPOLITAN SERIES
FUND?
The owner of a Policy may allocate the net premiums paid under the Policy to
one or more of the investment divisions of the Separate Account, a separate
investment account of Metropolitan Tower (see "The Separate Account," page 10)
and/or to a Fixed Account established by Metropolitan Tower. There are
currently five investment divisions in the Separate Account. The assets in each
division are invested in a separate class (or series) of stock of the Fund, a
"series" type of mutual fund (see "Metropolitan Series Fund," page 11). Each
class of stock represents a separate portfolio within the Fund. The five
portfolios of the Fund which are currently available to owners of a Policy are
the Growth Portfolio, the Income Portfolio, the Money Market Portfolio, the
Diversified (formerly Discretionary) Portfolio and the Equity Income Portfolio.
Net premiums allocated to the Fixed Account are held in the General Account of
Metropolitan Tower.
Each portfolio of the Fund has a different investment objective and is
managed by Metropolitan Life. For providing investment management services to
the Fund, Metropolitan Life receives a fee from the Fund equivalent to an
annual rate of .25% of the average daily value of the aggregate net assets of
the Growth, Income, Money Market, Diversified and Equity Income Portfolios.
State Street Research provides sub-investment management services with respect
to the Growth, Income, Diversified and Equity Income Portfolios. For these
services, State Street Research receives an annual percentage fee from
Metropolitan Life. The fees paid to State Street Research are the sole
responsibility of Metropolitan Life, and not the Fund.
For a full description of the Fund, see the prospectus for the Fund, which is
attached at the end of this Prospectus, and the Fund's Statement of Additional
Information referred to therein.
5
<PAGE>
WHAT DEATH BENEFITS ARE AVAILABLE UNDER THE POLICY?
The Policy provides for the payment of a benefit upon the death of the
insured. The Policy contains two death benefit options. The Policy owner must
select one of the options to be in effect at issue. Under Death Benefit Option
A, the death benefit is the specified face amount of the Policy. Under Death
Benefit Option B, the death benefit is the specified face amount of the Policy
plus the cash value on the date of death. If greater than the death benefit
otherwise payable under Option A or Option B, a minimum death benefit
equivalent to a percentage, determined by age at death, of the cash value will
be paid. The insurance proceeds payable will be reduced by any outstanding
indebtedness and any due and unpaid charges accrued during the grace period
(see "Policy Benefits--Death Benefits," page 12).
In addition, a Policy owner has the flexibility to add optional insurance
benefits by rider. These include a spouse term insurance rider; a children term
insurance rider; an accidental death benefit rider; a disability waiver benefit
rider; and an accelerated death benefit rider (see "Policy Benefits--Optional
Insurance Benefits," page 21). The cost of these optional insurance benefits
will be deducted from the cash value as part of the monthly deduction (see
"Charges and Deductions-- Monthly Deduction From Cash Value," page 26).
Proceeds under the Policy may be received in cash or under one of the
optional income plans set forth in the Policy (see "Policy Benefits--Optional
Income Plans," page 21).
WHAT IS THE POLICY'S CASH VALUE?
The Policy's cash value in the Separate Account will reflect the amount and
frequency of premium payments allocated to the Separate Account, transfers from
the Fixed Account, loan repayments, the investment experience of the chosen
investment divisions of the Separate Account, any partial withdrawals, any
Policy indebtedness and any charges imposed in connection with the Policy (see
"Policy Benefits--Cash Value," page 15). There is no minimum guaranteed cash
value with respect to amounts allocated to the Separate Account. The Policy's
total cash value will also reflect any amounts allocated to the Fixed Account
(see "The Fixed Account," page 41) and the Policy Loan Account (see "Loan
Privileges--Effect of a Policy Loan," page 39).
WHAT FLEXIBILITY DOES A POLICY OWNER HAVE TO ADJUST THE AMOUNT OF THE DEATH
BENEFIT?
Subject to certain limitations, the Policy owner may increase or decrease the
specified face amount of the Policy or change the death benefit option (see
"Policy Benefits--Change in Death Benefit Option," page 15) at any time after
the first Policy year. Any increases in the death benefit may require
additional evidence of insurability satisfactory to Metropolitan Tower (see
"Policy Benefits--Change in Specified Face Amount," page 14), and result in
additional charges (see "Policy Benefits--Increases," and "Effect of Changes in
Specified Face Amount," page 14). An increase or decrease in the death benefit
may have tax consequences (see "Federal Tax Matters," page 45).
WHAT FLEXIBILITY DOES A POLICY OWNER HAVE IN CONNECTION WITH PREMIUM PAYMENTS?
A Policy owner has considerable flexibility concerning the amount and
frequency of premium payments. A minimum initial premium should be paid during
the first Policy year or else it is probable that the Policy will terminate.
The Policy owner elects in the application to pay this premium in full when the
Policy is first purchased or on a monthly "check-o-matic" (or payroll deduction
plan if provided by the employer of the Policy owner) or semi-annual basis. In
addition, each Policy owner will select either an annual, semi-annual
6
<PAGE>
or monthly "check-o-matic" (or payroll deduction plan) planned periodic premium
schedule. The schedule will provide for a premium payment of a level amount
determined by the Policy owner at fixed intervals over a specified period of
time (see "Payment and Allocation of Premiums," page 22). Significantly,
however, a Policy owner need not adhere to the planned periodic premium payment
schedule. Instead, a Policy owner may, subject to certain restrictions, make
premium payments in any amount and at any frequency. However, the Policy owner
may be required to make an unscheduled premium payment in order to keep the
Policy in force (see "Payment and Allocation of Premiums," page 22).
HOW LONG WILL THE POLICY REMAIN IN FORCE?
The Policy will terminate only when its cash surrender value is insufficient
to pay the monthly deduction (see "Charges and Deductions--Monthly Deduction
from Cash Value," page 26), and the grace period expires without a sufficient
payment being made (see "Policy Termination and Reinstatement--Termination,"
page 24). Therefore, the failure to pay a planned periodic premium will not
automatically cause the Policy to terminate. Nevertheless, under the
circumstances described above, the Policy can terminate, even if planned
periodic premiums have been paid. Thus, the payment of planned premiums does
not guarantee that the Policy will remain in force until its final date.
HOW ARE NET PREMIUMS ALLOCATED?
The portion of the premium available for allocation ("net premium") equals
the premium paid less premium expense charges (see "Charges and Deductions--
Premium Expense Charges," page 25). The Policy owner determines in the
application what portions, if any, of net premiums are to be allocated to the
investment divisions of the Separate Account and/or to the Fixed Account. A
Policy owner may change allocations of future net premiums at any time without
charge by notifying Metropolitan Tower in writing, subject to certain
limitations (see "Payment and Allocation of Premiums--Allocation of Premiums
and Cash Value," page 23). Because investment performance of a Separate Account
investment division (unlike that of the Fixed Account) is not guaranteed by
Metropolitan Tower, allocation of net premiums to the Separate Account
investment divisions increases the amount of investment risk to the Policy
owner, and allocation to the Fixed Account decreases such risk. On the other
hand, the potential benefit of the Fixed Account is limited to the return
guaranteed by Metropolitan Tower plus any discretionary return declared by
Metropolitan Tower from time to time.
Subject to certain restrictions, a Policy owner may transfer amounts among
the investment divisions of the Separate Account or between the Separate
Account and the Fixed Account up to six times in a Policy year. In the first 24
Policy months, a Policy owner may transfer the entire amount in the Separate
Account to the Fixed Account without restriction on the number of transfers in
a Policy year (see "Policy Rights--Exchange Privilege," page 40 and "The Fixed
Account--Transfers, Withdrawals, Surrenders and Policy Loans," page 42). No
charge will be made for a transfer (see "Cash Value Transfers," page 24).
MAY THE POLICY BE SURRENDERED OR THE CASH VALUE PARTIALLY WITHDRAWN?
The Policy owner may surrender the Policy at any time and receive the cash
surrender value of the Policy. Subject to certain limitations, the Policy owner
also may make partial withdrawals from the cash surrender value at any time
prior to the final date. In either case, the Policy owner must notify
Metropolitan Tower in writing (see "Surrender and Withdrawal Privileges," page
39). No charge will be imposed on surrenders or partial withdrawals. If Death
Benefit Option A is in effect, partial withdrawals will reduce the Policy's
specified face amount by the amount of the partial withdrawal. If Death Benefit
Option B is in effect, partial withdrawals will not reduce the Policy's
specified face amount (see "Death Benefits," page 12).
7
<PAGE>
Payment of surrenders and withdrawals may be delayed under certain
circumstances (see "Other Policy Provisions--Payment and Deferment," and "The
Fixed Account--Transfers, Withdrawals, Surrenders, and Policy Loans," pages 44
and 42). Surrenders and withdrawals may have certain tax consequences (see
"Federal Tax Matters," page 45).
IS THERE A "FREE LOOK" PERIOD?
The Policy provides for a free-look period. During the free-look period, the
Policy owner may return the Policy within 10 days after receipt (except where
state law requires a longer period for replacement policies), within 45 days
after Part A of the application has been completed, or within 10 days after
Metropolitan Tower mails the owner a notice of cancellation right, whichever is
latest, and receive within 7 days a complete refund of any premiums paid. The
refund of any premium paid by check, however, may be delayed until the check
has cleared the Policy owner's bank.
WHAT IS THE LOAN PRIVILEGE?
A Policy owner may obtain a Policy loan any time after the first Policy year
if the Policy has a loan value. The loan value equals the cash surrender value
of the Policy less two monthly deductions, or if greater, 75% (90% for Policies
issued in Virginia and Maryland) of the cash surrender value (or, for Policies
issued in Texas, the Policy's cash surrender value less the monthly deductions
to the end of the Policy year, if greater). The interest rate on a loan will be
on an adjustable basis, if permitted by state law, based on the Moody's
Corporate Bond Yield Averages. Otherwise, the interest rate will be at a fixed
rate currently in the amount of 8% per year. Loan interest is payable at the
end of each Policy year. Loans and accrued interest may be repaid at any time
prior to the Final Date (see "Loan Privileges," page 38).
WHAT CHARGES ARE ASSESSED IN CONNECTION WITH THE POLICY?
Premium Expense Charges. A sales charge of 27% of premiums paid is deducted
from premium payments made in the first Policy year until the total of such
payments equals the lesser of the annual target premium and the Guideline
Annual Premium for that year. A sales charge of 7% of premiums paid is deducted
from any premium payments made in the first Policy year after such amount has
been reached and from each premium payment made in all subsequent Policy years.
In addition, a state premium tax charge of 2% of premiums paid is deducted from
all premiums (see "Charges and Deductions--Premium Expense Charges," page 25).
Monthly Deduction. Cash value will be reduced by a monthly deduction equal to
the sum of (1) a monthly cost of term insurance charge, (2) the cost of any
optional insurance benefits added by rider, (3) a flat administration charge of
$4.75, and (4) for each of the first twelve Policy months, a monthly
administration charge currently equal to $.25 per thousand dollars of specified
face amount (see "Charges and Deductions--Monthly Deduction from Cash Value,"
page 26). No profit is expected to be derived from the administration charges
set forth in (3) and (4) above. Any increases in specified face amount
requested by a Policy owner will result in a one-time underwriting expense
charge of $3.00 per thousand dollars of increase (see "Policy Benefits--
Increases," page 14). The monthly deduction will vary in amount from month to
month.
Charges Against the Separate Account. A daily charge equivalent to an
effective annual rate of .75% of the average daily net asset value of each
investment division of the Separate Account is imposed to compensate
Metropolitan Tower for its assumption of certain mortality and expense risks
(see "Charges and Deductions--Charge for Mortality and Expense Risks," page
28).
8
<PAGE>
No charges are currently made against the Separate Account for federal or
state income taxes. Should Metropolitan Tower determine that such taxes will be
imposed, Metropolitan Tower may make deductions from the Separate Account to
pay these taxes (see "Federal Tax Matters," page 45). The imposition of such
taxes would result in a reduction of the cash value in the Separate Account.
WHAT IS THE TAX TREATMENT OF CASH VALUE?
Cash value under a Policy is subject to the same federal income tax treatment
as cash value under a conventional fixed benefit life insurance policy. Under
existing tax law, if a Policy is not a modified endowment contract as discussed
in the following paragraphs, a Policy owner generally will be taxed on cash
value withdrawn from the Policy and cash value received upon surrender of the
Policy only to the extent these amounts, when added to previous distributions,
exceed the total premiums paid. Amounts received upon surrender or withdrawal
in excess of premiums paid will be treated as ordinary income.
Special rules govern pre-death withdrawals from life insurance contracts
referred to as modified endowment contracts. In short, if your Policy was:
--purchased before June 21, 1988 and not materially changed since then; or
--purchased on or after June 21, 1988 and meets the "7-pay test" described on
page 46, your Policy would not be classified as a modified endowment contract.
Pre-death withdrawals (including policy loans) from modified endowment
contracts are treated differently than withdrawals from other life insurance
contracts in the following ways:
--amounts withdrawn would be treated as income first and taxed accordingly;
--an additional 10% income tax would generally be imposed on the taxable
portion of certain amounts received before age 59 1/2.
For more information, see "Federal Tax Matters," pages 45 to 47.
IS THE BENEFICIARY SUBJECT TO FEDERAL INCOME TAX ON THE DEATH BENEFIT?
Like death benefits payable under conventional fixed benefit life insurance
policies, death benefit proceeds payable under the Policy under current law are
generally completely excludable from the gross income of the beneficiary. As a
result, the beneficiary generally will not be taxed on the death benefit
proceeds received under the Policy (see "Federal Tax Matters," page 45).
IS THE DEATH BENEFIT OR THE CASH VALUE SUBJECT TO FEDERAL ESTATE TAX?
The death benefit under the Policy or the cash value may be subject to
federal estate tax (see "Federal Tax Matters," page 45).
WHEN ARE PREMIUM PAYMENTS, POLICY OWNER REQUESTS AND OTHER COMMUNICATIONS
DEEMED TO BE RECEIVED?
Premium payments and other communications (such as transfer requests, loan
requests, loan repayments, withdrawal requests, surrender requests, changes of
beneficiary, changes of the specified face
9
<PAGE>
amount of insurance or death benefit option, or changes of premium allocation)
should be sent to the Designated Office for the Policy. Metropolitan Tower may
name different Designated Offices for different transactions. Premium payments
and communications will be deemed to be received at the Designated Office on
the date they are actually received at such office ("Date of Receipt"), with
two exceptions: (1) when they are received on any day that is not a Valuation
Date and (2) when they are received by means other than U.S. mail after 4:00
p.m. New York City time. In these two cases, the Date of Receipt will be
deemed to be the next Valuation Date. In the future Metropolitan Tower may
permit transfer and withdrawal or other requests to be made by telephone.
To exercise rights under a Policy, the owner must follow the procedures
stated in the Policy. To request a payment, change the allocation among the
investment divisions, change the beneficiary, change the specified face amount
of insurance or death benefit option, change an address or request any other
action by Metropolitan Tower, the owner should utilize the forms prepared by
Metropolitan Tower for each purpose. The forms are available from a
Metropolitan Life sales representative or from the Designated Offices.
SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND
THE SEPARATE ACCOUNT
The Separate Account, which is a separate investment account of Metropolitan
Tower, was established by Metropolitan Tower pursuant to the Delaware
Insurance Law on September 18, 1984. The Separate Account also receives
premium payments in connection with single premium multifunded life insurance
policies issued by Metropolitan Tower. The assets allocated to the Separate
Account are the property of Metropolitan Tower, and Metropolitan Tower is not
a trustee by reason of the Separate Account. Metropolitan Tower may accumulate
in the Separate Account mortality and expense risk charges, mortality gains
and investment gains on those assets (which represent such charges) in the
Separate Account and other amounts in excess of Metropolitan Tower's
liabilities and reserves with respect to the Separate Account.
The Separate Account meets the definition of "separate account" under the
federal securities laws. All income, gains and losses, whether or not
realized, from assets allocated to the Separate Account are credited to or
charged against the Separate Account without regard to other income, gains or
losses of Metropolitan Tower. Each Policy provides that such portion of the
assets in the Separate Account as equals the liabilities (and reserves) of
Metropolitan Tower with respect to the Separate Account shall not be
chargeable with liabilities arising out of any other business of Metropolitan
Tower. Metropolitan Tower may from time to time transfer to its General
Account any assets in the Separate Account in excess of such reserves and
liabilities. The liabilities are Metropolitan Tower's total commitments under
the Policies; the reserves are the assets allocated to pay these commitments.
Although the Separate Account is an integral part of Metropolitan Tower, the
Separate Account is registered with the Securities and Exchange Commission as
a unit investment trust under the Investment Company Act of 1940 ("1940 Act").
Registration does not involve supervision of management or investment
practices or policies of the Separate Account or of Metropolitan Tower by the
Commission.
There currently are five investment divisions in the Separate Account. The
assets in each investment division are invested in a separate class (or
series) of stock issued by the Fund. Each class of stock represents a separate
portfolio within the Fund. New investment divisions may be added as new
portfolios are added to the Fund and made available to Policy owners.
Correspondingly, if any portfolios are eliminated from the Fund, investment
divisions may be eliminated from the Separate Account. The owner of a Policy
may designate how the net premiums under the Policy are to be allocated among
the then current investment divisions.
10
<PAGE>
METROPOLITAN SERIES FUND
The Fund is a "series" type of mutual fund which is registered with the
Securities and Exchange Commission as a diversified open-end management
investment company under the 1940 Act. The Fund has served as the investment
medium for the Separate Account since the Separate Account commenced
operations. A brief summary of the investment objectives of each fund portfolio
presently available to Policy owners is set forth below.
Growth Portfolio. The investment objective of this portfolio is to achieve
long-term growth of capital and income, and moderate current income, by
investing primarily in common stocks that are believed to be of good quality or
to have good growth potential or which are considered to be undervalued based
on historical investment standards.
Income Portfolio. The investment objective of this portfolio is to achieve
the highest possible total return, by combining current income with capital
gains, consistent with prudent investment risk and the preservation of capital,
by investing primarily in fixed-income, high-quality debt securities.
Money Market Portfolio. The investment objective of this portfolio is to
achieve the highest possible current income consistent with the preservation of
capital and maintenance of liquidity, by investing primarily in short-term
money market instruments.
Diversified (formerly Discretionary) Portfolio. The investment objective of
this portfolio is to achieve a high total return while attempting to limit
investment risk and preserve capital by investing in equity securities, fixed-
income debt securities, or short-term money market instruments, or any
combination thereof, at the discretion of State Street Research.
Equity Income Portfolio. The investment objective of this portfolio is to
provide a high level of current income and, secondarily, long-term growth of
capital by investing primarily in common stocks offering above-average dividend
yields and in equity and debt securities convertible into or carrying the right
to acquire common stocks.
There are other portfolios of the Fund that are not currently available for
use in connection with the Policies.
Metropolitan Life acts as the investment manager for the Fund, and State
Street Research, a wholly-owned subsidiary of Metropolitan Life, provides sub-
investment management services with respect to the Growth, Income, Diversified
and Equity Income Portfolios.
Metropolitan Tower purchases and redeems Fund shares for the Separate Account
at their net asset value without the imposition of any sales or redemption
charges. Such shares represent an interest in one of the portfolios of the Fund
which correspond to the investment divisions of the Separate Account. Any
dividend or capital gain distributions received from the Fund are likewise
reinvested in Fund shares at net asset value as of the dates paid. The
distributions have the effect of reducing the value of each share of the Fund
and increasing the number of Fund shares outstanding. However, the total cash
value in the Separate Account does not change as a result of such
distributions.
On each Valuation Date, shares of each portfolio are purchased or redeemed by
Metropolitan Tower for the Separate Account, based on, among other things, the
amounts of net premiums allocated to the Separate Account, dividends and
distributions reinvested, transfers to and among investment divisions, Policy
loans, loan repayments and benefit payments to be effected pursuant to the
terms of the Policies as of that date.
11
<PAGE>
Such purchases and redemptions for the Separate Account are effected at the
net asset value per share for each portfolio determined as of 4:00 p.m., New
York City time, on that same Valuation Date.
A full description of the Fund, its investment policies and restrictions,
its charges and other aspects of its operation is contained in the prospectus
for the Fund, which is attached at the end of this Prospectus, and in the
Statement of Additional Information referred to therein. See "The Fund and its
Purpose," in the prospectus for the Fund for a discussion of the different
separate accounts of Metropolitan Tower and Metropolitan Life that invest in
the Fund and the risks related thereto.
POLICY BENEFITS
The discussion below assumes that no riders under the Policy are in effect.
See Appendix A, page 67, for a discussion of how certain riders can affect
benefits under the Policy.
DEATH BENEFITS
As long as the Policy remains in force (see "Policy Termination and
Reinstatement--Termination," page 24), Metropolitan Tower will, upon due proof
of the insured's death, pay the insurance proceeds of the Policy to the named
beneficiary. The proceeds may be received by the beneficiary in a single sum
or under one or more of the optional income plans set forth in the Policy (see
"Optional Income Plans," page 21).
The insurance proceeds are: The death benefit provided under Option A or
Option B, whichever is elected and in effect on the date of death; plus (b)
any additional insurance on the insured's life that is provided by rider;
minus (c) any outstanding indebtedness and any due and unpaid charges accruing
during the grace period.
DEATH BENEFIT OPTIONS
The Policy provides two death benefit options: Option A and Option B, as
described below. The Policy owner designates the desired option in the
application and can change the option by written request (see "Change in Death
Benefit Option," page 15).
Option A--The death benefit is equal to the specified face amount of
insurance.
Option B--The death benefit is equal to the specified face amount of
insurance plus the cash value.
Minimum Death Benefit--Under either Option A or Option B, there is a minimum
death benefit equal to the greater of (1) the death benefit option chosen and
(2) a percentage of the cash value as set forth in the table below. The
minimum death benefit is determined in accordance with federal income tax
laws, to ensure that the Policy qualifies as a life insurance contract and
that the insurance proceeds will be excluded from the gross income of the
beneficiary.
TABLE
<TABLE>
<CAPTION>
AGE
OF INSURED ON PERCENTAGE OF
DATE OF DEATH CASH VALUE
------------- -------------
<S> <C>
40 and less:................... 250%
45:............................ 215%
50:............................ 185%
55:............................ 150%
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
AGE
OF INSURED ON PERCENTAGE OF
DATE OF DEATH CASH VALUE
------------- -------------
<S> <C>
60: ........................... 130%
65: ........................... 120%
70: ........................... 115%
75: ........................... 105%
80: ........................... 105%
85: ........................... 105%
90: ........................... 105%
95: ........................... 100%
</TABLE>
For the ages not listed, the progression between the listed ages is linear.
Both Option A and Option B provide insurance protection as well as possible
build-up of cash value. Under Option A, the insurance coverage remains level
unless the minimum death benefit applies. Under Option B, the insurance
protection varies as the cash value changes.
For any specified face amount, the amount of the death benefit will be
greater under Option B than under Option A, since the cash value is added to
the specified face amount and included in the death benefit under Option B but
not under Option A. By the same token, the cost of term insurance included in
the monthly deduction (see "Charges and Deductions--Cost of Term Insurance,"
page 26) will be greater, and thus the accumulation of cash value will be
lower, under Option B than under Option A, assuming the same specified face
amount and the same actual premiums paid.
Illustration of Option A. For purposes of this illustration, assume that the
insured is under the age of 40, that there is no outstanding indebtedness and
that the insured has not died during a grace period (see "Policy Termination
and Reinstatement--Termination," page 24).
Under Option A, a Policy with a $100,000 specified face amount will
generally pay $100,000 in death benefits. However, because the death benefit
must be equal to or be greater than 250% of cash value, any time the cash
value of this Policy exceeds $40,000, the death benefit will exceed the
$100,000 specified face amount. Each additional dollar of cash value above
$40,000 will increase the death benefit (assuming the insured is age 40 or
less) by $2.50. Thus a Policy with a cash value of $50,000 will have a death
benefit of $125,000 (250% x $50,000); a cash value of $60,000 will yield a
death benefit of $150,000 (250% x $60,000); and a cash value of $100,000 will
yield a death benefit of $250,000 (250% x $100,000).
Similarly, so long as cash value exceeds $40,000, each dollar reduction in
cash value will reduce the death benefit (assuming the insured is age 40 or
less) by $2.50. If at any time, however, the cash value multiplied by the
applicable percentage is less than the specified face amount, the death
benefit will equal the specified face amount of the Policy.
Illustration of Option B. For purposes of this illustration, assume that the
insured is under the age of 40, that there is no outstanding indebtedness and
that the insured has not died during a grace period.
Under Option B, a Policy with a specified face amount of $100,000 will
generally pay a death benefit of $100,000 plus the cash value. Thus, for
example, a Policy with a cash value of $25,000 will have a death benefit of
$125,000 ($100,000 + $25,000); a cash value of $50,000 will yield a death
benefit of $150,000 ($100,000 + $50,000); and a cash value of $65,000 will
yield a death benefit of $165,000 ($100,000 + $65,000). The
13
<PAGE>
death benefit, however, must be at least 250% of cash value. As a result, if
the cash value of the Policy exceeds $66,666.67, the death benefit will be
greater than the specified face amount plus cash value. Each additional dollar
of cash value above $66,666.67 will increase the death benefit (assuming the
insured is age 40 or less) by $2.50. A Policy with a cash value of $75,000
will therefore have a death benefit of $187,500 (250% x $75,000); a cash value
of $85,000 will yield a death benefit of $212,500 (250% x $85,000); a cash
value of $100,000 will yield a death benefit of $250,000 (250% x $100,000).
Similarly, any time cash value exceeds $66,666.67, each dollar taken out of
cash value will reduce the death benefit (assuming the insured is age 40 or
less) by $2.50. Whenever cash value is less than $66,666.67 each dollar taken
out of cash value will reduce the death benefit by one dollar and the death
benefit will be the specified face amount plus the cash value of the Policy.
If the insured dies on a date that is not a Valuation Date, the amount of
death benefit proceeds payable will be determined as of the next Valuation
Date.
Change in Specified Face Amount. Subject to certain limitations, a Policy
owner, after the first Policy year, may increase or decrease the specified
face amount of a Policy (see "Decreases" and "Increases," below). Any increase
or decrease in the specified face amount requested by the Policy owner will
become effective on the monthly anniversary on or next following the Date of
Receipt of the request, or, if evidence of insurability is required, the date
of approval of the request.
Decreases. The specified face amount remaining in force after any requested
decrease may not be less than the Minimum Initial Specified Face Amount during
the first five Policy years nor less than one-half the Minimum Initial
Specified Face Amount thereafter. No decrease in the specified face amount
will be permitted if it would result in total premiums paid exceeding the then
current maximum premium limitations determined by Internal Revenue Service
Rules (see "Premiums--Premium Limitations," page 23). For purposes of
determining the cost of term insurance charge (see "Charges and Deductions--
Cost of Term Insurance;" "Cost of Term Insurance Rate;" and "Rate Class,"
pages 26-27), a decrease in the specified face amount will reduce the
specified face amount in the following order: (a) the specified face amount
provided by the most recent increase; (b) the next most recent increases
successively; and (c) the specified face amount when the Policy was issued.
Increases. Any change requested by the Policy owner which results in an
increase in the death benefit may be made only if the cash surrender value
after the change is large enough to cover at least two monthly deductions
based on the most recent cost of term insurance charge deducted. Any such
change will require that additional evidence of insurability be submitted to
Metropolitan Tower and will be subject to a one-time underwriting charge at a
rate of $3.00 for each $1,000 of specified face amount increase. For example,
if the specified face amount increase amounted to $25,500, the charge would be
$76.50. Metropolitan Tower will deduct this charge from the existing cash
value in the Fixed Account and the investment divisions of the Separate
Account in the same proportion that the Policy's cash value in the Fixed
Account and the Policy's cash value in each investment division bear to the
Policy's total cash value (except for the cash value in the Policy Loan
Account) as of the Date of Receipt of the request (this method hereinafter
referred to as the "Pro Rata Basis").
Effect of Changes in Specified Face Amount. A change in the specified face
amount may affect the cost of term insurance and the net amount at risk, both
of which may affect a Policy owner's cost of term insurance charge (see
"Charges and Deductions--Cost of Term Insurance;" "Cost of Term Insurance
Rate;" and "Rate Class," pages 26-27). This in turn can affect the level of
subsequent cash values and death
14
<PAGE>
benefits. A change in the specified face amount may also affect the Policy's
status as a modified endowment contract for tax purposes (see "Federal Tax
Matters," page 45).
Change in Death Benefit Option. Generally, the death benefit option in effect
may be changed at any time after the first Policy year while the insured is
alive by sending a written request for change to the Designated Office.
Changing death benefit options will not require evidence of insurability
satisfactory to Metropolitan Tower and the effective date of any such change
will be the monthly anniversary on or following the Date of Receipt of the
request.
If the death benefit option is changed from Option B to Option A, the
specified face amount will be increased to equal the death benefit which would
have been payable under Option B on the effective date of the change. The death
benefit will not be altered at the time of the change. However, the change in
death benefit option will affect the determination of the death benefit from
that point on since the cash value will no longer be added to the specified
face amount in determining the death benefit. From that point on, the death
benefit will equal the new specified face amount (or, if higher, the minimum
death benefit). This will mean that the cost of term insurance may be higher or
lower than it otherwise would have been since any increases or decreases in
cash value will, respectively, reduce or increase the term insurance amount
under Option A (see "Charges and Deductions--Cost of Term Insurance," page 26).
If the death benefit option is changed from Option A to Option B, the
specified face amount will be decreased to equal the death benefit less the
cash value on the effective date of the change. This change may not be made if
it would result in a specified face amount which is less than the Minimum
Initial Specified Face Amount during the first five Policy years and one-half
the Minimum Initial Specified Face Amount thereafter. As with a change from
Option B to Option A, a change from Option A to Option B will not alter the
death benefit at the time of the change, but will affect the determination of
the death benefit from that point on. Since, from that point on, the cash value
will be added to the new specified face amount, the death benefit will vary
with the cash value. Moreover, under Option B, the term insurance amount will
not vary unless the minimum death benefit is in effect. Therefore, the cost of
term insurance may be higher or lower than it otherwise would have been without
the change in death benefit option (see "Charges and Deductions--Cost of Term
Insurance," page 26). A change in death benefit option will not be permitted if
it results in total premiums paid exceeding the then current maximum premium
limitations determined by Internal Revenue Service Rules (see "Premiums--
Premium Limitations," page 23).
Under both Option A and Option B, cost of term insurance rates generally
increase as the insured's age increases. Nevertheless, assuming a positive
cumulative net investment return with respect to any amounts in the Separate
Account, changing the death benefit option from Option B to Option A will
reduce the term insurance amount and therefore the cost of term insurance
charge for all subsequent monthly deductions compared to what such charge would
have been if no such change were made.
CASH VALUE
The total cash value of a Policy at any time is the sum of the Policy's cash
values in the Fixed Account (see "The Fixed Account," page 41), the Policy Loan
Account (see "Policy Rights--Loan Privileges," page 38), and the investment
divisions of the Separate Account at such time. The Policy's cash value in the
Separate Account may increase or decrease on each Valuation Date depending on
the investment return of the chosen investment divisions of the Separate
Account (see "Separate Account Net Investment Return," page 16). There is no
guaranteed minimum cash value in the Separate Account.
15
<PAGE>
Calculation of Separate Account Cash Value. On the Investment Start Date, the
Policy's cash value in an investment division will equal the portion of any net
premium allocated to the investment division, reduced by the portion of the
first monthly deduction allocated to the Policy's cash value in that investment
division (see "Payment and Allocation of Premiums--Allocation of Premiums and
Cash Value," page 23). Thereafter, on each Valuation Date, the Policy's cash
value in an investment division of the Separate Account will equal:
(1) The cumulative net premium payments allocated to the investment division;
plus
(2) All cash values transferred to the investment division from the Fixed
Account, from the Policy Loan Account upon loan repayment (including all
interest credited on loaned amounts) or from another investment division;
minus
(3) Any cash value transferred from the investment division to the Fixed
Account, to the Policy Loan Account upon taking out a loan or to another
investment division; minus
(4) Any partial cash withdrawal from the investment division; minus
(5) The portion of the cumulative monthly deductions allocated to the Policy's
cash value in the investment division (see "Charges and Deductions--Monthly
Deduction from Cash Value," page 26); plus
(6) The cumulative net investment return (discussed below) on the net amount of
cash value in the investment division.
The Policy's total cash value in the Separate Account equals the sum of the
Policy's cash value in each investment division.
Separate Account Net Investment Return. A Separate Account investment
division's net investment return is determined as of 4:00 p.m., New York City
time, on each Valuation Date. All transactions and calculations with respect to
the Policies as of any Valuation Date are determined as of such time.
Each Separate Account division is credited with a rate of net investment
return equal to its gross rate of investment return during the Valuation Period
less (1) an adjustment for the Separate Account's charge for mortality and
expense risks (equivalent to .75% on an annual basis) and (2) a charge for
Metropolitan Tower's taxes, if any such tax charge becomes necessary in the
future (see "Charges and Deductions--Charges Against the Separate Account,"
page 28). The investment division's gross rate of investment return is equal to
the rate of increase or decrease in the net asset value per share of the
underlying Fund portfolio over the Valuation Period, adjusted upward to take
appropriate account of any dividends or distributions paid by the portfolio
during the period.
Depending primarily on the investment experience of the underlying Fund
portfolio, a Separate Account investment division's net investment return may
be either positive or negative during a Valuation Period.
Index of Investment Experience. The index of investment experience measures
changes in each investment division's investment experience during a Valuation
Period. Each investment division has its own distinct index. The index for each
investment division was set at $10.00 when it first began operations. On
January 24, 1986, all the divisions except the division which invests in the
Diversified Portfolio of the Fund and the division which invests in the Equity
Income Portfolio of the Fund first received net premium payments. The division
which invests in the Diversified Portfolio first received net premium payments
on August 1, 1986, and the division which invests in the Equity Income
Portfolio first received net premium payments on July 11, 1988. In determining
an investment division's index for a Valuation Period, the index for the
preceding Valuation Period is multiplied by the net investment return of the
investment division for the current period. As indicated above in "Calculation
of Separate Account Cash Value," other factors in addition to investment
16
<PAGE>
experience affect the cash value and death benefit of a particular Policy.
Thus, the index of investment experience for each investment division does not
reflect charges against premiums and cost of term insurance and monthly Policy
charges. See "Charges and Deductions--Premium Expense Charges," and "Monthly
Deduction from Cash Value," pages 25 and 26. Also, the index of investment
experience is based on historical information and does not represent what may
happen in the future.
Rates of Return. The average rates of return shown below for each of the
investment divisions of the Separate Account available as of the date of this
Prospectus reflect all charges against the Separate Account and the Fund but do
not reflect charges against premiums or cost of term insurance and monthly
Policy charges (see "Charges and Deductions--Premium Expense Charges," and
"Monthly Deduction from Cash Value," pages 25 and 26). The rate of return is
computed in each case by subtracting the value of the index of investment
experience of the investment division (see above) at the beginning of the
period from the value of the index at the end of the period and dividing the
result by the value of the index at the beginning of the period.
<TABLE>
<CAPTION>
AVERAGE
1/24/86- 1/24/86- 1/24/87- 1/24/88- 1/24/89- 1/24/90- 1/24/91- ANNUAL
1/24/92 1/24/87 1/24/88 1/24/89 1/24/90 1/24/91 1/24/92 RETURN
-------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Growth.................. 110.37% 23.68% -4.30% 12.78% 22.68% -1.41% 30.24% 13.20%
Income.................. 78.56% 22.15% -1.26% 6.11% 9.69% 12.25% 13.35% 10.14%
Money Market............ 46.02% 5.81% 5.53% 6.84% 8.42% 7.39% 5.09% 6.51%
INDEX VALUE AT
<CAPTION>
1/24/86 1/24/87 1/24/88 1/24/89 1/24/90 1/24/91 1/24/92
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Growth.................. $ 9.93 $12.29 $11.76 $13.26 $16.27 $16.04 $20.89
Income.................. $ 9.89 $12.08 $11.93 $12.66 $13.88 $15.58 $17.66
Money Market............ $10.04 $10.62 $11.21 $11.98 $12.99 $13.95 $14.66
</TABLE>
INDEX VALUE AT
<TABLE>
<CAPTION>
AVERAGE
8/1/86- 8/1/86- 8/1/87- 8/1/88- 8/1/89- 8/1/90- 8/1/91- ANNUAL
12/31/91 8/1/87 8/1/88 8/1/89 8/1/90 8/1/91 12/31/91 RETURN 8/1/86 8/1/87 8/1/88 8/1/89 8/1/90 8/1/91
-------- ------- ------- ------- ------- ------- -------- ------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Diversified..... 71.70% 17.78% -4.29% 19.63% 6.97% 6.17% 12.08% 10.49% $10.00 $11.78 $11.27 $13.49 $14.43 $15.32
<CAPTION>
12/31/91
--------
<S> <C>
Diversified..... $17.17
</TABLE>
<TABLE>
<CAPTION>
AVERAGE
7/11/88- 7/11/88- 7/11/89- 7/11/90- 7/11/91- ANNUAL
12/31/91 7/11/89 7/11/90 7/11/91 12/31/91 RETURN 7/11/88 7/11/89 7/11/90 7/11/91 12/31/91
-------- -------- -------- -------- -------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Income........... 34.07% 21.24% 7.11% -5.25% 8.96% 8.82% $9.98 $12.10 $12.96 $12.28 $13.38
</TABLE>
Illustrations. In order to demonstrate how the actual investment experience
of the Separate Account investment divisions will affect the death benefit and
cash value of a Policy, the following hypothetical illustrations showing the
hypothetical net return of each investment division are set forth below. These
hypothetical illustrations are based on the actual historical experience of the
Fund and the Separate Account as if a Policy had been issued on the date
indicated. They do not represent what may happen in the future.
The illustrations are based on the payment of annual planned premiums of $887
for a specified face amount of $100,000 for a male aged 25. The illustrations
assume that the insured is in Metropolitan Tower's standard nonsmoker
underwriting risk classification. The periods illustrated are based on the
periods set forth in "Rates of Return" above.
The amounts shown for the death benefits and cash values take into account
the charges against premiums and cost of term insurance and monthly Policy
charges, as well as the daily charge against the Separate Account for mortality
and expense risks equivalent to an effective annual rate of .75% of the
17
<PAGE>
average daily value of the assets in the Separate Account attributable to the
Policies and the daily charge to the Fund for investment management services
equivalent to an annual rate of .25% of the average daily value of the
aggregate net assets of the Fund. (See "Charges and Deductions," page 25).
For each investment division, one illustration is based on the guaranteed
cost of term insurance rates, the other illustration is based on the current
cost of term insurance rates (i.e., the rates in effect as of May 1, 1992) as
in effect during the period illustrated (see "Monthly Deduction From Cash
Value--Cost of Term Insurance Rate," page 27).
These examples of policy performance are for a specific age, sex, risk class,
premium payment pattern and policy anniversary as set forth above. The benefits
are calculated for a specific policy anniversary. The amount and timing of
premium payments would affect individual policy benefits as would any
withdrawals or Policy loans.
This Prospectus also contains illustrations based on assumed rates of return.
See "Illustrations Of Death Benefits, Cash Values And Accumulated Premiums," on
pages 29 to 37 and Appendix B.
The following examples show how the hypothetical net return of the investment
division which invests in the Growth Portfolio of the Fund would have affected
benefits for a Policy dated January 24, 1986. These examples assume that net
premiums and related cash values were in this investment division for the
entire period.
GROWTH
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
POLICY
ANNIVERSARY DEATH BENEFIT CASH VALUE
ON JANUARY ----------------- -----------------
24TH OF OPTION A OPTION B OPTION A OPTION B
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
1987.................................... $100,000 $100,293 $ 311 $ 293
1988.................................... 100,000 100,896 914 896
1989.................................... 100,000 101,733 1,756 1,733
1990.................................... 100,000 102,936 2,968 2,936
1991.................................... 100,000 103,517 3,552 3,517
1992.................................... 100,000 105,426 5,479 5,426
</TABLE>
GROWTH
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
POLICY
ANNIVERSARY DEATH BENEFIT CASH VALUE
ON JANUARY ----------------- -----------------
24TH OF OPTION A OPTION B OPTION A OPTION B
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
1987.................................... $100,000 $100,267 $ 292 $ 267
1988.................................... 100,000 100,821 847 821
1989.................................... 100,000 101,591 1,623 1,591
1990.................................... 100,000 102,706 2,750 2,706
1991.................................... 100,000 103,239 3,289 3,239
1992.................................... 100,000 105,003 5,076 5,003
</TABLE>
18
<PAGE>
The following examples show how the hypothetical net return of the investment
division which invests in the Income Portfolio of the Fund would have affected
benefits for a Policy dated January 24, 1986. These examples assume that net
premiums and related cash values were in this investment division for the
entire period.
INCOME
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
POLICY
ANNIVERSARY DEATH BENEFIT CASH VALUE
ON JANUARY ----------------- -----------------
24TH OF OPTION A OPTION B OPTION A OPTION B
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
1987.................................... $100,000 $100,300 $ 317 $ 300
1988.................................... 100,000 100,914 933 914
1989.................................... 100,000 101,646 1,668 1,646
1990.................................... 100,000 102,510 2,537 2,510
1991.................................... 100,000 103,530 3,565 3,530
1992.................................... 100,000 104,724 4,769 4,724
</TABLE>
INCOME
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
POLICY
ANNIVERSARY DEATH BENEFIT CASH VALUE
ON JANUARY ----------------- -----------------
24TH OF OPTION A OPTION B OPTION A OPTION B
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
1987.................................... $100,000 $100,274 $ 299 $ 274
1988.................................... 100,000 100,832 858 832
1989.................................... 100,000 101,502 1,533 1,502
1990.................................... 100,000 102,297 2,334 2,297
1991.................................... 100,000 103,235 3,283 3,235
1992.................................... 100,000 104,331 4,393 4,331
</TABLE>
The following examples show how the hypothetical net return of the investment
division which invests in the Money Market Portfolio of the Fund would have
affected benefits for a Policy dated January 24, 1986. These examples assume
that net premiums and related cash values were in this investment division for
the entire period.
MONEY MARKET
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
POLICY
ANNIVERSARY DEATH BENEFIT CASH VALUE
ON JANUARY ----------------- -----------------
24TH OF OPTION A OPTION B OPTION A OPTION B
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
1987.................................... $100,000 $100,218 $ 233 $ 218
1988.................................... 100,000 100,903 920 903
1989.................................... 100,000 101,646 1,667 1,646
1990.................................... 100,000 102,479 2,505 2,479
1991.................................... 100,000 103,345 3,376 3,345
1992.................................... 100,000 104,182 4,220 4,182
</TABLE>
19
<PAGE>
MONEY MARKET
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
POLICY
ANNIVERSARY DEATH BENEFIT CASH VALUE
ON JANUARY ----------------- -----------------
24TH OF OPTION A OPTION B OPTION A OPTION B
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
1987.................................... $100,000 $100,197 $ 218 $ 197
1988.................................... 100,000 100,824 849 824
1989.................................... 100,000 101,506 1,535 1,506
1990.................................... 100,000 102,271 2,307 2,271
1991.................................... 100,000 103,069 3,112 3,069
1992.................................... 100,000 103,836 3,889 3,836
</TABLE>
The following examples show how the hypothetical net return of the investment
division which invests in the Diversified Portfolio of the Fund would have
affected benefits for a Policy dated August 1, 1986. These examples assume that
net premiums and related cash values were in this investment division for the
entire period.
DIVERSIFIED
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
POLICY
ANNIVERSARY DEATH BENEFIT CASH VALUE
ON AUGUST 1ST ----------------- -----------------
OF OPTION A OPTION B OPTION A OPTION B
------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
1987.................................... $100,000 $100,267 $ 284 $ 267
1988.................................... 100,000 100,853 870 853
1989.................................... 100,000 101,788 1,811 1,788
1990.................................... 100,000 102,596 2,624 2,596
1991.................................... 100,000 103,421 3,455 3,421
</TABLE>
DIVERSIFIED
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
POLICY
ANNIVERSARY DEATH BENEFIT CASH VALUE
ON AUGUST 1ST ----------------- -----------------
OF OPTION A OPTION B OPTION A OPTION B
------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
1987.................................... $100,000 $100,243 $ 267 $ 243
1988.................................... 100,000 100,774 799 774
1989.................................... 100,000 101,632 1,664 1,632
1990.................................... 100,000 102,374 2,412 2,374
1991.................................... 100,000 103,129 3,176 3,129
</TABLE>
The following examples show how the hypothetical net return of the investment
division which invests in the Equity Income Portfolio of the Fund would have
affected benefits for a Policy dated July 11, 1988. These
20
<PAGE>
examples assume that net premiums and related cash values were in this
investment division for the entire period.
EQUITY INCOME
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
POLICY
ANNIVERSARY DEATH BENEFIT CASH VALUE
ON JULY ----------------- -----------------
11TH OF OPTION A OPTION B OPTION A OPTION B
------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
1989.................................... $100,000 $100,266 $ 284 $ 266
1990.................................... 100,000 100,972 992 972
1991.................................... 100,000 101,507 1,528 1,507
</TABLE>
EQUITY INCOME
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
POLICY
ANNIVERSARY DEATH BENEFIT CASH VALUE
ON JULY ----------------- -----------------
11TH OF OPTION A OPTION B OPTION A OPTION B
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
1989.................................... $100,000 $100,242 $266 $242
1990.................................... 100,000 100,889 917 889
1991.................................... 100,000 101,373 1,403 1,373
</TABLE>
BENEFIT AT FINAL DATE
If the insured is living, Metropolitan Tower will pay to the Policy owner
the cash value of the Policy on the Final Date, reduced by any outstanding
indebtedness (see "Policy Benefits--Cash Value," page 15). The Final Date of a
Policy is the Policy anniversary on which the insured is 95 (see "Federal Tax
Matters," page 45).
OPTIONAL INCOME PLANS
During the insured's lifetime, the Policy owner may arrange for the
insurance proceeds to be paid in a single sum, in an account that earns
interest or under one or more of the available optional income plans. For more
specifics regarding optional income plans, see Appendix A, page 67. These
choices are also available at the Final Date and if the Policy is surrendered.
If no election is made, Metropolitan Tower will place the amount in an account
that earns interest. The payee will have immediate access to all or any part
of the account.
When the insurance proceeds are payable in a single sum, the beneficiary
may, within one year of the insured's death, select one or more of the
optional income plans, if no payments have yet been made. If the insurance
proceeds become payable under an optional income plan and the beneficiary has
the right to withdraw the entire amount, the beneficiary may name and change
contingent beneficiaries.
OPTIONAL INSURANCE BENEFITS
Subject to certain requirements, one or more of the optional insurance
benefits described in Appendix As, page 67, may be added to a Policy by rider.
The cost of any optional insurance benefits will be deducted as part of the
monthly deduction (see "Charges and Deductions--Monthly Deduction From Cash
Value," page 26). See Appendix A, page 67, for a discussion of how certain
riders affect the benefits and the exercise of certain rights under the
Policy.
21
<PAGE>
PAYMENT AND ALLOCATION OF PREMIUMS
ISSUANCE OF A POLICY
Individuals wishing to purchase a Policy must complete an application which
will be sent to the Designated Office. A Policy will not be issued with a
specified face amount less than the Minimum Initial Specified Face Amount. A
Policy will generally be issued only to insureds 70 years of age or under who
supply evidence of insurability satisfactory to Metropolitan Tower.
Metropolitan Tower may, however, at its sole discretion, issue a Policy to an
individual above the age of 70. Acceptance is subject to Metropolitan Tower's
underwriting rules, and Metropolitan Tower reserves the right to reject an
application for any appropriate reason.
The Date of Policy is the date used to determine Policy years and Policy
months regardless of when the Policy is delivered. The Date of Policy will
ordinarily be the date the application is approved. Within limits,
Metropolitan Tower may establish an earlier Date of Policy (but no earlier
than the date the application is completed) if desired to preserve a younger
age at issue for the insured. Individuals may also request that the Date of
Policy be the date the application is completed if a payment of at least
$2,500.00 is received with the application. In these instances, the Policy
owner will incur a charge for insurance protection prior to the time that
insurance coverage under the Policy is in force (except under any temporary
insurance agreement described below). However, an earlier Date of Policy has
the potential advantage, to the Policy owner, of an earlier Investment Start
Date if a payment is received with the application. In the case of certain
payroll deduction plans, the Date of Policy may be earlier or later than the
date the first premium payment is received, pursuant to established
administrative rules.
If a premium payment equivalent to at least one "check-o-matic" payment is
received with the application, and there has been no material
misrepresentation in the application, fixed, temporary insurance equal to the
specified face amount applied for up to a maximum amount of $500,000, provided
at no additional charge, will start as of the date the application was
completed and will continue for a maximum of 90 days. However, if a medical
examination of a person to be insured is initially required by the
underwriting rules of Metropolitan Tower, coverage on that person will not
start until completion of the examination. If it is not completed within 90
days from the date of the application, there will be no coverage, except that,
if the person to be insured dies from an accident within 30 days from the date
of the application and before the examination is completed, temporary
insurance will be in effect if it has not already ended under the terms of the
temporary insurance agreement. In no event will a death benefit be provided
under the temporary insurance agreement if death is by suicide.
Metropolitan Tower will allocate net premiums to the Separate Account and/or
the Fixed Account on the Investment Start Date (see "Allocation of Premiums
and Cash Value," page 23). The Investment Start Date is the later of (i) the
Date of Policy and (ii) the date the first premium for a Policy is received at
the Designated Office.
Except as otherwise provided in any temporary insurance agreement, there
will be no insurance coverage under a Policy unless at the time the Policy is
delivered the insured's health is the same as stated in the application and,
in most states, the insured has not sought medical advice or treatment
subsequent to the date of the application.
PREMIUMS
Payment of Premiums. Each Policy owner will determine a planned periodic
premium schedule that provides for the payment of a level premium at fixed
intervals for a specified period of time. The Policy owner, however, is not
required to pay premiums in accordance with this schedule.
22
<PAGE>
MOREOVER THE PAYMENT OF PLANNED PERIODIC PREMIUMS WILL NOT GUARANTEE THAT THE
POLICY REMAINS IN FORCE. Instead, the duration of the Policy depends upon the
Policy's cash surrender value (see "Policy Termination and Reinstatement--
Termination," page 24).
Subject to the minimum and maximum premium limitations described below, a
Policy owner may make unscheduled premium payments at any time in any amount.
The Policy, therefore, provides the owner with the flexibility to vary the
frequency and amount of premium payments to reflect changing financial
conditions.
All premium payments after the initial premium payment are credited to the
Separate Account or Fixed Account as of the Date of Receipt.
Premium Limitations. During the first Policy year, premium payments by a
Policy owner should at least equal the minimum allowable planned premium for
the particular Policy or it is probable that the Policy will terminate. The
minimum allowable planned premium is equal to the then current first year
annual target premium. The Policy owner must designate in the application one
of the following ways to pay the minimum allowable planned premium for the
first Policy year. The Policy owner may elect to pay the minimum allowable
planned premium in full prior to commencement of coverage under the Policy.
Alternatively, the Policy owner may elect to pay premiums monthly through
"check-o-matic" payments or on a semi-annual basis, or through a combination of
a payment prior to commencement of coverage and "check-o-matic" or semi-annual
payments. Monthly "check-o-matic" payments are automatically made by pre-
authorized transfers from a bank checking account. Premiums may also be paid
through monthly "check-o-matic" payments during subsequent Policy years. A
Policy owner may also elect to pay monthly planned premiums through various
payroll deduction plans if provided by the employer of the Policy owner.
Except as described below, the total of all premiums paid, both planned and
unplanned, can never exceed the then current maximum premium limitation
determined by Internal Revenue Service rules relating to the definition of life
insurance. If at any time a premium is paid that would result in total premiums
exceeding the then current maximum premium limitations, Metropolitan Tower will
accept only that portion of the premium that will make total premiums equal the
limit. Any part of the premium in excess of that amount will be refunded, and
no further premiums will be accepted until allowed by the maximum premium
limitations. These limitations will not apply to any premium that is required
to be paid in order to prevent the Policy from terminating.
There may be cases where the total of all premiums paid could cause the
Policy to be classified as a modified endowment contract (see "Federal Tax
Matters," page 45). The annual statement (see "Reports," page 50) sent to each
Policy owner will include information regarding the modified endowment contract
status of a Policy. In cases where a Policy is not an irrevocable modified
endowment contract, the annual statement will indicate what action the Policy
owner can take to reverse the modified endowment contract status of the Policy.
Every planned premium payment after the first Policy Year must be at least
$50 ($25 on a "check-o-matic" or other pre-authorized transfer basis). Every
unplanned premium payment must be at least $250. Premium payments less than
these minimum amounts will be refunded to the Policy owner.
ALLOCATION OF PREMIUMS AND CASH VALUE
Net Premiums. The net premium equals the premium paid less premium expense
charges (see "Charges and Deductions--Premium Expense Charges," page 25).
23
<PAGE>
Allocation of Net Premiums. In the application for a Policy, the Policy owner
indicates the initial allocation of net premiums among the Fixed Account and
the investment divisions of the Separate Account. The minimum percentage of
each premium that may be allocated to the Fixed Account or any investment
division of the Separate Account is 10%. Allocation percentages must be in
whole numbers; for example, 33 1/3% may not be chosen. The Policy owner may
change the allocation of future net premiums without charge at any time by
providing Metropolitan Tower with written notification at the Designated
Office. The change will be effective as of the Date of Receipt of the notice at
the Designated Office.
The Policy's cash value in the investment divisions of the Separate Account
will vary with the investment experience of these investment divisions, and the
Policy owner bears this investment risk. Policy owners should periodically
review their allocations of net premiums and cash values in light of market
conditions and their overall financial planning requirements.
Cash Value Transfers. The Policy owner may transfer cash value between the
Fixed Account and the investment divisions of the Separate Account and among
the investment divisions of the Separate Account. Unless Metropolitan Tower
otherwise consents, only six transfers may be made in each Policy year. A
seventh transfer will be permitted for a transfer of the entire amount in the
Separate Account to the Fixed Account at any time during the first 24 Policy
months ("see Policy Rights--Exchange Privilege" page 40). A transfer must be
made in either dollar amounts or a percentage in whole numbers. The minimum
amount that may be transferred is the lesser of $50 or the total amount in an
investment division or, if the transfer is from the Fixed Account, the total
amount in the Fixed Account. Cash value transferred from one investment
division or from the Fixed Account into more than one investment division,
and/or into the Fixed Account, counts as one transfer. Similarly, transferring
cash value from more than one investment division and/or the Fixed Account,
into one other investment division or the Fixed Account counts as one transfer.
Metropolitan Tower reserves the right to delay the transfer, withdrawal,
surrender and payment of policy loans of amounts from the Fixed Account for up
to six months (see "The Fixed Account--Transfers, Withdrawals, Surrenders and
Policy Loans," page 42). Metropolitan Tower will effectuate transfers and
determine all values in connection with transfers as of the Date of Receipt of
written notice at the Designated Office.
Transfers resulting from Policy loans and loan repayments will not be counted
for purposes of the limitation on the number of transfers allowed in each
Policy year. Transfers are not taxable transactions under current law. Transfer
requests must be in writing, in a form acceptable to Metropolitan Tower.
POLICY TERMINATION AND REINSTATEMENT
Termination. If the cash surrender value on any monthly anniversary is
insufficient to cover the monthly deduction, Metropolitan Tower will notify the
Policy owner and any assignee of record of the shortfall. The Policy owner will
then have a grace period of 61 days, measured from the monthly anniversary, to
make sufficient payment. The minimum necessary payment will be the equivalent
of two monthly deductions. Failure to make a sufficient payment within the
grace period will result in termination of the Policy without any cash value.
If the insured dies during the grace period, the insurance proceeds will still
be payable, but any due and unpaid monthly deductions will be deducted from the
proceeds.
Reinstatement. A terminated Policy may be reinstated anytime within 3 years
(5 years in Missouri) after the end of the grace period and before the Final
Date by submitting the following items to Metropolitan Tower: (1) a written
application for reinstatement; (2) evidence of insurability satisfactory to
Metropolitan Tower; and (3) a premium that, after the deduction of the premium
expense charges (see "Charges and Deductions--Premium Expense Charges," page
25), is large enough to cover: (a) the monthly deductions for at least the
24
<PAGE>
two Policy months commencing with the effective date of reinstatement; (b) any
due and unpaid monthly Policy charges incurred during the first Policy year;
and (c) interest at the rate of 6% per year on the amount set forth in (b) from
the commencement of the grace period to the date of reinstatement. Metropolitan
Life reserves the right to waive the interest due set forth in (c) above.
Indebtedness on the date of termination will be cancelled and need not be
repaid and will not be reinstated. The amount of cash surrender value on the
date of reinstatement will be equal to the premiums paid at reinstatement, less
the premium expense charges and the amounts paid in accordance with (b) and (c)
above.
The date of reinstatement will be the date of approval of the application for
reinstatement. The terms of the original Policy, including the insurance rates
provided therein, will apply to the reinstated Policy. A reinstated Policy is
subject to a new two year period of contestability (see "Other Policy
Provisions--Incontestability," page 43).
CHARGES AND DEDUCTIONS
PREMIUM EXPENSE CHARGES
Sales Load. A charge (which may be deemed to be a sales load as defined in
the 1940 Act) is deducted from each premium payment received by Metropolitan
Tower as described below. A charge of 27% of premiums paid is deducted from
premium payments made in the first Policy year until the total of such payments
equals the lesser of the annual target premium and the Guideline Annual Premium
for that year. A charge of 7% of premiums paid is deducted from any premium
payments made in the first Policy year after such amount has been reached.
Regardless of the amount of premium payments made in the first Policy year, a
charge of 7% is deducted from each premium payment in all subsequent Policy
years.
For example, assume a Policy has a Guideline Annual Premium of $1,000 and an
annual target premium of $900. If the Policy owner makes a first year premium
payment of $1,200, such payment would be subject to the following sales load
deductions:
<TABLE>
<S> <C>
27% of $900......................................................... $243
7% of $300 (amount of payment above $900 annual target premium)..... 21
----
Total sales load.................................................... $264
</TABLE>
If, still in the first Policy year, the Policy owner makes a premium payment of
an additional $1,200, a deduction of $84 (7% of $1,200) would be made. If, in a
subsequent Policy year, the Policy owner made a payment of $1,500, a deduction
of $105 (7% of $1,500) would be made. For purposes of computing the amount of
sales load deducted from first year premium payments, the Policy's initial
annual target premium and Guideline Annual Premium will be used notwithstanding
that exercise by the Policy owner of certain of the Policy's flexible features
(including changes in specified face amount) might subsequently change the
annual target premium and Guideline Annual Premium.
The amount of the sales load in any Policy year cannot be specifically
related to actual sales expenses for that year, which include sales commissions
and costs of prospectuses, other sales material and advertising. To the extent
that sales expenses are not recovered from the charges for sales load, such
expenses will be recovered from other sources, including any excess accumulated
charges for mortality and
25
<PAGE>
expense risks under the Policies, any other gains attributable to operations
with respect to the Policies and Metropolitan Tower's general assets and
surplus. Metropolitan Tower expects to recover its total sales expenses over
the lifetime of the insureds.
State Premium Tax Charge. An additional charge is made for state premium
taxes of 2% of each premium payment. Premium taxes vary from state to state,
and the 2% rate approximates the average tax rate expected to be paid on
premiums from all states.
Special Rules. Special rules apply to the deduction of premium expense
charges in the case of a payment of a premium for a Policy at its issue or
within six months of its issue when such payment is made in a lump sum with all
or a portion of the proceeds of a cash surrender from a non-flexible permanent
life policy or an unmatured endowment policy issued by Metropolitan Life or any
of its affiliates. Under such special rules, which apply only to the amount
derived from such proceeds, on the portion of such amount up to the lesser of
the annual target premium and the Guideline Annual Premium for the first Policy
year, the sales load charge is only 20% of such sum instead of 27%. In
addition, Metropolitan Tower will waive the 2% charge for state premium taxes
on this portion of such amount. On any portion of such amount greater than the
lesser of the annual target premium and the Guideline Annual Premium, neither
the regular 7% sales charge nor the 2% state premium tax charge will be
deducted. These special rules apply only if the surrendered policy is a single
owner policy on the life of the primary insured under the Policy being
purchases. For purposes of computing the sales load, in the event that a lump
sum consists of an amount derived from such proceeds and an amount not so
derived, the lump sum will be treated as two separate payments, with the amount
derived from proceeds being deemed as the first payment.
MONTHLY DEDUCTION FROM CASH VALUE
The monthly deduction from cash value includes the cost of term insurance
charge, the charge for optional insurance benefits added by rider (see "Policy
Benefits--Optional Insurance Benefits," page 21) and monthly Policy charges.
The cost of term insurance charge and the monthly Policy charges are discussed
separately in the paragraphs that follow. The monthly deduction will also
include a charge for requested increases in the death benefit for the month in
which the increase occurs, as discussed more fully under "Policy Benefits--
Increases," page 14.
The monthly deduction will be deducted as of each monthly anniversary
commencing with the Date of Policy. It will be allocated among the Fixed
Account and each investment division of the Separate Account on a Pro Rata
Basis. See "Payment and Allocation of Premiums--Issuance of a Policy," page 22,
regarding when insurance coverage starts under a newly issued Policy.
Cost of Term Insurance. Because the cost of term insurance depends upon a
number of variables, it can vary from month to month. Metropolitan Tower will
determine the monthly cost of term insurance charge by multiplying the
applicable cost of term insurance rate or rates by the term insurance amount
for each Policy month. The term insurance amount for a Policy month is (a) the
death benefit at the beginning of the Policy month divided by 1.0032737 (a
discount factor to account for return deemed to be earned during the month),
less (b) the cash value at the beginning of the Policy month.
The term insurance amount may be affected by changes in the cash value or in
the specified face amount of the Policy and will be greater for owners who have
selected Death Benefit Option B than for those who have selected Death Benefit
Option A (see "Policy Benefits--Death Benefits," page 12), assuming the same
specified face amount in each case and assuming that the minimum death benefit
is not in effect. Since the
26
<PAGE>
death benefit payable under Option A remains constant while the death benefit
payable under Option B varies with the cash value, cash value increases will
generally reduce the term insurance amount under Option A but not under Option
B. If the term insurance amount is greater, the cost of insurance will be
greater. If the minimum death benefit is in effect (see "Death Benefit
Options--Minimum Death Benefit," page 12), then the cost of term insurance will
vary directly with the cash value under both death benefit options.
If more than one rate class is in effect under a Policy (see "Rate Class,"
below), the cost of term insurance will decrease if a Policy owner converts
from Option A to Option B and will increase if a Policy owner converts from
Option B to Option A.
Cost of Term Insurance Rate. Cost of term insurance rates are based on the
sex (except in Montana and Massachusetts and in the case of group conversions
which require unisex rates), age and rate class of the insured. The actual
monthly cost of term insurance rates will be based on Metropolitan Tower's
expectations as to future experience. They will not, however, be greater than
the guaranteed cost of term insurance rates set forth in the Policy. These
guaranteed rates are based on certain of the 1980 Commissioners Standard
Ordinary Mortality Tables and the insured's sex and age. The Tables used for
this purpose set forth different mortality estimates for males and females. Any
change in the cost of term insurance rates will apply to all persons of the
same insuring age, sex, and rate class whose Policies have been in force for
the same length of time.
Metropolitan Tower is adjusting the current cost of term insurance rates it
charges a Policy as of the next Monthly Anniversary for the Policy occurring
after April 30, 1992. The new rates represent an increase from the prior rates.
The amount of the increase depends on the insured's age, sex (except where
unisex rates apply) and rate class as well as the specified face amount of the
Policy. Metropolitan Tower's new rates for the Policies reflect actual
mortality experience. Metropolitan Tower reviews its cost of term insurance
rates periodically and may adjust the rates from time to time again in the
future.
Rate Class. The rate class of an insured affects the cost of term insurance
rate. Metropolitan Tower currently places insureds into a standard rate class
or rate classes involving a higher or lower mortality risk. Each such rate
class is further divided into a smoker division and a nonsmoker division. In an
otherwise identical Policy, insureds in the standard rate class will have a
lower cost of term insurance than those in the rate class with the higher
mortality risk and a higher cost of term insurance than those in the rate class
with the lower mortality risk. Also, those insureds in the nonsmoker division
of a rate class will have a lower cost of term insurance than those in the
smoker division of the same rate class.
If a Policy owner requests a specified face amount increase at a time when
the insured is in a less favorable rate class or division than previously, a
correspondingly higher cost of insurance rate will apply to that portion of the
term insurance amount attributable to the increase. On the other hand, if the
insured's rate class or division improves, the lower cost of insurance rate
will apply to the entire term insurance amount.
Monthly Policy Charges. A flat monthly Policy charge of $4.75 per Policy will
be deducted from cash value as part of the monthly deduction. This charge will
be used to compensate Metropolitan Tower for expenses incurred in the
administration of the Policy. During the first twelve Policy months, an
additional monthly charge of $.25 per thousand dollars of specified face amount
will be deducted from cash value as part of the monthly deduction. This charge
will compensate Metropolitan Tower for first year underwriting and other start-
up expenses incurred in connection with the Policy. These expenses include the
cost of processing applications, conducting medical examinations, determining
insurability and the insured's risk class, and establishing Policy records.
Metropolitan Tower does not expect to derive a profit from these charges.
27
<PAGE>
CHARGES AGAINST THE SEPARATE ACCOUNT
Charge for Mortality and Expense Risks. A daily charge is made against the
Separate Account for mortality and expense risks assumed by Metropolitan Tower.
The amount of the charge is equivalent to an effective annual rate of .75% of
the average daily value of the assets in the Separate Account which are
attributable to the Policies.
The mortality risk assumed is that insureds may live for a shorter period of
time than estimated (i.e., the period of time based on the appropriate 1980
Commissioners Standard Ordinary Mortality Table) and, thus, a greater amount of
death benefits than expected will be payable. The expense risk assumed is that
expenses incurred in issuing and administering the Policies will be greater
than estimated. Metropolitan Tower will realize a gain if the charges prove
ultimately to be more than sufficient to cover its actual costs of such
mortality and expense commitments. If the charges are not sufficient, the loss
will fall on Metropolitan Tower. If its estimates of future mortality and
expense experience are accurate, Metropolitan Tower anticipates that it will
realize a profit from the mortality and expense risk charge; however if such
estimates are inaccurate, Metropolitan Tower could incur a loss.
Charge for Income Taxes. Currently, no charge is made against the Separate
Account for income taxes. However, Metropolitan Tower may decide to make such a
charge in the future (see "Federal Tax Matters--Taxation of Metropolitan
Tower," page 47).
GUARANTEE OF CERTAIN CHARGES
Metropolitan Tower guarantees, and may not increase, the charges deducted
from premiums, the monthly Policy charges, and the charge against the Separate
Account for mortality and expense risks with respect to the Policies.
OTHER CHARGES
Fund Investment Management Fee. Shares of the Fund are purchased for the
Separate Account at their net asset value, which is determined after deduction
of the fee paid by the Fund at the annual rate of .25% of the average daily
value of the aggregate net assets of the portfolios for the investment
management services provided by Metropolitan Life, as described more fully
under "What are Separate Account Two, the Fixed Account and the Metropolitan
Series Fund?", page 5 and in the attached prospectus for the Fund.
28
<PAGE>
ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES AND ACCUMULATED PREMIUMS
The tables on pages 30 to 37 illustrate the way in which a Policy's death
benefit and cash value could vary over an extended period of time assuming that
all premiums are allocated to and remain in the Separate Account for the entire
period shown and hypothetical gross investment rates of return for the Fund
(i.e., investment income and capital gains and losses, realized or unrealized)
equivalent to constant gross (after tax) annual rates of 0%, 4% and 8%. The
tables are based on the payment of annual planned premiums (see "Premiums--
Premium Limitations," page 23), for a specified face amount of $100,000 for
males aged 25 and 40. Each illustration assumes that the insured is in
Metropolitan Tower's standard nonsmoker underwriting risk classification.
Illustrations for an insured in Metropolitan Tower's standard smoker
underwriting risk classification would show, for the same age and premium
payments, lower cash values and, therefore, for the minimum death benefit and
death benefit Option B, lower death benefits.
The death benefits and cash values would be different from those shown if the
actual gross investment rates of return averaged 0%, 4% or 8% over a period of
years, but fluctuated above or below such averages for individual policy years.
The values would also be different depending on the allocation of a Policy's
total cash value among the investment divisions of the Separate Account, if the
actual rates of return averaged 0%, 4% or 8% but the rates for each portfolio
of the Fund varied above and below such averages.
The amounts shown for the death benefits and cash values take into account
the deductions from premiums and the monthly deduction from cash value, as well
as the daily charge against the Separate Account for mortality and expense
risks equivalent to an effective annual rate of .75% of the average daily value
of the assets in the Separate Account attributable to the Policies and the
daily charge to the Fund for investment management services equivalent to an
annual rate of .25% of the average daily value of the aggregate net assets of
the Fund. (See "Charges and Deductions," page 25).
Columns on pages 30, 31, 34 and 35 are based on the guaranteed cost of term
insurance rates; columns on pages 32, 33, 36 and 37 are based on the current
cost of term insurance rates as presently in effect (i.e., the rates in effect
as of May 1, 1992) (see "Monthly Deduction From Cash Value--Cost of Term
Insurance Rate," page 27).
Taking account of the charges for mortality and expense risks and investment
management services, the gross annual investment rates of return of 0%, 4% and
8% correspond to actual (or net) annual rates of: --1.00%, 2.97% and 6.93%,
respectively.
The hypothetical returns shown in the tables do not reflect any charges for
income taxes against the Separate Account since no such charges are currently
made. However, if in the future such changes are made, in order to produce the
death benefits and cash values illustrated, the gross annual investment rate of
return would have to exceed 0%, 4% or 8% by sufficient amount to cover the tax
charges. (See "Federal Tax Matters--Taxation of Metropolitan Tower," page 47).
The second column of the tables shows the amount which would accumulate if an
amount equal to the annual target premium were invested to earn interest, after
taxes, at 4% compounded annually.
Appendix B, beginning on page 70, contains illustrations using other
hypothetical rates of return.
Upon request, Metropolitan Tower will furnish an illustration reflecting the
proposed insured's age, sex, the specified face amount or premium amount
requested, frequency of planned periodic premiums payments, death benefit
option selected and any available rider requested.
29
<PAGE>
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 25
STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH
BENEFIT OPTION A GUARANTEED COST OF TERM INSURANCE CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RATES OF RETURN OF RATES OF RETURN OF
POLICY AT 4% INTEREST ----------------------- --------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
------ -------------- ------ ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ....... $ 922 $ 190 $ 206 $ 222 $100,000 $100,000 $100,000
2 ....... 1,882 762 813 866 100,000 100,000 100,000
3 ....... 2,880 1,329 1,439 1,555 100,000 100,000 100,000
4 ....... 3,917 1,893 2,087 2,295 100,000 100,000 100,000
5 ....... 4,996 2,450 2,753 3,086 100,000 100,000 100,000
6 ....... 6,119 3,000 3,437 3,930 100,000 100,000 100,000
7 ....... 7,286 3,541 4,137 4,829 100,000 100,000 100,000
8 ....... 8,500 4,070 4,853 5,785 100,000 100,000 100,000
9 ....... 9,762 4,587 5,584 6,801 100,000 100,000 100,000
10 ....... 11,075 5,091 6,328 7,881 100,000 100,000 100,000
15 ....... 18,471 7,338 10,199 14,323 100,000 100,000 100,000
20 ....... 27,470 8,954 14,162 22,858 100,000 100,000 100,000
25 ....... 38,418 9,708 18,009 34,236 100,000 100,000 100,000
40 ....... 87,659 206 22,832 101,007 100,000 100,000 123,229(3)
</TABLE>
- --------
(1) Assumes annual planned premium payments of $887 paid in full at beginning
of each Policy year. The values would vary from those shown if the amount
or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive loans
or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Minimum death benefit applies; see "Death Benefit Options--Minimum Death
Benefit," on page 12 for further details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE
BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH
BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4% AND 8% OVER A PERIOD OF
YEARS. BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS
OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED
ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN TOWER OR THE FUND THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
30
<PAGE>
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 25
STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH
BENEFIT OPTION B GUARANTEED COST OF TERM INSURANCE CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RATES OF RETURN OF RATES OF RETURN OF
POLICY AT 4% INTEREST ---------------------------- -----------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
------ -------------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ..................... $ 922 $ 170 $ 185 $ 200 $100,170 $100,185 $100,200
2 ..................... 1,882 740 790 841 100,740 100,790 100,841
3 ..................... 2,880 1,305 1,413 1,526 101,305 101,413 101,526
4 ..................... 3,917 1,866 2,056 2,259 101,866 102,056 102,259
5 ..................... 4,996 2,419 2,716 3,042 102,419 102,716 103,042
6 ..................... 6,119 2,964 3,393 3,876 102,964 103,393 103,876
7 ..................... 7,286 3,498 4,084 4,763 103,498 104,084 104,763
8 ..................... 8,500 4,020 4,789 5,703 104,020 104,789 105,703
9 ..................... 9,762 4,529 5,507 6,700 104,529 105,507 106,700
10 ..................... 11,075 5,022 6,236 7,757 105,022 106,236 107,757
15 ..................... 18,471 7,190 9,974 13,981 107,190 109,974 113,981
20 ..................... 27,470 8,656 13,649 21,966 108,656 113,649 121,966
25 ..................... 38,418 9,157 16,921 27,740 109,157 116,921 127,740
40 ..................... 87,659 0(3) 15,425 75,172 0(3) 115,425 175,172
</TABLE>
- --------
(1) Assumes annual planned premium payments of $887 paid in full at beginning
of each Policy year. The values would vary from those shown if the amount
or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive loans
or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Zero values in cash value and death benefit indicate termination of
insurance coverage in the absence of a sufficient additional premium
payment; see "Policy Termination and Reinstatement--Termination," on page
24 for further details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE
BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH
BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4% AND 8% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS
OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED
ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN TOWER OR THE FUND THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
31
<PAGE>
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 25
STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH
BENEFIT OPTION A CURRENT COST OF TERM INSURANCE CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RATES OF RETURN OF RATES OF RETURN OF
POLICY AT 4% INTEREST ------------------------ --------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
------ -------------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ...... $ 922 $ 203 $ 220 $ 237 $100,000 $100,000 $100,000
2 ...... 1,882 829 883 938 100,000 100,000 100,000
3 ...... 2,880 1,448 1,565 1,688 100,000 100,000 100,000
4 ...... 3,917 2,063 2,270 2,491 100,000 100,000 100,000
5 ...... 4,996 2,670 2,993 3,348 100,000 100,000 100,000
6 ...... 6,119 3,269 3,737 4,264 100,000 100,000 100,000
7 ...... 7,286 3,859 4,499 5,240 100,000 100,000 100,000
8 ...... 8,500 4,439 5,280 6,280 100,000 100,000 100,000
9 ...... 9,762 5,008 6,080 7,388 100,000 100,000 100,000
10 ...... 11,075 5,566 6,898 8,568 100,000 100,000 100,000
15 ...... 18,471 8,136 11,233 15,685 100,000 100,000 100,000
20 ...... 27,470 10,273 15,950 25,369 100,000 100,000 100,000
25 ...... 38,418 11,908 21,054 38,691 100,000 100,000 100,000
40 ...... 87,659 11,353 37,568 119,376 100,000 100,000 145,639(3)
</TABLE>
- --------
(1) Assumes annual planned premium payments of $887 paid in full at beginning
of each Policy year. The values would vary from those shown if the amount
or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive loans
or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Minimum death benefit applies; see "Death Benefit Options--Minimum Death
Benefit," on page 12 for further details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE
BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH
BENEFIT AND CASH VALUE FOR A POLICY WOLD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL INVESTMENT RATES OF RETURN AVERAGES 0%, 4% AND 8% OVER A PERIOD OF
YEARS. BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS
OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED
ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN TOWER OR THE FUND THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
32
<PAGE>
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 25
STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH
BENEFIT OPTION B CURRENT COST OF TERM INSURANCE CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RATES OF RETURN OF RATES OF RETURN OF
POLICY AT 4% INTEREST ----------------------- --------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
------ -------------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 .......... $ 922 $ 189 $ 205 $ 222 $100,189 $100,205 $100,222
2 .......... 1,882 814 867 921 100,814 100,867 100,921
3 .......... 2,880 1,432 1,546 1,667 101,432 101,546 101,667
4 .......... 3,917 2,044 2,248 2,466 102,044 102,248 102,466
5 .......... 4,996 2,647 2,966 3,317 102,647 102,966 103,317
6 .......... 6,119 3,243 3,705 4,225 103,243 103,705 104,225
7 .......... 7,286 3,828 4,460 5,192 103,828 104,460 105,192
8 .......... 8,500 4,403 5,234 6,220 104,403 105,234 106,220
9 .......... 9,762 4,965 6,024 7,314 104,965 106,024 107,314
10 .......... 11,075 5,515 6,830 8,476 105,515 106,830 108,476
15 .......... 18,471 8,024 11,064 15,429 108,024 111,064 115,429
20 .......... 27,470 10,048 15,566 24,706 110,048 115,566 124,706
25 .......... 38,418 11,496 20,255 37,107 111,496 120,255 137,107
40 .......... 87,659 9,617 32,138 103,757 109,617 132,138 203,757
</TABLE>
- --------
(1) Assumes annual planned premium payments of $887 paid in full at beginning
of each Policy year. The values would vary from those shown if the amount
or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive loans
or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE
BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH
BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4% AND 8% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS
OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED
ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN TOWER OR THE FUND THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
33
<PAGE>
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 40
STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH
BENEFIT OPTION A GUARANTEED COST OF TERM INSURANCE CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RATES OF RETURN OF RATES OF RETURN OF
POLICY AT 4% INTEREST ----------------------------- --------------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
------ -------------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ..................... $ 956 $ 113 $ 128 $ 142 $100,000 $100,000 $100,000
2 ..................... 1,950 547 591 636 100,000 100,000 100,000
3 ..................... 2,984 948 1,040 1,136 100,000 100,000 100,000
4 ..................... 4,059 1,316 1,472 1,641 100,000 100,000 100,000
5 ..................... 5,177 1,649 1,885 2,147 100,000 100,000 100,000
6 ..................... 6,340 1,944 2,276 2,655 100,000 100,000 100,000
7 ..................... 7,549 2,200 2,642 3,161 100,000 100,000 100,000
8 ..................... 8,807 2,414 2,981 3,664 100,000 100,000 100,000
9 ..................... 10,115 2,585 3,288 4,161 100,000 100,000 100,000
10 ..................... 11,475 2,708 3,558 4,648 100,000 100,000 100,000
15 ..................... 19,138 2,370 4,062 6,643 100,000 100,000 100,000
20 ..................... 28,461 0(3) 2,179 6,917 0(3) 100,000 100,000
25 ..................... 39,803 0(3) 0(3) 3,155 0(3) 0(3) 100,000
</TABLE>
- --------
(1) Assumes annual planned premium payments of $919 paid in full at beginning
of each Policy year. The values would vary from those shown if the amount
or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive loans
or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Zero values in cash value and death benefit indicate termination of
insurance coverage in the absence of a sufficient additional premium
payment; see "Policy Termination and Reinstatement--Termination," on page
24 for further details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE
BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH
BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4% AND 8% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS
OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED
ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN TOWER OR THE FUND THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
34
<PAGE>
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 40
STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH
BENEFIT OPTION B GUARANTEED COST OF TERM INSURANCE CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RATES OF RETURN OF RATES OF RETURN OF
POLICY AT 4% INTEREST --------------------------- -----------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
- ------ -------------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ... $ 1,186 $ 268 $ 288 $ 309 $100,268 $100,288 $100,309
2 ... 2,419 896 961 1,027 100,896 100,961 101,027
3 ... 3,701 1,489 1,623 1,764 101,489 101,623 101,764
4 ... 5,035 2,045 2,273 2,520 102,045 102,273 102,520
5 ... 6,422 2,560 2,907 3,292 102,560 102,907 103,292
6 ... 7,864 3,305 3,524 4,080 103,035 103,524 104,080
7 ... 9,364 3,466 4,119 4,882 103,466 104,119 104,882
8 ... 10,924 3,852 4,690 5,697 103,852 104,690 105,697
9 ... 12,547 4,191 5,234 6,524 104,191 105,234 106,524
10 ... 14,234 4,477 5,743 7,356 104,477 105,743 107,356
15 ... 23,740 4,899 7,492 11,358 104,899 107,492 111,358
20 ... 35,305 2,995 6,981 14,170 102,995 106,981 114,170
25 ... 49,375 0(3) 2,476 13,813 0(3) 102,476 113,813
</TABLE>
- --------
(1) Assumes annual planned premium payments of $1,140 paid in full at beginning
of each Policy year. The values would vary from those shown if the amount
or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive loans
or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Zero values in cash value and death benefit indicate termination of
insurance coverage in the absence of a sufficient additional premium
payment; see "Policy Termination and Reinstatement--Termination," on page
24 for further details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE
BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH
BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL INVESTMENT RATES OF RETURN AVERAGES 0%, 4% AND 8% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS
OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED
ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN TOWER OR THE FUND THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
35
<PAGE>
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 40
STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH
BENEFIT OPTION A CURRENT COST OF TERM INSURANCE CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RATES OF RETURN OF RATES OF RETURN OF
POLICY AT 4% INTEREST ------------------------- --------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
------ -------------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ........ $ 956 $ 90 $ 104 $ 119 $100,000 $100,000 $100,000
2 ........ 1,950 628 673 720 100,000 100,000 100,000
3 ........ 2,984 1,147 1,246 1,349 100,000 100,000 100,000
4 ........ 4,059 1,648 1,821 2,008 100,000 100,000 100,000
5 ........ 5,177 2,132 2,403 2,701 100,000 100,000 100,000
6 ........ 6,340 2,594 2,984 3,426 100,000 100,000 100,000
7 ........ 7,549 3,030 3,561 4,179 100,000 100,000 100,000
8 ........ 8,807 3,439 4,134 4,963 100,000 100,000 100,000
9 ........ 10,155 3,821 4,701 5,778 100,000 100,000 100,000
10 ........ 11,475 4,172 5,257 6,625 100,000 100,000 100,000
15 ........ 19,138 5,476 7,894 11,426 100,000 100,000 100,000
20 ........ 28,461 5,789 10,010 17,263 100,000 100,000 100,000
25 ........ 39,803 4,333 10,717 23,930 100,000 100,000 100,000
</TABLE>
- --------
(1) Assumes annual planned premium payments of $919 paid in full at beginning
of each Policy year. The values would vary from those shown if the amount
or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive loans
or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE
BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH
BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4% AND 8% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS
OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED
ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN TOWER OR THE FUND THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
36
<PAGE>
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 40
STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH
BENEFIT OPTION B CURRENT COST OF TERM INSURANCE CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RATES OF RETURN OF RATES OF RETURN OF
POLICY AT 4% INTEREST ------------------------- --------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
------ -------------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ........ $ 1,186 $ 225 $ 245 $ 264 $100,225 $100,245 $100,264
2 ........ 2,419 959 1,023 1,089 100,959 101,023 101,089
3 ........ 3,701 1,671 1,810 1,955 101,671 101,810 101,955
4 ........ 5,035 2,360 2,604 2,865 102,360 102,604 102,865
5 ........ 6,422 3,030 3,408 3,825 103,030 103,408 103,825
6 ........ 7,864 3,674 4,217 4,832 103,674 104,217 104,832
7 ........ 9,364 4,287 5,026 5,883 104,287 105,026 105,883
8 ........ 10,924 4,871 5,834 6,982 104,871 105,834 106,982
9 ........ 12,547 5,423 6,640 8,131 105,423 106,640 108,131
10 ........ 14,234 5,939 7,439 9,328 105,939 107,439 109,328
15 ........ 23,740 8,004 11,332 16,168 108,004 111,332 116,168
20 ........ 35,305 8,958 14,733 24,523 108,958 114,733 124,523
25 ........ 49,375 8,027 16,652 33,989 108,027 116,652 133,989
</TABLE>
- --------
(1) Assumes annual planned premium payments of $1,140 paid in full at beginning
of each Policy year. The values would vary from those shown if the amount
or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive loans
or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE
BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH
BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4% AND 8% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS
OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED
ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN TOWER OR THE FUND THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
37
<PAGE>
POLICY RIGHTS
The description of rights under the Policy set forth below assumes that no
riders are in effect. See Appendix A, page 67, for a discussion of how these
rights may be affected by certain riders under the Policy.
LOAN PRIVILEGES
Policy Loan. After the first Policy year, the Policy owner may borrow money
from Metropolitan Tower using the Policy as the only security for the loan. The
smallest amount the Policy owner can borrow at any one time is $250. The
maximum amount that may be borrowed at any time is the loan value. The loan
value equals the cash surrender value less two monthly deductions or, if
greater, 75% (90% for Policies issued in Virginia or Maryland) of the cash
surrender value (or, in Texas, the Policy's cash surrender value less the
monthly deductions to the end of the Policy year, if greater). For situations
where a Policy loan may be treated as a taxable distribution, see "Federal Tax
Matters," page 45.
Allocation of Policy Loan. Metropolitan Tower will allocate a Policy loan
among the Fixed Account and the investment divisions of the Separate Account on
a Pro Rata Basis.
Interest. The interest charged on a Policy loan accrues daily. In most
states, the interest rate is adjustable and will be set by Metropolitan Tower
from time to time. An applicable interest rate will be determined for each
Policy year and will apply to any new or outstanding loan under a Policy during
that Policy year. The applicable interest rate will not exceed the greater of
5% or the Monthly Average Corporate Yield shown on Moody's Corporate Bond Yield
Averages published by Moody's Investors Service, Inc. In the event that such
average published by Moody's Investors Service, Inc. is not available,
Metropolitan Tower will substitute an average that is similar in nature and
which is acceptable to the Insurance Supervisory official of the state in which
the Policy is delivered.
In those states where an adjustable interest rate is not permitted or where a
fixed interest rate must be offered as an alternative, a separate policy will
be made available providing for loan interest on a fixed basis. In these cases,
the interest rate is currently 8% per year.
Interest payments are due at the end of each Policy year. If unpaid within 31
days after it is due, interest will be treated as a new loan subject to the
interest rates applicable at that time and an amount equal to such interest due
will be transferred from the Fixed Account and the investment divisions of the
Separate Account on a Pro Rata Basis to the Policy Loan Account.
The Tax Reform Act of 1986 phased out the consumer interest deduction for
federal income tax purposes. Thus, for individuals, interest paid to
Metropolitan Tower in connection with policy loans used for consumer purposes
is no longer deductible.
The Tax Reform Act of 1986 also changed the law with respect to the
deductibility of interest on policyholder loans on life insurance policies
owned by businesses. In the case of life insurance policies owned by a taxpayer
covering the life of an individual who is an officer or employee, or is
financially interested in the taxpayer's trade or business, the interest paid
on the policy loan is not deductible to the extent that the aggregate
indebtedness, under all the policies covering such person, exceeds $50,000.
Counsel and other competent advisors should be consulted with respect to the
deductibility of Policy loan interest for income tax purposes. See "Federal Tax
Matters," page 45.
38
<PAGE>
Effect of a Policy Loan. As of the Date of Receipt of the loan request, cash
value equal to the portion of the Policy loan allocated to the Fixed Account
and to each investment division will be transferred from the Fixed Account
and/or such investment divisions to a Policy Loan Account within the General
Account, reducing the Policy's cash value in the accounts from which the
transfer was made.
Cash value in the Policy Loan Account equal to indebtedness will be credited
with interest at a rate equal to the adjustable or fixed rate charged less a
percentage charge, based on expenses associated with Policy loans, determined
by Metropolitan Tower. Presently, this charge is 2%. Thus, with respect to
loans subject to the present fixed rate of 8%, the interest rate presently
credited is 6%. The minimum rate credited to the Policy Loan Account will be 4%
per year regardless of whether loans are subject to a fixed rate or an
adjustable rate. NO ADDITIONAL INTEREST WILL BE CREDITED TO THE CASH VALUE IN
THE POLICY LOAN ACCOUNT, NOR WILL THE CASH VALUE IN THE POLICY LOAN ACCOUNT
PARTICIPATE IN ANY INVESTMENT EXPERIENCE APPLICABLE TO THE SEPARATE ACCOUNT.
The Policy's cash value in the Policy Loan Account will be the outstanding
indebtedness on the valuation date plus any interest credited to the Policy
Loan Account which has not yet been allocated to the Fixed Account or the
investment divisions of the Separate Account as of the Valuation Date. Interest
credited to amounts in the Policy Loan Account will be allocated at least once
a year among the Fixed Account and the investment divisions of the Separate
Account in the same proportion as the net premiums are then being allocated.
Indebtedness. Indebtedness equals the outstanding Policy loan plus accrued
interest thereon. If, on a monthly anniversary, indebtedness exceeds the cash
value minus the monthly deduction, Metropolitan Tower will notify the Policy
owner and any assignee of record. If a sufficient payment is not made to
Metropolitan Tower within 61 days from the monthly anniversary, the Policy will
terminate without value. The Policy may, however, later be reinstated, subject
to certain conditions (see "Policy Termination and Reinstatement," page 24).
Repayment of Indebtedness. Indebtedness may be repaid any time before the
Final Date while the insured is living. The minimum repayment is $50. If not
repaid, Metropolitan Tower will deduct indebtedness from any amount payable
under the Policy. As of the Date of Receipt of the repayment, the Policy's cash
value in the Policy Loan Account securing indebtedness will be allocated among
the Fixed Account and the investment divisions of the Separate Account in the
same proportion that net premiums are being allocated to those accounts at the
time of repayment. The Policy owner must designate whether a payment is
intended as a loan repayment or a premium payment. Any payment for which no
designation is made will be treated as a premium payment.
SURRENDER AND WITHDRAWAL PRIVILEGES
Subject to the limitations set forth below, at any time before the earlier of
the death of the insured and the Final Date, the Policy owner may make a
partial withdrawal or totally surrender the Policy by sending a written request
to Metropolitan Tower. The maximum amount available for surrender or withdrawal
is the cash surrender value on the Date of Receipt of the request. No charge
will be imposed on surrenders or partial withdrawals. For any tax consequences
in connection with a partial withdrawal or surrender, see "Federal Tax
Matters," page 45.
Surrenders. The Policy owner may surrender the Policy for its cash surrender
value. If the Policy is being surrendered, Metropolitan Tower may require that
the Policy itself be returned along with the request.
39
<PAGE>
A Policy owner may elect to have the proceeds paid in a single sum or applied
under an optional income plan (see "Appendix A," page 67). If the insured dies
after the surrender of the Policy and payment to the Policy owner of the cash
surrender value but before the end of the Policy month in which the surrender
occurred, a death benefit will be payable to the beneficiary in an amount equal
to the difference between the Policy's death benefit and cash value, both
computed as of the surrender date.
Partial Withdrawals. The Policy owner may make a partial withdrawal from the
Policy's cash surrender value. The minimum partial withdrawal is $250. There is
no charge for a partial withdrawal. The amount withdrawn will be deducted from
the Policy's cash value as of the Date of Receipt. The amount will be deducted
from the Fixed Account and the investment divisions of the Separate Account on
a Pro Rata Basis.
When death benefit Option A is in effect, any partial withdrawal will reduce
the specified face amount, and thus the death benefit, by the amount withdrawn.
When death benefit Option B is in effect, the amount withdrawn will not reduce
the specified face amount. However, the death benefit will be reduced by the
amount withdrawn. If increases in the specified face amount previously have
occurred, a partial withdrawal when Death Benefit Option A is in effect will
reduce the specified face amount in the same manner as would a direct request
by the Policy owner to reduce the specified face amount (see "Policy Benefits--
Decreases," page 14).
A Policy owner will not be permitted to make any partial withdrawal that
would reduce the specified face amount of the Policy below the Minimum Initial
Specified Face Amount in the first five Policy years or one-half the Minimum
Initial Specified Face Amount thereafter (see "Policy Benefits--Decreases,"
page 14), or that would result in total premiums paid exceeding the then
current maximum premium limitation determined by Internal Revenue Service Rules
(see "Premiums--Premium Limitations," page 23). A partial withdrawal will also
not be permitted if the resulting cash surrender value would be less than $500.
Any time a request for a partial withdrawal is received that would reduce the
specified face amount below the minimum face amount, result in total premiums
paid exceeding maximum premium limitations, or reduce the cash surrender value
below $500, Metropolitan Tower will not implement the partial withdrawal
request, but will contact the Policy owner as to whether the request should be
withdrawn or reduced to a smaller amount or changed to a request for the full
cash surrender value.
EXCHANGE PRIVILEGE
During the first 24 Policy months following the issuance of the Policy, the
Policy owner may exercise the Policy exchange privilege, which results in the
transfer at any one time of the entire amount in the Separate Account to the
Fixed Account, notwithstanding any limitations on transfers described in
"Allocation of Premiums and Cash Value--Cash Value Transfers," on page 24, and
the allocation of all future net premiums to the Fixed Account. This will, in
effect, serve as an exchange of the Policy for the equivalent of a flexible
premium fixed benefit life insurance policy. No charge will be imposed on such
transfer in exercising this exchange privilege. Moreover, the Policy owner may
subsequently transfer amounts back to one or more of the investment divisions
of the Separate Account at any time, within the limitations described in
"Allocation of Premiums and Cash Value--Cash Value Transfers," on page 24.
In those states which require it, the Policy owner may also, during the first
24 Policy months following the issuance of the Policy, without charge, on one
occasion exchange any Policy still in force for a flexible premium fixed
benefit life insurance policy issued by Metropolitan Life. Upon such exchange,
the Policy's cash surrender value will be transferred to the general account of
Metropolitan Life.
40
<PAGE>
THE FIXED ACCOUNT
A Policy owner may allocate net premiums and transfer cash value to the Fixed
Account, which is part of the General Account of Metropolitan Tower. Because of
exemptive and exclusionary provisions, interests in the Fixed Account have not
been registered under the Securities Act of 1933 and neither the Fixed Account
nor the General Account has been registered as an investment company under the
1940 Act. Accordingly, neither the General Account, the Fixed Account nor any
interests therein are generally subject to the provisions of these Acts and we
have been advised that the staff of the Securities and Exchange Commission has
not reviewed the disclosures in this Prospectus relating to the Fixed Account.
Disclosures regarding the Fixed Account may, however, be subject to certain
generally applicable provisions of the Federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
GENERAL DESCRIPTION
This Prospectus is generally intended to serve as a disclosure document only
for the aspects of the Policy involving the Separate Account and contains only
selected information regarding the Fixed Account. For complete details
regarding the Fixed Account, see the Policy itself.
The General Account consists of all assets owned by Metropolitan Tower other
than those in the Separate Account and other separate accounts. Subject to
applicable law, Metropolitan Tower has sole discretion over the investment of
the assets of the General Account, including those in the Fixed Account. Unlike
the assets of the Separate Account, the assets in the Fixed Account, as a part
of the General Account, are chargeable with liabilities arising out of any
other business of Metropolitan Tower.
A Policy owner may elect to allocate net premiums to the Fixed Account or to
transfer cash value from the investment divisions of the Separate Account to
the Fixed Account. The allocation or transfer of funds to the Fixed Account
does not entitle a Policy owner to share in the investment experience of the
General Account. Instead, Metropolitan Tower guarantees that cash value in the
Fixed Account will accrue interest at an effective annual rate of at least 4%,
independent of the actual investment experience of the General Account.
Metropolitan Tower is not obligated to credit interest at any higher rate,
although Metropolitan Tower may, in its sole discretion, do so.
FIXED ACCOUNT BENEFITS
The Policy owner may select either death benefit Option A or B under the
Policy and may change such option or the Policy's specified face amount,
subject to satisfactory evidence of insurability where required and subject to
all the conditions and limitations applicable to such transactions generally
(see "Policy Benefits--Death Benefits," page 12).
FIXED ACCOUNT CASH VALUE
Net premiums allocated to the Fixed Account are credited to the Policy. The
Company guarantees that interest credited to each Policy owner's cash value in
the Fixed Account will not be less than an effective annual rate of at least 4%
per year. The Company may declare any rate of interest in excess of 4% at any
time, subject to the following conditions: the Company will not decrease the
rate of excess interest on any premiums paid during any month of the year
before the first day of the same month of the subsequent year; thereafter, the
Company will not decrease the rate of excess interest for a period of twelve
months from the date declared. The Company may also establish multiple bands of
excess interest. This means that different
41
<PAGE>
rates of excess interest may apply to premium payments made in different months
of the year and at the end of each twelve-month period, and different rates of
excess interest may apply to cash value related to premiums received in a given
month of each prior year. Transfers made into the Fixed Account will be treated
as new premium payments for these purposes.
The guaranteed and excess interest are credited each Valuation Date. Once
credited, that interest will be guaranteed and become part of the Policy's cash
value in the Fixed Account. The monthly deduction will be charged against the
most recent premiums paid and interest credited thereto.
ANY INTEREST METROPOLITAN TOWER CREDITS ON THE POLICY'S CASH VALUE IN THE
FIXED ACCOUNT IN EXCESS OF THE GUARANTEED RATE OF 4% PER YEAR WILL BE
DETERMINED IN THE SOLE DISCRETION OF METROPOLITAN TOWER. THE POLICY OWNER
ASSUMES THE RISK THAT INTEREST CREDITED MAY NOT EXCEED THE GUARANTEED MINIMUM
RATE OF 4% PER YEAR. The cash value in the Fixed Account will be calculated on
each Valuation Date.
The Policy's cash value in the Fixed Account will reflect the amount and
frequency of premium payments allocated to the Fixed Account, the amount of
interest credited to amounts in the Fixed Account, any partial withdrawals, any
transfers from or to the investment divisions of the Separate Account, any
Policy indebtedness and any charges imposed on amounts in the Fixed Account in
connection with the Policy.
The portion of the monthly deduction attributable to the Fixed Account will
be determined as of the actual monthly anniversary, even if the monthly
anniversary does not fall on a Valuation Date.
TRANSFERS, WITHDRAWALS, SURRENDERS, AND POLICY LOANS
Amounts in the Fixed Account are subject to the same rights and limitations
as are amounts allocated to the investment divisions of the Separate Account
with respect to transfers, withdrawals, surrenders and Policy loans (see
"Allocation of Premiums and Cash Value--Cash Value Transfers;" "Loan
Privileges;" "Surrender and Withdrawal Privileges," pages 24, 38 and 39).
Metropolitan Tower reserves the right to delay transfers, withdrawals,
surrenders and the payment of the Policy loans allocated to the Fixed Account
for up to six months (see "Other Policy Provisions--Payment and Deferment,"
page 44). Payments to pay premiums on another policy with Metropolitan Tower
will not be delayed.
RIGHTS RESERVED BY METROPOLITAN TOWER
Metropolitan Tower reserves the right to make certain changes if, in its
judgment, they would best serve the interests of the Policy owners or would be
appropriate in carrying out the purposes of the Policies. Any changes will be
made only to the extent and in the manner permitted by applicable laws. Also,
when required by law, Metropolitan Tower will obtain Policy owner approval of
the changes and approval from any appropriate regulatory authority. Examples of
the changes Metropolitan Tower may make include:
. To operate the Separate Account in any form permitted under the 1940 Act
or in any other form permitted by law.
. To take any action necessary to comply with or obtain and continue any
exemptions from the 1940 Act.
42
<PAGE>
. To transfer any assets in any investment division to another investment
division, or to one or more separate accounts, or to the Fixed Account;
or to add, combine or remove investment divisions in the Separate
Account.
. To substitute, for the Fund shares held in any investment division, the
shares of another portfolio of the Fund or the shares of another
investment company or any other investment permitted by law.
. To change the way Metropolitan Tower assesses charges, but without
increasing the aggregate amount charged to the Fixed Account, the
Separate Account and any currently available portfolio of the Fund in
connection with the Policies.
. To make any other necessary technical changes in the Policy in order to
conform with any action the above provisions permit Metropolitan Tower to
take.
If any of these changes result in a material change in the underlying
investments of an investment division to which the net premiums of a Policy are
allocated, Metropolitan Tower will notify the Policy owner of such change, and
the owner may then make a new choice of investment divisions or the Fixed
Account.
OTHER POLICY PROVISIONS
Owner. The owner of a Policy is the insured unless another owner has been
named in the application for the Policy. The owner is entitled to exercise all
rights under a Policy while the insured is alive, including the right to name a
new owner or a contingent owner who would become the Policy owner if the owner
should die before the insured dies.
Beneficiary. The beneficiary is the person or persons to whom the insurance
proceeds are payable upon the insured's death. The owner may name a contingent
beneficiary to become the beneficiary if all the beneficiaries die while the
insured is alive. If no beneficiary or contingent beneficiary is alive when the
insured dies, the owner (or the owner's estate) will be the beneficiary. While
the insured is alive, the owner may change any beneficiary or contingent
beneficiary.
If more than one beneficiary is alive when the insured dies, they will be
paid in equal shares, unless the owner has chosen otherwise.
Incontestability. Metropolitan Tower will not contest the validity of a
Policy after it has been in force during the insured's lifetime for two years
from the Date of Policy (or date of reinstatement if a terminated Policy is
reinstated) except with respect to certain optional insurance benefits that may
be added subsequent to the Date of Policy. Metropolitan Tower will not contest
the validity of any increase in the death benefit after such increase has been
in force during the insured's lifetime for two years from its effective date.
Suicide. The insurance proceeds will not be paid if the insured commits
suicide, while sane or insane, within two years (one year in Colorado and North
Dakota) from the Date of Policy. Instead, Metropolitan Tower will pay the
beneficiary an amount equal to all premiums paid for the Policy, without
interest, less any outstanding Policy loan and accrued loan interest and less
any partial cash withdrawal. If the insured commits suicide, while sane or
insane, more than two years after the Date of Policy but within two years (one
year in Colorado and North Dakota) from the effective date of any increase in
the death benefit, Metropolitan Tower's liability with respect to such increase
will be limited to the cost thereof.
Age and Sex. If the insured's age or sex as stated in the application for a
Policy is not correct, benefits under a Policy will be adjusted to reflect the
correct age and sex.
43
<PAGE>
Collateral Assignment. The owner may assign a Policy as collateral. All
rights under the Policy will be transferred to the extent of the assignee's
interest. Metropolitan Tower is not bound by an assignment or release thereof,
unless it is in writing and is recorded at the Designated Office. Metropolitan
Tower is not responsible for the validity of any assignment or release thereof.
Payment and Deferment. With respect to amounts in the investment divisions of
the Separate Account, payment of the death benefit, all or a portion of the
cash surrender value, free look proceeds or a loan will ordinarily be made
within seven days after the Date of Receipt of all documents required for such
payment. Metropolitan Tower will pay interest on the amount of death benefit at
a rate which is currently 6% per year (or such higher rate as may be required
by state law) from the date of death until the date of payment of the death
benefit.
However, Metropolitan Tower may defer the determination, application or
payment of any such amount or any transfer of cash value for any period during
which the New York Stock Exchange is closed (other than customary weekend and
holiday closings), for any period during which any emergency exists as a result
of which it is not reasonably practicable for Metropolitan Tower to determine
the investment experience for a Policy or for such other periods as the
Securities and Exchange Commission may by order permit for the protection of
Policy owners. Metropolitan Tower will not defer a loan used to pay premiums on
other policies issued by it.
As with traditional life insurance, Metropolitan Tower can delay payment of
the entire insurance proceeds or other Policy benefits if entitlement to
payment is being questioned or is uncertain.
Dividends. The Policies are nonparticipating. This means that they are not
eligible for dividends, and they do not participate in any distribution of
Metropolitan Tower's surplus.
The description throughout this Prospectus of the features of the Policies is
subject to the specific terms of the Policies.
SALES AND ADMINISTRATIVE SERVICES AGREEMENT
Metropolitan Tower and Metropolitan Life have entered into a Sales and
Administrative Services Agreement ("Agreement") under which Metropolitan Life
has agreed to perform the sales and administrative services relating to the
Policies. For performing these services, Metropolitan Life will be reimbursed
by Metropolitan Tower pursuant to the terms of the Agreement. The offices which
may administer the Policies are located in: Aurora, Illinois; Johnstown,
Pennsylvania; Pearl River, New York; Princeton, New Jersey; San Ramon,
California; Tampa, Florida; Tulsa, Oklahoma; and Warwick, Rhode Island. Each
Policy owner will be notified which office will be the Designated Office for
servicing the Policy. Metropolitan Tower may name different Designated Offices
for different transactions.
Under the Agreement, Metropolitan Life acts as the principal underwriter
(distributor) of the Policies as defined in the 1940 Act (see "Distribution of
the Policies," page 45). In addition to selling insurance and annuities,
Metropolitan Life also serves as investment adviser to certain other advisory
clients, and is also principal underwriter for Metropolitan Tower Separate
Account One of Metropolitan Tower and Metropolitan Life Separate Accounts E and
UL of Metropolitan Life, each of which is registered as a unit investment trust
under the 1940 Act. Finally, Metropolitan Life acts as the principal
underwriter of single premium multifunded life insurance policies, premiums for
which may also be allocated to the Separate Account.
44
<PAGE>
The Agreement may be terminated by either party in accordance with its terms.
Bonding. The directors, officers and employees of Metropolitan Tower are
bonded in the amount of $50,000,000 subject to a $5,000,000 deductible.
Directors, officers and employees of Metropolitan Life are covered under the
same bond.
DISTRIBUTION OF THE POLICIES
The Policies will be sold by individuals who, in addition to being licensed
by state insurance authorities to sell the policies of Metropolitan Tower, are
also licensed life insurance sales representatives and registered
representatives of Metropolitan Life, the principal underwriter of the
Policies. Metropolitan Life is registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 as a broker-dealer and is
a member of the National Association of Securities Dealers, Inc. The Policies
may in the future be sold through other registered broker-dealers, including
MetLife Securities, Inc., a wholly owned broker-dealer subsidiary of
Metropolitan Life. Maximum commissions payable during the first policy year to
writing representatives will be 55% of the commissionable premium plus 5% of
the excess of the premium paid over the commissionable premium. The
commissionable premium is equal to $500 plus an amount per thousand dollars of
specified face amount which varies by the age and sex of the insured and with
the existence of certain optional insurance benefits. The commissionable
premium may be less than the amount of premium actually paid. Writing
representatives may be required to return all or part of the first year
commission if the Policy is not continued through the first Policy year.
Renewal commissions in Policy years 2 through 4 will be 3% of premiums paid and
are payable to the writing representative. Service commissions in Policy years
2 through 10 will be 2% of premiums paid. Service commissions in Policy years
11 and after will be 1% of premiums paid.
The sales manager receives (i) a commission not to exceed 16% of first year
commissions credited to the writing representative, (ii) a commission not to
exceed 16% of renewal and service commissions paid to the writing
representative in Policy years 2 and later and (iii) a commission not to exceed
35% of service commissions credited to the servicing representative after the
first Policy year.
The commissions are paid by Metropolitan Life and reimbursed by Metropolitan
Tower under the Agreement. They do not result in any charges against the Policy
in addition to those set forth under "Charges and Deductions," page 25. During
1991, such commissions aggregated approximately $1,100,000.
FEDERAL TAX MATTERS
The following description is a brief summary of some of the tax rules,
primarily related to federal income and estate taxes, which in the opinion of
Metropolitan Tower are currently in effect.
TAXATION OF THE POLICY
The Policy receives the same federal income and estate tax treatment as fixed
benefit life insurance. The death benefit payable under either death benefit
option in the Policy is generally excludable from the gross income of the
beneficiary under Section 101 of the Internal Revenue Code ("Code") and the
Policy owner is not deemed to be in constructive receipt of the cash values
under the Policy until actual withdrawal or surrender.
45
<PAGE>
Under existing tax law, unless a Policy is a modified endowment contract as
discussed below, a Policy owner generally will be taxed on cash value withdrawn
from the Policy and cash value received upon surrender of the Policy. Under
most circumstances, only the amount withdrawn or received upon surrender that
exceeds the total premiums paid will be treated as ordinary income.
The United States Treasury Department has adopted regulations which set
standards of diversification for the investments underlying the Policies, in
order for the Policies to be treated as life insurance. Metropolitan Tower
believes that these diversification standards will be satisfied. Failure to do
so would result in immediate taxation to Policy owners of all positive
investment experience credited to a Policy.
There is a possibility that regulations may be proposed in the future
describing the extent to which Policy owner control over allocation of cash
value may cause Policy owners to be treated as the owners of Separate Account
assets for tax purposes. Metropolitan Tower reserves the right to amend the
Policies in any way necessary to avoid any such result.
Metropolitan Tower also believes that loans received under the Policy will be
treated as indebtedness of an owner for federal tax purposes, and, unless the
Policy is or becomes a modified endowment contract as described below, that no
part of any loan received under a Policy will constitute income to the owner. A
partial withdrawal may have tax consequences depending on the circumstances of
such withdrawal. A total surrender or cancellation of the Policy also may have
tax consequences depending on the circumstances.
The Technical and Miscellaneous Revenue Act of 1988 amended the federal
income tax treatment of pre-death withdrawals from a class of life insurance
contracts referred to as modified endowment contracts. Unlike other life
insurance contracts, amounts received before death from a modified endowment
contract, including policy loans, are treated first as income (to the extent of
gain) and then as recovered investment. For purposes of determining the amount
includible in income, all modified endowment contracts issued by the same
company (or affiliate) to the same policyholder during any calendar year will
be treated as one modified endowment contract. Finally, an additional 10%
income tax is generally imposed on the taxable portion of certain amounts
received before age 59 1/2.
In general, a modified endowment contract is a life insurance contract
entered into or materially changed after June 20, 1988 that fails to meet a "7-
pay test". Under the 7-pay test if the amount of premiums paid under the life
insurance contract at any time during the first 7 policy years exceeds the sum
of the net level premiums which would have been paid if the contract provide
for paid-up future benefits after the payment of 7 level annual payments, the
contract is a modified endowment contract. A policy may have to be reviewed
under the 7-pay test even after the first seven policy years in the case of
certain events such as a material modification of the policy as discussed
below. If there is a reduction in benefits under the contract during any seven-
pay testing period, the 7-pay test is applied using the reduced benefits level.
Any distribution made within two years before a policy fails the 7-pay test
is treated as made in anticipation of such failure. Whether or not a particular
policy meets these definitional requirements is dependent on the date the
contract was entered into, premium payments made and the periodic premium
payments to be made, the level of death benefits, any changes in the level of
death benefits, the extent of any prior cash withdrawals, and several other
factors. Generally, a life insurance policy which is received in exchange for a
modified endowment contract will also be considered a modified endowment
contract.
A Policy should be reviewed upon issuance, upon making a cash withdrawal,
upon making a change in future benefits and upon making a material modification
to the Policy to determine to what extent, if any, these tax rules apply. A
material modification to a Policy includes, but is not limited to, any increase
in the future benefits provided under the Policy. However, in general,
increases that are attributable to the payment
46
<PAGE>
of premiums necessary to fund the lowest death benefit and qualified additional
benefits payable in the first 7 Policy years will not be considered material
modifications. Furthermore, an increase in death benefits of not more than
$150,000 over the death benefit in effect on October 20, 1988 on a pre-June 21,
1988 Policy will also not be considered a material modification if under the
terms of the Policy such increase is not subject to additional evidence of
insurability. The annual statement sent to each Policy owner will include
information regarding the modified endowment contract status of a Policy (see
"Premiums--Premium Limitations," page 23).
Counsel and other competent advisors should be consulted to determine how
these rules apply to an individual situation and before making unscheduled
premium payments, increasing or decreasing the specified face amount, or adding
or removing a rider.
Congress may, in the future, consider other legislation that, if enacted,
could adversely affect the tax treatment of life insurance policies. In
addition, the Treasury Department may by regulation or interpretation modify
the above described tax effects. Any legislative or administrative action could
be applied retroactively.
The death benefit payable under the Policy is includable in the insured's
gross estate for federal estate tax purposes if the death benefit is paid to
the insured's estate or if the death benefit is paid to a beneficiary other
than the estate and the insured either possessed incidents of ownership in the
Policy at the time of death or transferred incidents of ownership in the Policy
to another person within three years of death.
Whether or not any federal estate tax is payable with respect to the death
benefit of the Policy which is included in the insured's gross estate depends
on a variety of factors including the following. A smaller size estate may be
exempt from federal estate tax because of an estate tax credit which generally
is equivalent to an exemption of $600,000. In addition, a death benefit paid to
a surviving spouse may not be taxable because of a 100% estate tax marital
deduction. Furthermore, a death benefit paid to a tax-exempt charity may not be
taxable because of the allowance of an estate tax charitable deduction.
If the owner of the Policy is not the insured, and the owner dies before the
insured, the value of the Policy, as determined under Internal Revenue Service
regulations, is includable in the federal gross estate of the owner for federal
estate tax purposes. Whether a federal estate tax is payable depends on a
variety of factors, including those listed in the preceding paragraph.
State and local income, estate, inheritance and other tax consequences of
ownership of receipt of Policy proceeds depend on the circumstances of each
insured, owner or beneficiary.
The foregoing summary does not purport to be complete or to cover all
situations. Counsel and other competent advisors should be consulted for more
complete information.
TAXATION OF METROPOLITAN TOWER
Metropolitan Tower does not initially expect to incur any federal income tax
upon the earnings or the realized capital gains attributable to the Separate
Account. Based upon these expectations, no charge is currently being made
against the Separate Account for federal income taxes which may be attributable
to the Separate Account. If, however, Metropolitan Tower determines that it may
incur such taxes, it may assess a charge against or make provisions in the
Separate Account for those taxes.
Under present laws, Metropolitan Tower may incur state and local taxes (in
addition to premium taxes) in several states. At present, these taxes are not
significant. If they increase, however, Metropolitan Tower may decide to assess
a charge against or make provisions for such taxes in the Separate Account.
47
<PAGE>
MANAGEMENT
The present directors and the senior officers of Metropolitan Tower are
listed below, together with certain information concerning them:
<TABLE>
<CAPTION>
DIRECTORS PRINCIPAL OCCUPATION*
--------- ---------------------
<S> <C>
Theodossios Athanassiades.... Senior Executive Vice-President, Metropolitan
Life.
Philip Briggs................ Vice-Chairman of the Board, Metropolitan
Life.
<CAPTION>
OFFICER-DIRECTORS
-----------------
<S> <C>
Stewart G. Nagler............ Chairman of the Board, Metropolitan Tower;
Senior Executive Vice-President, Metropolitan
Life.
Robert J. Crimmins........... President and Chief Executive Officer, Metro-
politan Tower; Executive Vice-President, Met-
ropolitan Life.
Charles M. Kavitsky.......... Vice-President, Metropolitan Tower and Metro-
politan Life.
Alan E. Lazarescu............ Vice-President and General Counsel, Metropol-
itan Tower; Vice-President and Insurance
Counsel, Metropolitan Life.
Stephen E. White............. Vice-President and Actuary, Metropolitan
Tower and Metropolitan Life.
<CAPTION>
OFFICERS
--------
<S> <C>
Elliot Reiter................ Vice-President and Controller, Metropolitan
Tower; Vice-President and Personal Insurance
Controller, Metropolitan Life.
Leland C. Launer............. Vice-President and Treasurer, Metropolitan
Tower; Vice-President, Metropolitan Life.
Thomas F. McDermott.......... Vice-President, Metropolitan Tower and Metro-
politan Life.
William D. Kerrigan.......... Vice-President, Metropolitan Tower and Metro-
politan Life.
Pamela J. Duffy.............. Actuary, Metropolitan Tower; Vice-President,
Metropolitan Life.
Ira H. Shuman................ Vice-President, Metropolitan Tower; Associate
General Counsel, Metropolitan Life.
Nicholas D. Latrenta......... Secretary, Metropolitan Tower; Vice-President
and Secretary, Metropolitan Life.
</TABLE>
- --------
* The principal occupation of each director and officer during the last five
years has been as an officer of Metropolitan Life. Each officer spends part
time on Metropolitan Tower matters. The business address of each director and
officer is 1 Madison Avenue, New York, New York 10010.
48
<PAGE>
VOTING RIGHTS
RIGHT TO INSTRUCT VOTING OF FUND SHARES
In accordance with its view of present applicable law, Metropolitan Tower
will vote the shares of each of the portfolios of the Fund which are deemed
attributable to Policies at regular and special meetings of the shareholders of
the Fund based on instructions received from persons 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 Metropolitan Tower
determines that it is permitted to vote such shares of the Fund in its own
right, it may elect to do so.
Accordingly, the Policy owner will have a voting interest under a Policy. The
number of shares held in each Separate Account investment division deemed
attributable to each owner is determined by dividing a Policy's cash value in
that division, if any, by the net asset value of one share in the corresponding
Fund portfolio in which the assets in that Separate Account investment division
are invested. Fractional votes will be counted. The number of shares concerning
which a Policy owner has the right to give instructions will be determined as
of the record date for the meeting.
Fund shares held in each registered separate account of Metropolitan Life or
any affiliate that are or are not attributable to life insurance policies
(including the Policies) or annuity contracts 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. Fund
shares held in the general accounts or unregistered separate accounts of
Metropolitan Life 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 Metropolitan Life or an affiliate determines that it is permitted to vote
any such shares of the Fund in its own right, it may elect to do so subject to
the then current interpretation of the 1940 Act or any rules thereunder.
The Policy owners may give instructions regarding, among other things, the
election of the Board of Directors of the Fund, ratification of the selection
of the Fund's independent auditors, and the approval of the Fund's investment
manager and sub-investment manager.
Each Policy owner having a voting interest will be sent voting instruction
soliciting material and a form for giving voting instructions to Metropolitan
Tower.
DISREGARD OF VOTING INSTRUCTIONS
Notwithstanding contrary Policy owner voting instructions, Metropolitan Tower
may vote Fund shares in any manner necessary to enable the Fund to (1) make or
refrain from making any change in the investments or investment policies for
any portfolio of the Fund, if required by any insurance regulatory authority;
(2) refrain from making any change in the investment policies or any investment
adviser or principal underwriter of any portfolio which may be initiated by
Policy owners or the Fund's Board of Directors, provided Metropolitan Tower's
disapproval of the change is reasonable and, in the case of a change in
investment policies or investment adviser, 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) enter into or refrain
from entering into any advisory agreement or underwriting contract, if required
by any insurance regulatory authority.
In the event that Metropolitan Tower does disregard voting instructions, a
summary of the action and the reasons for such action will be included in the
next semiannual report to Policy owners.
49
<PAGE>
REPORTS
Policy owners will receive promptly statements of significant transactions
such as change in specified face amount, change in death benefit option,
transfers among investment divisions, partial withdrawals, increases in loan
principal by the Policy owner, loan repayments, termination for any reason,
reinstatement and premium payments. An annual statement will also be sent to
the Policy owner within thirty days after a Policy year summarizing all of the
above transactions and deductions of charges occurring during that Policy year
and setting forth the status of the death benefit, cash and cash surrender
values, amounts in the investment divisions and Fixed Account, any policy loan
and unpaid loan interest added to loan principal. The annual statement will
also discuss the modified endowment contract status of a Policy (see
"Premiums--Premium Limitations," page 23). In addition, an owner will be sent
semiannual reports containing financial statements for the Fund, as required by
the 1940 Act.
STATE REGULATION
Metropolitan Tower is subject to regulation and supervision by the Insurance
Department of the State of Delaware, which periodically examines its affairs.
It is also subject to the insurance laws and regulations of all jurisdictions
where it is authorized to do business. A copy of the form of Policy has been
filed with, and where required approved by, insurance officials in each
jurisdiction where the Policies are sold.
Metropolitan Tower is required to submit annual statements of its operations,
including financial statements, to the insurance departments of the various
jurisdictions in which it does business, for the purposes of determining
solvency and compliance with local insurance laws and regulations. Such
statements are available for public inspection at state insurance department
offices.
REGISTRATION STATEMENT
A registration statement under the Securities Act of 1933 has been filed with
the Securities and Exchange Commission relating to the offering described in
this Prospectus. This Prospectus does not contain all the information set forth
in the registration statement and amendments thereto and the exhibits filed as
a part thereof, to all of which reference is hereby made for additional
information concerning the Separate Account, Metropolitan Tower and the
Policies. The additional information may be obtained at the Commission's main
office in Washington, D.C., upon payment of the prescribed fees.
LEGAL MATTERS
The legality of the Policies described in this Prospectus has been passed
upon by J. Austin Lyons, Jr., Vice-President and General Counsel of
Metropolitan Tower, since retired. Messrs. Freedman, Levy, Kroll & Simonds,
Washington, D.C., have acted as special counsel on certain matters relating to
the federal securities laws.
EXPERTS
The financial statements included in this Prospectus have been audited by
Deloitte & Touche, independent auditors, as stated in their reports appearing
herein, and have been so included in reliance upon such opinions given upon the
authority of such firm as experts in auditing and accounting.
Actuarial matters included in this Prospectus have been examined by Pamela J.
Duffy, FSA, MAAA, Actuary of Metropolitan Tower, as stated in her opinion filed
as an exhibit to the registration statement.
50
<PAGE>
FINANCIAL STATEMENTS
The financial statements of Metropolitan Tower included in this Prospectus
should be considered only as bearing upon the ability of Metropolitan Tower to
meet its obligations under the Policies.
INDEPENDENT AUDITORS' REPORT
Board of Directors
Metropolitan Tower Life Insurance Company:
We have audited the accompanying statement of assets and liabilities of the
Growth, Income, Money Market, Diversified and Equity Income Divisions of
Metropolitan Tower Separate Account Two as of December 31, 1991 and the related
statements of operations for the year then ended and of changes in net assets
for the years ended December 31, 1991 and 1990. These financial statements are
the responsibility of the Separate Account's management. Our responsibility is
to express an opinion of 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 misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at December 31, 1991 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 Growth, Income, Money Market, Diversified and
Equity Income Divisions of Metropolitan Tower Separate Account Two at December
31, 1991 and the results of their operations and the changes in their net
assets for the respective stated periods in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE
New York, New York
February 24, 1992
51
<PAGE>
METROPOLITAN TOWER SEPARATE ACCOUNT TWO
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1991
<TABLE>
<CAPTION>
MONEY EQUITY
GROWTH INCOME MARKET DIVERSIFIED INCOME
DIVISION DIVISION DIVISION DIVISION DIVISION
----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in Metropol-
itan Series Fund, Inc.
at Value (Note 1A):
Growth Portfolio
(760,432 shares; cost
$13,449,124)......... $16,391,561 -- -- -- --
Income Portfolio
(272,627 shares; cost
$3,090,010).......... -- $3,359,970 -- -- --
Money Market Portfolio
(139,277 shares; cost
$1,511,640).......... -- -- $1,475,401 -- --
Diversified Portfolio
(2,837,325 shares;
cost $32,831,676).... -- -- -- $38,607,482 --
Equity Income Portfo-
lio (104,840 shares; -- -- -- -- $1,077,605
cost $1,109,727)..... ----------- ---------- ---------- ----------- ----------
Total Investments.. 16,391,561 3,359,970 1,475,401 38,607,482 1,077,605
Cash and Accounts Re- 7,663 2,997 108 3,269 1,122
ceivable............... ----------- ---------- ---------- ----------- ----------
TOTAL ASSETS............ 16,399,224 3,362,967 1,475,509 38,610,751 1,078,727
LIABILITIES............. 16,456 2,523 288 42,469 1,393
----------- ---------- ---------- ----------- ----------
NET ASSETS.............. $16,382,768 $3,360,444 $1,475,221 $38,568,282 $1,077,334
=========== ========== ========== =========== ==========
</TABLE>
See Notes to Financial Statements.
52
<PAGE>
METROPOLITAN TOWER SEPARATE ACCOUNT TWO
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1991
<TABLE>
<CAPTION>
MONEY EQUITY
GROWTH INCOME MARKET DIVERSIFIED INCOME
DIVISION DIVISION DIVISION DIVISION DIVISION
---------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends (Note 2)........ $ 946,954 $197,369 $ 95,462 $1,906,097 $ 62,592
Expenses:
Mortality and expense 98,118 21,627 10,463 247,791 6,425
charges (Note 3)......... ---------- -------- -------- ---------- --------
Net investment income...... 848,836 175,742 84,999 1,658,306 56,167
---------- -------- -------- ---------- --------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss)
from
security transactions..... 117,381 6,323 2,432 44,027 (7,634)
Unrealized appreciation
(depreciation) of invest- 2,722,055 274,486 (15,618) 5,599,306 96,441
ments..................... ---------- -------- -------- ---------- --------
Net realized and unrealized
gain (loss) on investments 2,839,436 280,809 (13,186) 5,643,333 88,807
(Note 1B)................. ---------- -------- -------- ---------- --------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM $3,688,272 $456,551 $ 71,813 $7,301,639 $144,974
OPERATIONS................ ========== ======== ======== ========== ========
</TABLE>
See Notes to Financial Statements.
53
<PAGE>
METROPOLITAN TOWER SEPARATE ACCOUNT TWO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
------------------------------------------------
GROWTH DIVISION INCOME DIVISION
------------------------ ----------------------
1991 1990 1991 1990
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss)..................... $ 848,836 $ 224,508 $ 175,742 $ 198,292
Net realized gain (loss)
from security transactions. 117,381 42,607 6,323 4,392
Unrealized appreciation (de- 2,722,055 (1,115,834) 274,486 3,179
preciation) of investments. ----------- ----------- ---------- ----------
Net increase (decrease) in
net assets resulting from 3,688,272 (848,719) 456,551 205,863
operations................. ----------- ----------- ---------- ----------
From capital transactions:
Net premiums................ 5,564,010 7,340,783 971,837 1,295,769
Portfolio transfers......... (567,437) (351,772) (48,571) (90,933)
Other transfers............. (2,815,183) (3,034,815) (518,032) (619,085)
----------- ----------- ---------- ----------
Net increase in net assets
resulting from capital 2,181,390 3,954,196 405,234 585,751
transactions............... ----------- ----------- ---------- ----------
NET CHANGE IN NET ASSETS..... 5,869,662 3,105,477 861,785 791,614
Net Assets--beginning of 10,513,106 7,407,629 2,498,659 1,707,045
year....................... ----------- ----------- ---------- ----------
Net Assets--end of year..... $16,382,768 $10,513,106 $3,360,444 $2,498,659
=========== =========== ========== ==========
</TABLE>
See Notes to Financial Statements.
54
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
EQUITY INCOME
MONEY MARKET DIVISION DIVERSIFIED DIVISION DIVISION
- ------------------------ ------------------------ --------------------
1991 1990 1991 1990 1991 1990
- ----------- ----------- ----------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
$ 84,999 $ 60,397 $ 1,658,306 $ 1,442,073 $ 56,167 $ 56,956
2,432 14,789 44,027 10,316 (7,634) (35,626)
(15,618) 2,415 5,599,306 (1,605,702) 96,441 (99,596)
- ----------- ----------- ----------- ----------- ---------- --------
71,813 77,601 7,301,639 (153,313) 144,974 (78,266)
- ----------- ----------- ----------- ----------- ---------- --------
423,525 629,183 9,824,546 12,777,365 517,746 704,435
85,058 (209,086) (2,184,350) (1,991,235) (97,658) (341,410)
(251,074) (259,130) (5,478,719) (5,673,589) (232,373) (281,364)
- ----------- ----------- ----------- ----------- ---------- --------
257,509 160,967 2,161,477 5,112,541 187,715 81,661
- ----------- ----------- ----------- ----------- ---------- --------
329,322 238,568 9,463,116 4,959,228 332,689 3,395
1,145,899 907,331 29,105,166 24,145,938 744,645 741,250
- ----------- ----------- ----------- ----------- ---------- --------
$1,475,221 $1,145,899 $38,568,282 $29,105,166 $1,077,334 $744,645
=========== =========== =========== =========== ========== ========
</TABLE>
55
<PAGE>
METROPOLITAN TOWER SEPARATE ACCOUNT TWO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1991
Metropolitan Tower Separate Account Two (the "Separate Account") is a multi-
division unit investment trust registered under the Investment Company Act of
1940 and presently consists of five investment divisions. The assets in each
division are invested in shares of the corresponding portfolio of the
Metropolitan Series Fund, Inc. (the "Fund"). Each portfolio has varying
investment objectives relative to growth of capital and income.
The Separate Account was formed by Metropolitan Tower Life Insurance Company
("Metropolitan Tower Life"), a wholly-owned subsidiary of Metropolitan Life
Insurance Company ("Metropolitan Life"), on September 18, 1984 and registered
as a unit investment trust on December 21, 1984. The assets of the Separate
Account are the property of Metropolitan Tower Life.
A summary of significant accounting policies, all of which are in accordance
with generally accepted accounting principles, 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. A summary of investments of the five
designated portfolios of the Fund in which the five investment divisions
of the Separate Account invest as of December 31, 1991 is included as
Note 5. The methods used to value the Fund's investments at December 31,
1991 are described in Note 1A of the Fund's 1991 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
The operations of the Separate Account will be reported on the federal
income tax return of Metropolitan Tower Life, which is taxed as a life
insurance company under the provisions of the Internal Revenue Code.
Metropolitan Tower Life joins with Metropolitan Life and Metropolitan
Life's includable affiliates in filing a consolidated federal income tax
return.
Currently, no charge is being made against the Separate Account for
federal income taxes, or reserves for such taxes, that may be
attributable to the Separate Account. Although Metropolitan Tower Life
may decide to make such a charge in the future, it does not expect to do
so for a number of years, based on current law.
D. NET PREMIUMS
Metropolitan Tower Life deducts a sales load and a state premium tax
charge from premiums before amounts are allocated to the Separate
Account.
56
<PAGE>
2. DIVIDENDS
On April 24, 1991 and December 20, 1991 the Fund declared dividends for all
shareholders of record on April 25, 1991 and December 26, 1991, respectively.
Total dividends of $3,208,474 were received by Metropolitan Tower Life for the
Separate Account on April 26, 1991 and December 27, 1991, and were immediately
reinvested in additional shares of the portfolios in which the investment
divisions invest. As a result of these investments, the number of shares of the
fund held by each of the five investment divisions increased by the following:
Growth Portfolio 45,354 shares, Income Portfolio 16,149 shares, Money Market
Portfolio 9,016 shares, Diversified Portfolio 143,169 shares, and Equity Income
Portfolio 6,211 shares.
3. EXPENSES
Metropolitan Tower Life applies a daily charge against the Separate Account
for the mortality and expense risks assumed by Metropolitan Tower Life. This
charge is equivalent to an effective annual rate of .75% of the average daily
value of the assets in the Separate Account which are attributable to the
policies.
4. RELATED PARTY AGREEMENTS
Metropolitan Life acts as the distributor and principal underwriter, as
defined in the Investment Company Act of 1940, of the policies issued through
the Separate Account. Metropolitan Life has entered into a sales agreement with
Metropolitan Tower Life, whereby Registered Representatives of Metropolitan
Life, authorized as variable life insurance agents under applicable state
insurance laws, sell the policies. The Registered Representatives are
compensated on a commission basis.
Metropolitan Life has also entered into an agreement with Metropolitan Tower
Life under which Metropolitan Life performs the administrative services related
to the policies, including underwriting and issue, billing and collections, and
policyowner service.
57
<PAGE>
5. METROPOLITAN SERIES FUND, INC.
A SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1991
<TABLE>
<CAPTION>
GROWTH INCOME MONEY MARKET DIVERSIFIED EQUITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------------------- ----------- -------------
VALUE VALUE VALUE VALUE VALUE
(NOTE 1A) (NOTE 1A) (NOTE 1A) (NOTE 1A) (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
Airline ......... $ 3,885,150 (1.7%) $ 2,230,950 (1.0%) $ 350,675 (2.3%)
Automotive....... 7,356,250 (3.2%) 4,173,000 (1.8%) -- --
Banking.......... 7,306,000 (3.1%) 4,301,312 (1.9%) -- --
Business Servic-
es.............. 5,395,119 (2.3%) 3,328,194 (1.4%) 718,138 (4.7%)
Chemical......... -- -- -- -- 328,063 (2.1%)
Drug............. 36,960,738 (15.9%) 20,809,563 (9.0%) 793,688 (5.2%)
Electric Utili-
ties............ 8,945,588 (3.9%) 4,881,975 (2.1%) 1,783,361 (11.7%)
Electronic....... -- -- -- -- -- --
Financial Servic-
es.............. 4,978,350 (2.1%) 2,997,000 (1.3%) -- --
Food and Bever-
age............. 13,674,075 (5.9%) 7,468,037 (3.2%) 240,750 (1.6%)
Forest Products.. 4,525,950 (1.9%) 2,574,000 (1.1%) -- --
Hospital Supply.. 16,782,700 (7.2%) 9,840,987 (4.2%) 182,738 (1.2%)
Hotel and Restau-
rant............ 5,861,250 (2.5%) 3,288,750 (1.4%) -- --
Insurance........ 3,646,763 (1.6%) 2,117,250 (0.9%) 774,150 (5.1%)
Machinery........ -- -- -- -- 309,375 (2.0%)
Metal and Mining. 2,225,020 (1.0%) 1,188,200 (0.5%) -- --
Natural Gas...... 4,279,375 (1.8%) 2,318,625 (1.0%) -- --
Oil.............. 13,091,070 (5.6%) 7,218,735 (3.1%) 1,028,487 (6.7%)
Oil Services..... 4,175,025 (1.8%) 2,284,862 (1.0%) 513,950 (3.4%)
Personal Care.... 9,894,400 (4.2%) 5,496,463 (2.4%) -- --
Printing and Pub-
lishing......... 7,555,125 (3.3%) 4,285,000 (1.8%) 83,250 (0.5%)
Recreation....... 16,613,874 (7.2%) 9,395,856 (4.0%) 366,400 (2.4%)
Retail Trade..... 18,490,982 (8.0%) 10,855,725 (4.7%) 732,750 (4.8%)
Telephone........ 12,005,749 (5.2%) 7,021,313 (3.0%) -- --
Textiles & Appar-
el.............. 2,028,000 (0.9%) 1,157,650 (0.5%) -- --
Tobacco.......... 11,064,350 (4.8%) 6,415,063 (2.8%) -- --
----------- ------- ----------- ------- --------- ---------
Total Common
Stocks.......... 220,740,903 (95.1%) 125,648,510 (54.1%) 8,205,775 (53.7%)
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
GROWTH INCOME MONEY MARKET DIVERSIFIED EQUITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------------- -------------------- --------------------- ---------------------- --------------------
VALUE VALUE VALUE VALUE VALUE
(NOTE 1A) (NOTE 1A) (NOTE 1A) (NOTE 1A) (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONVERTIBLE PREFERRED
STOCKS
Automotive...... $ 457,275 (3.0%)
Banking......... 716,444 (4.7%)
Machinery....... 261,800 (1.7%)
Metal and Min-
ing............ 368,650 (2.4%)
Oil............. 363,225 (2.4%)
Oil Services.... 145,750 (0.9%)
Printing & Pub- 426,525 (2.8%)
lishing........ ----------- --------
Total Convert-
ible Preferred
Stocks......... 2,739,669 (17.9%)
LONG-TERM DEBT SECURITIES
Corporate Bonds
Bank............ $ 2,012,500 (2.3%) -- -- --
Electric Utili-
ty............. 523,250 (0.6%) -- -- --
Financial Serv-
ices............ 4,246,277 (4.9%) 10,000,300 (4.3%) -- --
Government
Backed......... 2,772,441 (3.2%) 4,168,569 (1.8%) -- --
Industrials..... 5,972,694 (6.8%) 5,042,505 (2.1%) -- --
Mortgage-Backed. 651,032 (0.7%) 868,042 (0.4%) -- --
Retail Trade.... -- -- -- -- 383,688 (2.5%)
Telephone....... 3,157,316 (3.6%) 2,242,211 (1.0%) -- --
----------- -------- ------------ -------- ----------- --------
Total Corporate
Bonds.......... 19,335,510 (22.1%) 22,321,627 (9.6%) 383,688 (2.5%)
Foreign Obliga-
tions.......... 13,193,184 (15.1%) 4,014,273 (1.7%) -- --
Federal Agency
Obligations.... 21,384,440 (24.5%) 30,169,956 (13.0%) -- --
Federal Treasury
Obligations.... 19,898,499 (22.8%) 28,638,252 (12.3%) -- --
Federal Treasury
Obligations 3,846,972 (4.4%) 13,269,510 (5.7%) -- --
Zero Coupon.... ----------- -------- ------------ -------- ----------- --------
Total Long-Term
Debt
Securities..... 77,658,605 (88.9%) 98,413,618 (42.3%) 383,688 (2.5%)
CONVERTIBLE BONDS
Banking......... 424,000 (2.8%)
Business Servic-
es............. 352,000 (2.3%)
Oil............. 372,000 (2.4%)
Oil Services.... 386,250 (2.5%)
Recreation...... 1,106,000 (7.2%)
Retail Trade.... 759,500 (5.0%)
----------- --------
Total Convert-
ible Bonds..... 3,399,750 (22.2%)
VARIABLE RATE EX-
CHANGE DEBT
Oil............. 410,000 (2.7%)
----------- --------
Total Variable 410,000 (2.7%)
Rate Exchange
Debt...........
SHORT-TERM OBLIGATIONS
Bankers' Accept-
ances.......... -- -- -- -- $ 9,450,420 (13.3%) -- -- -- --
Commercial Pa-
per............ 11,728,142 (5.0%) 8,174,000 (9.3%) 37,843,657 (53.4%) 8,279,713 (3.6%) -- --
Federal Agency
Obligations.... -- -- -- -- 14,500,180 (20.4%) -- -- -- --
Federal Treasury -- -- -- -- 9,629,357 (13.6%) -- -- -- --
Obligations.... ------------ -------- ----------- -------- ----------- -------- ------------ -------- ----------- --------
Total Short-Term 11,728,142 (5.0%) 8,174,000 (9.3%) 71,423,614 (100.7%) 8,279,713 (3.6%) -- --
Obligations.... ------------ -------- ----------- -------- ----------- -------- ------------ -------- ----------- --------
TOTAL INVEST-
MENTS........... 232,469,045 (100.1%) 85,832,605 (98.2%) 71,423,614 (100.7%) 232,341,841 (100.0%) 15,138,882 (99.0%)
Other Assets
Less Liabili- (309,434) (0.1%) 1,579,519 (1.8%) (477,270) (0.7%) (66,025) (0.0%) 153,572 (1.0%)
ties........... ------------ -------- ----------- -------- ----------- -------- ------------ -------- ----------- --------
NET ASSETS....... $232,159,611 (100.0%) $87,412,124 (100.0%) $70,946,344 (100.0%) $232,275,816 (100.0%) $15,292,454 (100.0%)
============ ======== =========== ======== =========== ======== ============ ======== =========== ========
<CAPTION>
<S> <C>
CONVERTIBLE PREFERRED
STOCKS
Automotive......
Banking.........
Machinery.......
Metal and Min-
ing............
Oil.............
Oil Services....
Printing & Pub-
lishing........
Total Convert-
ible Preferred
Stocks.........
LONG-TERM DEBT SECURITIES
Corporate Bonds
Bank............
Electric Utili-
ty.............
Financial Serv-
ices............
Government
Backed.........
Industrials.....
Mortgage-Backed.
Retail Trade....
Telephone.......
Total Corporate
Bonds..........
Foreign Obliga-
tions..........
Federal Agency
Obligations....
Federal Treasury
Obligations....
Federal Treasury
Obligations
Zero Coupon....
Total Long-Term
Debt
Securities.....
CONVERTIBLE BONDS
Banking.........
Business Servic-
es.............
Oil.............
Oil Services....
Recreation......
Retail Trade....
Total Convert-
ible Bonds.....
VARIABLE RATE EX-
CHANGE DEBT
Oil.............
Total Variable
Rate Exchange
Debt...........
SHORT-TERM OBLIGATIONS
Bankers' Accept-
ances..........
Commercial Pa-
per............
Federal Agency
Obligations....
Federal Treasury
Obligations....
Total Short-Term
Obligations....
TOTAL INVEST-
MENTS...........
Other Assets
Less Liabili-
ties...........
NET ASSETS.......
</TABLE>
59
<PAGE>
INDEPENDENT AUDITORS' REPORT
Metropolitan Tower Life Insurance Company:
We have audited the accompanying balance sheets of Metropolitan Tower Life
Insurance Company as of December 31, 1991 and 1990 and the related statements
of operations and surplus and of cash flow for the years then ended. These
financial statements are the responsibility of the Company'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 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 financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1991 and 1990
and the results of its operations and its cash flow for the years then ended in
conformity with accounting practices prescribed or permitted by insurance
regulatory authorities and generally accepted accounting principles.
Deloitte & Touche
New York, New York
February 7, 1992
60
<PAGE>
METROPOLITAN TOWER LIFE INSURANCE COMPANY
BALANCE SHEETS
DECEMBER 31, 1991 AND 1990
<TABLE>
<CAPTION>
NOTES 1991 1990
----- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Bonds................................................ 5 $ 6,872 $ 6,963
Mortgage loans....................................... 6 11
Policy loans......................................... 4,233 2,320
Cash and short-term investments...................... 5 43,518 37,935
Due from affiliates--Federal income tax recoverable.. 2 0 1,628
Premiums deferred and uncollected.................... 357 397
Investment income due and accrued.................... 343 284
Separate account assets.............................. 65,480 47,802
Other assets......................................... 54 17
-------- --------
TOTAL............................................. $120,863 $ 97,357
======== ========
LIABILITIES AND SURPLUS
Liabilities:
Reserves for life insurance......................... $ 28,364 $ 24,959
Policy and contract claims.......................... 445 773
Other policy liabilities............................ 5 6
Federal income tax.................................. 2 2,257 0
Mandatory securities valuation reserve.............. 297 439
Payable to affiliates............................... 6 83 2,711
Separate account liabilities........................ 65,480 47,802
Other liabilities................................... 1,017 1,138
-------- --------
Total liabilities................................ 97,948 77,828
-------- --------
Surplus:
Capital stock (1,000 shares authorized issued and
outstanding, par
value $2,000 per share)............................ 2,000 2,000
Paid-in surplus..................................... 52,500 52,500
Accumulated deficit................................. (31,585) (34,971)
-------- --------
Total surplus.................................... 22,915 19,529
-------- --------
TOTAL............................................ $120,863 $ 97,357
======== ========
</TABLE>
See accompanying notes to financial statements.
61
<PAGE>
METROPOLITAN TOWER LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1991 AND 1990
<TABLE>
<CAPTION>
NOTES 1991 1990
----- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
INCOME:
Premiums.............................................. $26,236 $34,861
Net investment income................................. 3,681 3,479
Other income.......................................... 6 2,904 344
------- -------
Total income.......................................... 32,821 38,684
------- -------
BENEFITS AND EXPENSES:
Benefit payments...................................... 11,853 7,415
Additions to reserve liabilities...................... 3,402 5,187
Insurance expenses and taxes.......................... 7,310 21,567
Net transfers to Separate Accounts.................... 4,749 9,605
------- -------
Total benefits and expenses........................... 27,314 43,774
------- -------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME TAXES....... 5,507 (5,090)
FEDERAL INCOME TAXES (EXCLUDING TAX ON CAPITAL GAINS).. 2 (2,279) 1,629
------- -------
NET INCOME............................................. 3,228 (3,461)
SURPLUS ADDITIONS (DEDUCTIONS):
Change in mandatory securities valuation reserves..... 142 (76)
Change in non-admitted assets......................... 16 148
------- -------
NET CHANGE IN SURPLUS.................................. 3,386 (3,389)
SURPLUS AT BEGINNING OF YEAR........................... 19,529 22,918
------- -------
SURPLUS AT END OF YEAR................................. $22,915 $19,529
======= =======
</TABLE>
See accompanying notes to financial statements.
62
<PAGE>
METROPOLITAN TOWER LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 1991 AND 1990
<TABLE>
<CAPTION>
1991 1990
------- -------
(IN THOUSANDS)
<S> <C> <C>
CASH PROVIDED:
Premiums received........................................... $26,280 $34,906
Net investment income received.............................. 3,642 3,499
Other income received....................................... 2,903 344
------- -------
Total Receipts.............................................. 32,825 38,749
------- -------
Benefits paid............................................... 12,180 7,151
Insurance expenses and taxes paid........................... 7,616 21,475
Net transfers to Separate Accounts.......................... 4,807 9,477
Federal income taxes paid................................... (1,606) (2,040)
Other--(net)................................................ 1,913 1,119
------- -------
Total Payments.............................................. 24,910 37,182
------- -------
Net Cash from Operations.................................... 7,915 1,567
Proceeds from long-term investments sold, matured or repaid,
after deducting tax on capital gains of $0 for 1991 and
1990....................................................... 65 1,105
Other cash provided......................................... 923 477
------- -------
Total Cash Provided......................................... 8,903 3,149
------- -------
CASH APPLIED:
Cost of long-term investments acquired...................... 0 1,207
Other cash applied.......................................... 3,320 126
------- -------
Total Cash Applied.......................................... 3,320 1,333
------- -------
NET CHANGE IN CASH AND SHORT-TERM INVESTMENTS................ 5,583 1,816
CASH AND SHORT-TERM INVESTMENTS:
BEGINNING OF YEAR............................................ 37,935 36,119
------- -------
END OF YEAR.................................................. $43,518 $37,935
======= =======
</TABLE>
See accompanying notes to financial statements.
63
<PAGE>
METROPOLITAN TOWER LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1991 AND 1990
1. ACCOUNTING POLICIES
The Metropolitan Tower Life Insurance Company (the "Company") is a wholly-
owned subsidiary of Metropolitan Life Insurance Company ("Metropolitan Life").
The Company is domiciled in Delaware and is chartered to sell life insurance
and annuities.
The accompanying financial statements are prepared on the basis of accounting
practices prescribed or permitted by insurance regulatory authorities, which
practices are also considered to be generally accepted accounting principles
for a wholly-owned life insurance subsidiary of a mutual life insurance
company. The primary interest of insurance authorities is the ability of the
Company to fulfill its obligations to policyholders; therefore, the financial
statements are oriented to the insuring public. Significant accounting policies
applied in preparing the financial statements follow.
Invested Assets and Related Valuation Reserves--Investments are stated in
accordance with the valuation procedures of the National Association of
Insurance Commissioners ("NAIC"). Bonds and short term investments are stated
at their amortized cost, and policy loans at their unpaid principal balances.
Short term investments generally mature within a year.
In connection with general account investments, a mandatory securities
valuation reserve prescribed by the NAIC for bonds and stocks is included among
the liabilities. Changes in the reserve are reflected directly in surplus.
Policy Reserves--Policy reserves are computed on the net level premium
method, the commissioner's reserve valuation method or the Illinois standard
valuation method, as appropriate, and are based on mortality, morbidity and
interest rates permitted by the insurance laws of Delaware and all other states
in which the Company is licensed. Such reserves are sufficient to provide for
contractual surrender values.
Separate Account Operations--Separate account assets consist solely of
investments in shares of the Metropolitan Series Fund, Inc., which are valued
at the reported net asset values of the portfolio. Investments held in the
separate account (stated at market value) and liabilities of the separate
account (including participants' corresponding equity in the separate account)
are reported separately as assets and liabilities in the accompanying Balance
Sheets. The separate accounts' operating results are reflected in the changes
to these assets and liabilities in the accompanying Balance Sheets.
Revenues and Expenses--Premium revenues are reported over the premium paying
period. Investment income is reported as earned. Expenses, including
acquisition costs and federal income taxes, are charged to operations as
incurred.
Reclassification--Certain 1990 amounts have been reclassified to conform to
the 1991 presentation.
2. FEDERAL INCOME TAXES
The Company joins with Metropolitan Life and its includable affiliates in
filing a consolidated Federal income tax return. The consolidating companies
have executed a tax allocation agreement. Under this agreement the Federal
income tax provision is computed on a separate return basis and provides that
64
<PAGE>
members shall receive reimbursement to the extent their losses and other
credits result in a reduction of the consolidated tax liability.
Federal income tax expense has been calculated in accordance with the
provisions of the Internal Revenue Code, as amended (the "Code"). Under the
Code, the Company's taxable income includes the deferral of certain acquisition
costs that are expensed in the accompanying Statement of Operations and
Surplus.
3. DIVIDEND RESTRICTION
Under Delaware Insurance Law, the maximum amount of distributions which can
be made to the Company's parent in any given year without prior approval by the
Insurance Commissioner is equal to the greater of 10% of the Company's surplus
as of the last calendar year, or the net gain from operations as of the last
calendar year. The Company did not pay any dividends in 1991 or 1990.
4. CONTINGENCIES
It is the opinion of management that any litigation, claims or assessments
against the Company that have arisen in course of the Company's business, in
addition to those that might otherwise be provided for in the financial
statements, is not likely to have a material adverse effect on the Company's
financial position or the results of its operations.
5. INVESTMENTS
Bonds--The carrying value, gross unrealized gain (loss) and estimated market
value of investments in bonds, by category, as of December 31, 1991 are shown
below. For certain securities, market values were obtained from an independent
pricing service. Such securities represented approximately 99% of the carrying
value and market value of the total bonds as of December 31, 1991. For all
other securities, the market values were determined by management, based on
interest rates, maturity, credit quality and average life.
<TABLE>
<CAPTION>
GROSS ESTIMATED
CARRYING UNREALIZED MARKET
VALUE GAIN (LOSS) VALUE
-------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury Notes......................... $6,814 $307 -- $7,121
Obligations of states and political subdivi-
sions...................................... 58 -- (38) 20
------ ----- ----- ------
Total..................................... $6,872 $307 ($38) $7,141
====== ===== ===== ======
</TABLE>
The carrying values and market values of bonds, by contractual maturity, at
December 31, 1991 are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
ESTIMATED
CARRYING MARKET
VALUE VALUE
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less................................... $3,996 $4,090
Due after one year through five years..................... 1,348 1,400
Due after five years through ten years.................... 1,470 1,631
Due after ten years....................................... 58 20
------ ------
Total................................................... $6,872 $7,141
====== ======
</TABLE>
65
<PAGE>
As of December 31, 1991, the Company had $2,818,190 of its bonds on deposit
with several state regulatory agencies.
Concentrations of Credit Risk--As of December 31, 1991, the Company had
$43,806,221 or 80% of its total invested assets invested in a Metropolitan
Money Market Pool (the "pool"). The pool is a New York general partnership
consisting of the Company and other wholly-owned subsidiaries of Metropolitan
Life. The pool was formed as a private pass-through investment vehicle to
enable the partners to invest, on a pooled basis, in U.S. Treasury securities
and high quality corporate money market instruments. Although for economic and
administrative convenience, the pooled securities are held in the name of the
pool, each member's investments represent that company's pro rata undivided
ownership interest in each of the pooled securities.
6. RELATED PARTIES
The following represents the Company's significant intercompany transactions
in 1991 and 1990.
Service Agreement--Metropolitan Life employees provide management,
administrative, investment and policyholder service functions for the
Company because the Company has no employees. Metropolitan Life establishes
guidelines for reasonable determination of costs of services provided,
based on time spent or use of services, and charges its subsidiaries for
services rendered. The charges to the Company for such services were
approximately $6.7 million and $20.8 million during 1991 and 1990,
respectively.
Term Conversions--During 1990, the Company received $266,000 in assets
from Metropolitan Life and $79,000 from Metropolitan Insurance and Annuity
Company ("MIAC"), an affiliated company. These amounts are held as
additional reserves for Metropolitan Life and MIAC term conversions to
Flexible Premium Multifunded Life policies issued by the Company. There
were no term conversions in 1991.
66
<PAGE>
APPENDIX A
OPTIONAL INCOME PLANS
The insurance proceeds when the insured dies, the proceeds payable on the
Final Date, or the cash surrender value payable on full surrender of a Policy,
instead of being paid in one lump sum, may be applied under one or more of the
following income plans. Values under the income plans do not depend upon the
investment experience of a separate account.
OPTION 1. Interest Income
The amount applied will earn interest which will be paid monthly. Withdrawals
of at least $500 each may be made at any time by written request.
OPTION 2. Installment Income for a Stated Period
Monthly installment payments will be made so that the amount applied, with
interest, will be paid over the period chosen (from 1 to 30 years).
OPTION 2A. Installment Income of a Stated Amount
Monthly installment payments of a chosen amount will be made until the entire
amount applied, with interest, is paid.
OPTION 3. Single Life Income--Guaranteed Payment Period
Monthly payments will be made during the lifetime of the payee with a chosen
guaranteed payment period of 10, 15 or 20 years.
OPTION 3A. Single Life Income--Guaranteed Return
Monthly payments will be made during the lifetime of the payee. If the payee
dies before the total amount applied under this plan has been paid, the
remainder will be paid in one sum as a death benefit.
OPTION 4. Joint and Survivor Life Income
Monthly payments will be made jointly to two persons during their lifetime
and will continue during the remaining lifetime of the survivor. A total
payment period of 10 years is guaranteed.
Other Frequencies and Plans. Instead of monthly payments, the owner may elect
to have payments made quarterly, semiannually or annually. Other income plans
may be arranged with Metropolitan Tower's approval, including a plan involving
an affiliated company of Metropolitan Tower.
Choice of Income Plans. See "Policy Benefits--Optional Income Plans," page 21
and "Policy Rights--Surrenders," page 39, regarding how optional income plans
may be chosen. When an income plan starts, a separate contract will be issued
describing the terms of the plan. Specimen contracts may be obtained from
Metropolitan Life sales representatives, and reference should be made to these
forms for further details.
Limitations. If the payee is not a natural person, the choice of an income
plan will be subject to Metropolitan Tower's approval. A collateral assignment
will modify a prior choice of income plan. The amount
67
<PAGE>
due the assignee will be payable in one sum and the balance will be applied
under the income plan. A choice of an income plan will not become effective
unless each payment under the plan would be at least $50. Income plan payments
may not be assigned and, to the extent permitted by law, will not be subject to
the claims of creditors.
Income Plan Rates. Amounts applied under the interest income and installment
income plans will earn interest at a rate set from time to time by Metropolitan
Tower but never less than 3% per year. Life income payments will be based on a
rate set by Metropolitan Tower and in effect on the date the amount to be
applied becomes payable, but never less than the minimum payments guaranteed in
the Policy. Such minimum guaranteed payments are based on certain assumed
mortality rates and an interest rate of 3%.
OPTIONAL INSURANCE BENEFITS
Optional insurance benefit riders may be attached to a Policy, subject to
certain insurance underwriting requirements and the payment of additional
premiums. These riders are described in general terms below. Limitations and
conditions are contained in the riders, and the description below is subject to
the specific terms of the riders. A prospective purchaser may obtain a specimen
Policy with riders from a Metropolitan Life sales representative. The duration,
but not the amount, of rider benefits may depend on the investment experience
of a separate account.
Disability Waiver Benefit. This rider waives the entire monthly deduction
during the total disability of the insured if the insured is totally and
continuously disabled for at least six months beginning prior to age 60. If the
total disability continues without interruption to the Policy anniversary at
age 65, it will be deemed permanent and all further monthly deductions will be
waived as they fall due. If there has been an increase in the death benefit
resulting from a request by the Policy owner and the Policy owner at the time
of the increase did not request or did not qualify for this rider with respect
to such increase, monthly deductions for charges related to such increase will
continue to be made against the cash value of the Policy. This could result in
the cash value being insufficient to cover the monthly deductions related to
the increase. In such a case, the grace period and termination provisions of
the Policy would apply only to such increase in death benefit. Since the
monthly deduction with respect to the increase in the death benefit could
reduce the cash value of the Policy to zero, it may be advantageous for the
Policy owner, at the time of the total disability, to reduce the death benefit
to that amount which is subject to this rider.
Accidental Death Benefit. This rider provides additional insurance equal to
an amount stated in the Policy if the insured dies from an accident prior to
age 70. It also provides an additional amount equal to twice the stated amount
if the insured dies from an accident occurring while the insured is a fare-
paying passenger on a common carrier. This rider is available at issue only.
Children's Term Insurance Benefit. This rider provides term insurance on each
insured child payable to the child's beneficiary if an insured child dies
before the end of coverage on that child (generally at the child's twenty-fifth
birthday).
Spouse Term Insurance Benefit. This rider provides term insurance on the life
of the spouse payable to the spouse's beneficiary if the spouse dies prior to
age 65 while the rider is in effect.
Accelerated Death Benefit. This rider provides for a one-time discounted
payment of all or a portion of the death benefit to the Policy owner once the
insured has been determined to be terminally ill with twelve months or less to
live. The size of the benefit payment and the maximum benefit are stated in the
rider. There are no premiums or rider fees for this rider.
68
<PAGE>
Upon payment of a portion of the death benefit, the death benefit under the
Policy is reduced to reflect the amount of the payment. In addition, the
specified face amount, the cash value and the cash surrender value are reduced
by the same proportion as the amount of the reduction of the death benefit
divided by the death benefit prior to the payment. Any outstanding loan is
reduced and paid out of the proceeds of the portion only if such reduction is
necessary to keep the Policy in force. Moreover, in the case of payment of all
of the death benefit, the amount of any outstanding Policy loan will be
deducted from the payment.
The payment under this rider may be taxable or may affect eligibility for
benefits under state or federal law. Counsel and other competent advisors
should be consulted to determine the effect on an individual situation.
69
<PAGE>
APPENDIX B
ADDITIONAL ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES AND ACCUMULATED
PREMIUMS
The tables on pages 71 to 78 illustrate the way in which a Policy's death
benefit and cash value could vary over an extended period of time assuming that
all premiums are allocated to and remain in the Separate Account for the entire
period shown and hypothetical gross investment rates of return for the Fund
(i.e., investment income and capital gains and losses, realized or unrealized)
equivalent to constant gross (after tax) annual rates of 0%, 6% and 12%. The
tables are based on annual planned premiums (see "Premiums--Premium
Limitations," page 23) for a specified face amount of $100,000 for males aged
25 and 40. Each illustration assumes that the insured is in the standard
nonsmoker underwriting risk classification. Illustrations for an insured in
Metropolitan Tower's standard smoker underwriting risk classification would
show, for the same age and premium payments, lower cash values and, therefore,
for the minimum death benefit and death benefit Option B, lower death benefits.
The death benefits and cash values would be different from those shown if the
actual gross investment rates of return averaged 0%, 6% and 12% over a period
of years, but fluctuated above or below such averages for individual policy
years. The values would also be different depending on the allocation of a
Policy's total cash value among the investment divisions of the Separate
Account, if the actual rates of return averaged 0%, 6% and 12% but the rates
for each portfolio of the Fund varied above and below such averages.
Columns on pages 71, 72, 75 and 76 are based on the guaranteed cost of term
insurance rates; columns on pages 73, 74, 77 and 78 are based on the current
cost of term insurance rates as presently in effect (i.e., the rates in effect
as of May 1, 1992) (see "Monthly Deduction From Cash Value--Cost of Term
Insurance Rate," page 27).
The amounts shown for the death benefits and cash values take into account
the deductions from premiums and the monthly deduction from cash value, as well
as the daily charge against the Separate Account for mortality and expense
risks equivalent to an effective annual rate of .75% of the average daily value
of the assets in the Separate Account attributable to the Policies and the
daily charge to the Fund for investment management services equivalent to an
annual rate of .25% of the average daily value of the aggregate net assets of
the Series Fund. (See "Charges and Deductions," page 25.)
Taking account of the charges for mortality and expense risks and investment
management services, the gross annual investment rates of return of 0%, 6% and
12% correspond to actual (or net) annual rates of: -1.00%, 4.95% and 10.89%,
respectively.
The hypothetical returns shown in the tables do not reflect any charges for
income taxes against the Separate Account since no such charges are currently
made. However, if in the future such charges are made, in order to produce the
death benefits and cash values illustrated, the gross annual investment rate of
return would have to exceed 0%, 6% or 12% by a sufficient amount to cover the
tax charges. (See "Federal Tax Matters--Taxation of Metropolitan Tower," page
47).
The second column of the tables shows the amount which would accumulate if an
amount equal to the annual target premium were invested to earn interest, after
taxes, at 5% compounded annually. The 5% accumulated rate is higher than the 4%
rate used in the illustrations on pages 30 to 37 to reflect the higher
hypothetical rates of return used in the tables on pages 71 to 78.
Upon request, Metropolitan Tower will furnish an illustration reflecting the
proposed insured's age, sex, the face amount or premium amount requested,
frequency of planned periodic premium payments, death benefit option selected
and any available rider requested.
70
<PAGE>
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 25
STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH
BENEFIT OPTION A GUARANTEED COST OF TERM INSURANCE CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RATES OF RETURN OF RATES OF RETURN OF
POLICY AT 5% INTEREST ----------------------- --------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------ ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ....... $ 931 $ 190 $ 214 $ 238 $100,000 $100,000 $100,000
2 ....... 1,909 762 839 920 100,000 100,000 100,000
3 ....... 2,936 1,329 1,497 1,677 100,000 100,000 100,000
4 ....... 4,014 1,893 2,189 2,519 100,000 100,000 100,000
5 ....... 5,146 2,450 2,915 3,453 100,000 100,000 100,000
6 ....... 6,335 3,000 3,676 4,487 100,000 100,000 100,000
7 ....... 7,583 3,541 4,470 5,631 100,000 100,000 100,000
8 ....... 8,894 4,070 5,299 6,895 100,000 100,000 100,000
9 ....... 10,270 4,587 6,162 8,291 100,000 100,000 100,000
10 ....... 11,714 5,091 7,060 9,832 100,000 100,000 100,000
15 ....... 20,097 7,338 12,071 20,291 100,000 100,000 100,000
20 ....... 30,796 8,954 17,950 37,483 100,000 100,000 100,000
25 ....... 44,451 9,708 24,763 66,035 100,000 100,000 126,126(3)
40 ....... 112,507 206 50,588 313,761 100,000 100,000 382,789(3)
</TABLE>
- --------
(1) Assumes annual planned premium payments of $887 paid in full at beginning
of each Policy year. The values would vary from those shown if the amount
or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive loans
or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Minimum death benefits applies; see "Death Benefit Options--Minimum Death
Benefit," on page 12 for further details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE
BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH
BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS
OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED
ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN TOWER OR THE FUND THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
71
<PAGE>
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 25
STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH
BENEFIT OPTION B GUARANTEED COST OF TERM INSURANCE CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RATES OF RETURN OF RATES OF RETURN OF
POLICY AT 5% INTEREST -------------------------- -----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------ ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 .... $ 931 $ 170 $ 193 $ 216 $100,170 $100,193 $100,216
2 .... 1,909 740 815 893 100,740 100,815 100,893
3 .... 2,936 1,305 1,469 1,644 101,305 101,469 101,644
4 .... 4,014 1,866 2,156 2,478 101,866 102,156 102,478
5 .... 5,146 2,419 2,875 3,402 102,419 102,875 103,402
6 .... 6,335 2,964 3,627 4,422 102,964 103,627 104,422
7 .... 7,583 3,498 4,411 5,549 103,498 104,411 105,549
8 .... 8,894 4,020 5,226 6,791 104,020 105,226 106,791
9 .... 10,270 4,529 6,074 8,159 104,529 106,074 108,159
10 .... 11,714 5,022 6,953 9,665 105,022 106,953 109,665
15 .... 20,097 7,190 11,794 19,769 107,190 111,794 119,769
20 .... 30,796 8,656 17,275 35,926 108,656 117,275 135,926
25 .... 44,451 9,157 23,223 61,835 109,157 123,223 161,835
40 .... 112,507 0(3) 36,347 277,430 0(3) 136,347 377,430
</TABLE>
- --------
(1) Assumes annual planned premium payments of $887 paid in full at beginning
of each Policy year. The values would vary from those shown if the amount
or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive loans
or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Zero values in cash value and death benefit indicate termination of
insurance coverage in the absence of a sufficient additional premium
payment; see "Policy Termination and Reinstatement--Termination," on page
24 for further details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE
BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH
BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS
OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED
ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN TOWER OR THE FUND THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
72
<PAGE>
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 25
STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH
BENEFIT OPTION A CURRENT COST OF TERM INSURANCE CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RATES OF RETURN OF RATES OF RETURN OF
POLICY AT 5% INTEREST ------------------------ --------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ...... $ 931 $ 203 $ 228 $ 254 $100,000 $100,000 $100,000
2 ...... 1,909 829 910 995 100,000 100,000 100,000
3 ...... 2,936 1,448 1,626 1,816 100,000 100,000 100,000
4 ...... 4,014 2,063 2,379 2,729 100,000 100,000 100,000
5 ...... 5,146 2,670 3,166 3,739 100,000 100,000 100,000
6 ...... 6,335 3,269 3,992 4,859 100,000 100,000 100,000
7 ...... 7,583 3,859 4,856 6,098 100,000 100,000 100,000
8 ...... 8,894 4,439 5,759 7,469 100,000 100,000 100,000
9 ...... 10,270 5,008 6,702 8,985 100,000 100,000 100,000
10 ...... 11,714 5,566 7,686 10,662 100,000 100,000 100,000
15 ...... 20,097 8,136 13,256 22,109 100,000 100,000 100,000
20 ...... 30,796 10,273 20,060 41,133 100,000 100,000 100,000
25 ...... 44,451 11,908 28,419 72,859 100,000 100,000 139,160(3)
40 ...... 112,507 11,353 67,502 355,983 100,000 100,000 434,300(3)
</TABLE>
- --------
(1) Assumes annual planned premium payments of $887 paid in full at beginning
of each Policy year. The values would vary from those shown if the amount
or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive loans
or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Minimum death benefit applies; see "Death Benefit Options--Minimum Death
Benefit," on page 12 for further details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE
BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH
BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS
OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED
ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN TOWER OR THE FUND THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
73
<PAGE>
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 25
STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH
BENEFIT OPTION B CURRENT COST OF TERM INSURANCE CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RATES OF RETURN OF RATES OF RETURN OF
POLICY AT 5% INTEREST ------------------------- --------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------- ------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ........ $ 931 $ 189 $ 213 $ 238 $100,189 $100,213 $100,238
2 ........ 1,909 814 893 976 100,814 100,893 100,976
3 ........ 2,936 1,432 1,606 1,793 101,432 101,606 101,793
4 ........ 4,014 2,044 2,355 2,700 102,044 102,355 102,700
5 ........ 5,146 2,647 3,137 3,702 102,647 103,137 103,702
6 ........ 6,335 3,243 3,957 4,812 103,243 103,957 104,812
7 ........ 7,583 3,828 4,813 6,038 103,828 104,813 106,038
8 ........ 8,894 4,403 5,706 7,393 104,403 105,706 107,393
9 ........ 10,270 4,965 6,637 8,889 104,965 106,637 108,889
10 ........ 11,714 5,515 7,607 10,539 105,515 107,607 110,539
15 ........ 20,097 8,024 13,048 21,720 108,024 113,048 121,720
20 ........ 30,796 10,048 19,556 39,980 110,048 119,556 139,980
25 ........ 44,451 11,496 27,297 69,976 111,496 127,297 169,976
40 ........ 112,507 9,617 57,789 334,979 109,617 157,789 434,979
</TABLE>
- --------
(1) Assumes annual planned premium payments of $887 paid in full at beginning
of each Policy year. The values would vary from those shown if the amount
or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive loans
or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE
BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH
BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS
OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED
ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN TOWER OR THE FUND THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
74
<PAGE>
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 40
STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH
BENEFIT OPTION A GUARANTEED COST OF TERM INSURANCE CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RATES OF RETURN OF RATES OF RETURN OF
POLICY AT 5% INTEREST ------------------------------ --------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ..................... $ 965 $ 113 $ 135 $ 157 $100,000 $100,000 $100,000
2 ..................... 1,978 547 614 683 100,000 100,000 100,000
3 ..................... 3,042 948 1,087 1,238 100,000 100,000 100,000
4 ..................... 4,159 1,316 1,555 1,823 100,000 100,000 100,000
5 ..................... 5,332 1,649 2,013 2,438 100,000 100,000 100,000
6 ..................... 6,564 1,944 2,460 3,087 100,000 100,000 100,000
7 ..................... 7,857 2,200 2,891 3,770 100,000 100,000 100,000
8 ..................... 9,214 2,414 3,306 4,489 100,000 100,000 100,000
9 ..................... 10,640 2,585 3,701 5,247 100,000 100,000 100,000
10 ..................... 12,137 2,708 4,069 6,044 100,000 100,000 100,000
15 ..................... 20,822 2,370 5,217 10,544 100,000 100,000 100,000
20 ..................... 31,907 0(3) 4,173 15,738 0(3) 100,000 100,000
25 ..................... 46,054 0(3) 0(3) 21,074 0(3) 0(3) 100,000
</TABLE>
- --------
(1) Assumes annual planned premium payments of $919 paid in full at beginning
of each Policy year. The values would vary from those shown if the amount
or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive loans
or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Zero values in cash value and death benefit indicate termination of
insurance coverage in the absence of a sufficient additional premium
payment; see "Policy Termination and Reinstatement--Termination," on page
24 for further details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE
BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH
BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS
OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED
ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN TOWER OR THE FUND THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
75
<PAGE>
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 40
STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH
BENEFIT OPTION B GUARANTEED COST OF TERM INSURANCE CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RATES OF RETURN OF RATES OF RETURN OF
POLICY AT 5% INTEREST ---------------------------- -----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ..................... $ 1,197 $ 268 $ 299 $ 330 $100,268 $100,299 $100,330
2 ..................... 2,454 896 994 1,095 100,896 100,994 101,095
3 ..................... 3,774 1,489 1,693 1,912 101,489 101,693 101,912
4 ..................... 5,159 2,045 2,394 2,785 102,045 102,394 102,785
5 ..................... 6,614 2,560 3,095 3,717 102,560 103,095 103,717
6 ..................... 8,142 3,035 3,793 4,712 103,035 103,793 104,712
7 ..................... 9,746 3,466 4,486 5,774 103,466 104,486 105,774
8 ..................... 11,430 3,852 5,171 6,908 103,852 105,171 106,908
9 ..................... 13,199 4,191 5,844 8,119 104,191 105,844 108,119
10 ..................... 15,056 4,477 6,501 9,410 104,477 106,501 109,410
15 ..................... 25,830 4,899 9,232 17,117 104,899 109,232 117,117
20 ..................... 39,580 2,955 10,054 26,985 102,955 110,054 126,985
25 ..................... 57,129 0(3) 7,003 38,841 0(3) 107,003 138,841
</TABLE>
- --------
(1) Assumes annual planned premium payments of $1,140 paid in full at beginning
of each Policy year. The values would vary from those shown if the amount
or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive loans
or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Zero values in cash value and death benefit indicate termination of
insurance coverage in the absence of a sufficient additional premium
payment; see "Policy Termination and Reinstatement--Termination," on page
24 for further details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE
BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH
BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS
OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED
ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN TOWER OR THE FUND THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
76
<PAGE>
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 40
STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH
BENEFIT OPTION A CURRENT COST OF TERM INSURANCE CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RATES OF RETURN OF RATES OF RETURN OF
POLICY AT 5% INTEREST ----------------------- --------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- -------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 .......... $ 965 $ 90 $ 111 $ 133 $100,000 $100,000 $100,000
2 .......... 1,978 628 696 768 100,000 100,000 100,000
3 .......... 3,042 1,147 1,297 1,458 100,000 100,000 100,000
4 .......... 4,159 1,648 1,913 2,209 100,000 100,000 100,000
5 .......... 5,332 2,132 2,548 3,031 100,000 100,000 100,000
6 .......... 6,564 2,594 3,198 3,925 100,000 100,000 100,000
7 .......... 7,857 3,030 3,858 4,895 100,000 100,000 100,000
8 .......... 9,214 3,439 4,530 5,951 100,000 100,000 100,000
9 .......... 10,640 3,821 5,212 7,100 100,000 100,000 100,000
10 .......... 12,137 4,172 5,901 8,350 100,000 100,000 100,000
15 .......... 20,822 5,476 9,492 16,596 100,000 100,000 100,000
20 .......... 31,907 5,789 13,147 29,738 100,000 100,000 100,000
25 .......... 46,054 4,333 16,140 51,065 100,000 100,000 100,000
</TABLE>
- --------
(1) Assumes annual planned premium payments of $919 paid in full at beginning
of each Policy year. The values would vary from those shown if the amount
or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive loans
or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE
BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH
BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS
OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED
ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN TOWER OR THE FUND THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
77
<PAGE>
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 40
STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH
BENEFIT OPTION B CURRENT COST OF TERM INSURANCE CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RATES OF RETURN OF RATES OF RETURN OF
POLICY AT 5% INTEREST ---------------------------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- -------- ------- ---------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ......... $ 1,197 $ 225 $ 255 $ 284 $100,225 $100,255 $100,284
2 ......... 2,454 959 1,056 1,156 100,959 101,056 101,156
3 ......... 3,774 1,671 1,881 2,108 101,671 101,881 102,108
4 ......... 5,159 2,360 2,732 3,146 102,360 102,732 103,146
5 ......... 6,614 3,030 3,612 4,284 103,030 103,612 104,284
6 ......... 8,142 3,674 4,515 5,526 103,674 104,515 105,526
7 ......... 9,746 4,287 5,438 6,877 104,287 105,438 106,877
8 ......... 11,430 4,871 6,383 8,351 104,871 106,383 108,351
9 ......... 13,199 5,423 7,347 9,957 105,423 107,347 109,957
10 ......... 15,056 5,939 8,329 11,706 105,939 108,329 111,706
15 ......... 25,830 8,004 13,523 23,214 108,004 113,523 123,214
20 ......... 39,580 8,958 18,981 41,188 108,958 118,981 141,188
25 ......... 57,129 8,027 23,817 68,902 108,027 123,817 168,902
</TABLE>
- --------
(1) Assumes annual planned premium payments of $1,140 paid in full at beginning
of each Policy year. The values would vary from those shown if the amount
or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive loans
or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE
BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH
BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS
OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED
ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN TOWER OR THE FUND THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
78
<PAGE>
PART II
CONTENTS OF REGISTRATION STATEMENT
REPRESENTATION WITH RESPECT TO FEES AND CHARGES
Metropolitan Tower represents that the fees and charges deducted under the
Policies described in this amended Registration Statement, in the aggregate,
are reasonable in relation to the services rendered, the expenses to be
incurred, and the risks assumed by Metropolitan Tower under the Policies.
Metropolitan Tower bases its representation on its assessment of all of the
facts and circumstances, including such relevant factors as: the nature and
extent of such services, expenses and risks, the need for Metropolitan Tower to
earn a profit, the degree to which the Policies include innovative features,
and regulatory standards for exemptive relief under the Investment Company Act
of 1940 used prior to October 1996, including the range of industry practice.
This amended Registration Statement comprises the following papers and
documents:
The facing sheet.
Cross-Reference Table.
The Supplement to the Prospectus, consisting of 29 pages.
The Prospectus, consisting of 78 pages.
Undertaking to File Reports, as filed with Pre-Effective Amendment No. 2 to
this Registration Statement on November 27, 1985.
Undertaking pursuant to Rule 484(b)(1) under the Securities Act of 1933, as
filed with Pre-Effective Amendment No. 2 to this Registration Statement on
November 27, 1985.
Representation with respect to fees and charges filed herewith.
The signatures.
Written Consents of the following persons:
Anthony E. Amodeo (filed with Exhibit 6 below).
Deloitte & Touche LLP.
Freedman, Levy, Kroll & Simonds, as filed with Pre-Effective Amendment
No. 2 to this Registration Statement on November 27, 1985.
The following exhibits:
<TABLE>
<CAPTION>
<C> <S> <C>
1.A (1) --Resolution of Board of
Directors of
Metropolitan Tower
effecting the
establishment of
Metropolitan Tower
Separate Account Two... *
(2) --Not Applicable
(3) --(a)Amended and Re-
stated Sales and
Administrative
Services Agreement
between Metropoli-
tan Life and Metro-
politan Tower...... (degrees)(degrees)
--(b)Form of Selected
Broker Agreement... (degrees)(degrees)
--(c)Schedule of sales
commissions........ (degrees)(degrees)(degrees)(degrees)(degrees)
(4) --Not Applicable
(5) --(a)Specimen Flexible
Premium Multifunded
Life Insurance Pol-
icy (including al-
ternate pages as
required by state
law) with form of
riders............. *
--(b)Amended Specimen
Flexible Premium
Multifunded Life
Insurance Policy... **
--(c)Additional Exchange
Right Provision
Rider.............. ***
--(d)New York Endorse-
ment to Flexible
Premium Multifunded
Life Insurance Pol-
icy................ ****
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S> <C>
--(e)Texas Endorsement
to Flexible Premium
Multifunded Life
Insurance Policy... *****
--(f)Additional alter-
nate pages required
by state law....... (degrees)(degrees)(degrees)(degrees)
--(g)Additional alter-
nate pages required
by state law....... (degrees)(degrees)(degrees)(degrees)(degrees)
--(h)Riders for Acceler-
ated Death Benefit. +++
(6) --(a)Certificate of In-
corporation of Metro-
politan Tower.......... *
--(b)By-laws of Metro-
politan Tower.......... *
(7) --Not Applicable
(8) --Agreement dated June
3, 1982 between
Metropolitan Life and
Metropolitan Tower..... *
(9) --Not Applicable
(10) --Revised Application
Form for Flexible Pre-
mium Multifunded Life
Insurance Policy and
Form of Receipt and
Temporary Insurance
Agreement.............. ***
2. --See Exhibit 1.A(5)
above
3. --Opinion and consent of
Counsel as to the le-
gality of the securi-
ties being registered.. ***
4. --Not Applicable
5. --Not Applicable
6. --Opinion and consent of
Anthony E. Amodeo...... ++++
8. --Powers of Attorney.... (degrees)
9. --Method of Computing
Exchange pursuant to
Rule 6e-
3(T)(b)(13)(v)(B) under
the Investment Company
Act of 1940 (not
required because there
will be no cash value
adjustments)
11. --(a)Memorandum describ-
ing certain issu-
ance procedures
filed pursuant to
Rule 6e-
3(T)(b)(12)(iii)... (degrees)(degrees)(degrees)
--(b)Second memorandum
describing certain
procedures filed
pursuant to Rule
6e-
3(T)(b)(12)(iii)... (degrees)(degrees)(degrees)(degrees)(degrees)
--(c)Additional memo-
randa describing
certain procedures
filed pursuant to
Rule 6e-
3(T)(b)(12)(iii)... ++
27. --Financial Data Sched-
ule.................... +
</TABLE>
- --------
+ Filed herewith.
Incorporated by reference to the initial filing of this Registration
Statement on December 21, 1984.
*
**
Incorporated by reference to the filing of Pre-Effective Amendment No. 1
to this Registration Statement on September 5, 1985.
***
Incorporated by reference to the filing of Pre-Effective Amendment No. 2
to this Registration Statement on November 27, 1985.
II-2
<PAGE>
****
Incorporated by reference to the filing of Post-Effective Amendment No. 2
to this Registration Statement on July 9, 1986.
Incorporated by reference to the filing of Post-Effective Amendment No. 4
to this Registration Statement on October 31, 1986.
*****
(degrees)
[/R]
A Power of Attorney for Alan E. Lazarescu was filed with the filing of
Post-Effective Amendment No. 12 to this Registration Statement on April
3, 1992. Powers of Attorney for Anthony E. Amodeo and Harold B. Leff were
filed with this Post-Effective Amendment No. 14 to the Registration
Statement. Powers of Attorney for David A. Levene, Susan M. Ende, Pauline
Wittenberg and Stanley Saunders are filed with this Post-Effective
Amendment No. 15 to the Registration Statement.
Incorporated by reference to the filing of Pre-Effective Amendment No. 1
to this Registration Statement of Separate Account Two (File No. 33-
12302) on June 3, 1987.
(degrees)(degrees)
(degrees)(degrees)(degrees)
Incorporated by reference to the filing of Post-Effective Amendment No. 7
to this Registration Statement on December 21, 1987.
(degrees)(degrees)(degrees)(degrees)
Incorporated by reference to the filing of Post-Effective Amendment No. 8
to this Registration Statement on March 28, 1988.
Incorporated by reference to the filing of Post-Effective Amendment No. 9
to this Registration Statement on March 1, 1989.
(degrees)(degrees)(degrees)(degrees)(degrees)
++
Incorporated by reference to the filing of Post-Effective Amendment No.
10 to this Registration Statement on April 26, 1990.
+++
Incorporated by reference to the filing of Post-Effective Amendment No.
11 to this Registration Statement on March 1, 1991.
++++
[/R]
Incorporated by reference to the filing of Post-Effective Amendment No.
14 to this Registration Statement on April 22, 1994.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, METROPOLITAN
TOWER LIFE INSURANCE COMPANY CERTIFIES THAT IT MEETS ALL OF THE REQUIREMENTS
FOR EFFECTIVENESS OF THIS AMENDED REGISTRATION STATEMENT PURSUANT TO RULE
485(b) UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS AMENDED
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO
DULY AUTHORIZED, AND ITS SEAL TO BE HEREUNTO AFFIXED AND ATTESTED, ALL IN THE
CITY OF NEW YORK, STATE OF NEW YORK, THIS 30TH DAY OF APRIL, 1997.
METROPOLITAN TOWER LIFE INSURANCE
COMPANY
(Seal)
/s/ Alan E. Lazarescu, Esq.
By: ________________________________
ALAN E. LAZARESCU, ESQ.
VICE-PRESIDENT
/s/ Robin Wagner, Esq.
Attest: _____________________________
ROBIN WAGNER, ESQ.
ASSISTANT SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDED
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE AND TITLE
*
/s/ David A. Levene
- -------------------------------------
David A. Levene
Chairman of the Board, President and
Chief Executive Officer
*
/s/ Anthony E. Amodeo
- -------------------------------------
Anthony E. Amodeo
Director
*
/s/ Susan M. Ende
- -------------------------------------
Susan M. Ende
Director
*
/s/ Harold B. Leff
- -------------------------------------
Harold B. Leff
Director
/s/ Alan E. Lazarescu
*
- -------------------------------------
Alan E. Lazarescu
Director
*
/s/ Pauline Wittenberg
- -------------------------------------
Pauline Wittenberg
Director
*
/s/ Stanley Saunders
- -------------------------------------
Stanley Saunders
Vice-President and Controller
(Principal Financial and Accounting
Officer)
/s/ Christopher P. Nicholas, Esq. April 30, 1997
*By _________________________________
Christopher P. Nicholas, Esq.
ATTORNEY-IN-FACT
II-4
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
METROPOLITAN TOWER SEPARATE ACCOUNT TWO CERTIFIES THAT IT MEETS ALL OF THE
REQUIREMENTS FOR EFFECTIVENESS OF THIS AMENDED REGISTRATION STATEMENT PURSUANT
TO RULE 485(B) UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS
AMENDED REGISTRATION STATEMENT TO BE SIGNED, ON ITS BEHALF BY THE UNDERSIGNED
THEREUNTO DULY AUTHORIZED, AND ITS SEAL TO BE HEREUNTO AFFIXED AND ATTESTED,
ALL IN THE CITY OF NEW YORK, STATE OF NEW YORK THIS 30TH DAY OF APRIL, 1997.
METROPOLITAN TOWER SEPARATE ACCOUNT
TWO
(REGISTRANT)
By: METROPOLITAN TOWER LIFE
INSURANCE COMPANY
(DEPOSITOR)
(Seal)
/s/ Alan E. Lazarescu, Esq.
By: ______________________________
ALAN E. LAZARESCU, ESQ.
VICE-PRESIDENT
/s/ Robin Wagner, Esq.
Attest: _____________________________
ROBIN WAGNER, ESQ.
ASSISTANT SECRETARY
II-5
<PAGE>
INDEPENDENT AUDITORS' CONSENT
Metropolitan Tower Life Insurance Company:
We consent to the use in this Post-Effective Amendment No. 15 to the
Registration Statement No. 2-95019 of Metropolitan Tower Separate Account Two
on Form S-6 of our report dated February 28, 1997 relating to Metropolitan
Tower Separate Account Two appearing in the Prospectus Supplement, which is a
part of such Registration Statement, our report dated April 4, 1997 relating to
Metropolitan Tower Life Insurance Company also appearing in the Prospectus
Supplement, and to the reference to us under the heading "Experts" in such
Prospectus Supplement.
Deloitte & Touche LLP
New York, New York
April 28, 1997
II-6
<PAGE>
EXHIBIT 8
POWER OF ATTORNEY
-----------------
Susan M. Ende
KNOW ALL MEN BY THESE PRESENTS, that I, a director of Metropolitan Tower
Life Insurance Company, do hereby appoint Richard G. Mandel, Christopher P.
Nicholas and Robin Wagner and each of them severally, my true and lawful
attorney-in-fact, for me and in my name, place and stead to execute and file any
instrument or document to be filed as part of or in connection with or in any
way related to the Registration Statements and any and all amendments thereto,
filed by said Company under the Securities Act of 1933, as amended, and/or the
Investment Company Act of 1940, as amended, in connection with Metropolitan
Tower Separate Account One or Metropolitan Tower Separate Account Two, and to
have full power and authority to do or cause to be done in my name, place and
stead each and every act and thing necessary or appropriate in order to
effectuate the same, as fully to all intents and purposes as I might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact or
any of them, may do or cause to be done by virtue hereof. Each said attorney-in-
fact shall have power to act hereunder with or without the others.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of April,
----
1997.
/s/ Susan M. Ende
-------------------------
Susan M. Ende
<PAGE>
POWER OF ATTORNEY
-----------------
Stanley Saunders
KNOW ALL MEN BY THESE PRESENTS, that I, an officer of Metropolitan Tower
Life Insurance Company, do hereby appoint Richard G, Mandel, Christopher P.
Nicholas and Robin Wagner and each of them severally, my true and lawful
attorney-in-fact, for me and in my name, place and stead to execute and file any
instrument or document to be filed as part of or in connection with or in any
way related to the Registration Statements and any and all amendments thereto,
filed by said Company under the Securities Act of 1933, as amended, and/or the
Investment Company Act of 1940, as amended, in connection with Metropolitan
Tower Separate Account One or Metropolitan Tower Separate Account Two, and
to have full power and authority to do or cause to be done in my name, place and
stead each and every act and thing necessary or appropriate in order to
effectuate the same, as fully to all intents and purposes as I might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact or
any of them, may do or cause to be done by virtue hereof. Each said attorney-in-
fact shall have power to act hereunder with or without the others.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of April,
1997.
/s/ Stanley Saunders
---------------------
Stanley Saunders
<PAGE>
POWER OF ATTORNEY
David A.Levene
KNOW ALL MEN BY THESE PRESENTS, that I, a director and officer of
Metropolitan Tower Life Insurance Company, do hereby appoint Richard G. Mandel,
Christopher P. Nicholas and Robin Wagner and each of them severally, my true and
lawful attorney-in-fact, for me and in my name, place and stead to execute and
file any instrument or document to be filed as part of or in connection with or
in any way related to the Registration Statements and any and all amendments
thereto, filed by said Company under the Securities Act of 1933, as amended,
and/or the Investment Company Act of 1940, as amended, in connection with
Metropolitan Tower Separate Account One or Metropolitan Tower Separate Account
Two, and to have full power and authority to do or cause to be done in my name,
place and stead each and every act and thing necessary or appropriate in order
to effectuate the same, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact or
any of them, may do or cause to be done by virtue hereof. Each said attorney-in-
fact shall have power to act hereunder with or without the others.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of April,
1997.
/s/ David A. Levene
---------------------
David A. Levene
<PAGE>
POWER OF ATTORNEY
Pauline Wittenberg
KNOW ALL MEN BY THESE PRESENTS, that I, a director of Metropolitan Tower
Life Insurance Company, do hereby appoint Richard G. Mandel, Christopher P.
Nicholas and Robin Wagner and each of them severally, my true and lawful
attorney-in-fact, for me and in my name, place and stead to execute and file any
instrument or document to be filed as part of or in connection with or in any
way related to the Registration Statements and any and all amendments thereto,
filed by said Company under the Securities Act of 1933, as amended, and/or the
Investment Company Act of 1940, as amended, in connection with Metropolitan
Tower Separate Account One, or Metropolitan Tower Separate Account Two, and to
have full power and authority to do or cause to be done in my name, place and
stead each and every act and thing necessary or appropriate in order to
effectuate the same, as fully to all intents and purposes as I might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact or
any of them, may do or cause to be done by virtue hereof. Each said attorney-in-
fact shall have power to act hereunder with or without the others.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of
April, 1997.
/s/ Pauline Wittenberg
----------------------
Pauline Wittenberg
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN
TOWER LIFE SEPARATE ACCOUNT TWO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> GROWTH
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 26,082,049
<INVESTMENTS-AT-VALUE> 36,157,867
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 20,090
<TOTAL-ASSETS> 36,177,957
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 72,249
<TOTAL-LIABILITIES> 72,249
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,185,115
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 36,105,708
<DIVIDEND-INCOME> 3,437,586
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 263,040
<NET-INVESTMENT-INCOME> 3,174,546
<REALIZED-GAINS-CURRENT> 810,822
<APPREC-INCREASE-CURRENT> 2,410,203
<NET-CHANGE-FROM-OPS> 5,819,763
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,819,763
<ACCUMULATED-NII-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN
TOWER LIFE SEPARATE ACCOUNT TWO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> INCOME
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 4,760,958
<INVESTMENTS-AT-VALUE> 4,889,480
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2,332
<TOTAL-ASSETS> 4,891,812
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 36,534
<TOTAL-LIABILITIES> 36,534
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 395,589
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,855,278
<DIVIDEND-INCOME> 308,397
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 87,271
<NET-INVESTMENT-INCOME> 271,128
<REALIZED-GAINS-CURRENT> 42,671
<APPREC-INCREASE-CURRENT> (180,569)
<NET-CHANGE-FROM-OPS> 133,328
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (117,688)
<ACCUMULATED-NII-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN
TOWER LIFE SEPARATE ACCOUNT TWO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> MONEY MARKET
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,446,568
<INVESTMENTS-AT-VALUE> 1,415,385
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 9
<TOTAL-ASSETS> 1,415,394
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 26,606
<TOTAL-LIABILITIES> 26,606
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 135,628
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,388,788
<DIVIDEND-INCOME> 69,320
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 10,866
<NET-INVESTMENT-INCOME> 58,454
<REALIZED-GAINS-CURRENT> (5,156)
<APPREC-INCREASE-CURRENT> 5,113
<NET-CHANGE-FROM-OPS> 58,411
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (12,849)
<ACCUMULATED-NII-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN
TOWER LIFE SEPARATE ACCOUNT TWO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> DIVERSIFIED
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 50,313,451
<INVESTMENTS-AT-VALUE> 63,812,728
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 17,072
<TOTAL-ASSETS> 63,829,800
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,072
<TOTAL-LIABILITIES> 17,072
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,827,998
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 63,324,887
<DIVIDEND-INCOME> 5,629,752
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 462,651
<NET-INVESTMENT-INCOME> 5,167,071
<REALIZED-GAINS-CURRENT> 1,151,621
<APPREC-INCREASE-CURRENT> 1,469,562
<NET-CHANGE-FROM-OPS> 7,788,854
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,432,252
<ACCUMULATED-NII-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN
TOWER LIFE SEPARATE ACCOUNT TWO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> AGGR. GROWTH
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,444,411
<INVESTMENTS-AT-VALUE> 3,662,608
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 9,650
<TOTAL-ASSETS> 3,672,258
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 41,337
<TOTAL-LIABILITIES> 41,337
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 135,301
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,630,921
<DIVIDEND-INCOME> 97,108
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 23,929
<NET-INVESTMENT-INCOME> 73,179
<REALIZED-GAINS-CURRENT> 23,432
<APPREC-INCREASE-CURRENT> 63,281
<NET-CHANGE-FROM-OPS> 159,892
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,066,409
<ACCUMULATED-NII-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN
TOWER LIFE SEPARATE ACCOUNT TWO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 6
<NAME> STOCK INDEX
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 861,878
<INVESTMENTS-AT-VALUE> 1,007,408
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2,443
<TOTAL-ASSETS> 1,009,851
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,460
<TOTAL-LIABILITIES> 9,460
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 45,318
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,000,391
<DIVIDEND-INCOME> 23,374
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 5,076
<NET-INVESTMENT-INCOME> 18,248
<REALIZED-GAINS-CURRENT> 13,140
<APPREC-INCREASE-CURRENT> 102,220
<NET-CHANGE-FROM-OPS> 133,658
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 669,809
<ACCUMULATED-NII-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN
TOWER LIFE SEPARATE ACCOUNT TWO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 7
<NAME> INT'L STOCK
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,002,950
<INVESTMENTS-AT-VALUE> 934,227
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 3,813
<TOTAL-ASSETS> 938,040
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,741
<TOTAL-LIABILITIES> 7,741
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 78,178
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 930,299
<DIVIDEND-INCOME> 9,586
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 6,977
<NET-INVESTMENT-INCOME> 2,609
<REALIZED-GAINS-CURRENT> (5,525)
<APPREC-INCREASE-CURRENT> (20,777)
<NET-CHANGE-FROM-OPS> (23,693)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 28,701
<ACCUMULATED-NII-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
