<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 1998
REGISTRATION NO. 33-32813
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-6
POST-EFFECTIVE AMENDMENT No. 6
To REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933
----------------
METROPOLITAN LIFE SEPARATE ACCOUNT UL
(EXACT NAME OF TRUST)
METROPOLITAN LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
1 Madison Avenue
New York, New York 10010
(COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
----------------
GARY A. BELLER, ESQ.
Senior Executive Vice-President and General Counsel
Metropolitan Life Insurance Company
1 Madison Avenue
New York, New York 10010
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
----------------
Copies to:
GARY O. COHEN, ESQ. and THOMAS C. 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, 1998 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 in reliance on Rule 6c-3 and 6e-3(T) under the Investment
Company Act of 1940 to register an indefinite amount of interests in
Metropolitan Life Separate Account UL which funds certain variable universal
life insurance policies.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
METROPOLITAN LIFE INSURANCE COMPANY
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
ITEMS OF
FORM N-8B-2 CAPTIONS IN PROSPECTUS
- ----------- ----------------------
<S> <C>
1...................... Cover Page
2...................... SUMMARY--About Metropolitan Life
3...................... Inapplicable
4...................... SALES AND ADMINISTRATION OF THE POLICIES; SUMMARY--
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(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, Withdrawals, 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 LIFE
10(g)(4), 10(h)(4)...... Inapplicable
10(i)................... POLICY BENEFITS--Death Benefits; Death Benefit Op-
tions; Cash Value; Optional Income Plans; Optional
Insurance Benefits; PAYMENT AND ALLOCATION OF PRE-
MIUMS--Issuance of a Policy; Premiums; Allocation
of Premiums and Cash Value; Policy Termination and
Reinstatement
11...................... SUMMARY--What are Separate Account UL, the Fixed Ac-
count and the Metropolitan Series Fund?; SEPARATE
ACCOUNT AND METROPOLITAN SERIES FUND--Metropolitan
Series Fund
12(a)................... Cover Page
12(b), 12(e)............ Inapplicable
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ITEMS OF
FORM N-8B-2 CAPTIONS IN PROSPECTUS
- ----------- ----------------------
<S> <C>
12(c), 12(d)............ SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Met-
ropolitan Series Fund
13(a), 13(b), 13(c), SUMMARY--What are Separate Account UL, the Fixed Ac-
13(d).................. count and Metropolitan Series Fund?; What Charges
are Assessed in Connection with the Policy? CHARGES
AND DEDUCTIONS; SEPARATE ACCOUNT AND METROPOLITAN
SERIES FUND--The Separate Account; POLICY BENE-
FITS--Death Benefit Increases
13(e)................... SALES AND ADMINISTRATION OF THE POLICIES
13(f), 13(g)............ Inapplicable
14...................... PAYMENT AND ALLOCATION OF PREMIUMS--Issuance of a
Policy; SALES AND ADMINISTRATION OF THE POLICIES
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 ADMINISTRATION OF THE POLICIES; VOTING
RIGHTS; REPORTS
20(a), 20(b)............ RIGHTS RESERVED BY METROPOLITAN LIFE; 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...................... SALES AND ADMINISTRATION OF THE POLICIES
24...................... OTHER POLICY PROVISIONS
25...................... SUMMARY--Who is the Issuer of the Policies?
26...................... CHARGES AND DEDUCTIONS--Other Charges
27...................... SUMMARY--Who is the Issuer of the Policies?
28...................... MANAGEMENT
29...................... Inapplicable
30, 31, 32, 33, 34...... Inapplicable
35...................... STATE REGULATION
36, 37.................. Inapplicable
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
ITEMS OF
FORM N-8B-2 CAPTIONS IN PROSPECTUS
- ----------- ----------------------
<S> <C>
38....................... SALES AND ADMINISTRATION OF THE POLICIES; DISTRIBU-
TION OF THE POLICIES
39....................... SUMMARY--About Metropolitan Life; SALES AND ADMINIS-
TRATION OF THE POLICIES; DISTRIBUTION OF THE POLI-
CIES
40(a).................... Inapplicable
40(b).................... SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Met-
ropolitan Series Fund; CHARGES AND DEDUCTIONS--
Other Charges
41(a).................... SUMMARY--About Metropolitan Life; SALES AND ADMINIS-
TRATION OF THE POLICIES
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--About Metropolitan Life; 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 THE POLICIES
52(a), 52(c)............. RIGHTS RESERVED BY METROPOLITAN LIFE
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 LIFE INSURANCE COMPANY
.ANNUAL REPORT
METROPOLITAN LIFE
SEPARATE ACCOUNT UL
DECEMBER 31, 1997
.ANNUAL FINANCIAL STATEMENTS
METROPOLITAN LIFE INSURANCE COMPANY
DECEMBER 31, 1997
.PROSPECTUS
METROPOLITAN SERIES FUND, INC.
MAY 1, 1998
METLIFE(R)
Metropolitan Life Insurance Company
MLI-SA-UL (5/98 EDITION) PRINTED IN U.S.A.
98042H20
(EXP0599) MLIC-LD
<PAGE>
SUPPLEMENT DATED MAY 1, 1998
to
PROSPECTUS DATED APRIL 30, 1993
(AS PREVIOUSLY SUPPLEMENTED ON MAY 1, 1994 AND MAY 1, 1997)
for
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICIES
(Minimum Initial Specified Face Amount $50,000)
Issued by
METROPOLITAN LIFE INSURANCE COMPANY
This Supplement updates information contained in the Metropolitan Life
Separate Account UL Prospectus dated April 30, 1993 (the "Prospectus"), and
its supplements dated May 1, 1994 and May 1, 1997. Please call Metropolitan
Life Insurance Company ("Metropolitan Life") 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 Life 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.
These Policies are no longer being sold by Metropolitan Life.
The premiums paid, less premium expense charges, will be allocated at the
owner's discretion among one or more investment divisions of Metropolitan Life
Separate Account UL ("Separate Account") and/or a fixed interest account
("Fixed Account") within the General Account of Metropolitan Life. 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, State Street Research Money Market, MetLife Stock Index,
State Street Research 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>
1. The following replaces the table under "Fund Investment Management Fees
and Direct Expenses" included in the May 1, 1997 Supplement to the Prospectus:
METROPOLITAN SERIES FUND ANNUAL EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)(A)
<TABLE>
<CAPTION>
OTHER
EXPENSES
MANAGEMENT AFTER EXPENSE
FEES(B) REIMBURSEMENT(C) TOTAL
---------- ---------------- -----
<S> <C> <C> <C>
MetLife Stock Index Portfolio.............. .25% .08% .33%
State Street Research Money Market
Portfolio................................. .25% .24% .49%
State Street Research Income Portfolio..... .33% .10% .43%
State Street Research Diversified
Portfolio................................. .44% .06% .50%
State Street Research Growth Portfolio..... .49% .07% .56%
State Street Research Aggressive Growth
Portfolio................................. .71% .08% .79%
T. Rowe Price Small Cap Growth Portfolio... .55% .18% .73%
Scudder Global Equity Portfolio............ .90% .22% 1.12%
Loomis Sayles High Yield Bond Portfolio.... .70% .20% .90%
Janus Mid Cap Portfolio.................... .75% .14% .89%
State Street Research International Stock
Portfolio................................. .75% .28% 1.03%
</TABLE>
-------
(a) Annual expenses for the Loomis Sayles High Yield Bond, T. Rowe Price
Small Cap Growth, Scudder Global Equity and Janus Mid Cap Portfolios are
expressed as a percentage of the year-end net assets.
(b) The marginal fee rate for the State Street Research Income Portfolio,
State Street Research Diversified Portfolio, State Street Research Growth
Portfolio, State Street Research Aggressive Growth Portfolio, State
Street Research International Stock Portfolio, T. Rowe Price Small Cap
Growth 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) Expenses for the T. Rowe Price Small Cap Growth, Janus Mid Cap, Scudder
Global Equity and Loomis Sayles High Yield Bond Portfolios are based on
estimated amounts for the 1998 fiscal year. Metropolitan Life 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. Expenses for the Loomis
Sayles High Yield Bond and Scudder Global Equity Portfolio absent the
expense reimbursement, would have been .39% and .31%, respectively.
Metropolitan Life ceased subsidizing such expenses for the Janus Mid Cap
Portfolio as of December 31, 1997 and the T. Rowe Price Small Cap
Portfolio Portfolio as of January 23, 1998.
2. The following are added as the last paragraphs in the section "Payment
and Allocation of Premiums--Allocation of Premiums and Cash Value."
Automated Investment Strategies. Metropolitan Life may permit the Policy
owner to submit a written authorization directing Metropolitan Life to make
transfers on a continuing periodic basis from one investment division to
another or to the Fixed Account. Metropolitan Life currently offers four such
investment strategies: the "Equity Generator," the "Equalizer," the
"Allocator" and the "Rebalancer." Only one automated investment strategy may
be in effect at any one time. The Owner may submit a written request electing
a strategy or directing Metropolitan Life to cancel a strategy at any time.
Under the "Equity Generator," Policy owners may have the interest earned on
amounts in the Fixed Account transferred to the MetLife Stock Index Division
or the State Street Research Aggressive Growth Division, as elected by the
Policy owner. Any such transfer from the Fixed Account to the MetLife Stock
Index Division or the State Street Research Aggressive Growth Division, as
applicable, will be made at the beginning of each Policy month following the
Policy month in which the interest is earned. The transfer will only be made
for a month during which at least $20 in interest is earned. Amounts earned
during a month in which less than $20 in interest is earned will remain in the
Fixed Account.
Under the "Equalizer," at the end of a specified period (e.g. monthly,
quarterly) as determined by Metropolitan Life, a transfer is made from the
MetLife Stock Index Division or the State Street Research Aggressive Growth
Division, as elected by the Policy owner, to the Fixed Account or from the
Fixed Account to such elected investment division in order to make the Fixed
Account and such elected investment division equal in value. While the
"Equalizer" is in effect, any cash value transfer out of any elected
investment division or the Fixed Account that is not part of this automated
investment strategy will automatically terminate the "Equalizer" election. The
Policy owner may then reelect the "Equalizer" strategy to become effective on
the next Policy anniversary.
S-2
<PAGE>
Under the "Allocator," at the beginning of each Policy month, an amount
designated by the Policy owner is transferred from the State Street Research
Money Market Division to any investment division(s) specified by the Owner.
The Policy owner may choose to do this in one of the following three ways: (1)
designating an amount to be transferred from the State Street Research Money
Market Division each month until amounts in that investment division are
exhausted; (2) designating an amount to be transferred from the State Street
Research Money Market Division for a certain number of months; or (3)
designating a total amount to be transferred from the State Street Research
Money Market Division in equal monthly installments over a certain number of
months. The Policy owner's designations must allow the "Allocator" to remain
in effect for at least three months.
Under the "Rebalancer," Policy owners may elect the periodic redistribution
of cash value so that the cash value is allocated among the Fixed Account and
the investment divisions of the Separate Account in the same proportion as the
net premiums are allocated. Metropolitan Life will redistribute the cash value
at the beginning of each calendar quarter.
Telephonic Transactions. Metropolitan Life reserves the right, if permitted
by state law, to allow Policy owners to make transfer requests, changes to the
Automatic Investment Strategies and reallocation of future net premiums by
telephone and to allow Policy owners to authorize their sales representatives
to make such requests on behalf of the Policy owners by telephone. The Policy
owner must authorize these types of transactions in the manner prescribed by
Metropolitan Life. If Metropolitan Life decides to permit any of these
procedures, and a Policy owner elects to participate in any of them, the
following will apply: the Policy owner will authorize Metropolitan Life to act
upon the telephone instructions of any person purporting to be the Policy
owner (or, if applicable, the Policy owner's sales representative), assuming
Metropolitan Life's procedures have been followed, to do the transactions both
regarding amounts in the Policy's Fixed Account and in the Separate Account.
Metropolitan Life will institute reasonable procedures to confirm that any
instructions communicated by telephone are genuine. All telephone calls will
be recorded, and the Policy owner (or, if applicable, the Policy owner's sales
representative) will be asked to produce the Policy owner's personalized data
prior to Metropolitan Life honoring any requests by telephone. Additionally,
as with other transactions, the Policy owner will receive a written
confirmation of each telephonically requested transaction. Neither
Metropolitan Life nor the Separate Account will be liable for any loss,
expense or cost arising out of any requests that Metropolitan Life or the
Separate Account reasonably believe to be genuine. In the event that these
procedures are instituted and in the further event that the Policy owner who
has elected to use such procedures encounters difficulty with them, such
Policy owner should make inquiry to the Designated Office.
3. The following is added as the last paragraph under the section "Sales and
Administration of the Policies."
Certain computer systems Metropolitan Life uses to process Policy transac-
tions and valuations need to be adjusted to be able to continue to administer
Policies beginning January 1, 2000. As is the case with most system conversion
projects, risks and uncertainties exist, due in part to reliance on third
party vendors, and a project could be delayed. Metropolitan Life is, however,
devoting substantial resources necessary to make these systems modifications
and expects that the necessary changes will be completed on time and in a way
that will result in no disruption to Policy servicing operations.
4. 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.
5. FINANCIAL STATEMENTS--The financial statements of Metropolitan Life
included in this Supplement should be considered only as bearing upon the
ability of Metropolitan Life to meet its obligations under the Policies.
S-3
<PAGE>
[This Page Intentionally Left Blank]
S-4
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Metropolitan Life Insurance Company:
We have audited the accompanying statements of assets and liabilities of the
State Street Research Growth, State Street Research Income, State Street
Research Money Market, State Street Research Diversified, State Street
Research Aggressive Growth, MetLife Stock Index, State Street Research
International Stock, Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe
Price Small Cap Growth and Scudder Global Equity Divisions of Metropolitan
Life Separate Account UL (the "Separate Account") as of December 31, 1997, and
the related statements (i) of operations for the year then ended and of
changes in net assets for the years ended December 31, 1997 and 1996 of the
State Street Research Growth, State Street Research Income, State Street
Research Money Market, State Street Research Diversified, State Street
Research Aggressive Growth, MetLife Stock Index and State Street Research
International Stock Divisions and (ii) of operations and of changes in net
assets for the period March 3, 1997 (commencement of operations) to December
31, 1997 of the Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe Price
Small Cap Growth and Scudder Global Equity Divisions. 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, 1997
by correspondence with the custodian and 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 financial position of the State Street Research Growth, State
Street Research Income, State Street Research Money Market, State Street
Research Diversified, State Street Research Aggressive Growth, MetLife Stock
Index, State Street Research International Stock, Loomis Sayles High Yield
Bond, Janus Mid Cap, T. Rowe Price Small Cap Growth and Scudder Global Equity
Divisions of Metropolitan Life Separate Account UL at December 31, 1997 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.
As discussed in Note 4, the accompanying 1996 financial statements have been
restated.
DELOITTE & TOUCHE LLP
New York, New York
March 31, 1998
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
STATE STREET STATE STREET STATE STREET
STATE STREET STATE STREET RESEARCH STATE STREET RESEARCH METLIFE RESEARCH
RESEARCH RESEARCH MONEY RESEARCH 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 Metropol-
itan Series Fund, Inc.
at Value (Note 1A):
State Street Research
Growth Portfolio
(7,500,517 shares; cost
$207,140,190).......... $239,416,510 -- -- -- -- -- --
State Street Research
Income Portfolio
(3,451,828 shares; cost
$43,468,874)........... -- $43,700,145 -- -- -- -- --
State Street Research
Money Market Portfolio
(770,408 shares; cost
$8,291,617)............ -- -- $7,996,630 -- -- -- --
State Street Research
Diversified Portfolio
(9,161,690 shares; cost
$143,847,786).......... -- -- -- $155,565,502 -- -- --
State Street Research
Aggressive Growth Port-
folio
(4,299,153 shares; cost
$110,480,495).......... -- -- -- -- $181,699,529 -- --
MetLife Stock Index
Portfolio
(2,992,597 shares; cost
$67,138,007)........... -- -- -- -- -- $86,126,949 --
State Street Research
International Stock
Portfolio
(2,324,516 shares; cost
$28,974,736)........... -- -- -- -- -- -- $27,127,110
Loomis Sayles High Yield
Bond Portfolio
(146,279 shares; cost
$1,553,369)............ -- -- -- -- -- -- --
Janus Mid Cap Portfolio
(302,556 shares; cost
$3,640,229)............ -- -- -- -- -- -- --
T. Rowe Price Small Cap
Growth Portfolio
(383,687 shares; cost
$4,511,133)............ -- -- -- -- -- -- --
Scudder Global Equity
Portfolio
(278,937 shares; cost
$3,035,018)............ -- -- -- -- -- -- --
------------ ----------- ---------- ------------ ------------ ----------- -----------
Total Assets........... 239,416,510 43,700,145 7,996,630 155,565,502 118,699,529 86,126,949 27,127,110
LIABILITIES............. 530,268 (749) 395 165,745 43,493 30,337 1,155
------------ ----------- ---------- ------------ ------------ ----------- -----------
NET ASSETS.............. $238,886,242 $43,700,894 $7,996,235 $155,399,757 $118,656,036 $86,096,612 $27,125,955
============ =========== ========== ============ ============ =========== ===========
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
LOOMIS T. ROWE
SAYLES PRICE SCUDDER
HIGH YIELD JANUS SMALL CAP GLOBAL
BOND MID CAP GROWTH EQUITY
DIVISION DIVISION DIVISION DIVISION
---------- ---------- ---------- ----------
<S> <C> <C> <C>
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
$1,483,275 -- -- --
-- $3,863,631 -- --
-- -- $4,558,201 --
-- -- -- $3,026,461
---------- ---------- ---------- ----------
1,483,275 3,863,631 4,558,201 3,026,461
150 393 89 3,120
---------- ---------- ---------- ----------
$1,483,125 $3,863,238 $4,558,112 $3,023,341
========== ========== ========== ==========
</TABLE>
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------------------------------
STATE STATE STATE
STATE STATE STREET STATE STREET STREET
STREET STREET RESEARCH STREET RESEARCH METLIFE RESEARCH
RESEARCH RESEARCH MONEY RESEARCH 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)..... $42,138,867 $2,922,583 $421,931 $23,433,922 $4,355,881 $ 1,696,231 --
Expenses:
Mortality and expense
charges (Note 3)...... 1,720,073 304,795 68,737 1,130,927 885,075 509,584 $ 232,079
----------- ---------- -------- ----------- ---------- ----------- -----------
Net investment income
(loss)................. 40,418,794 2,617,788 353,194 22,302,995 3,470,806 1,186,647 (232,079)
----------- ---------- -------- ----------- ---------- ----------- -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS: (Note
1B)
Net realized gain (loss)
from security transac-
tions.................. 1,080,724 32,950 68,458 418,723 136,827 1,210,648 (84,952)
Change in unrealized ap-
preciation (deprecia-
tion) of investments... 6,378,588 748,796 (49,717) 1,103,869 2,615,059 13,344,725 (691,181)
----------- ---------- -------- ----------- ---------- ----------- -----------
Net realized and
unrealized gain (loss)
on investments......... 7,459,312 781,746 18,741 1,522,592 2,751,886 14,555,373 (776,133)
----------- ---------- -------- ----------- ---------- ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $47,878,106 $3,399,534 $371,935 $23,825,587 $6,222,692 $15,742,020 $(1,008,212)
=========== ========== ======== =========== ========== =========== ===========
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD MARCH 3, 1997 TO DECEMBER 31, 1997
-----------------------------------------------------------------------------------
T. ROWE
LOOMIS SAYLES PRICE SCUDDER
HIGH YIELD JANUS SMALL CAP GLOBAL
BOND MID CAP GROWTH EQUITY
DIVISION DIVISION DIVISION DIVISION
------------- ------------ ------------ -----------
<S> <C> <C> <C>
$ 63,593 $ 14,490 $ 471 $ 30,685
4,044 8,553 9,261 7,271
------------ ------------ ----------- -----------
59,549 5,937 (8,790) 23,414
------------ ------------ ----------- -----------
9,361 26,779 47,764 21,982
(70,093) 223,402 47,067 (8,556)
------------ ------------ ----------- -----------
(60,732) 250,181 94,831 13,426
------------ ------------ ----------- -----------
$ (1,183) $ 256,118 $ 86,041 $ 36,840
============ ============ =========== ===========
</TABLE>
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (AS RESTATED--SEE NOTE 4)
<TABLE>
<CAPTION>
STATE STREET RESEARCH STATE STREET RESEARCH STATE STREET RESEARCH
GROWTH DIVISION INCOME DIVISION MONEY MARKET DIVISION
-------------------------- ------------------------ -------------------------
AS RESTATED AS RESTATED AS RESTATED
1997 1996 1997 1996 1997 1996
------------ ------------ ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ 40,418,794 $ 14,318,113 $ 2,617,788 $ 1,769,924 $ 353,194 $ 340,213
Net realized gain
(loss) from security
transactions.......... 1,080,724 3,249,072 32,950 13,127 68,458 21,159
Change in unrealized
appreciation (depreci-
ation) of invest-
ments................. 6,378,588 9,530,521 748,796 (824,310) (49,717) (111,136)
------------ ------------ ----------- ----------- ------------ -----------
Net increase (decrease)
in net assets result-
ing from operations... 47,878,106 27,097,706 3,399,534 958,741 371,935 250,236
------------ ------------ ----------- ----------- ------------ -----------
From capital
transactions:
Net premiums........... 59,834,638 51,991,970 13,090,983 11,838,904 13,691,749 13,703,314
Redemptions............ (7,416,220) (5,657,523) (1,082,695) (1,098,660) (357,692) (370,938)
Net portfolio trans-
fers.................. 3,569,720 (676,324) 1,296,485 (342,990) (12,877,177) (8,370,773)
Other net transfers.... (29,309,077) (23,203,846) (4,895,666) (4,686,537) (887,059) (1,089,670)
------------ ------------ ----------- ----------- ------------ -----------
Net increase (decrease)
in net assets result-
ing from capital
transactions.......... 26,679,061 22,454,277 8,409,107 5,710,717 (430,179) 3,871,933
------------ ------------ ----------- ----------- ------------ -----------
NET CHANGE IN NET
ASSETS................. 74,557,167 49,551,983 11,808,641 6,669,458 (58,244) 4,122,169
------------ ----------- -----------
NET ASSETS--BEGINNING OF
YEAR, AS PREVIOUSLY RE-
PORTED................. 112,440,622 22,311,472 2,974,740
ADJUSTMENT FOR EXCLUDED
CONTRACTS
(NOTE 4)............... 2,336,470 2,911,323 957,570
------------ ------------ ----------- ----------- ------------ -----------
NET ASSETS--BEGINNING OF
YEAR,
AS RESTATED............ 164,329,075 114,777,092 31,892,253 25,222,795 8,054,479 3,932,310
------------ ------------ ----------- ----------- ------------ -----------
NET ASSETS--END OF
YEAR................... $238,886,242 $164,329,075 $43,700,894 $31,892,253 $ 7,996,235 $ 8,054,479
============ ============ =========== =========== ============ ===========
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
STATE STREET RESEARCH STATE STREET RESEARCH STATE STREET RESEARCH
DIVERSIFIED AGGRESSIVE METLIFE STOCK INDEX INTERNATIONAL
DIVISION GROWTH DIVISION DIVISION STOCK DIVISION
---------------------------- ------------------------- ------------------------- ------------------------
AS RESTATED AS RESTATED AS RESTATED AS RESTATED
1997 1996 1997 1996 1997 1996 1997 1996
------------ ------------ ------------ ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 22,302,995 $ 9,021,710 $ 3,470,806 $ 1,735,559 $ 1,186,647 $ 668,041 $ (232,079) $ 26,852
418,723 626,567 136,827 356,580 1,210,648 992,755 (84,952) 7,882
1,103,869 3,195,414 2,615,059 1,727,152 13,344,725 3,305,639 (691,181) (643,946)
------------ ------------ ------------ ----------- ------------ ----------- ----------- -----------
23,825,587 12,843,691 6,222,692 3,819,291 15,742,020 4,966,435 (1,008,212) (609,212)
------------ ------------ ------------ ----------- ------------ ----------- ----------- -----------
41,236,061 34,685,709 52,235,040 47,883,634 38,059,853 18,825,744 11,240,912 12,149,313
(4,829,385) (4,063,905) (3,613,975) (2,963,448) (1,198,193) (754,780) (1,139,393) (680,851)
1,557,340 444,154 (5,941,719) 2,977,777 9,580,428 6,207,785 (3,084,541) (323,788)
(19,209,913) (16,290,905) (20,670,473) (18,671,965) (13,547,536) (6,979,516) (5,008,528) (2,938,187)
------------ ------------ ------------ ----------- ------------ ----------- ----------- -----------
18,754,103 14,775,053 22,008,873 29,225,998 32,894,552 17,299,233 2,008,450 8,206,487
------------ ------------ ------------ ----------- ------------ ----------- ----------- -----------
42,579,690 27,618,744 28,231,565 33,045,289 48,636,572 22,265,668 1,000,238 7,597,275
------------ ----------- ----------- -----------
84,180,741 54,331,797 13,425,770 17,296, 137
1,020,582 3,047,385 1,768,602 1,232,305
------------ ------------ ------------ ----------- ------------ ----------- ----------- -----------
112,820,067 85,201,323 90,424,471 57,379,182 37,460,040 15,194,372 26,125,717 18,528,442
------------ ------------ ------------ ----------- ------------ ----------- ----------- -----------
$155,399,757 $112,820,067 $118,656,036 $90,424,471 $ 86,096,612 $37,460,040 $27,125,955 $26,125,717
============ ============ ============ =========== ============ =========== =========== ===========
</TABLE>
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD MARCH 3, 1997 TO DECEMBER 31, 1997
--------------------------------------------------------------
LOOMIS SAYLES T. ROWE PRICE
HIGH YIELD JANUS SMALL CAP SCUDDER GLOBAL
BOND DIVISION MID CAP DIVISION GROWTH DIVISION EQUITY DIVISION
------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ 59,549 $ 5,937 $ (8,790) $ 23,414
Net realized gain from
security transac-
tions................. 9,361 26,779 47,764 21,982
Change in unrealized
appreciation (depreci-
ation)
of investments........ (70,093) 223,402 47,067 (8,556)
---------- ---------- ---------- ----------
Net increase (decrease)
in net assets result-
ing from
operations............ (1,183) 256,118 86,041 36,840
---------- ---------- ---------- ----------
From capital
transactions:
Net premiums........... 590,158 2,676,784 1,816,732 1,425,649
Redemptions............ (1,126) (46,974) (40,707) (7,873)
Net portfolio trans-
fers.................. 1,002,454 1,554,471 3,110,800 1,855,028
Other net transfers.... (107,178) (577,161) (414,754) (286,303)
---------- ---------- ---------- ----------
Net increase in net as-
sets resulting from
capital
transactions.......... 1,484,308 3,607,120 4,472,071 2,986,501
---------- ---------- ---------- ----------
NET CHANGE IN NET
ASSETS................. 1,483,125 3,863,238 4,558,112 3,023,341
NET ASSETS--BEGINNING OF
PERIOD................. -- -- -- --
---------- ---------- ---------- ----------
NET ASSETS--END OF PERI-
OD..................... $1,483,125 $3,863,238 $4,558,112 $3,023,341
========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
Metropolitan Life Separate Account UL (the "Separate Account") is a multi-
division unit investment trust registered under the Investment Company Act of
1940 and presently consists of eleven investment divisions used to support
variable universal life insurance policies. 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 Life Insurance Company
("Metropolitan Life") on December 13, 1988, and registered as a unit
investment trust on January 5, 1990. The assets of the Separate Account are
the property of Metropolitan Life. On March 3, 1997, operations commenced for
the four new investment divisions added to the Separate Account on that date:
the Loomis Sayles High Yield Bond Division, the Janus Mid Cap Division, the T.
Rowe Price Small Cap Growth Division and the Scudder Global Equity Division.
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
eleven designated portfolios of the Fund in which the eleven investment
divisions of the Separate Account invests as of December 31, 1997 is
included as Note 5.
B. SECURITY TRANSACTIONS
Purchases and sales are recorded on the trade date. Realized gains and
losses on sales of investments are determined on the basis of identified
cost.
C. FEDERAL INCOME TAXES
In the opinion of counsel of Metropolitan Life, the Separate Account
will be treated as a part of Metropolitan Life and its operations, and
the Separate Account will not be taxed separately as a "regulated
investment company" under existing law. Metropolitan Life is taxed as a
life insurance company. The policies permit Metropolitan Life to charge
against the Separate Account any taxes, or reserves for taxes,
attributable to the maintenance or operation of the Separate Account.
Metropolitan 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 Life deducts a sales load and a state premium tax charge
from premiums before amounts are allocated to the Separate Account. In
the case of certain of the policies, Metropolitan Life also deducts a
Federal income tax charge before amounts are allocated to the Separate
Account. The Federal income tax charge is imposed in connection with
certain of the policies to recover a portion of the Federal income tax
adjustment attributable to policy acquisition expenses.
2. DIVIDENDS
On April 16, 1997 and December 18, 1997, the Fund declared dividends for all
shareholders of record on April 25, 1997 and December 30, 1997, respectively.
The amount of dividends received by the Separate Account was $75,078,657. The
dividends were paid to Metropolitan Life on April 25, 1997 and December 30,
1997, respectively, and were immediately reinvested in additional shares of
the portfolios in which the investment divisions invest. As a
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
result of this reinvestment, the number of shares of the Fund held by each of
the eleven investment divisions increased by the following: State Street
Research Growth Portfolio, 1,371,274 shares; State Street Research Income
Portfolio, 231,057 shares; State Street Research Money Market Portfolio,
40,663 shares; State Street Research Diversified Portfolio, 1,404,733 shares;
State Street Research Aggressive Growth Portfolio, 182,267 shares; MetLife
Stock Index Portfolio, 60,453 shares; State Street Research International
Stock Portfolio, 0 shares; Loomis Sayles High Yield Bond Portfolio, 6,294
shares; Janus Mid Cap Portfolio, 1,175 shares; T. Rowe Price Small Cap Growth
Portfolio, 41 shares; and Scudder Global Equity Portfolio, 2,836 shares.
3. EXPENSES
With respect to assets in the Separate Account that support certain
policies, Metropolitan Life applies a charge against the assets attributable
to the Separate Account for the mortality and expense risks assumed by
Metropolitan Life. This charge varies by policy type but will not be higher
than an effective annual rate of .90% of the average daily value of the net
assets or the monthly anniversary value of the net assets in the Separate
Account which are attributable to such policies.
4. RESTATEMENT FOR EXCLUDED CONTRACTS
Subsequent to the issuance of the Separate Account 1996 financial
statements, Metropolitan Life management determined that the 1996 and prior
year financial statements inadvertently excluded amounts related to two groups
of insurance contracts included in subsidiary accounting records applicable to
the Separate Account. As a result the 1996 financial statements have been
restated from the amounts previously reported to include such amounts. A
summary of the effects of the restatement on net increase (decrease) in net
assets resulting from operations ("Operations") and net increase in net assets
resulting from capital transactions ("Capital Transactions") for the year
ended December 31, 1996 is as follows:
<TABLE>
<CAPTION>
OPERATIONS CAPITAL TRANSACTIONS
------------------------ -----------------------
AS AS
PREVIOUSLY PREVIOUSLY
AS RESTATED REPORTED AS RESTATED REPORTED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
State Street Research Growth
Division.................... $27,097,706 $26,165,771 $22,454,277 $20,291,179
State Street Research Income
Division.................... 958,741 789,262 5,710,717 4,157,019
State Street Research Money
Market Division............. 250,236 162,166 3,871,933 2,982,949
State Street Research Diver-
sified Division............. 12,843,691 12,559,668 14,775,053 13,727,050
State Street Research Aggres-
sive Growth Division........ 3,819,291 3,487,444 29,225,998 25,921,962
MetLife Stock Index Divi-
sion........................ 4,966,435 4,138,300 17,299,233 14,469,444
State Street Research Inter-
national Stock Division..... (609,212) (550,732) 8,206,487 6,923,935
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1997
Below are summarized information of the investments of the portfolios of the
Fund in which each of the investment divisions invest.
METROPOLITAN SERIES FUND, INC.
<TABLE>
<CAPTION>
STATE STREET STATE STREET STATE STREET STATE STREET
RESEARCH RESEARCH RESEARCH RESEARCH
GROWTH INCOME MONEY MARKET DIVERSIFIED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Aerospace.............. $ 55,477,881 (2.4%) $ 25,844,668 (1.3%)
Automotive............. 43,379,027 (1.8%) 20,079,121 (1.0%)
Banking................ 205,479,175 (8.7%) 95,552,627 (4.8%)
Broadcasting........... 124,133,525 (5.3%) 56,726,174 (2.9%)
Business Services...... 25,546,853 (1.1%) 11,853,663 (0.6%)
Chemicals.............. 105,409,887 (4.5%) 48,725,475 (2.5%)
Drugs & Health Care.... 150,504,102 (6.4%) 70,602,148 (3.6%)
Electrical Equipment... 94,815,937 (4.0%) 43,986,787 (2.2%)
Electronics............ 77,962,605 (3.3%) 36,467,790 (1.8%)
Entertainment &
Leisure............... 22,431,812 (1.0%) 10,385,217 (0.5%)
Financial Services..... 35,764,865 (1.5%) 16,588,059 (0.8%)
Food & Beverages....... 74,536,480 (3.2%) 34,639,368 (1.7%)
Forest Products &
Paper................. 45,897,963 (2.0%) 21,753,294 (1.1%)
Hospital Management.... 16,383,625 (0.7%) 7,608,812 (0.4%)
Household Products..... 36,627,032 (1.6%) 17,004,594 (0.9%)
Insurance.............. 101,332,113 (4.3%) 47,329,837 (2.4%)
Machinery.............. 16,361,400 (0.7%) 7,592,400 (0.4%)
Medical Supply......... 45,413,162 (1.9%) 21,172,712 (1.1%)
Metals--Steel & Iron... 23,359,400 (1.0%) 10,840,668 (0.5%)
Miscellaneous.......... 68,513,025 (2.9%) 31,886,225 (1.6%
Office & Business
Equipment............. 111,018,537 (4.7%) 51,900,043 (2.6%)
Oil.................... 40,733,670 (1.7%) 19,133,347 (1.0%)
Oil & Gas Exploration.. 54,241,001 (2.3%) 25,252,861 (1.3%)
Oil--Domestic.......... 47,151,675 (2.0%) 20,900,250 (1.1%)
Oil--International..... 23,614,913 (1.0%) 10,994,644 (0.6%)
Retail Grocery......... 74,417,500 (3.2%) 34,970,447 (1.8%)
Retail Trade........... 183,384,019 (7.8%) 85,473,643 (4.3%)
Software............... 25,740,375 (1.1%) 12,118,958 (0.6%)
Tobacco................ 47,328,906 (2.0%) 22,112,500 (1.1%)
Transportation--
Trucking.............. 0 (0.0%) 63 (0.0%)
Utilities--Electric.... 91,202,222 (3.9%) 25,835,899 (1.3%)
Utilities--Telephone... 43,652,700 (1.9%) 36,947,828 (1.8%)
-------------- --------------
Total Common Stock..... 2,111,815,387 (89.9%) 982,280,122 (49.6%)
-------------- --------------
LONG-TERM DEBT
SECURITIES
Corporate Bonds:
Asset Backed........... $ 12,067,182 (2.9%) 29,417,837 (1.5%)
Banking................ 23,128,825 (5.6%) 42,344,898 (2.1%)
Broadcasting........... 3,944,733 (1.0%) 7,737,746 (0.4%)
Collateralized Mortgage
Obligations........... 24,819,316 (6.0%) 49,612,357 (2.5%)
Financial Services..... 60,775,829 (14.8%) 129,445,268 (6.5%)
Government Sponsored :
Federally Chartered... 5,506,656 (1.3%) 6,323,235 (0.3%)
Government Sponsored :
State Chartered....... 2,042,474 (0.5%) 4,057,347 (0.2%)
Healthcare Services.... 10,036,465 (2.4%) 15,063,888 (0.8%)
Household Products..... 3,962,600 (1.0%) 7,724,563 (0.4%)
Industrials............ 24,078,102 (5.9%) 66,622,264 (3.4%)
Newspapers............. 4,677,541 (1.1%) 7,990,940 (0.4%)
Restaurant............. 3,362,275 (0.8%) 4,226,860 (0.2%)
Utilities--Electric.... 12,459,882 (3.0%) 13,174,510 (0.7%)
Utilities--Telephone... 0 (0.0%) 5,119,400 (0.2%)
------------ --------------
Total Corporate Bonds.. 190,861,880 (46.3%) 388,861,113 (19.6%)
------------ --------------
Federal Agency
Obligations........... 21,608,734 (5.2%) 32,463,133 (1.6%)
Federal Treasury
Obligations........... 121,993,026 (29.6%) 296,514,139 (15.0%)
Foreign Obligations.... 29,919,864 (7.3%) 64,010,479 (3.2%)
Yankee Bonds........... 22,911,597 (5.6%) 40,757,635 (2.1%)
------------ --------------
Total Bonds............ 387,295,101 (94.0%) 822,606,499 (41.5%)
------------ --------------
SHORT-TERM OBLIGATIONS
Banker's Acceptance.... $ 1,999,504 (5.1%)
Commercial Paper....... 35,110,031 (88.9%)
Federal Agency
Obligations........... 1,999,174 (5.1%)
Financial Services..... 260,576,843 (11.1%) 18,926,000 (4.6%) 175,117,291 (8.8%)
-------------- ------------ ----------- --------------
Total Short-Term
Obligations........... 260,576,843 (11.1%) 18,926,000 (4.6%) 39,108,709 (99.1%) 175,117,291 (8.8%)
-------------- ------------ ----------- --------------
TOTAL INVESTMENTS....... 2,372,392,230 (101.0%) 406,221,101 (98.6%) 39,108,709 (99.1%) 1,980,003,912 (99.9%)
Other Assets Less
Liabilities........... (23,330,647) (-1.0%) 5,969,530 (1.4%) 371,130 (0.9%) 2,227,802 (0.1%)
-------------- ------------ ----------- --------------
NET ASSETS.............. $2,349,061,583 (100.0%) $412,190,631 (100.0%) $39,479,839 (100.0%) $1,982,231,714 (100.0%)
============== ============ =========== ==============
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1997--(CONTINUED)
METROPOLITAN SERIES FUND, INC.
<TABLE>
<CAPTION>
STATE STREET STATE STREET
RESEARCH RESEARCH
METLIFE AGGRESSIVE INTERNATIONAL
STOCK INDEX GROWTH STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Aerospace............... $ 40,637,466 (2.0%) $ 11,289,881 (0.8%) $ 2,387,852 (0.9%)
Automotive.............. 45,456,508 (2.3%) 28,967,250 (2.1%) 5,015,967 (1.9%)
Banking................. 184,244,814 (9.1%) 29,889,600 (2.1%) 40,150,993 (15.0%)
Broadcasting............ 34,958,314 (1.7%) 34,642,109 (2.5%) 3,027,948 (1.1%)
Building &
Construction............ 13,042,869 (0.7%) 1,588,198 (0.6%)
Business Services....... 25,038,859 (1.2%) 264,032,617 (19.0%) 5,966,734 (2.2%)
Chemicals............... 55,137,636 (2.7%) 4,039,673 (1.5%)
Computer Equipment &
Service................. 34,881,231 (2.5%)
Construction Materials.. 7,498,217 (2.8%)
Construction & Mining
Equipment............... 8,304,900 (0.6%)
Consumer Products....... 1,829,846 (0.7%)
Containers & Glass...... 5,472,575 (0.3%) 1,006,387 (0.4%)
Cosmetics............... 5,512,025 (0.3%) 11,648,975 (0.8%)
Drugs & Health Care..... 157,334,686 (7.8%) 42,144,363 (3.0%) 21,570,856 (8.1%)
Education............... 7,437,875 (0.5%)
Electrical Equipment.... 82,536,849 (4.1%) 2,041,231 (0.7%)
Electronics............. 84,752,427 (4.2%) 123,061,789 (8.8%) 7,720,814 (2.9%)
Energy.................. 1,160,064 (0.4%)
Entertainment &
Leisure................. 18,716,901 (0.9%) 46,907,107 (3.4%) 3,136,901 (1.2%)
Financial Services...... 84,711,977 (4.2%) 72,052,419 (5.2%) 982,925 (0.4%)
Food & Beverages........ 114,340,308 (5.7%) 9,929,888 (0.7%) 11,047,677 (4.1%)
Forest Products &
Paper................... 22,113,212 (1.1%) 4,201,571 (1.6%)
General Business........ 588,933 (0.2%)
Healthcare Services..... 43,554 (0.0%)
Hospital Management..... 11,028,388 (0.5%) 14,045,000 (1.0%)
Hotel & Motel........... 5,444,538 (0.3%) 23,227,899 (1.7%)
Household Appliances &
Home Furnishings........ 4,813,163 (0.2%) 2,290,994 (0.9%)
Household Products...... 64,582,375 (3.2%) 1,266,205 (0.5%)
Insurance............... 79,897,474 (4.0%) 35,200,306 (2.5%) 19,743,473 (7.4%)
Liquor.................. 2,688,400 (0.1%)
Machinery............... 21,529,430 (1.1%) 5,393,875 (2.0%)
Medical Supply.......... 52,060,343 (2.6%) 21,603,563 (1.6%)
Metals--Aluminum........ 4,689,262 (0.2%)
Metals--Gold............ 4,638,780 (0.2%)
Metals--Non-Ferrous..... 2,126,308 (0.1%) 5,000,016 (1.9%)
Metals--Steel & Iron.... 3,137,730 (0.2%) 1,647,825 (0.1%) 2,926,945 (1.1%)
Mining.................. 2,634,900 (0.1%) 1,189,500 (0.1%) 620,596 (0.2%)
Miscellaneous........... 12,701,499 (0.6%) 22,837,675 (1.6%) 1,002,644 (0.4%)
Multi-Industry.......... 12,758,726 (0.6%) 9,623,993 (3.6%)
Newspapers.............. 13,177,443 (0.7%) 789,576 (0.3%)
Office & Business
Equipment............... 108,801,022 (5.4%) 120,385,619 (8.7%)
Oil & Gas Exploration... 905,738 (0.0%) 3,386,080 (1.3%)
Oil--Domestic........... 34,654,774 (1.7%)
Oil--International...... 107,077,494 (5.3%) 14,022,941 (5.2%)
Oil--Services........... 24,773,387 (1.2%) 12,017,500 (0.9%)
Personal Care........... 618,289 (0.2%)
Photography............. 6,809,362 (0.3%)
Pollution Control....... 4,725,750 (0.2%) 3,842,575 (0.3%)
Printing & Publishing... 6,863,863 (0.3%) 10,278,600 (0.7%) 1,324,259 (0.5%)
Real Estate............. 3,294,667 (1.2%)
Restaurant.............. 9,458,756 (0.5%) 2,436,537 (0.2%)
Retail Grocery.......... 10,371,392 (0.5%) 21,435,425 (1.5%)
Retail Trade............ 85,410,978 (4.2%) 130,225,513 (9.4%) 9,107,736 (3.4%)[
Software................ 59,131,545 (2.9%) 68,992,501 (5.0%)
Telecommunications
Equipment & Services.... 15,880,518 (1.1%) 4,694,678 (1.8%)
Textiles & Apparel...... 6,077,783 (0.3%) 26,273,281 (1.9%) 954,522 (0.4%)
Tires & Rubber.......... 5,458,800 (0.3%) 1,191,661 (0.4%)
Tobacco................. 29,937,401 (1.5%) 14,880,625 (1.1%)
Toys & Amusements....... 4,075,259 (0.2%) 3,087,999 (1.2%)
Transportation--
Airlines................ 11,143,931 (0.6%) 2,799,020 (1.0%)
Transportation--
Railroad................ 13,732,100 (0.7%) 3,894,818 (1.5%)
Transportation--
Trucking................ 1,172,450 (0.1%)
Utilities--Electric..... 59,636,673 (3.0%) 4,866,641 (1.8%)
Utilities--Gas
Distribution &
Pipelines............... 14,279,257 (0.7%) 1,658,516 (0.6%)
Utilities--
Miscellaneous........... 8,432,787 (3.2%)
Utilities--Telephone.... 130,153,229 (6.4%) 27,899,850 (2.0%) 11,476,736 (4.3%)
-------------- -------------- ------------
Total Common Stock...... 2,006,567,129 (99.3%) 1,299,533,870 (93.4%) 248,432,454 (93.0%)
-------------- -------------- ------------
PREFERRED STOCK
Banking................. $ 1,885,762 (0.7%)
Chemicals............... 706,634 (0.3%)
Retail Trade............ 484,538 (0.2%)
Software................ 808,024 (0.3%)
-------------- -------------- ------------
Total Preferred Stock... 0 (0.0%) 0 (0.0%) 3,884,958 (1.5%)
-------------- -------------- ------------
Total Equity
Securities.............. 2,006,567,129 (99.3%) 1,299,533,870 (93.4%) 252,317,412 (94.5%)
SHORT-TERM OBLIGATIONS
Federal Treasury
Obligations............. 947,146 (0.1%)
Financial Services...... 82,499,000 (5.9%)
Finance................. 8,748,846 (0.4%)
Time Deposit............ 11,000,000 (4.1%)
-------------- -------------- ------------
Total Short-Term
Obligations............. 9,695,992 (0.5%) 82,499,000 (5.9%) 11,000,000 (4.1%)
-------------- -------------- ------------
TOTAL INVESTMENTS....... 2,016,263,121 (99.8%) 1,382,032,870 (99.3%) 263,317,412 (98.6%)
Other Assets Less
Liabilities............. 4,216,915 (0.2%) 9,922,742 (0.7%) 3,771,397 (1.4%)
-------------- -------------- ------------
NET ASSETS.............. $2,020,480,036 (100.0%) $1,391,955,612 (100.0%) $267,088,809 (100.0%)
============== ============== ============
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1997--(CONTINUED)
METROPOLITAN SERIES FUND, INC.
<TABLE>
<CAPTION>
LOOMIS SAYLES
HIGH YIELD BOND
PORTFOLIO
---------------
<S> <C> <C>
COMMON STOCK
Banking............................................... $ 29,699 (0.1%)
Forest Products & Paper............................... 171,511 (0.6%)
Real Estate........................................... 299,587 (1.1%)
Utilities--Electric................................... 105,000 (0.4%)
Utilities--Telephone.................................. 8,409 (0.0%)
-----------
Total Common Stock.................................... 614,206 (2.2%)
-----------
PREFERRED STOCK
Metals--Steel & Iron.................................. 269,750 (1.0%)
Oil--Services......................................... 30,400 (0.1%)
Transportation--Trucking.............................. 66,800 (0.2%)
Utilities--Electric................................... 87,336 (0.3%)
-----------
Total Preferred Stock................................. 454,286 (1.6%)
-----------
LONG-TERM DEBT SECURITIES
Convertible Bonds:
Broadcasting.......................................... 96,750 (0.4%)
Business Services..................................... 152,250 (0.6%)
Computer Equipment & Service.......................... 1,038,775 (3.7%)
Electrical Equipment.................................. 32,800 (0.1%)
Electronics........................................... 638,250 (2.3%)
Entertainment & Leisure............................... 234,750 (0.9%)
Foreign Obligations................................... 1,350,438 (4.9%)
Industrials........................................... 633,650 (2.3%)
Medical Supply........................................ 298,500 (1.1%)
Metals--Steel & Iron.................................. 2,000 (0.0%)
Mining................................................ 522,250 (1.9%)
Miscellaneous......................................... 452,050 (1.6%)
Oil--International.................................... 37,167 (0.1%)
Pollution Control..................................... 255,469 (0.9%)
Real Estate........................................... 96,000 (0.3%)
Restaurant............................................ 682,625 (2.5%)
Retail Trade.......................................... 84,250 (0.3%)
Textiles & Apparel.................................... 317,000 (1.1%)
Transportation--Trucking.............................. 116,800 (0.4%)
Utilities--Telephone.................................. 310,000 (1.1%)
-----------
Total Convertible Bonds............................... 7,351,774 (26.5%)
-----------
Corporate Bonds:
Automotive............................................ 177,500 (0.6%)
Broadcasting.......................................... 1,445,555 (5.2%)
Collateralized Mortgage Obligations................... 98,000 (0.4%)
Computer Equipment & Service.......................... 1,017,754 (3.7%)
Electronics........................................... 275,525 (1.0%)
Financial Services.................................... 793,750 (2.9%)
Food & Beverages...................................... 997,719 (3.6%)
Industrials........................................... 525,236 (1.9%)
Metals--Steel & Iron.................................. 152,004 (0.5%)
Pollution Control..................................... 120,000 (0.4%)
Real Estate........................................... 247,500 (0.9%)
Retail Grocery........................................ 169,500 (0.6%)
Retail Trade.......................................... 526,625 (1.9%)
Telecommunications Equipment & Services............... 525,825 (1.9%)
Utilities--Electric................................... 778,000 (2.8%)
Utilities--Telephone.................................. 2,393,688 (8.6%)
-----------
Total Corporate Bonds................................. 10,244,181 (36.9%)
-----------
Foreign Obligations................................... 4,150,064 (14.9%)
Yankee Bonds.......................................... 3,152,009 (11.3%)
-----------
Total Bonds........................................... 24,898,028 (89.6%)
TOTAL SHORT-TERM OBLIGATIONS--REPURCHASE AGREEMENTS.... 1,782,000 (6.4%)
-----------
TOTAL INVESTMENTS...................................... 27,748,520 (99.8%)
Other Assets Less Liabilities......................... 55,146 (0.2%)
-----------
NET ASSETS............................................. $27,803,666 (100.0%)
===========
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1997--(CONTINUED)
METROPOLITAN SERIES FUND, INC.
<TABLE>
<CAPTION>
JANUS T. ROWE PRICE SCUDDER
MID CAP SMALL CAP GROWTH GLOBAL EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Aerospace............... $ 1,929,398 2.1%) $ 582,356 (1.0%)
Automotive.............. $ 868,848 (0.8%) 1,535,550 (1.6%) 334,050 (0.6%)
Banking................. 2,514,292 (2.4%) 3,793,175 (4.0%) 2,528,176 (4.2%)
Biotechnology........... 737,930 (0.8%) 109,238 (0.2%)
Broadcasting............ 9,592,084 (9.2%) 2,176,161 (2.3%) 668,014 (1.1%)
Building &
Construction........... 1,339,459 (1.4%)
Business Services....... 8,259,757 (8.0%) 9,108,644 (9.7%) 473,850 (0.8%)
Chemicals............... 488,150 (0.5%) 4,301,881 (7.1%)
Computer Equipment &
Service................ 1,355,650 (1.3%) 4,896,551 (5.2%)
Construction Materials.. 5,772,605 (5.6%) 911,288 (1.0%) 511,486 (0.8%)
Construction & Mining
Equipment.............. 512,742 (0.5%)
Consumer Products....... 327,816 (0.4%) 1,038,234 (1.7%)
Consumer Services....... 230,503 (0.4%)
Cosmetics............... 269,325 (0.3%)
Drugs & Health Care..... 9,479,980 (9.1%) 7,326,342 (7.8%) 1,893,125 (3.1%)
Education............... 4,412,464 (4.3%) 985,719 (1.0%)
Electrical Equipment.... 3,993,096 (3.9%) 2,149,376 (2.3%) 1,121,131 (1.7%)
Electronics............. 5,015,736 (4.8%) 6,660,654 (7.1%) 850,606 (1.4%)
Energy.................. 605,906 (0.6%)
Entertainment &
Leisure................ 2,498,617 (2.4%) 2,547,108 (2.7%)
Financial Services...... 9,266,979 (8.9%) 1,936,243 (2.1%) 1,252,399 (2.1%)
Food & Beverages........ 1,822,511 (1.8%) 552,782 (0.6%) 1,693,834 (2.8%)
Forest Products &
Paper.................. 52,594 (0.1%) 261,625 (0.4%)
Healthcare Services..... 1,858,959 (1.8%) 2,159,197 (2.3%)
Hotel & Motel........... 981,770 (1.0%)
Household Appliances &
Home Furnishings....... 617,587 (0.7%)
Insurance............... 2,665,512 (2.6%) 3,326,513 (3.5%) 7,298,843 (12.0%)
Machinery............... 69,400 (0.1%) 584,593 (1.0%)
Medical Supply.......... 1,846,006 (2.0%) 1,113,861 (1.8%)
Metals--Gold............ 14,688 (0.0%) 247,458 (0.4%)
Metals--Non-Ferrous..... 364,000 (0.4%) 213,760 (0.4%)
Metals--Steel & Iron.... 458,394 (0.8%)
Mining.................. 443,368 (0.7%)
Miscellaneous........... 1,842,291 (2.0%)
Multi-Industry.......... 1,319,463 (1.3%) 1,727,416 (2.8%)
Office & Business
Equipment.............. 1,772,944 (1.7%) 2,371,144 (2.5%) 1,768,470 (2.9%)
Oil & Gas Exploration... 1,892,111 (2.0%)
Oil--Domestic........... 46,575 (0.0%)
Oil--International...... 1,329,968 (2.2%)
Oil--Services........... 1,363,250 (1.4%) 523,959 (0.9%)
Plastics................ 1,356,956 (1.3%) 333,450 (0.4%)
Pollution Control....... 448,322 (0.5%)
Printing & Publishing... 38,375 (0.0%) 148,548 (0.2%)
Real Estate............. 2,574,758 (2.5%) 453,506 (0.5%) 326,281 (0.5%)
Restaurant.............. 9,003,672 (8.7%) 956,133 (1.0%)
Retail Grocery.......... 323,275 (0.3%) 565,025 (0.6%)
Retail Trade............ 3,673,828 (3.5%) 6,760,914 (7.2%) 264,075 (0.4%)
Shipbuilding............ 416,500 (0.4%)
Software................ 3,020,850 (2.9%) 6,090,820 (6.5%) 1,565,031 (2.6%)
Technology.............. 16,949 (0.0%)
Telecommunications
Equipment & Services... 4,621,813 (4.9%) 521,314 (0.9%)
Textiles & Apparel...... 1,289,919 (1.4%)
Tires & Rubber.......... 458,339 (0.8%)
Transportation.......... 327,750 (0.3%)
Transportation--
Airlines............... 1,388,156 (1.3%) 567,225 (0.6%) 1,067,700 (1.8%)
Transportation--
Railroad............... 494,413 (0.5%) 711,123 (1.2%)
Transportation--
Trucking............... 346,544 (0.4%)
Utilities--Electric..... 2,729,894 (2.6%) 3,366,089 (5.5%)
Utilities--Gas
Distribution &
Pipelines.............. 619,281 (1.0%)
Utilities--
Miscellaneous.......... 552,834 (0.5%)
Utilities--Telephone.... 1,637,908 (1.6%) 1,031,758 (1.1%) 963,189 (1.6%)
------------ ----------- -----------
Total Common Stock...... 99,244,370 (95.6%) 91,984,119 (97.8%) 43,571,568 (71.8%)
------------ ----------- -----------
PREFERRED STOCK
Food & Beverages........ 369,607 (0.6%)
Metals--Steel & Iron.... 651,921 (1.1%)
Oil--International...... 950,554 (1.6%)
Software................ 686,984 (1.1%)
------------ ----------- -----------
Total Preferred Stock... -- (0.0%) -- (0.0%) 2,659,066 (4.4%)
------------ ----------- -----------
Total Equity
Securities............. 99,244,370 (95.6%) 91,984,119 (97.8%) 46,230,634 (76.2%)
LONG-TERM DEBT
SECURITIES
Federal Treasury
Obligations............ 8,051,582 (13.2%)
Foreign Obligations..... 1,873,970 (3.1%)
------------ ----------- -----------
Total Long-Term Debt
Securities............. -- (0.0%) -- (0.0%) 9,925,552 (16.3%)
SHORT-TERM OBLIGATIONS
Commercial Paper........ 1,879,000 (3.1%)
Banking................. 410,282 (0.4%)
Federal Agency
Obligations............ 4,999,167 (4.8%) 1,518,800 (1.6%) 3,999,472 (6.6%)
Financial Services...... 4,899,088 (4.7%) 1,657,167 (1.8%)
------------ ----------- -----------
Total Short-Term
Obligations............ 9,898,255 (9.5%) 3,586,249 (3.8%) 5,878,472 (9.7%)
------------ ----------- -----------
TOTAL INVESTMENTS....... 109,142,625 (105.1%) 95,570,368 (101.6%) 62,034,658 (102.2%)
Other Assets Less
Liabilities............ (5,290,984) (-5.1%) (1,550,362) (-1.6%) (1,322,516) (-2.2%)
------------ ----------- -----------
NET ASSETS.............. $103,851,641 (100.0%) $94,020,006 (100.0%) $60,712,142 (100.0%)
============ =========== ===========
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
5. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1997--(CONCLUDED)
The value of the investments of the Fund's portfolios are determined using
the following valuation techniques. Portfolio securities that are traded on
domestic stock exchanges are valued at the last price as of the close of
business on the day the securities are being valued, or, lacking any sales, at
the mean between closing bid and asked prices (except for the Loomis Sayles
High Yield Bond Portfolio, which in the latter case would value such
securities at the last bid price). Securities trading primarily on non-
domestic exchanges are valued at the preceding closing price on the exchange
where it primarily trades (or, in the case of the Loomis Sayles High Yield
Bond and Scudder Global Equity Portfolios, the last sale). A security that is
listed or traded on more than one exchange is valued at the quotation on the
exchange determined to be the primary market for that security by the Board of
Directors or its delegates. If no closing price is available, then such
securities are valued by using the mean between the last current bid and asked
prices or, second, by using the last available closing price (except for the
Scudder Global Equity Portfolio which second values such securities at the
last current bid, and third by using the last available price). Domestic
securities traded in the over-the-counter market are valued at the mean
between the bid and asked prices or yield equivalent as obtained from two or
more dealers that make markets in the securities (except for the Loomis Sayles
High Yield Bond Portfolio, which, in the latter case, would value such
security at the last bid price; or the Scudder Global Equity Portfolio which
would value such security first at the last sale, and second at the bid
price). All non-U.S. securities traded in the over-the-counter securities
market are valued at the last sale quote, if market quotations are available,
or the last closing bid price, if there is no active trading in a particular
security for a given day. Where market quotations are not readily available
such non-domestic over-the-counter securities, then such securities will be
valued in good faith by a method that the Board of Directors, or it delegates,
believe accurately reflects fair value. Portfolio securities which are traded
both in the over-the-counter market and on a stock exchange are valued
according to the broadest and most representative market, and it is expected
that for debt securities this ordinarily will be the over-the-counter market.
Securities and assets for which market quotations are not readily available
(e.g. certain long-term bonds and notes) are valued at fair value as
determined in good faith by or under the direction of the Board of Directors
of the Fund, including valuations furnished by a pricing service retained for
this purpose and typically utilized by other institutional-sized trading
organizations. Forward foreign currency exchange contracts are valued based on
the closing prices of the forward currency contract rates in the London
foreign exchange markets on a daily basis as provided by a reliable bank or
dealer. Short-term instruments with a remaining maturity of sixty days or less
are valued utilizing the amortized cost, method of valuation. If for any
reason the fair value of any security is not fairly reflected by such method,
such security will be valued by the same methods as securities having a
maturity of more than sixty days.
Options, whether on securities, indices, or futures contracts, are valued at
the last sales price available as of the close of business on the day of
valuation or, if no sale, at the mean between the bid and asked prices.
Options on currencies are valued at the spot price each day. As a general
matter, futures contracts are marked-to-market daily. The value of futures
contracts will be the sum of the margin deposit plus or minus the difference
between the value of the futures contract on each day the net asset value is
calculated and the value on the date the futures contract originated, value
being that established on a recognized commodity exchange, or by reference to
other customary sources, with gain or loss being realized when the futures
contract closes or expires.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Metropolitan Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Metropolitan
Life Insurance Company (the "company") as of December 31, 1997 and 1996 and
the related consolidated statements of earnings, equity and cash flows for
each of the three years in the period ended December 31, 1997. These
consolidated financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of the company at
December 31, 1997 and 1996 and the consolidated results of its operations and
its consolidated cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the company
has changed the method of accounting for investment income on certain
structured securities.
Deloitte & Touche LLP
New York, New York
February 12, 1998, except for Note 17,
as to which the date is March 12, 1998
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
NOTES 1997 1996
----- -------- --------
<S> <C> <C> <C>
ASSETS
Investments:
Fixed Maturities:.................................... 2,15
Available for Sale, at Estimated Fair Value........ $ 92,630 $ 75,039
Held to Maturity, at Amortized Cost................ -- 11,322
Equity Securities.................................... 2,15 4,250 2,816
Mortgage Loans on Real Estate........................ 2,15 20,247 18,964
Policy Loans......................................... 15 5,846 5,842
Real Estate.......................................... 2 6,111 7,498
Real Estate Joint Ventures........................... 4 680 851
Other Limited Partnership Interests.................. 4 855 1,004
Leases and Leveraged Leases.......................... 2 2,123 1,763
Short-Term Investments............................... 15 705 741
Other Invested Assets................................ 2,338 2,692
-------- --------
Total Investments.................................. 135,785 128,532
Cash and Cash Equivalents.............................. 15 2,871 2,325
Deferred Policy Acquisition Costs...................... 6,436 7,227
Accrued Investment Income.............................. 1,860 1,611
Premiums and Other Receivables......................... 5 3,280 2,916
Deferred Income Taxes Recoverable...................... 6 -- 37
Other Assets........................................... 3,055 2,340
Separate Account Assets................................ 48,620 43,763
-------- --------
Total Assets........................................... $201,907 $188,751
======== ========
LIABILITIES AND EQUITY
Liabilities
Future Policy Benefits................................. 5 $ 72,125 $ 69,115
Policyholder Account Balances.......................... 15 48,533 47,674
Other Policyholder Funds............................... 4,681 4,758
Policyholder Dividends Payable......................... 1,373 1,348
Short- and Long-Term Debt.............................. 9,15 7,203 5,257
Income Taxes Payable:.................................. 6
Current.............................................. 480 599
Deferred............................................. 472 --
Other Liabilities...................................... 4,695 4,618
Separate Account Liabilities........................... 48,338 43,399
-------- --------
Total Liabilities...................................... 187,900 176,768
-------- --------
Commitments and Contingencies (Notes 2 and 10)
Equity
Retained Earnings...................................... 12,140 10,937
Net Unrealized Investment Gains........................ 3 1,898 1,028
Foreign Currency Translation Adjustments............... (31) 18
-------- --------
Total Equity........................................... 16 14,007 11,983
-------- --------
Total Liabilities and Equity........................... $201,907 $188,751
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1997, AND 1996 AND 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
NOTES 1997 1996 1995
----- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES
Premiums...................................... 5 $11,299 $11,462 $11,178
Universal Life and Investment-Type Product
Policy Fee Income............................ 1,458 1,243 1,177
Net Investment Income......................... 3 9,475 8,993 8,837
Investment Gains (Losses), Net................ 3 798 231 (157)
Commissions, Fees and Other Income............ 1,344 1,256 834
------- ------- -------
Total Revenues............................ 24,374 23,185 21,869
------- ------- -------
BENEFITS AND OTHER DEDUCTIONS
Policyholder Benefits......................... 5 12,328 12,399 11,915
Interest Credited to Policyholder Account Bal-
ances........................................ 2,874 2,868 3,143
Policyholder Dividends........................ 1,720 1,728 1,786
Other Operating Costs and Expenses............ 11 5,759 4,784 4,281
------- ------- -------
Total Benefits and Other Deductions....... 22,681 21,779 21,125
------- ------- -------
Earnings from Continuing Operations Before In-
come Taxes................................... 1,693 1,406 744
Income Taxes.................................. 6 476 482 407
------- ------- -------
Earnings from Continuing Operations........... 1,217 924 337
------- ------- -------
Discontinued Operations: 13
Loss from Discontinued Operations (Net of
Income Tax (Benefit) Expense of $(8) in
1997, $(18) in 1996 and $32 in 1995)....... (14) (52) (54)
(Loss) Gain on Disposal of Discontinued Op-
erations (Net of Income Tax (Benefit) Ex-
pense of $(11) in 1996 and $106 in 1995)... -- (19) 416
------- ------- -------
(Loss) Earnings from Discontinued Operations.. (14) (71) 362
------- ------- -------
Net Earnings.................................. 16 $ 1,203 $ 853 $ 699
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
NOTES 1997 1996 1995
----- ------- ------- -------
<S> <C> <C> <C> <C>
Retained Earnings, Beginning of Year.......... $10,937 $10,084 $ 9,385
Net Earnings.................................. 1,203 853 699
------- ------- -------
Retained Earnings, End of Year................ 12,140 10,937 10,084
------- ------- -------
Net Unrealized Investment Gains (Losses), Be-
ginning of Year.............................. 1,028 1,646 (955)
Change in Unrealized Investment Gains (Loss-
es).......................................... 3 870 (618) 2,601
------- ------- -------
Net Unrealized Investment Gains, End of Year.. 1,898 1,028 1,646
------- ------- -------
Foreign Currency Translation Adjustments, Be-
ginning of Year.............................. 18 24 (2)
Change in Foreign Currency Translation Adjust-
ments........................................ (49) (6) 26
------- ------- -------
Foreign Currency Translation Adjustments, End
of Year...................................... (31) 18 24
------- ------- -------
Total Equity, End of Year..................... 16 $14,007 $11,983 $11,754
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net Earnings $ 1,203 $ 853 $ 699
Adjustments to Reconcile Net Earnings to Net Cash
Provided by Operating Activities:
<CAPTION>
Change in Deferred Policy Acquisition Costs, Net. (159) (391) (376)
<S> <C> <C> <C>
Change in Accrued Investment Income.............. (215) 350 (191)
Change in Premiums and Other Receivables......... (819) (106) (29)
Change in Undistributed Income of Real Estate
Joint Ventures and Other
Limited Partnership Interests................... 163 (45) (221)
Gains from Sales of Investments and Businesses,
Net............................................. (1,029) (428) (595)
Depreciation and Amortization Expenses........... 516 (18) 30
Interest Credited to Policyholder Account Bal-
ances........................................... 2,874 2,868 3,143
Universal Life and Investment-Type Product Policy
Fee Income...................................... (1,458) (1,243) (1,177)
Change in Future Policy Benefits................. 1,641 2,149 2,332
Change in Other Policyholder Funds............... 88 181 (66)
Change in Income Taxes Payable................... (99) (134) 327
Other, Net....................................... 512 (348) 947
-------- -------- --------
Net Cash Provided by Operating Activities.......... 3,218 3,688 4,823
-------- -------- --------
Cash Flows from Investing Activities
Sales, Maturities and Repayments of:
Fixed Maturities................................ 75,346 76,117 64,372
Equity Securities............................... 1,821 2,069 694
Mortgage Loans on Real Estate................... 2,381 2,380 3,182
Real Estate..................................... 1,875 1,948 1,193
Real Estate Joint Ventures...................... 205 410 387
Other Limited Partnership Interests............. 166 178 42
Leases and Leveraged Leases..................... 192 102 123
Purchases of:
Fixed Maturities................................ (76,603) (76,225) (66,693)
Equity Securities............................... (2,121) (2,742) (781)
Mortgage Loans on Real Estate................... (4,119) (4,225) (2,491)
Real Estate..................................... (387) (859) (904)
Real Estate Joint Ventures...................... (72) (130) (285)
Other Limited Partnership Interests............. (338) (307) (87)
Assets to be Leased............................. (738) (585) (383)
Net Change in Short-Term Investments.............. 37 1,028 (634)
Net Change in Policy Loans........................ 17 (128) (112)
Other, Net........................................ 442 45 (308)
-------- -------- --------
Net Cash Used by Investing Activities.............. (1,896) (924) (2,685)
-------- -------- --------
Cash Flows from Financing Activities
Policyholder Account Balances:
Deposits....................................... 16,061 17,167 16,017
Withdrawals.................................... (18,831) (19,321) (19,142)
Additions to Long-Term Debt....................... 828 -- 692
Repayments of Long-Term Debt...................... (99) (284) (389)
Net Increase (Decrease) in Short-Term Debt........ 1,265 69 (78)
-------- -------- --------
Net Cash Used by Financing Activities.............. (776) (2,369) (2,900)
-------- -------- --------
Change in Cash and Cash Equivalents................ 546 395 (762)
Cash and Cash Equivalents, Beginning of Year....... 2,325 1,930 2,692
-------- -------- --------
Cash and Cash Equivalents, End of Year............. $ 2,871 $ 2,325 $ 1,930
======== ======== ========
Supplemental Cash Flow Information
Interest Paid.................................... $ 422 $ 310 $ 280
======== ======== ========
Income Taxes Paid................................ $ 589 $ 497 $ 283
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNLESS OTHERWISE INDICATED, ALL AMOUNTS ARE IN MILLIONS OF DOLLARS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Metropolitan Life Insurance Company ("MetLife") and its subsidiaries
(collectively, the "company") provide life insurance and annuity products and
pension, pension-related and investment-related products and services to
individuals, corporations and other institutions. The company also provides
nonmedical health, disability and property and casualty insurance and offers
investment management, investment advisory and commercial finance services.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). The New York State
Insurance Department (the "Department") recognizes only statutory accounting
practices for determining and reporting the financial condition and results of
operations of an insurance company for determining solvency under the New York
Insurance Law. No consideration is given by the Department to financial
statements prepared in accordance with GAAP in making such determination.
The consolidated financial statements include the accounts of MetLife and
its subsidiaries, partnerships and joint venture interests in which MetLife
has control. Other equity investments in affiliated companies, partnerships
and joint ventures are generally reported on the equity basis. Minority
interest relating to certain consolidated entities amounted to $277 and $149
at December 31, 1997 and 1996, respectively, and is included in other
liabilities. Significant intercompany transactions and balances have been
eliminated in consolidation.
Prior years' amounts have been reclassified to conform to the 1997
presentation.
On December 31, 1995, the company reclassified (under one-time accounting
implementation guidance) to available for sale certain held to maturity
securities. On July 1, 1997, the company reclassified to available for sale
all securities classified as held to maturity on that date as management
concluded that all securities are now available for sale. As a result,
consolidated equity at July 1, 1997 and December 31, 1995 increased by $198
and $135, respectively, excluding the effects of deferred income taxes,
amounts attributable to participating pension contracts, and adjustments of
deferred policy acquisition costs and future policy benefit loss recognition.
During 1997 management changed to the retrospective interest method of
accounting for investment income on structured note securities in accordance
with authoritative guidance issued in late 1996. As a result, net investment
income increased by $175. The cumulative effect of this accounting change on
prior years' income is not material.
VALUATION OF INVESTMENTS
SECURITIES--As mentioned above, during 1997 management reclassified all of
the company's fixed maturity securities to available for sale. Accordingly, as
of December 31, 1997, all of the company's investment securities are carried
at estimated fair value. Prior to this reclassification, certain fixed
maturity securities (principally bonds and redeemable preferred stock) were
carried at amortized cost. Unrealized investment gains and losses on
investment securities are recorded directly as a separate component of equity
net of related deferred income taxes, amounts attributable to participating
pension contracts and adjustments of deferred policy acquisition costs and
future policy benefit loss recognition. Costs of securities are adjusted for
impairments in value considered other than temporary. Such adjustments are
recorded as realized investment losses.
All security transactions are recorded on a trade date basis.
MORTGAGE LOANS in good standing are carried at amortized cost. A provision
is made for a realized investment loss (and a corresponding allowance is
established) when it becomes probable that the company will be unable to
collect all amounts due under the terms of the loan agreement. The provision
generally is equal to the excess of the carrying value of the mortgage loan
over its estimated fair value. Estimated fair value is based on either the
present value of
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
expected future cash flows discounted at the loan's effective interest rate,
the loan's observable market price or the fair value of the collateral.
Mortgage loans considered to be uncollectible are charged against the
allowance and subsequent recoveries are credited to the allowance. Interest
income earned on loans where the collateral value is used to measure
impairment is recorded on a cash basis. Interest income earned on loans where
the present value method is used to measure impairment is accrued on the net
carrying value amount of the loan at the interest rate used to discount the
cash flows.
POLICY LOANS are stated at unpaid principal balances.
INVESTMENT REAL ESTATE is generally stated at depreciated cost. Real estate
acquired in satisfaction of debt is recorded at estimated fair value at the
date of foreclosure. If events or changes in circumstances indicate that the
carrying amount of the investment exceeds its expected future cash flows, a
realized investment loss is recorded for the impairment. Real estate
investments that management intends to sell in the near term are reported at
the lower of cost or estimated fair market value less allowances for the
estimated cost of sales. Changes in the allowance relating to real estate to
be disposed of and impairments of real estate are reported as realized
investment gains or losses.
Depreciation of real estate is computed evenly over the estimated useful
lives of the properties (20 to 40 years).
LEASES AND LEVERAGED LEASES--The company is the lessor of equipment in both
direct financing and operating lease transactions. At lease commencement, the
company records the aggregate future minimum lease payments due and the
estimated residual value of the leased equipment less the unearned lease
income for direct financing leases. The unearned lease income represents the
excess of aggregate future minimum lease receipts plus the estimated residual
value over the cost of the leased equipment. Lease income is recognized over
the term of the lease in a manner which reflects a level yield on the net
investment in the lease. Certain origination fees and costs are deferred and
recognized over the term of the lease using the interest method. For operating
lease transactions, the cost of equipment or its net realizable value is
depreciated evenly over its estimated economic life.
The company participates in leasing transactions in which it supplies only a
portion of the purchase price, but generally has the entire equity interest in
the equipment and rentals receivable (leveraged leases). These interests,
however, are subordinated to the interests of the lenders supplying the
nonequity portion of the purchase price. The financing is generally in the
form of long-term debt that provides for no recourse against the company and
is collateralized by the property. The investment in leveraged leases is
recorded net of the nonrecourse debt. Revenue, including related tax benefits,
is recorded over the term of the lease at a level rate of return. Management
regularly reviews residual values and writes down residuals to expected values
as needed.
SHORT-TERM INVESTMENTS are stated at amortized cost, which approximates fair
value.
INVESTMENT RESULTS
Realized investment gains and losses are determined by specific
identification and are presented as a component of revenues. Valuation
allowances are deducted from asset categories to which they apply and
provisions for losses for investments are included in investment gains and
losses. Investment gains and losses are reduced by amounts attributable to
participating pension contracts and adjustments of deferred policy acquisition
costs and future policy benefit loss recognition.
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.
PROPERTY AND EQUIPMENT
Property and equipment and leasehold improvements are included in other
assets, and are stated at cost, less accumulated depreciation and
amortization. Depreciation, including charges relating to capitalized leases,
is provided evenly or using sum of the years digits method over the lesser of
estimated useful lives of the assets or, where
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
appropriate, the term of the lease. Estimated lives range from 20 to 40 years
for real estate and 5 to 15 years for all other property and equipment.
Amortization of leasehold improvements is provided evenly over the lesser of
the term of the lease or the estimated useful life of the improvements.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business that vary with and are primarily related
to the production of new business are deferred. Such costs, which consist
principally of commissions, agency and policy issue expenses, are amortized
over 40 years for participating traditional life and 30 years for universal
life and investment-type products. Amortization is recorded based on a
constant percentage of estimated gross margins or profits (arising principally
from surrender charges and interest, mortality and expense margins based on
historical and anticipated future experience). Changes to amounts previously
amortized are reflected in earnings in the period related estimates are
revised.
For nonparticipating traditional life and annuity policies with life
contingencies, deferred policy acquisition costs are amortized in proportion
to anticipated premiums. Assumptions as to anticipated premiums are made at
the date of policy issue and are consistently applied during the life of the
contracts. Deviations from estimated experience are reflected in earnings when
they occur. For these contracts, the amortization periods generally are for
the estimated life of the policy.
For nonmedical health insurance contracts, deferred policy acquisition costs
are amortized over the estimated life of the contracts (generally 10 years) in
proportion to anticipated premium revenue at the time of issue.
For property and liability insurance, deferred policy acquisition costs are
amortized over the terms of policies or reinsurance treaties.
OTHER INTANGIBLE ASSETS
The value of insurance acquired and the excess of purchase price over the
fair value of net assets acquired are included in other assets. The value of
insurance acquired is amortized over the expected policy or contract duration
in relation to the present value of estimated gross profits from such policies
and contracts. The excess of purchase price over the fair value of net assets
acquired is amortized evenly over 10 years.
FUTURE POLICY BENEFITS AND POLICYHOLDER ACCOUNT BALANCES
Future policy benefit liabilities for participating traditional life
insurance policies are equal to the aggregate of (a) net level premium
reserves for death and endowment policy benefits (calculated based on the
nonforfeiture interest rate, ranging from 2.5 percent to 7.0 percent, and
mortality rates guaranteed in calculating the cash surrender values described
in such contracts), (b) the liability for terminal dividends, and (c) premium
deficiency reserves, which are established when the liabilities for future
policy benefits plus the present value of expected future gross premiums are
insufficient to provide for expected future policy benefits and expenses after
deferred policy acquisition costs are written off.
Future policy benefit liabilities for traditional annuities are equal to
accumulated contractholder fund balances during the accumulation period and
the present value of expected future payments after annuitization. Interest
rates used in establishing such liabilities range from 6.0 percent to 8.25
percent.
Policyholder account balances for universal life and investment-type
contracts are equal to the policy account values, which consist of an
accumulation of gross premium payments plus credited interest less expense and
mortality charges and withdrawals.
Benefit liabilities for nonmedical health insurance are calculated using the
net level premium method and assumptions as to future morbidity, withdrawals
and interest, which provide a margin for adverse deviation. Benefit
liabilities for disabled lives are estimated using the present value of
benefits method and experience assumptions as to claim terminations, expenses
and interest.
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
For property and liability insurance, the liability for unpaid reported
losses is based on a case by case or overall estimate using the company's past
experience. A provision is also made for losses incurred but not reported on
the basis of estimates and past experience. Revisions of estimates are
reflected in net earnings in the year such refinements are made.
RECOGNITION OF INCOME AND EXPENSE
Premiums from traditional life and annuity policies with life contingencies
are recognized as income when due. Benefits and expenses are matched with such
income resulting in the recognition of profits over the life of the contract.
This match is accomplished through the provision for future policy benefits
and the deferral and subsequent amortization of policy acquisition costs.
Premiums due over a significantly shorter period than the total period over
which benefits are provided are recorded as income when due with any excess
profit deferred and recognized as income in a constant relationship to
insurance in-force or, for annuities, the amount of expected future benefit
payments.
Premiums from nonmedical health contracts are recognized as income on a pro
rata basis over the contract term.
Premiums from universal life and investment-type contracts are credited to
policyholder account balances. Revenues from such contracts consist of amounts
assessed against policyholder account balances for mortality, policy
administration and surrender charges. Amounts that are charged to expense
include benefit claims incurred in the period in excess of related
policyholder account balances and interest credited to policyholder account
balances.
Property and liability premiums are generally recognized as revenue on a pro
rata basis over the policy term. Unearned premiums are included in other
liabilities.
POLICYHOLDER DIVIDENDS
The amount of policyholder dividends to be paid is determined annually by
the board of directors. The aggregate amount of policyholder dividends is
related to actual interest, mortality, morbidity and expense experience for
the year and management's judgment as to the appropriate level of statutory
surplus to be retained by the company.
INCOME TAXES
MetLife and its eligible life insurance and nonlife insurance subsidiaries
file a consolidated U.S. federal income tax return and separate income tax
returns as required. The future tax consequences of temporary differences
between financial reporting and tax bases of assets and liabilities are
measured as of the balance sheet dates and are recorded as deferred income tax
assets or liabilities.
SEPARATE ACCOUNT OPERATIONS
Separate Accounts are established in conformity with insurance laws and are
generally not chargeable with liabilities that arise from any other business
of the company. Separate Account assets are subject to general account claims
only to the extent the value of such assets exceeds the Separate Account
liabilities.
Investments held in the Separate Accounts (stated at estimated fair 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.
DISCONTINUED OPERATIONS
Certain operations have been discontinued and, accordingly, are segregated
in the consolidated statements of earnings.
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign operations and subsidiaries are translated
at the exchange rate in effect at year-end. Revenues and benefits and other
expenses are translated at the average rate prevailing during the year.
Translation adjustments arising from the use of differing exchange rates from
period to period are charged or credited directly to equity.
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, the
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.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 125 Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
and SFAS No. 127 Deferral of the Effective Date of Certain Provisions of FASB
Statement No. 125 provide accounting and reporting standards relating to
transfers of security interests, repurchase agreements, dollar rolls,
securities lending and similar transactions which will be effective in 1998.
The company believes that the application of these standards will not have a
material impact on the company's results of operations, financial position or
liquidity.
SFAS No. 130 Reporting Comprehensive Income establishes standards for
reporting and presentation of comprehensive income and its components and will
be effective in 1998. Comprehensive income, which includes all changes to
equity except those resulting from investments by owners or distributions to
owners, was $2,024, $229 and $3,326 in 1997, 1996 and 1995, respectively.
Consolidated statements of comprehensive income have not been presented, as
the company has not determined the individual amounts to be displayed in such
statements.
2. INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES
The cost or amortized cost, gross unrealized gain and loss, and estimated
fair value of fixed maturity and equity securities, by category, were as
follows:
<TABLE>
<CAPTION>
COST OR GROSS UNREALIZED
AMORTIZED ---------------- ESTIMATED
COST GAIN LOSS FAIR VALUE
--------- --------- -----------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Available for Sale Securities:
Fixed Maturities:
Bonds:
U. S. Treasury securities and
obligations of U. S. government
corporations and agencies............ $ 10,619 $ 1,511 $ 2 $ 12,128
States and political subdivisions..... 486 22 -- 508
Foreign governments................... 3,420 371 52 3,739
Corporate............................. 41,191 2,343 290 43,244
Mortgage-backed securities............ 22,191 572 21 22,742
Other................................. 9,463 428 134 9,757
-------- --------- ------ --------
Total bonds......................... 87,370 5,247 499 92,118
Redeemable preferred stocks............. 494 19 1 512
-------- --------- ------ --------
Total fixed maturities.............. $ 87,864 $ 5,266 $ 500 $ 92,630
======== ========= ====== ========
Equity Securities:
Common stocks........................... $ 2,444 $ 1,716 $ 105 $ 4,055
Nonredeemable preferred stocks.......... 201 5 11 195
-------- --------- ------ --------
Total equity securities............. $ 2,645 $ 1,721 $ 116 $ 4,250
======== ========= ====== ========
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
COST OR GROSS UNREALIZED
AMORTIZED ---------------- ESTIMATED
COST GAIN LOSS FAIR VALUE
--------- --------- ------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Available for Sale Securities:
Fixed Maturities:
Bonds:
U. S. Treasury securities and
obligations of U. S. government
corporations and agencies........... $12,949 $ 901 $128 $13,722
States and political subdivisions.... 536 13 1 548
Foreign governments.................. 2,597 266 6 2,857
Corporate............................ 32,520 1,102 294 33,328
Mortgage-backed securities........... 21,200 407 91 21,516
Other................................ 2,511 90 30 2,571
------- --------- ------- -------
Total bonds........................ 72,313 2,779 550 74,542
Redeemable preferred stocks............ 500 -- 3 497
------- --------- ------- -------
Total fixed maturities............. $72,813 $ 2,779 $ 553 $75,039
======= ========= ======= =======
Equity Securities:
Common stocks.......................... $ 1,882 $ 648 $ 55 $ 2,475
Nonredeemable preferred stocks......... 371 51 81 341
------- --------- ------- -------
Total equity securities............ $ 2,253 $ 699 $ 136 $ 2,816
======= ========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED ---------------- ESTIMATED
COST GAIN LOSS FAIR VALUE
--------- -------- -------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Held to Maturity Securities:
Fixed Maturities:
Bonds:
U.S. Treasury securities and obliga-
tions of U.S. government corpora-
tions and
agencies............................ $ 48 $ 3 $ 51
States and political subdivisions.... 58 1 59
Foreign governments.................. 260 5 265
Corporate............................ 7,520 236 $ 64 7,692
Mortgage-backed securities........... 689 1 16 674
Other................................ 2,746 85 24 2,807
------- -------- -------- -------
Total bonds........................ 11,321 331 104 11,548
Redeemable preferred stocks............ 1 -- -- 1
------- -------- -------- -------
Total fixed maturities............. $11,322 $ 331 $ 104 $11,549
======= ======== ======== =======
</TABLE>
The amortized cost and estimated fair value of bonds, by contractual
maturity, were as follows:
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
DECEMBER 31, 1997
Due in one year or less.............................. $ 1,916 $ 1,927
Due after one year through five years................ 15,830 16,260
Due after five years through 10 years................ 23,023 24,067
Due after 10 years................................... 24,410 27,122
------- -------
Subtotal........................................... 65,179 69,376
Mortgage-backed securities........................... 22,191 22,742
------- -------
Total.............................................. $87,370 $92,118
======= =======
</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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
MORTGAGE LOANS
Mortgage loans are collateralized by properties principally located
throughout the United States and Canada. At December 31, 1997, approximately
15 percent, 7 percent and 6 percent of the properties were located in
California, Illinois and Florida, respectively. Generally, the company (as the
lender) requires that a minimum of one-fourth of the purchase price of the
underlying real estate be paid by the borrower.
The mortgage loan investments were categorized as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
DECEMBER 31
Office buildings................................................ 32% 30%
Retail.......................................................... 16% 19%
Residential..................................................... 15% 16%
Agricultural.................................................... 18% 18%
Other........................................................... 19% 17%
---- ----
Total......................................................... 100% 100%
==== ====
</TABLE>
Many of the company's real estate joint ventures have mortgage loans with
the company. The carrying values of such mortgages were $753 and $869 at
December 31, 1997 and 1996, respectively.
Mortgage loan valuation allowances and changes thereto were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Balance, January 1............................... $ 444 $ 466 $ 483
Additions charged to income...................... 61 144 107
Deductions for writedowns and dispositions....... (241) (166) (124)
------ ------ ------
Balance, December 31............................. $ 264 $ 444 $ 466
====== ====== ======
Impaired mortgage loans and related valuation allowances were as follows:
<CAPTION>
1997 1996
------ ------
<S> <C> <C> <C>
DECEMBER 31
Impaired mortgage loans with valuation allow-
ances........................................... $1,231 $1,677
Impaired mortgage loans with no valuation allow-
ances........................................... 306 165
------ ------
Recorded investment in impaired mortgage loans... 1,537 1,842
Valuation allowances............................. (250) (427)
------ ------
Net impaired mortgage loans...................... $1,287 $1,415
====== ======
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Average recorded investment in impaired mortgage
loans........................................... $1,680 $2,113 $2,365
====== ====== ======
</TABLE>
Interest income on impaired mortgage loans recorded on a cash basis totaled
$110 , $122 and $169 for the years ended December 31, 1997, 1996 and 1995,
respectively.
REAL ESTATE
Accumulated depreciation on real estate was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Balance, January 1................................ $2,109 $2,187 $2,757
Depreciation expense.............................. 332 348 427
Deductions for dispositions....................... (475) (426) (997)
------ ------ ------
Balance, December 31.............................. $1,966 $2,109 $2,187
====== ====== ======
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Real estate valuation allowances and changes thereto were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Balance, January 1................................... $ 529 $ 743 $ 622
(Credited) charged to income......................... (52) 127 358
Deductions for writedowns and dispositions........... (436) (341) (237)
----- ----- -----
Balance, December 31................................. $ 41 $ 529 $ 743
===== ===== =====
</TABLE>
The above table does not include valuation allowances of $55, $118 and $167
at December 31, 1997, 1996 and 1995, respectively, relating to investments in
real estate joint ventures.
Prior to 1996, the company established valuation allowances for all impaired
real estate investments including real estate held for investment. During
1996, $150 of allowances relating to real estate held for investment were
applied as writedowns to specific properties. During 1997, allowances of $94
relating to real estate held for sale were applied as writedowns to specific
properties. The balances in the real estate valuation allowances at December
31, 1997 and 1996, relate to properties that management has committed to a
plan of sale. The carrying values, net of valuation allowances, of properties
committed to a plan of sale were $206 and $1,844 at December 31, 1997 and
1996, respectively. Net investment income relating to such properties was $8
and $60 for the years ended December 31, 1997 and 1996, respectively.
At December 31, 1997 and 1996, the company owned real estate acquired in
satisfaction of debt of $218 and $456, respectively.
LEASES AND LEVERAGED LEASES
The company's investment in direct financing leases and leveraged leases was
as follows:
<TABLE>
<CAPTION>
DIRECT
FINANCING LEVERAGED
LEASES LEASES TOTAL
-------------- ------------- --------------
1997 1996 1997 1996 1997 1996
------ ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31
Investment................ $1,137 $1,247 $ 851 $ 387 $1,988 $1,634
Estimated residual values. 183 238 641 543 824 781
------ ------ ------ ----- ------ ------
Total................... 1,320 1,485 1,492 930 2,812 2,415
Unearned income........... (261) (336) (428) (316) (689) (652)
------ ------ ------ ----- ------ ------
Net investment............ $1,059 $1,149 $1,064 $ 614 $2,123 $1,763
====== ====== ====== ===== ====== ======
</TABLE>
The investment amounts set forth above are generally due in monthly
installments. The payment periods generally range from three to eight years,
but in certain circumstances are as long as 20 years. Average yields range
from 7 percent to 12 percent. These receivables are generally collateralized
by the related property.
Scheduled aggregate receipts for the investment and estimated residual
values in direct financing leases were as follows:
<TABLE>
<CAPTION>
DIRECT
FINANCING RESIDUALS TOTAL
--------- --------- ------
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
1998......................................... $ 229 $ 14 $ 243
1999......................................... 211 19 230
2000......................................... 192 25 217
2001......................................... 147 19 166
2002......................................... 114 22 136
Thereafter................................... 244 84 328
------ ---- ------
Total........................................ $1,137 $183 $1,320
====== ==== ======
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Historical collection experience indicates that a portion of the above
amounts will be paid prior to contractual maturity. Accordingly, the future
receipts, as shown above, should not be regarded as a forecast of future cash
flows.
FINANCIAL INSTRUMENTS
The company has a securities lending program whereby large blocks of
securities are loaned to third parties, primarily major brokerage firms.
Company policy requires a minimum of 102 percent of the fair value of the
loaned securities to be separately maintained as collateral for the loans. The
collateral is recorded in memorandum records and is not reflected in the
consolidated balance sheets. To further minimize the credit risks related to
this lending program, the company regularly monitors the financial condition
of the borrowers.
The company engages in a variety of derivative transactions. Certain
derivatives, such as forwards, futures, options and swaps, which do not
themselves generate interest or dividend income, are acquired or sold in order
to hedge or reduce risks applicable to assets held, or expected to be
purchased or sold, and liabilities incurred or expected to be incurred. The
company also may occasionally sell covered call options. The company does not
engage in trading of derivatives.
Derivative financial instruments involve varying degrees of market risk
resulting from changes in the volatility of interest rates, foreign currency
exchange rates or market values of the underlying financial instruments. The
company's risk of loss is typically limited to the fair value of these
instruments and not by the notional or contractual amounts which reflect the
extent of involvement but not necessarily the amounts subject to risk. Credit
risk arises from the possible inability of counterparties to meet the terms of
the contracts. Credit risk due to counterparty nonperformance associated with
these instruments is the unrealized gain, if any, reflected by the fair value
of such instruments.
During the three year period ended December 31, 1997, the company employed
several ongoing derivatives strategies. The company entered into a number of
anticipatory hedge agreements using securities forwards, futures and interest
rate swaps to limit the interest rate exposure of investments expected to be
acquired or sold within one year. The company also executed swaps and foreign
currency forwards to hedge, including on an anticipatory basis, the foreign
currency risk of foreign currency denominated investments. The company also
used interest rate swaps and forwards to reduce risks from changes in interest
rates and exposures arising from mismatches between assets and liabilities. In
addition, the company has used interest rate caps to reduce the market and
interest rate risks relating to certain assets and liabilities.
Income and expense related to derivatives used to hedge or manage risks are
recorded on the accrual basis as an adjustment to the yield of the related
securities over the periods covered by the derivative contracts. Gains and
losses relating to early terminations of interest rate swaps used to hedge or
manage interest rate risk are deferred and amortized over the remaining period
originally covered by the swap. Gains and losses relating to derivatives used
to hedge the risks associated with anticipated transactions are deferred and
utilized to adjust the basis of the transaction once it has closed. If it is
determined that the transaction will not close, such gains and losses are
included in realized investment gains and losses.
ASSETS ON DEPOSIT
As of December 31, 1997 and 1996, the company had assets on deposit with
regulatory agencies of $4,695 and $4,062, respectively.
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. NET INVESTMENT INCOME AND INVESTMENT GAINS
The sources of net investment income were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Fixed maturities............................ $ 6,455 $ 6,042 $ 6,006
Equity securities........................... 50 60 45
Mortgage loans on real estate............... 1,684 1,523 1,501
Policy loans................................ 368 399 394
Real estate................................. 1,566 1,647 1,833
Real estate joint ventures.................. 42 21 41
Other limited partnership interests......... 302 215 149
Leases and leveraged leases................. 131 135 113
Cash, cash equivalents and short-term in-
vestments.................................. 169 214 231
Other investment income..................... 235 281 326
------- ------- -------
Gross investment income..................... 11,002 10,537 10,639
Investment expenses......................... (1,527) (1,544) (1,802)
------- ------- -------
Investment income, net...................... $ 9,475 $ 8,993 $ 8,837
======= ======= =======
Investment gains (losses), including changes in valuation allowances, were as
follows:
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Fixed maturities............................ $ 118 $ 234 $ 621
Equity securities........................... 224 78 (5)
Mortgage loans on real estate............... 56 (86) (51)
Real estate................................. 249 165 (375)
Real estate joint ventures.................. 117 61 (142)
Other limited partnership interests......... 103 82 117
Other....................................... 162 (76) (92)
------- ------- -------
Subtotal................................ 1,029 458 73
Investment gains relating to:
Participating pension contracts........... (35) (20) --
Amortization of deferred policy acquisi-
tion costs............................... (70) (4) (78)
Future policy benefit loss recognition.... (126) (203) (152)
------- ------- -------
Net investment gains (losses)............... $ 798 $ 231 $ (157)
======= ======= =======
Sales of bonds were as follows:
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Bonds classified as available for sale
Proceeds.................................. $72,396 $74,580 $58,537
Gross realized gains...................... 691 1,069 1,013
Gross realized losses..................... 584 842 402
Bonds classified as held to maturity
Proceeds.................................. $ 352 $ 1,281 $ 1,806
Gross realized gains...................... 5 10 17
Gross realized losses..................... 1 1 4
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The net unrealized investment gains (losses), which are included in the
consolidated balance sheets as a component of equity, and the changes for the
corresponding years were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -------
<S> <C> <C> <C>
DECEMBER 31
Balance, comprised of:
Unrealized investment gains on:
Fixed maturities.......................... $4,766 $2,226 $ 5,166
Equity securities......................... 1,605 563 210
Other..................................... 294 474 380
------ ------ -------
6,665 3,263 5,756
------ ------ -------
Amounts allocable to:
Participating pension contracts............. 312 9 350
Loss recognition............................ 2,189 1,219 2,064
Deferred policy acquisition cost............ 1,147 420 748
Deferred income taxes....................... 1,119 587 948
------ ------ -------
4,767 2,235 4,110
------ ------ -------
Total................................... $1,898 $1,028 $ 1,646
====== ====== =======
<CAPTION>
1997 1996 1995
------ ------ -------
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Balance, January 1............................ $1,028 $1,646 $ (955)
Unrealized investment gains (losses) during
year......................................... 3,402 (2,493) 7,665
Unrealized investment (gains) losses allocable
to:
Participating pension contracts............. (303) 341 (258)
Loss recognition............................ (970) 845 (2,063)
Deferred policy acquisition costs........... (727) 328 (1,247)
Deferred income taxes......................... (532) 361 (1,496)
------ ------ -------
Balance, December 31.......................... $1,898 $1,028 $ 1,646
====== ====== =======
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. JOINT VENTURES AND OTHER LIMITED PARTNERSHIPS
Combined financial information for real estate joint ventures and other
limited partnership interests accounted for under the equity method, in which
the company has an investment of at least $10 and an equity interest of at
least 10 percent, was as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
DECEMBER 31
Assets:
Investments in real estate, at depreciated cost........ $ 938 $1,030
Investments in securities, at estimated fair value..... 717 621
Cash and cash equivalents.............................. 141 37
Other.................................................. 984 1,030
------ ------
Total assets......................................... 2,780 2,718
------ ------
Liabilities:
Borrowed funds--third party............................ 384 243
Borrowed funds--MetLife................................ 136 69
Other.................................................. 678 915
------ ------
Total liabilities.................................... 1,198 1,227
------ ------
Partners' capital........................................ $1,582 $1,491
====== ======
MetLife equity in partners' capital included above....... $ 822 $ 786
====== ======
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Operations:
Revenues of real estate joint ventures......... $ 291 $ 275 $ 364
Revenues of other limited partnership inter-
ests.......................................... 276 297 417
Interest expense--third party.................. (25) (11) (26)
Interest expense--MetLife...................... (16) (19) (31)
Other expenses................................. (396) (411) (501)
----- ----- -----
Net earnings..................................... $ 130 $ 131 $ 223
===== ===== =====
MetLife earnings from real estate joint ventures
and other limited partnership interests included
above........................................... $ 59 $ 34 $ 28
===== ===== =====
</TABLE>
5. REINSURANCE AND OTHER INSURANCE TRANSACTIONS
The company assumes and cedes insurance with other insurance companies. The
consolidated statements of earnings are presented net of reinsurance ceded.
The effect of reinsurance on premiums earned was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Direct premiums............................ $12,749 $12,569 $11,944
Reinsurance assumed........................ 360 508 812
Reinsurance ceded.......................... (1,810) (1,615) (1,578)
------- ------- -------
Net premiums earned........................ $11,299 $11,462 $11,178
======= ======= =======
Reinsurance recoveries netted against
policyholder benefits..................... $ 1,689 $ 1,667 $ 1,523
======= ======= =======
</TABLE>
Premiums and other receivables in the consolidated balance sheets include
reinsurance recoverables of $1,579 and $700 at December 31, 1997 and 1996,
respectively.
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Activity in the liability for unpaid losses and loss adjustment expenses
relating to property and casualty and group accident and nonmedical health
policies and contracts was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Balance at January 1........................... $3,345 $3,296 $2,670
Reinsurance recoverables..................... (215) (214) (104)
------ ------ ------
Net balance at January 1....................... 3,130 3,082 2,566
------ ------ ------
Incurred related to:
Current year................................. 2,855 2,951 3,420
Prior years.................................. 88 (114) (68)
------ ------ ------
Total incurred............................. 2,943 2,837 3,352
------ ------ ------
Paid related to:
Current year................................. 1,832 1,998 2,053
Prior years.................................. 815 791 783
------ ------ ------
Total paid................................. 2,647 2,789 2,836
------ ------ ------
Net balance at December 31..................... 3,426 3,130 3,082
Plus reinsurance recoverables................ 229 215 214
------ ------ ------
Balance at December 31......................... $3,655 $3,345 $3,296
====== ====== ======
</TABLE>
The company has exposure to catastrophes, which are an inherent risk of the
property and casualty insurance business and could contribute to material
fluctuations in the company's results of operations. The company uses excess
of loss and quota share reinsurance arrangements to reduce its catastrophe
losses and provide diversification of risk.
6. INCOME TAXES
Income tax expense for U. S. operations has been calculated in accordance
with the provisions of the Internal Revenue Code, as amended (the "Code").
Under the Code, the amount of federal income tax expense incurred by mutual
life insurance companies includes an equity tax calculated by a prescribed
formula that incorporates a differential earnings rate between stock and
mutual life insurance companies.
The income tax expense (benefit) of continuing operations was as follows:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
<S> <C> <C> <C>
1997
Federal......................................... $432 $(26) $406
State and local................................. 10 9 19
Foreign......................................... 26 25 51
---- ---- ----
Total......................................... $468 $ 8 $476
==== ==== ====
1996
Federal......................................... $346 $ 66 $412
State and local................................. 25 6 31
Foreign......................................... 27 12 39
---- ---- ----
Total......................................... $398 $ 84 $482
==== ==== ====
1995
Federal......................................... $241 $ 65 $306
State and local................................. 52 3 55
Foreign......................................... 22 24 46
---- ---- ----
Total......................................... $315 $ 92 $407
==== ==== ====
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Reconciliations of the differences between income taxes of continuing
operations computed at the federal statutory tax rates and consolidated
provisions for income taxes were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ----
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Earnings from continuing operations before
income taxes................................... $1,693 $1,406 $744
Income tax rate................................. 35% 35% 35%
------ ------ ----
Expected income tax expense at federal statutory
income tax rate................................ 593 492 260
Tax effect of:
Tax exempt investment income.................. (30) (18) (9)
Goodwill...................................... 9 -- --
Differential earnings amount.................. (40) 38 67
State and local income taxes.................. 15 23 37
Foreign operations............................ 7 (7) 25
Tax credits................................... (15) (15) (15)
Prior year taxes.............................. (2) (46) (3)
Sale of subsidiary............................ (41) -- --
Other, net.................................... (20) 15 45
------ ------ ----
Income taxes.................................... $ 476 $ 482 $407
====== ====== ====
</TABLE>
The deferred income tax assets or liabilities recorded at December 31, 1997
and 1996 represent the net temporary differences between the tax bases of
assets and liabilities and their amounts for financial reporting. The
components of the net deferred income tax asset or liability were as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
DECEMBER 31
Deferred income tax assets:
Policyholder liabilities and receivables........ $3,010 $2,889
Net operating loss carryforwards................ 33 38
Other, net...................................... 938 698
------ ------
Total gross deferred income tax assets........ 3,981 3,625
Less valuation allowance........................ 24 14
------ ------
Deferred income tax assets, net of valuation al-
lowance.......................................... 3,957 3,611
------ ------
Deferred income tax liabilities:
Investments..................................... 1,227 848
Deferred policy acquisition costs............... 1,890 1,940
Net unrealized capital gains.................... 1,119 587
Other, net...................................... 193 199
------ ------
Total deferred income tax liabilities......... 4,429 3,574
------ ------
Net deferred income tax (liability) asset......... $ (472) $ 37
====== ======
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The sources of deferred income tax expense (benefit) and their tax effects
were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Policyholder liabilities and receivables........... $(109) $ 53 $(105)
Net operating loss carryforwards................... 5 (19) 89
Investments........................................ 382 50 199
Deferred policy acquisition costs.................. (51) 55 49
Change in valuation allowance...................... 10 4 (6)
Other, net......................................... (229) (59) (134)
----- ----- -----
Total............................................ $ 8 $ 84 $ 92
===== ===== =====
The valuation allowance for the tax benefits of net operating loss
carryforwards reflects management's assessment, based on available information,
that it is more likely than not that the deferred income tax asset for net
operating loss carryforwards will not be realized. The benefit will be
recognized when management believes that it is more likely than not that the
deferred income tax asset is realizable. U.S. tax basis net operating loss
carryforwards of $15 are available, subject to statutory limitation, to offset
taxable income through the year 2012.
7. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The company is both the sponsor and administrator of defined benefit pension
plans covering all eligible employees and sales representatives of MetLife and
certain of its subsidiaries. Retirement benefits are based on years of credited
service and final average earnings history.
Components of the net periodic pension (credit) cost for the defined benefit
qualified and nonqualified pension plans were as follows:
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Service cost....................................... $ 73 $ 77 $ 62
Interest cost on projected benefit obligation...... 244 232 222
Actual return on assets............................ (318) (273) (280)
Net amortization and deferrals..................... (5) (12) (13)
----- ----- -----
Net periodic pension (credit) cost................. $ (6) $ 24 $ (9)
===== ===== =====
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The funded status of the qualified and nonqualified defined benefit pension
plans and a comparison of the accumulated benefit obligation, plan assets and
projected benefit obligation were as follows:
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
OVERFUNDED UNDERFUNDED OVERFUNDED UNDERFUNDED
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
DECEMBER 31
Actuarial present value of
obligations:
Vested.................... $2,804 $ 251 $2,668 $223
Nonvested................. 33 2 36 2
------ ----- ------ ----
Accumulated benefit obliga-
tion...................... $2,837 $ 253 $2,704 $225
====== ===== ====== ====
Projected benefit obliga-
tion...................... $3,170 $ 353 $2,958 $310
Plan assets (principally
company investment
contracts) at contract
value 3,831 151 3,495 133
------ ----- ------ ----
Plan assets in excess of
(less than) projected
benefit obligation........ 661 (202) 537 (177)
Unrecognized prior service
cost...................... 125 25 139 26
Unrecognized net (gain)
loss from past experience
different from that
assumed................... (130) 21 (27) 60
Unrecognized net asset at
transition................ (140) -- (176) --
------ ----- ------ ----
Prepaid (accrued) pension
cost at December 31....... $ 516 $(156) $ 473 $(91)
====== ===== ====== ====
</TABLE>
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation ranged from 7.25 percent to 7.75
percent for 1997 and 7.25 percent to 8.0 percent for 1996. The weighted
average assumed rate of increase in future compensation levels ranged from 4.5
percent to 8.5 percent in 1997 and from 4.0 percent to 8.0 percent in 1996.
The assumed long-term rate of return on assets used in determining the net
periodic pension cost was 8.75 percent in 1997 and ranged from 8.0 percent to
8.5 percent in 1996. In addition, several other factors, such as expected
retirement dates and mortality, enter into the determination of the actuarial
present value of the accumulated benefit obligation.
SAVINGS AND INVESTMENT PLANS
The company sponsors savings and investment plans available for
substantially all employees under which the company matches a portion of
employee contributions. During 1997, 1996 and 1995, the company contributed
$44, $42 and $49, respectively, to the plans.
OTHER POSTRETIREMENT BENEFITS
The company also provides certain postretirement health care and life
insurance benefits for retired employees through insurance contracts.
Substantially all of the company's employees may, in accordance with the plans
applicable to such benefits, become eligible for these benefits if they attain
retirement age, with sufficient service, while working for the company.
The components of the net periodic nonpension postretirement benefit cost
were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Service cost......................................... $ 31 $ 41 $ 28
Interest cost on accumulated postretirement benefit
obligation.......................................... 122 127 115
Actual return on plan assets (company insurance
contracts).......................................... (66) (58) (63)
Net amortization and deferrals....................... (5) 2 (9)
---- ---- ----
Net periodic nonpension postretirement benefit cost.. $ 82 $112 $ 71
==== ==== ====
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the postretirement health care and life
insurance plans' combined status reconciled with the amount included in the
company's consolidated balance sheets.
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
DECEMBER 31
Accumulated postretirement benefit obligation:
Retirees............................................. $1,251 $1,228
Fully eligible active employees...................... 115 145
Active employees not eligible to retire.............. 397 400
------ ------
Total............................................... 1,763 1,773
Plan assets (company insurance contracts) at contract
value................................................ 1,004 897
------ ------
Plan assets less than accumulated postretirement
benefit obligation................................... (759) (876)
Unrecognized net gain from past experience different
from that assumed and from changes in assumptions.... (173) (60)
------ ------
Accrued nonpension postretirement benefit cost at
December 31.......................................... $ (932) $ (936)
====== ======
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
nonpension postretirement benefit obligation was generally 9.0 percent in
1997, gradually decreasing to 5.25 percent over five years and generally 9.5
percent in 1996 decreasing to 5.25 percent over 12 years. The weighted average
discount rate used in determining the accumulated postretirement benefit
obligation ranged from 7.25 percent to 7.75 percent at December 31, 1997 and
7.0 percent to 7.75 percent at December 31, 1996.
If the health care cost trend rate assumptions were increased 1.0 percent,
the accumulated postretirement benefit obligation as of December 31, 1997
would be increased 6.75 percent. The effect of this change on the sum of the
service and interest cost components of the net periodic postretirement
benefit cost for the year ended December 31, 1997, would be an increase of 9.7
percent.
8. LEASES
RENTAL INCOME ON REAL ESTATE OWNED AND LEASE EXPENSE
In accordance with industry practice, certain of the company's lease
agreements with retail tenants result in income that is contingent on the
level of the tenants' sales revenues. Additionally, the company, as lessee,
has entered into various lease and sublease agreements for office space, data
processing and other equipment. Future minimum rental income, gross minimum
rental payments and minimum sublease rental income relating to these lease
agreements were as follows:
<TABLE>
<CAPTION>
GROSS
RENTAL RENTAL SUBLEASE
INCOME PAYMENTS INCOME
------ -------- --------
<S> <C> <C> <C>
DECEMBER 31
1998.......................................... $ 697 $146 $55
1999.......................................... 657 127 52
2000.......................................... 604 103 50
2001.......................................... 560 82 44
2002.......................................... 496 59 36
2003 and thereafter........................... 2,724 103 68
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
9. DEBT
Debt consisted of the following:
<TABLE>
<CAPTION>
SCHEDULED
MATURITY 1997 1996
--------- ------ ------
<S> <C> <C> <C>
DECEMBER 31
Surplus notes:
6.300% 2003 $ 397 $ 396
7.000% 2005 249 248
7.700% 2015 198 197
7.450% 2023 296 296
7.875% 2024 148 148
7.800% 2025 248 248
Floating rate notes, interest rates
based on LIBOR................................. 1999-2007 358 49
Fixed rate notes, interest rates ranging from
5.80%-10.50%................................... 1998-2007 519 135
Zero coupon Eurobonds........................... 1999 79 71
Other........................................... 124 158
------ ------
Total long-term debt............................ 2,616 1,946
Short-term debt................................. 4,587 3,311
------ ------
Total........................................... $7,203 $5,257
====== ======
</TABLE>
Payments of interest and principal on the surplus notes may be made only
with the prior approval of the Superintendent of Insurance of the State of New
York (Superintendent). Subject to the prior approval of the Superintendent,
the 7.45 percent surplus notes may be redeemed, in whole or in part, at the
election of the company at any time on or after November 1, 2003.
At December 31, 1997, aggregate maturities of the long-term debt based on
required principal payments at maturity for 1998 and the succeeding four years
amounted to $80, $377, $178, $9 and $11, respectively, and $1,979 thereafter.
10. CONTINGENCIES
The company is currently a defendant in numerous state and federal lawsuits
(including individual suits and putative class actions) raising allegations of
improper marketing of individual life insurance. Litigation seeking
compensatory and/or punitive damages relating to the marketing by the company
of individual life insurance (including putative class and individual actions)
continues to be brought by or on behalf of policyholders and others. These
cases, most of which are in the early stages of litigation, seek substantial
damages, including in some cases claims for punitive and treble damages and
attorneys' fees, and raise, among other claims, allegations that individual
life insurance policies were improperly sold in replacement transactions or
with inadequate or inaccurate disclosure as to the period for which premiums
would be payable, or were misleadingly sold as savings or retirement plans.
Putative classes have been certified, conditionally or subject to appeal, in
state court actions covering certain policyholders in California and West
Virginia; class certification has been denied in a state court action in Ohio
thus far. A number of the federal cases alleging improper marketing of
individual life insurance have been consolidated in the United States District
Court for the Western District of Pennsylvania and the United States District
Court in Massachusetts for pretrial proceedings. Additional litigation
relating to the company's marketing of individual life insurance may be
commenced in the future. The company is vigorously defending itself in these
actions.
Regulatory authorities in a small number of states, including both insurance
departments and attorneys general, have ongoing investigations of the
company's sales of individual life insurance, including investigations of
alleged improper replacement transactions and alleged improper sales of
insurance with inaccurate or inadequate disclosures
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
as to the period for which premiums would be payable. In addition, an
investigation by the Office of the United States Attorney for the Middle
District of Florida, which commenced in 1994, into certain of the retirement
and savings plan selling allegations that have been a subject of regulatory
inquiries, has not been closed.
In addition to the foregoing matters, the company is a defendant in a large
number of asbestos lawsuits relating to allegations regarding certain
research, advice and publication activity that occurred decades ago. While the
company believes that it has significant defenses to these claims and has
effected settlements in many of these cases and has prevailed in certain
cases, it is not possible to predict the number of such cases that may be
brought or the aggregate amount of any liability that may ultimately be
incurred by the company.
Various litigation, claims and assessments against the company, in addition
to the aforementioned and those otherwise provided for in the company's
financial statements, have arisen in the course of the company's business,
including in connection with its activities as an insurer, employer, investor
and taxpayer. Further, state insurance regulatory authorities and other state
authorities regularly make inquiries and conduct investigations concerning the
company's compliance with applicable insurance and other laws and regulations.
In certain of the matters referred to above, very large and/or indeterminate
amounts, including punitive and treble damages, are sought. While it is not
feasible to predict or determine the ultimate outcome of all pending
investigations and legal proceedings or to make a meaningful estimate of the
amount or range of loss that could result from an unfavorable outcome in all
such matters, it is the opinion of the company's management that their
outcome, after consideration of the provisions made in the company's financial
statements, is not likely to have a material adverse effect on the company's
financial position.
11. OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Compensation costs............................. $2,072 $1,813 $1,607
Commissions.................................... 766 722 853
Interest and debt issue costs.................. 453 311 285
Amortization of policy acquisition costs....... 771 633 606
Capitalization of policy acquisition costs..... (1,000) (1,028) (1,060)
Rent expense, net of sublease.................. 179 180 184
Restructuring charges.......................... -- 18 88
Minority interest.............................. 51 30 22
Other.......................................... 2,467 2,105 1,696
------ ------ ------
Total.......................................... $5,759 $4,784 $4,281
====== ====== ======
</TABLE>
During 1996 and 1995, the company recorded restructuring charges primarily
related to the consolidation of administration and agency sales force leased
office space and costs relating to workforce reductions.
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
12. OTHER INTANGIBLE ASSETS
The value of business acquired and the excess of purchase price over the
fair value of net assets acquired and changes thereto were as follows:
<TABLE>
<CAPTION>
EXCESS OF PURCHASE PRICE
OVER FAIR VALUE OF
VALUE OF BUSINESS ACQUIRED NET ASSETS ACQUIRED
---------------------------- ----------------------------
1997 1996 1995 1997 1996 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31
Net Balance, January 1.. $ 358 $ 381 $ 6 $ 544 $ 377 $ 413
Acquisitions............ 176 7 396 387 197 221
Dispositions............ -- -- -- -- -- (236)
Amortization............ (36) (30) (21) (47) (30) (21)
-------- -------- -------- -------- -------- --------
Net balance, December
31..................... $ 498 $ 358 $ 381 $ 884 $ 544 $ 377
======== ======== ======== ======== ======== ========
<CAPTION>
1997 1996 1995 1997 1996 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31
Accumulated amortiza-
tion................... $ 87 $ 51 $ 21 $ 148 $ 101 $ 71
======== ======== ======== ======== ======== ========
</TABLE>
13. DISCONTINUED OPERATIONS
In January 1995 the company contributed its group medical benefits
businesses to a corporate joint venture, The MetraHealth Companies, Inc.
("MetraHealth"). In October 1995, the company sold its investment in
MetraHealth to United HealthCare Corporation. For its interest in MetraHealth,
the company received $485 face amount of United HealthCare Corporation
convertible preferred stock and $326 in cash (including additional
consideration of $50 in 1996). The sale resulted in an aftertax loss of $36 in
1996 and an aftertax gain of $372 in 1995. Operating losses in 1997 and 1996
related principally to the finalization of the transfer of group medical
contracts to United HealthCare Corporation.
During 1995 the company also sold its real estate brokerage, mortgage
banking and mortgage administration operations for an aggregate consideration
of $251 (including additional cash consideration of $25 in 1996), resulting in
aftertax gains of $17 in 1996 and $44 in 1995.
14. CONSOLIDATED CASH FLOWS INFORMATION
During 1997 the company acquired assets of $3,777 and assumed liabilities of
$3,347 through the acquisition of certain insurance and noninsurance
companies. The aggregate purchase prices were allocated to the assets and
liabilities acquired based upon their estimated fair values. During 1997 the
company also reduced assets and liabilities by $4,342 and $4,207,
respectively, through the sale of certain insurance operations, resulting in a
pretax gain of $139. During 1995 the company also reduced assets and
liabilities by $919 and $413, respectively, through the sale of its real
estate brokerage, mortgage banking and mortgage administration operations.
During 1997 the company assumed liabilities of $227 and received assets of
$227 and during 1995 the company assumed liabilities of $1,573 and received
assets of $1,573 through assumption of certain businesses from other insurance
companies.
For the years ended December 31, 1997, 1996 and 1995, respectively, real
estate of $151, $189 and $429 was acquired in satisfaction of debt.
During 1997 and 1995, fixed maturity securities with an amortized cost of
$11,682 and $3,058, respectively, were transferred from held to maturity to
available for sale.
15. 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, 1997 and 1996, 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The estimates presented below were 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>
NOTIONAL CARRYING ESTIMATED
AMOUNT VALUE FAIR VALUE
-------- -------- ----------
<S> <C> <C> <C>
DECEMBER 31, 1997
Assets:
Fixed maturities................................ $92,630 $92,630
Equity securities............................... 4,250 4,250
Mortgage loans on real estate................... 20,247 21,133
Policy loans.................................... 5,846 6,110
Short-term investments.......................... 705 705
Cash and cash equivalents....................... 2,871 2,871
Liabilities:
Policyholder account balances................... 36,433 36,664
Short- and long-term debt....................... 7,203 7,258
Other financial instruments:
Interest rate swaps............................. $1,464 (1) (19)
Interest rate caps.............................. 1,545 16 12
Foreign currency swaps.......................... 254 -- (28)
Foreign currency forwards....................... 150 -- --
Covered call options............................ 88 (31) (31)
Other options................................... 565 -- (2)
Futures contracts............................... 2,262 10 10
Unused lines of credit.......................... 2,310 -- 2
<CAPTION>
NOTIONAL CARRYING ESTIMATED
AMOUNT VALUE FAIR VALUE
-------- -------- ----------
<S> <C> <C> <C>
DECEMBER 31, 1996
Assets:
Fixed maturities................................ $86,361 $86,588
Equity securities............................... 2,816 2,816
Mortgage loans on real estate................... 18,964 19,342
Policy loans.................................... 5,842 5,796
Short-term investments.......................... 741 741
Cash and cash equivalents....................... 2,325 2,325
Liabilities:
Policyholder account balances................... 30,470 30,611
Short- and long-term debt....................... 5,257 5,223
Other Financial Instruments:
Interest rate swaps............................. $1,242 -- (14)
Interest rate caps.............................. 1,946 20 14
Foreign currency swaps.......................... 207 -- (23)
Foreign currency forwards....................... 151 3 3
Covered call options............................ 25 (2) (2)
Unused lines of credit.......................... 1,821 -- 1
</TABLE>
Estimated fair values were determined as follows: publicly traded fixed
maturities (approximately 78 percent of the estimated fair value of total
fixed maturities) from an independent market pricing service; all other bonds
at estimated fair value determined by management (based primarily on interest
rates, maturity, credit quality and average life); equity securities, on
quoted market prices; mortgage loans, based on discounted projected cash flows
using interest rates offered for loans to borrowers with comparable credit
ratings and for the same maturities; policy loans, based on
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
discounted projected cash flows using U.S. Treasury rates to approximate
interest rates and company experience to project patterns of loan accrual and
repayment; cash and cash equivalents and short-term investments, at carrying
amount, which is considered to be a reasonable estimate of fair value.
Included in fixed maturities are loaned securities with estimated fair
values of $6,537 and $7,293 at December 31, 1997 and 1996, respectively.
The fair values for policyholder account balances are estimated using
discounted projected cash flows, based on interest rates being offered for
similar contracts with maturities consistent with those remaining for the
contracts being valued.
The estimated fair value of short- and long-term debt was determined using
rates currently available to the company for debt with similar terms and
remaining maturities.
For interest rate and foreign currency swaps, interest rate caps, foreign
currency forwards, covered call options, other options and futures contracts,
estimated fair value is the amount at which the contracts could be settled
based on estimates obtained from dealers. The estimated fair values of unused
lines of credit were based on fees charged to enter into similar agreements.
16. STATUTORY FINANCIAL INFORMATION
The reconciliation of the net change in statutory surplus and statutory
surplus determined in accordance with accounting practices prescribed or
permitted by insurance regulatory authorities with net earnings and equity on
a GAAP basis was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ---- ----
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Net change in statutory surplus...................... $ 227 $366 $229
Adjustments for GAAP:
Future policy benefits and policyholder account
balances.......................................... (445) (165) (17)
Deferred policy acquisition costs.................. 159 391 376
Deferred income taxes.............................. 62 (74) (97)
Valuation of investments........................... (387) (84) 106
Statutory asset valuation reserves................. 1,170 599 30
Statutory interest maintenance reserve............. 53 19 284
Surplus notes...................................... -- -- (622)
Other, net......................................... 364 (199) 410
------ ---- ----
Net earnings..................................... $1,203 $853 $699
====== ==== ====
</TABLE>
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
DECEMBER 31
Statutory surplus..................................... $ 7,378 $ 7,151
Adjustments for GAAP:
Future policy benefits and policyholder account bal-
ances (7,305) (5,742)
Deferred policy acquisition costs................... 6,436 7,227
Deferred income taxes............................... (242) 264
Valuation of investments............................ 3,474 610
Statutory asset valuation reserves.................. 3,854 2,684
Statutory interest maintenance reserve.............. 1,261 1,208
Surplus notes....................................... (1,396) (1,393)
Other, net.......................................... 601 (26)
------- -------
Equity............................................ $14,061 $11,983
======= =======
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
17. SUBSEQUENT EVENT
On March 12, 1998 the company reached an agreement, subject to regulatory
approval, to sell substantially all of its Canadian operations to a
nonaffiliated life insurance company at a gain. Financial information for the
Canadian operations was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- ----
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31
Total revenue......................................... $ 969 $ 920 $903
Total benefits and other deductions................... 831 802 804
Net earnings.......................................... 87 83 22
<CAPTION>
1997 1996
----- -----
<S> <C> <C> <C>
DECEMBER 31
Total assets.......................................... 5,881 5,826
Total equity.......................................... 957 917
</TABLE>
<PAGE>
Bulk Rate
U.S. Postage Paid
Rutland, VT
Permit 220
METLIFE(R)
MetLife Customer Service Center--Tulsa
P.O. Box 21889
Tulsa, OK 74121-1889
ADDRESS SERVICE REQUESTED
<PAGE>
PROSPECTUSES FOR
. FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICIES
ISSUED BY
METROPOLITAN LIFE INSURANCE COMPANY
. METROPOLITAN SERIES FUND, INC.
[LOGO] METROPOLITAN LIFE (R)
AND AFFILIATED COMPANIES
<PAGE>
APRIL 30, 1993
PROSPECTUS
for
FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICIES
(Minimum Initial Specified Face Amount $50,000)
Issued by
METROPOLITAN LIFE INSURANCE COMPANY
The individual flexible premium multifunded life insurance policies
("Policies") offered by this Prospectus are issued by Metropolitan Life
Insurance Company ("Metropolitan Life") 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 Life
Separate Account UL ("Separate Account") and/or a fixed interest account
("Fixed Account") within the General Account of Metropolitan Life. 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
seven currently available portfolios of the Fund: Growth Portfolio, Income
Portfolio, Money Market Portfolio, Diversified Portfolio, Aggressive Growth
Portfolio, International Stock Portfolio and Stock Index Portfolio. The
International Stock Portfolio is not available in California.
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 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
Aggressive Growth Portfolios of the Fund. State Street Research is a wholly-
owned subsidiary of Metropolitan Life. GFM International Investors Limited
("GFM") is the sub-investment manager with respect to the International Stock
Portfolio of the Fund. GFM is a subsidiary of Metropolitan Life.
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 (813) 873-3429
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS.......................... A-3
SUMMARY.............................. A-5
Who is the Issuer of the Policies?.. A-5
What are Separate Account UL, the
Fixed Account and the Metropolitan
Series Fund?....................... A-5
What Death Benefits are Available
under the Policy?.................. A-6
What is the Policy's Cash Value?.... A-6
What Flexibility Does a Policy Owner
have to Adjust the Amount of the
Death Benefit?..................... A-7
What Flexibility Does a Policy Owner
have in Connection with Premium
Payments?.......................... A-7
How Long Will the Policy Remain in
Force?............................. A-7
How are Net Premiums Allocated?..... A-7
May the Policy be Surrendered or the
Cash Value Partially Withdrawn?.... A-8
Is There a "Free Look" Period?...... A-8
What is the Loan Privilege?......... A-8
What Charges are Assessed in Connec-
tion with the Policy?.............. A-9
What is the Tax Treatment of Cash
Value?............................. A-9
Is the Beneficiary Subject to Fed-
eral Income Tax on the Death Bene-
fit?............................... A-10
Is the Death Benefit or the Cash
Value Subject to Federal Estate
Tax?............................... A-10
When are Premium Payments, Policy
Owner Requests and Other Communica-
tions Deemed to be Received?....... A-10
SEPARATE ACCOUNT AND METROPOLITAN
SERIES FUND......................... A-11
The Separate Account................ A-11
Metropolitan Series Fund............ A-11
POLICY BENEFITS...................... A-13
Death Benefits...................... A-13
Death Benefit Options............... A-13
Cash Value.......................... A-16
Benefit at Final Date............... A-24
Optional Income Plans............... A-24
Optional Insurance Benefits......... A-25
PAYMENT AND ALLOCATION OF PREMIUMS... A-25
Issuance of a Policy................ A-25
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Premiums..................................................................................... A-26
Allocation of Premiums and Cash Value........................................................ A-27
Policy Termination and Reinstatement......................................................... A-28
CHARGES AND DEDUCTIONS........................................................................ A-29
Premium Expense Charges...................................................................... A-29
Transfer Charge.............................................................................. A-30
Monthly Deduction From Cash Value............................................................ A-30
Charges Against the Separate Account......................................................... A-32
Surrender Charge............................................................................. A-32
Guarantee of Certain Charges................................................................. A-34
Other Charges................................................................................ A-34
ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES, CASH SURRENDER VALUES AND ACCUMULATED PREMIUMS.. A-35
POLICY RIGHTS................................................................................. A-44
Loan Privileges.............................................................................. A-44
Surrender and Withdrawal Privileges.......................................................... A-45
Exchange Privilege........................................................................... A-46
THE FIXED ACCOUNT............................................................................. A-46
General Description.......................................................................... A-47
Fixed Account Benefits....................................................................... A-47
Fixed Account Cash Value..................................................................... A-47
Transfers, Withdrawals, Surrenders and Policy Loans.......................................... A-48
RIGHTS RESERVED BY METROPOLITAN LIFE.......................................................... A-48
OTHER POLICY PROVISIONS....................................................................... A-49
SALES AND ADMINISTRATION OF THE POLICIES...................................................... A-50
DISTRIBUTION OF THE POLICIES.................................................................. A-51
FEDERAL TAX MATTERS........................................................................... A-51
Taxation of the Policy....................................................................... A-51
Taxation of Metropolitan Life................................................................ A-53
MANAGEMENT.................................................................................... A-54
VOTING RIGHTS................................................................................. A-58
Right to Instruct Voting of Fund Shares...................................................... A-58
Disregard of Voting Instructions............................................................. A-58
REPORTS....................................................................................... A-59
STATE REGULATION.............................................................................. A-59
REGISTRATION STATEMENT........................................................................ A-59
LEGAL MATTERS................................................................................. A-59
EXPERTS....................................................................................... A-60
FINANCIAL STATEMENTS.......................................................................... A-60
APPENDIX A.................................................................................... A-85
</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 LIFE 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 LIFE.
A-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.
Base Administration Charge--The portion of the first year monthly
administration charge which is determined by the Age of the insured under a
Policy and not by the specified face amount.
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 and any applicable
surrender charge (computed from the tables set forth under "Surrender Charge"
on page A-32) and, if the Policy is surrendered in the first Policy year, less
the Base Administration Charge for each full Policy month remaining to the end
of the first Policy year.
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 home office of Metropolitan Life at 1 Madison Avenue,
New York, New York 10010, to which all Policy owner communications are to be
sent. Metropolitan Life may, by written notice, name other locations within the
United States to serve as designated offices, in place of or in addition to the
home 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 Life 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 Life 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 Life 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.
A-3
<PAGE>
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).
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 after the first two
Policy years unless the guaranteed minimum death benefit rider is in effect.
Policy--The flexible premium multifunded life insurance policy offered by
Metropolitan Life 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 Life Separate Account UL, a separate
investment account of Metropolitan Life 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
A-4
<PAGE>
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.
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 A-46).
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, that no Policy loans have
been made and that no riders are in effect (see "Loan Privileges--Effect of a
Policy Loan," page A-44, "Payment and Allocation of Premiums--Policy
Termination and Reinstatement," page A-28, and Appendix A, page A-85).
WHO IS THE ISSUER OF THE POLICIES?
Metropolitan Life, the issuer of the Policies, 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, 1992, Metropolitan Life had total life
insurance in force of over $1.06 trillion and total assets of over $118
billion.
WHAT ARE SEPARATE ACCOUNT UL, 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 Life (see "The Separate Account," page A-11)
and/or to a Fixed Account established by Metropolitan Life. There are currently
seven 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 A-11). Each class of
stock represents a separate portfolio within the Fund. The seven 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
Portfolio, the Aggressive Growth Portfolio, the International Stock Portfolio
and the Stock Index Portfolio. The International Stock Portfolio is not
available in California. As of April 30, 1993, the Equity Income investment
division is no longer available for allocation of net premiums or for cash
value transfers from other investment divisions or the Fixed Account, except
that Owners whose allocation instructions currently direct net premiums to the
Equity Income investment division may continue such allocation instructions
until July 1, 1993. Any such allocation instructions directing net premiums to
the Equity Income investment division will be automatically changed to direct
net premiums received on and after July 1, 1993 to the Diversified investment
division unless and until Metropolitan Life has received a different allocation
instruction from the Owner. The Owner may provide different allocation
instructions by completing and returning to Metropolitan Life the Reallocation
Request Card attached to this Prospectus. Amounts currently invested in the
Equity Income investment division will remain in the division unless withdrawn
or transferred from the investment division in the manner described in this
Prospectus. Net premiums allocated to the Fixed Account are held in the General
Account of Metropolitan Life.
A-5
<PAGE>
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 Stock Index Portfolios and
an annual rate of .75% of the average daily value of the aggregate net assets
of the International Stock and Aggressive Growth Portfolios. State Street
Research provides sub-investment management services with respect to the
Growth, Income, Aggressive Growth and Diversified Portfolios. GFM provides sub-
investment management services with respect to the International Stock
Portfolio. For these services, State Street Research and GFM receive an annual
percentage fee from Metropolitan Life. The fees paid to State Street Research
and GFM are the sole responsibility of Metropolitan Life, and not the Fund. In
addition to the investment management fees, other direct expenses are charged
against assets of 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.
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. The Policy owner can change
options while the insured is living. 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 A-13).
In addition, a Policy owner has the flexibility to add optional insurance
benefits by rider. These include a spouse term insurance benefit rider; a
children's term insurance benefit rider; an accidental death benefit rider; a
disability waiver benefit rider; an accelerated death benefit rider and a long
term care rider (see "Policy Benefits--Optional Insurance Benefits," page A-
25). 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 A-30).
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 A-25).
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 A-16). 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 A-46) and the Policy Loan Account (see "Loan
Privileges--Effect of a Policy Loan," page A-44).
A-6
<PAGE>
WHAT FLEXIBILITY DOES A POLICY OWNER HAVE TO ADJUST THE AMOUNT OF THE DEATH
BENEFIT?
Subject to certain limitations, the Policy owner may at any time after the
second Policy year change the death benefit option or increase or decrease the
specified face amount of the Policy (see "Policy Benefits--Change in Death
Benefit Option," page A-15). Any increases in the death benefit may require
additional evidence of insurability satisfactory to Metropolitan Life (see
"Policy Benefits--Change in Specified Face Amount," page A-14), and result in
additional charges (see "Policy Benefits--Increases," and "Effect of Changes in
Specified Face Amount on Charges," page A-15). An increase or decrease in the
death benefit may have tax consequences (see "Federal Tax Matters," page A-51).
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 premium at least equal to the target
premium must be paid during each of the first two Policy years (see "Premiums--
Premium Limitations," page A-26). The Policy owner elects in the application
when the Policy is first purchased to pay premiums annually or on a monthly
"check-o-matic" (or payroll deduction plan if provided by the employer of the
Policy owner) or semi-annual basis, which will be the 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 A-25). Significantly,
after the first two Policy years, 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 A-25).
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 A-30), and the grace period expires without a sufficient
payment being made (see "Policy Termination and Reinstatement--Termination,"
page A-28) or, in the first two Policy years, if the cash surrender value on
any monthly anniversary is insufficient to pay the monthly deduction and the
total premiums paid as of such monthly anniversary do not equal at least the
minimum premiums required as of that date. Therefore, the failure to pay a
planned periodic premium after the first two Policy years will not
automatically cause the Policy to terminate. Nevertheless, after the first two
Policy years, 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 A-29). 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 Life in writing, subject to certain
limitations (see "Payment and Allocation of Premiums--Allocation of Premiums
and Cash Value," page A-27). Because investment performance of a Separate
Account investment division (unlike that of the
A-7
<PAGE>
Fixed Account) is not guaranteed by Metropolitan Life, 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 Life plus any
discretionary return declared by Metropolitan Life from time to time.
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
four times a Policy year without charge (see "Charges and Deductions--Transfer
Charge," page A-30). In the first 24 Policy months, a Policy owner may transfer
the entire amount in the Separate Account to the Fixed Account without charge
(see "Policy Rights--Exchange Privilege," page A-46 and "The Fixed Account--
Transfers, Withdrawals, Surrenders, and Policy Loans," page A-48).
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. The Policy owner must notify Metropolitan Life in
writing requesting a surrender or partial withdrawal (see "Surrender and
Withdrawal Privileges," page A-45). No charge will be imposed on partial
withdrawals. A sales charge will be imposed on surrenders during the first
fifteen Policy years and during the fifteen Policy years after an increase in
the specified face amount (see "Charges and Deductions--Surrender Charge," page
A-32). In addition, the remaining Base Administration Charge will be imposed
upon surrender in the first Policy year (see "Charges and Deductions--Monthly
Policy Charges," page A-31). 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
A-13). 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 A-
50 and A-48). Surrenders and withdrawals may have certain tax consequences (see
"Federal Tax Matters," page A-51).
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 Life mails the owner a notice of cancellation right, whichever is
later. Metropolitan Life will send the Policy owner a complete refund of any
premiums paid within 7 days. 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 at any time that 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 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 A-44).
A-8
<PAGE>
WHAT CHARGES ARE ASSESSED IN CONNECTION WITH THE POLICY?
Premium Expense Charges. Total premium expense charges of 4% are deducted
from all premium payments. These charges consist of a sales charge of 2% of
premiums paid and a state premium tax charge of 2% of premiums paid (see
"Charges and Deductions--Premium Expense Charges," page A-29). There is also a
sales charge upon the surrender of a Policy in certain circumstances (see
"Charges and Deductions--Surrender Charge," page A-32).
Transfer Charges. At the present time, there is no charge assessed the first
four times in a Policy year that amounts are transferred among the different
investment divisions of the Separate Account and between the investment
divisions and the Fixed Account. For each subsequent transfer in that Policy
year, a charge of $25 is assessed (see "Charges and Deductions--Transfer
Charge," page A-30).
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, and (3) a monthly administration
charge (see "Charges and Deductions--Monthly Deduction from Cash Value," page
A-30). During the first Policy year, there will be a Base Administration Charge
as described below plus a monthly charge equal to $0.25 per thousand dollars of
specified face amount of the Policy. The Base Administration Charge is equal to
$5 per month at Ages less than eighteen, $15 per month at Ages eighteen to
forty-nine, and $20 per month at Ages fifty and above. After the first Policy
year, the monthly administration charge is $5 per month for Policies with a
specified face amount of $250,000 or more, $7 per month for Policies with a
specified face amount of $100,000 to $249,999, and $9 per month for Policies
with a specified face amount of less than $100,000. No profit is expected to be
derived from the administration charges set forth in (3) above. Any increases
in specified face amount requested by a Policy owner will result in a one-time
underwriting expense charge of $5.00 per thousand dollars of increase (see
"Policy Benefits--Increases," page A-15). 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 .90% of the average daily net asset value of each
investment division of the Separate Account is imposed to compensate
Metropolitan Life for its assumption of certain mortality and expense risks
(see "Charges and Deductions--Charge for Mortality and Expense Risks," page A-
32).
No charges are currently made against the Separate Account for federal or
state income taxes. Should Metropolitan Life determine that such taxes will be
imposed, Metropolitan Life may make deductions from the Separate Account to pay
these taxes (see "Federal Tax Matters," page A-51). The imposition of such
taxes would result in a reduction of the cash value in the Separate Account.
Surrender Charge. A sales charge will be deducted in the form of a surrender
charge from the cash value if the Policy is surrendered during the first
fifteen Policy years or during the first fifteen Policy years after an increase
in the specified face amount of a Policy. The surrender charge is based on a
charge per thousand dollars of specified face amount depending on the death
benefit option and the Age of the insured at the time of issue of the Policy or
at the time of an increase in the specified face amount, and declines over the
fifteen Policy years to zero after the fifteenth year (see "Charges and
Deductions--Surrender Charge," page A-32).
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
A-9
<PAGE>
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 fails the
"7-pay test" described on page A-51, your Policy would 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 amounts received before age 59 1/2.
For more information, see "Federal Tax Matters," pages A-51 to A-53.
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 death benefit proceeds
(see "Federal Tax Matters," page A-51).
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 A-51).
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 amount of insurance or death benefit
option, or changes of premium allocation) should be sent to the Designated
Office for the Policy. Metropolitan Life 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 Life 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 Life, the owner should utilize the forms prepared by
Metropolitan Life for each purpose. The forms are available from a Metropolitan
Life sales representative or from the Designated Offices.
A-10
<PAGE>
SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND
THE SEPARATE ACCOUNT
The Separate Account, which is a separate investment account of Metropolitan
Life, was established by Metropolitan Life pursuant to the New York Insurance
Law on December 13, 1988. The Separate Account also receives premium payments
in connection with another form of the flexible premium multifunded life
insurance policy and a flexible premium variable universal life insurance
policy issued by Metropolitan Life. The assets allocated to the Separate
Account are the property of Metropolitan Life, and Metropolitan Life is not a
trustee by reason of the Separate Account. Metropolitan Life 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 Life'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 Life. Each Policy provides that such portion of the assets in the
Separate Account as equals the liabilities (and reserves) of Metropolitan Life
with respect to the Separate Account shall not be chargeable with liabilities
arising out of any other business of Metropolitan Life. Metropolitan Life 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 Life'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 Life, 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 Life by the Commission.
There currently are seven 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. In
addition, 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.
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.
A-11
<PAGE>
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 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.
Aggressive Growth Portfolio. The investment objective of this portfolio is to
achieve maximum capital appreciation by investing primarily in common stocks
(and equity and debt securities convertible into or carrying the right to
acquire common stocks) of emerging growth companies, undervalued securities or
special situations.
International Stock Portfolio. The investment objective of this portfolio is
to achieve long-term growth of capital by investing primarily in common stocks
and equity-related securities of non-United States companies. This portfolio is
not available in connection with Policies issued in California.
Stock Index Portfolio. The investment objective of this portfolio is to equal
the performance of the Standard & Poor's 500 Composite Stock Price Index
(adjusted to assume reinvestment of dividends) by investing in the common stock
of companies which are included in the index.
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; State Street
Research, a wholly-owned subsidiary of Metropolitan Life, provides sub-
investment management services with respect to the Growth, Income, Diversified
and Aggressive Growth Portfolios; and GFM, a subsidiary of Metropolitan Life,
provides sub-investment management services with respect to the International
Stock Portfolio.
Metropolitan Life 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 Life 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. 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 for Metropolitan Life and its affiliates that invest in the Fund and
the risks related thereto.
A-12
<PAGE>
POLICY BENEFITS
The discussion below assumes that no riders under the Policy are in effect.
See Appendix A, page A-85, 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 28), Metropolitan Life 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 A-24).
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 A-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%
60: .................... 130%
65: .................... 120%
</TABLE>
<TABLE>
<CAPTION>
AGE
OF INSURED ON PERCENTAGE OF
DATE OF DEATH CASH VALUE
- ------------- -------------
<S> <C>
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.
A-13
<PAGE>
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 A-30) 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 A-28).
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 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 second Policy year and before the insured reaches Age 80, may
increase or decrease the specified face amount of
A-14
<PAGE>
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 Code rules
(see "Premiums--Premium Limitations," page A-26). 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 A-30 and A-
31), 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 in the specified face amount 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. The minimum amount of an increase is $5,000. Any such change will
require that additional evidence of insurability be submitted to Metropolitan
Life and will be subject to a one-time underwriting charge at a rate of $5.00
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
$127.50. Metropolitan Life 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 on Charges. 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 and the monthly administration charge (see "Charges and Deductions--Cost
of Term Insurance;" "Cost of Term Insurance Rate," "Rate Class," and "Monthly
Policy Charges," pages A-30 and A-31). This in turn can affect the level of
subsequent cash values and death 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 A-51). Finally, an increase in
the specified face amount can result in additional surrender charges (see
"Charges and Deductions--Surrender Charge," page A-32).
Change in Death Benefit Option. Generally, the death benefit option in effect
may be changed at any time after the second Policy year while the insured is
alive by sending a written request for change to the Designated Office. A
change in death benefit option will not be permitted unless the cash surrender
value of a Policy after the change is effected would be sufficient to pay at
least two monthly deductions. Changing death benefit options will not require
evidence of insurability satisfactory to Metropolitan Life 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
A-15
<PAGE>
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
values will, respectively, reduce or increase the term insurance amount under
Option A (see "Charges and Deductions--Cost of Term Insurance," page A-30).
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 A-30). 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 A-26).
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.
A change in the death benefit option may also affect the monthly
administration charge (see "Charges and Deductions--Monthly Policy Charges,"
page A-31).
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 A-46), the Policy
Loan Account (see "Policy Rights--Loan Privileges," page A-44), 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 A-17).
There is no guaranteed minimum cash value in the Separate Account.
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 A-27). 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
A-16
<PAGE>
(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 A-30); minus
(6) The portion of any transfer charge allocated to the Policy's cash value in
the investment division (see "Charges and Deductions--Transfer Charge,"
page A-30); plus
(7) 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 .90% on an annual basis) and (2) a charge for
Metropolitan Life's taxes, if any such tax charge becomes necessary in the
future (see "Charges and Deductions--Charges Against the Separate Account,"
page A-32). 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 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 May 1,
1990, all the divisions except the division which invests in the International
Stock Portfolio of the Fund, the division which invests in the Stock Index
Portfolio of the Fund and the division which invests in the Aggressive Growth
Portfolio of the Fund were available to receive net premium payments. The
division which invests in the International Stock Portfolio was available
(except in California) to receive net premium payments on July 1, 1991, the
division which invests in the Stock Index Portfolio was available to receive
net premium payments on May 1, 1992 and the division which invests in the
Aggressive Growth Portfolio was available to receive net premium payments on
April 30, 1993. 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 in "Calculation of Separate Account Cash Value," page A-16, other
factors in addition to investment 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 A-29 and A-30.
Also, the index of investment experience is based on historical information and
does not represent what may happen in the future.
A-17
<PAGE>
Rates of Return. The average rates of return for each of the investment
divisions of the Separate Account shown below 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 A-29 and A-30). 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 said
index at the end of the period and dividing the result by the value of said
index at the beginning of the period and multiplying by 100 to obtain a
percentage for rate of return.
The first date shown for each investment division is the later of the date
the portfolio of the Fund in which it invests began operations and the date the
first registration statement relating to such portfolio was declared effective
by the Securities and Exchange Commission. Thus the rates of return are based
on the actual historical experience of the Fund as if the Separate Account
investment division had been in existence on the dates indicated. The
computation of index values for an investment division prior to the time it was
first available to receive net premium payments is based on annualized figures.
Hypothetical index value of $10.00 was assumed for April 29, 1992 for the
Aggressive Growth investment division in order to provide a basis for
determining rates of return for that division.
<TABLE>
<CAPTION>
AVERAGE
6/24/83- 6/24/83- 6/24/84- 6/24/85- 6/24/86- 6/24/87- 6/24/88- 6/24/89- 6/24/90- 6/24/91- ANNUAL
6/24/92 6/24/84 6/24/85 6/24/86 6/24/87 6/24/88 6/24/89 6/24/90 6/24/91 6/24/92 RETURN
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth.............. 148.89% -11.42% 28.41% 24.78% 23.09% -9.51% 24.48% 13.28% -2.52% 14.53% 10.65%
Income.............. 160.84% -0.49% 28.37% 25.94% 3.28% 5.45% 9.58% 7.10% 10.39% 14.91% 11.23%
Money Market........ 79.88% 8.63% 8.70% 6.63% 5.05% 5.87% 7.83% 7.65% 6.44% 3.97% 6.73%
</TABLE>
INDEX VALUE AT
<TABLE>
<CAPTION>
6/24/83 6/24/84 6/24/85 6/24/86 6/24/87 6/24/88 6/24/89 6/24/90 6/24/91 6/24/92
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth.................. $4.82 $4.27 $5.49 $6.85 $8.43 $7.63 $ 9.49 $10.75 $10.48 $12.01
Income.................. $5.08 $5.06 $6.49 $8.17 $8.44 $8.90 $ 9.75 $10.45 $11.53 $13.25
Money Market............ $6.22 $6.76 $7.34 $7.83 $8.23 $8.71 $ 9.39 $10.11 $10.76 $11.19
</TABLE>
<TABLE>
<CAPTION>
AVERAGE
7/25/86- 7/25/86- 7/25/87- 7/25/88- 7/25/89- 7/25/90- 7/25/91- ANNUAL
7/25/92 7/25/87 7/25/88 7/25/89 7/25/90 7/25/91 7/25/92 RETURN
-------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Diversified.. 70.92% 16.38% -5.17% 18.87% 8.97% 4.25% 14.68% 9.34%
INDEX VALUE AT
<CAPTION>
7/25/86 7/25/87 7/25/88 7/25/89 7/25/90 7/25/91 7/25/92
-------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Diversified........... $7.50 $8.73 $8.28 $9.84 $10.73 $11.18 $12.82
</TABLE>
INDEX VALUE AT
<TABLE>
<CAPTION>
AVERAGE
5/1/90- 5/1/90- 5/1/91- ANNUAL
5/1/92 5/1/91 5/1/92 RETURN 5/1/90 5/1/91 5/1/92
------- ------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock In-
dex....... 29.80% 17.63% 10.35% 13.91% $7.70 $9.06 $10.00
</TABLE>
INDEX VALUE AT
<TABLE>
<CAPTION>
AVERAGE
4/29/88- 4/29/88- 4/29/89- 4/29/90- 4/29/91- ANNUAL
4/29/92 4/29/89 4/29/90 4/29/91 4/29/92 RETURN 4/29/88 4/29/89 4/29/90 4/29/91 4/29/92
-------- -------- -------- -------- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth.. 80.89% 20.57% 9.36% 14.36% 19.96% 15.96% $5.53 $6.67 $7.29 $8.34 $10.00
</TABLE>
INDEX VALUE AT
<TABLE>
<CAPTION>
5/1/91-
5/1/92 5/1/91 5/1/92
------- ------ ------
<S> <C> <C> <C>
International Stock....................................... -8.42% $10.87 $9.95
</TABLE>
A-18
<PAGE>
Illustrations. In order to demonstrate how the investment experience of the
Separate Account investment divisions will affect the death benefit, cash value
and cash surrender 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 as if the Separate Account had been in existence and a
Policy had been issued on the dates indicated. They do not represent what may
happen in the future.
The illustrations are based on the payment of annual planned premiums of
$1,000 for a specified face amount of $100,000 for a male aged 25. The
illustrations assume that the insured is in Metropolitan Life's standard
nonsmoker underwriting risk classification. The periods illustrated are based
on the periods set forth in "Rates of Return" on page A-18.
The amounts shown for the death benefits, cash values and cash surrender
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 .90% 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 A-29).
For each investment division, one illustration is based on the guaranteed
cost of term insurance rates, the other illustration is based as if the current
cost of term insurance rates (i.e., the rates in effect as of May 1, 1992) were
in effect during the period illustrated (see "Monthly Deduction From Cash
Value--Cost of Term Insurance Rate," page A-31).
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.
From time to time the Separate Account may advertise its performance ranking
and rating information among similar investments as compiled by Lipper
Analytical Services, Inc., Morningstar, Inc. and other independent
organizations.
This Prospectus also contains illustrations based on assumed rates of return.
See "'Illustrations Of Death Benefits, Cash Values, Cash Surrender Values And
Accumulated Premiums," on pages A-35 to A-43.
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 June 24, 1983 (the effective date for the Growth
Portfolio). These examples assume that net premiums and related cash values
were in this investment division for the entire period.
A-19
<PAGE>
GROWTH
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
POLICY
NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
ON JUNE ----------------- ----------------- -----------------------
24TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B
- ----------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1984................... $100,000 $100,284 $ 285 $ 284 $ 43* $ 18*
1985................... 100,000 101,349 1,351 1,349 1,051* 857*
1986................... 100,000 102,637 2,641 2,637 2,341 2,037
1987................... 100,000 104,186 4,194 4,186 3,894 3,586
1988................... 100,000 104,458 4,470 4,458 4,170 3,858
1989................... 100,000 106,501 6,521 6,501 6,321 6,001
1990................... 100,000 108,223 8,252 8,223 8,052 7,723
1991................... 100,000 108,744 8,780 8,744 8,580 8,344
1992................... 100,000 110,884 10,933 10,884 10,733 10,484
</TABLE>
GROWTH
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
POLICY
NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
ON JUNE ----------------- ----------------- -----------------------
24TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B
- ----------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1984................... $100,000 $100,284 $ 285 $ 284 $ 43* $ 18*
1985................... 100,000 101,243 1,246 1,243 946* 751*
1986................... 100,000 102,401 2,409 2,401 2,109 1,801
1987................... 100,000 103,794 3,810 3,794 3,510 3,194
1988................... 100,000 104,016 4,038 4,016 3,738 3,416
1989................... 100,000 105,843 5,881 5,843 5,681 5,343
1990................... 100,000 107,370 7,427 7,370 7,227 6,870
1991................... 100,000 107,807 7,877 7,807 7,677 7,407
1992................... 100,000 109,685 9,785 9,685 9,585 9,285
</TABLE>
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 June 24, 1983. These examples assume
that the 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
NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
ON JUNE ----------------- ----------------- -----------------------
24TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B
- ----------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1984................... $100,000 $100,350 $ 351 $ 350 $ 109* $ 84*
1985................... 100,000 101,433 1,435 1,433 1,135* 941*
1986................... 100,000 102,768 2,773 2,768 2,473 2,168
1987................... 100,000 103,635 3,643 3,635 3,343 3,035
1988................... 100,000 104,627 4,639 4,627 4,339 4,027
1989................... 100,000 105,899 5,916 5,899 5,716 5,399
1990................... 100,000 107,125 7,150 7,125 6,950 6,625
1991................... 100,000 108,700 8,734 8,700 8,534 8,300
1992................... 100,000 110,869 10,918 10,869 10,718 10,469
</TABLE>
- -------
* The values indicated take into account the Securities and Exchange
Commission limits on sales charges (see "Surrender Charge--Excess Sales
Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value
for purposes of determining whether a Policy will terminate and the amount
a Policy owner may borrow or partially withdraw is not affected by such
limits, may be less than stated above and could be zero.
A-20
<PAGE>
INCOME
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
POLICY
NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
ON JUNE ----------------- ----------------- -----------------------
24TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B
- ----------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1984................... $100,000 $100,350 $ 351 $ 350 $ 109* $ 84*
1985................... 100,000 101,327 1,331 1,327 1,031* 835*
1986................... 100,000 102,531 2,539 2,531 2,239 1,931
1987................... 100,000 103,297 3,312 3,297 3,012 2,697
1988................... 100,000 104,176 4,199 4,176 3,899 3,576
1989................... 100,000 105,304 5,339 5,304 5,139 4,804
1990................... 100,000 106,384 6,433 6,384 6,233 5,884
1991................... 100,000 107,768 7,837 7,768 7,637 7,368
1992................... 100,000 109,674 9,772 9,674 9,572 9,274
</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 June 24, 1983. 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
NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
ON JUNE ----------------- ----------------- -----------------------
24TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B
- ----------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1984................... $100,000 $100,406 $ 407 $ 406 $ 165* $ 140*
1985................... 100,000 101,262 1,264 1,262 964* 770*
1986................... 100,000 102,149 2,153 2,149 1,853 1,549
1987................... 100,000 103,049 3,055 3,049 2,755 2,449
1988................... 100,000 104,025 4,035 4,025 3,735 3,425
1989................... 100,000 105,154 5,169 5,154 4,969 4,654
1990................... 100,000 106,360 6,381 6,360 6,181 5,860
1991................... 100,000 107,572 7,601 7,572 7,401 7,172
1992................... 100,000 108,654 8,691 8,654 8,491 8,254
</TABLE>
MONEY MARKET
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
POLICY
NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
ON JUNE ----------------- ----------------- -----------------------
24TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B
- ----------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1984................... $100,000 $100,406 $ 407 $ 406 $ 165* $ 140*
1985................... 100,000 101,166 1,169 1,166 869* 674*
1986................... 100,000 101,951 1,958 1,951 1,658 1,351
1987................... 100,000 102,747 2,759 2,747 2,459 2,147
1988................... 100,000 103,611 3,630 3,611 3,330 3,011
1989................... 100,000 104,608 4,636 4,608 4,436 4,108
1990................... 100,000 105,668 5,709 5,668 5,509 5,168
1991................... 100,000 106,724 6,781 6,724 6,581 6,324
1992................... 100,000 107,654 7,728 7,654 7,528 7,254
</TABLE>
- -------
* The values indicated take into account the Securities and Exchange
Commission limits on sales charges (see "Surrender Charge--Excess Sales
Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value
for purposes of determining whether a Policy will terminate and the amount
a Policy owner may borrow or partially withdraw is not affected by such
limits, may be less than stated above and could be zero.
A-21
<PAGE>
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 July 25, 1986 (the effective
date for the Diversified Portfolio). 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
NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
ON JULY ----------------- ----------------- -----------------------
25TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B
- ----------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1987................... $100,000 $100,454 $ 455 $ 454 $ 213* $ 188*
1988................... 100,000 101,137 1,139 1,137 839* 645*
1989................... 100,000 102,256 2,260 2,256 1,960 1,656
1990................... 100,000 103,282 3,289 3,282 2,989 2,682
1991................... 100,000 104,205 4,216 4,205 3,916 3,605
1992................... 100,000 105,693 5,710 5,693 5,510 5,693
</TABLE>
DIVERSIFIED
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
POLICY
NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
ON JULY ----------------- ----------------- -----------------------
25TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B
- ----------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1987................... $100,000 $100,454 $ 455 $ 454 $ 213* $ 188*
1988................... 100,000 101,048 1,050 1,048 750* 556*
1989................... 100,000 102,049 2,056 2,049 1,756 1,449
1990................... 100,000 102,961 2,973 2,961 2,673 2,361
1991................... 100,000 103,776 3,796 3,776 3,496 3,176
1992................... 100,000 105,098 5,130 5,098 4,930 4,598
</TABLE>
The following examples show how the hypothetical net return of the
investment division which invests in the Stock Index Portfolio of the Fund
would have affected benefits for a Policy dated May 1, 1990 (the effective
date for the Stock Index Portfolio). These examples assume that net premiums
and related cash values were in this investment division for the entire
period.
STOCK INDEX
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
POLICY
NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
ON MAY ----------------- ----------------- ------------------------
1ST OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B
- ----------- -------- -------- -------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1991................... $100,000 $100,462 $ 462 $ 462 $ 220* $ 196*
1992................... 100,000 101,344 1,346 1,344 1,046* 852*
</TABLE>
- -------
* The values indicated take into account the Securities and Exchange
Commission limits on sales charges (see "Surrender Charge--Excess Sales
Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value
for purposes of determining whether a Policy will terminate and the amount
a Policy owner may borrow or partially withdraw is not affected by such
limits, may be less than stated above and could be zero.
A-22
<PAGE>
STOCK INDEX
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
POLICY
NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
ON MAY ----------------- ----------------- ------------------------
1ST OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B
- ----------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1991................... $100,000 $100,462 $ 462 $ 462 $ 220* $ 196*
1992................... 100,000 101,247 1,250 1,247 950* 755*
</TABLE>
The following examples show how the hypothetical net return of the
investment division which invests in the Aggressive Growth Portfolio of the
Fund would have affected benefits for a Policy dated April 29, 1988 (the
effective date for the Aggressive Growth Portfolio). These examples assume
that net premiums and related cash values were in this investment division for
the entire period.
AGGRESSIVE GROWTH
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
POLICY
NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
ON APRIL ----------------- ----------------- -----------------------
29TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B
- ----------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1989................... $100,000 $100,480 $ 481 $ 480 $ 239* $ 214*
1990................... 100,000 101,351 1,353 1,351 1,053* 859*
1991................... 100,000 102,413 2,417 2,413 2,117 1,813
1992................... 100,000 103,809 3,817 3,809 3,517 3,209
</TABLE>
AGGRESSIVE GROWTH
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
POLICY
NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
ON APRIL ----------------- ----------------- -----------------------
29TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B
- ----------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1989................... $100,000 $100,480 $ 481 $ 480 $ 239* $ 214*
1990................... 100,000 101,255 1,258 1,255 958* 763*
1991................... 100,000 102,203 2,211 2,203 1,911 1,603
1992................... 100,000 103,457 3,472 3,457 3,172 2,857
</TABLE>
- -------
* The values indicated take into account the Securities and Exchange
Commission limits on sales charges (see "Surrender Charge--Excess Sales
Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value
for purposes of determining whether a Policy will terminate and the amount
a Policy owner may borrow or partially withdraw is not affected by such
limits, may be less than stated above and could be zero.
A-23
<PAGE>
The following examples show how the hypothetical net return of the
investment division which invests in the International Stock Portfolio of the
Fund would have affected benefits for a Policy dated May 1, 1991 (the
effective date for the International Stock Portfolio). These examples assume
that the net premiums and related cash values were in this investment division
for the entire period.
INTERNATIONAL STOCK
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
POLICY
NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
ON MAY ----------------- ----------------- -------------------------
1ST OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B
- ----------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1992................... $100,000 $100,302 $303 $302 $61* $36*
</TABLE>
INTERNATIONAL STOCK
($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK)
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
POLICY
NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
ON MAY ----------------- ----------------- -------------------------
1ST OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B
- ----------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1992................... $100,000 $100,302 $303 $302 $ 61* $ 36*
</TABLE>
- -------
* The values indicated take into account the Securities and Exchange
Commission limits on sales charges (see "Surrender Charge--Excess Sales
Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value
for purposes of determining whether a Policy will terminate and the amount
a Policy owner may borrow or partially withdraw is not affected by such
limits, may be less than stated above and could be zero.
BENEFIT AT FINAL DATE
If the insured is living, Metropolitan Life 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 A-16). The Final Date of
a Policy is the Policy anniversary on which the insured is 95 (see "Federal
Tax Matters," page A-51).
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 A-85. These
choices are also available at the Final Date and if the Policy is surrendered.
If no election is made, Metropolitan Life 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.
A-24
<PAGE>
OPTIONAL INSURANCE BENEFITS
Subject to certain requirements, one or more of the optional insurance
benefits described in Appendix A, page A-85, may be included with 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 A-30). See Appendix A, page A-85, for a discussion of how certain
riders affect the benefits and the exercise of certain rights under the Policy.
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 80 years of age or under who
supply evidence of insurability satisfactory to Metropolitan Life. Metropolitan
Life may, however, at its sole discretion, issue a Policy to an individual
above the age of 80. Acceptance is subject to Metropolitan Life's underwriting
rules, and Metropolitan Life reserves the right to reject an application for
any reason permitted by law.
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
Life 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 or other automatic
investment 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 Life, 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 Life 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 A-27). 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.
A-25
<PAGE>
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. During the first two Policy years,
premium payments must be at least equal to a minimum allowable planned premium
schedule. After the first two Policy years, the Policy owner is not required to
pay premiums in accordance with the planned periodic premium schedule.
MOREOVER THE PAYMENT OF PLANNED PERIODIC PREMIUMS WILL NOT GUARANTEE THAT THE
POLICY REMAINS IN FORCE AFTER THE FIRST TWO POLICY YEARS. Instead, the duration
of the Policy after the first two Policy years depends upon the Policy's cash
surrender value (see "Policy Termination and Reinstatement--Termination," page
A-28).
The Policy owner must designate in the application one of the following ways
to pay the planned periodic premium. The Policy owner may elect to pay the
planned periodic premium annually, semi-annually, or monthly through "check-o-
matic" payments. Monthly "check-o-matic" payments are automatically made by
preauthorized transfers from a bank checking account. A Policy owner may also
elect to pay monthly planned periodic premiums through various payroll
deduction plans if provided by the employer of the Policy owner.
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 two Policy years, premium payments by a
Policy owner must at least equal the minimum allowable planned premium for the
particular Policy or the Policy will terminate after a grace period commencing
on a monthly anniversary when the total premiums paid as of that date are not
at least equal to the minimum premiums required as of that date and the cash
surrender value is insufficient to pay the monthly deduction on that date. The
minimum allowable planned premium is equal to the then current annual target
premium for the Policy.
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 Code 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 Life 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.
A-26
<PAGE>
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 A-51). The annual statement (see "Reports," page A-59) 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
$200 on an annual basis, $100 on a semi-annual basis and $15 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 A-29).
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 Life 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. At the present time, there is
no charge for transfers. Metropolitan Life reserves the right in the future to
assess a charge of up to $25 against each transfer. 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. Transferring cash value from one or more investment divisions
and/or the Fixed Account into one or more other investment divisions and/or the
Fixed Account counts as one transfer. Metropolitan Life 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 A-48). Metropolitan
Life will effectuate transfers and determine all values in connection with
transfers as of the Date of Receipt of written notice at the Designated Office.
A-27
<PAGE>
Transfers are not taxable transactions under current law. Transfer requests
must be in writing, in a form acceptable to Metropolitan Life.
POLICY TERMINATION AND REINSTATEMENT
Termination. If, during the first two Policy years, the cash surrender value
on any monthly anniversary is insufficient to cover the monthly deduction and
the total premiums paid as of such monthly anniversary are not equal to the
minimum premiums required as of that date, Metropolitan Life will notify the
Policy owner and any assignee of record of that difference. Also, if, after the
first two Policy years, the cash surrender value on any monthly anniversary is
insufficient to cover the monthly deduction, Metropolitan Life will notify the
Policy owner and any assignee of record of that shortfall. In either case, the
Policy owner will then have a grace period of 61 days, measured from the
monthly anniversary, to make sufficient payment. In the first two Policy years,
the minimum necessary premium payment will be an amount equal to the difference
between the total premiums previously paid and the minimum required premiums.
After the first two Policy years, the minimum necessary payment must be an
amount sufficient to keep the Policy in force for two months after the premium
expense charges have been deducted. Failure to make a sufficient payment within
the grace period will result in termination of the Policy. In the first two
Policy years after issue or after an increase in the specified face amount, any
excess sales charges (see "Surrender Charge--Excess Sales Charge," page A-34)
will be returned to the Policy owner. Otherwise, a Policy terminates without
any cash surrender 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 Life: (1) a written
application for reinstatement; (2) evidence of insurability satisfactory to
Metropolitan Life; and (3) a premium that, after the deduction of the premium
expense charges (see "Charges and Deductions--Premium Expense Charges," page A-
29), is large enough to cover: (a) the monthly deductions for at least the two
Policy months commencing with the effective date of reinstatement; (b) any due
and unpaid monthly Policy charges incurred during the first Policy year; (c)
any portion of the surrender charge which was not paid at termination because
the cash value at termination was insufficient to pay such portion of the
charge; (d) for terminations occurring in the two Policy years after issue or
after an increase in the specified face amount, an amount equal to the excess,
if any, of (i) the portion of the surrender charge applicable to the issue or
the increase which would be payable (without regard to any excess sales charge
limitations as described on page A-34) if the Policy were surrendered in the
Policy year of reinstatement and as if the Policy had not been terminated
earlier over (ii) the amount of the applicable surrender charge paid at
termination; and (e) 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 (e) above.
Notwithstanding the above, at the present time, with respect to the
reinstatement of a Policy that is terminated during the first two Policy years,
Metropolitan Life will accept as the premium required for reinstatement the
lesser of the amount as defined in the immediately preceding paragraph and the
following: the excess of the sum of (a) the monthly deductions for at least the
two Policy months commencing with the effective date of reinstatement; (b) the
total of the minimum required premiums that would have been payable under the
Policy from the date of the Policy until the effective date of reinstatement
had no termination
A-28
<PAGE>
occurred; and (c) an amount that after the deduction of the premium expense
charges would equal any amount previously refunded to the Policy owner as an
Excess Sales Charge (see "Surrender Charge-- Excess Sales Charge," page A-34),
over the sum of all premiums paid by the Policy owner to the effective date of
the termination before any charges or deductions were applied. Metropolitan
Life offers this alternative calculation of the premium required for
reinstatement at present but reserves the right to modify or rescind this offer
at its sole discretion.
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 two monthly deductions plus any amount
of net premiums paid at reinstatement in excess of the amount of premium
required above to reinstate the Policy.
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. However, a Policy which
was terminated and reinstated during the first two Policy years will be subject
to termination after a grace period when the cash surrender value is
insufficient to pay a monthly deduction even if all minimum premiums required
to be paid during the first two Policy years have been paid. A reinstated
Policy is subject to a new two year period of contestability (see "Other Policy
Provisions--Incontestability," page A-49).
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
Life as described below. A charge of 2% of premiums paid is deducted from all
premium payments. There is also a charge (which may be deemed to be a sales
load) upon the surrender of a Policy during the first fifteen Policy years or
during the first fifteen Policy years after an increase in the specified face
amount of a Policy (see "Surrender Charge," page A-32).
The amount of the sales load (whether from either the premium expense charge
or upon surrender of the Policy) 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 expense risks under the Policies, any other gains
attributable to operations with respect to the Policies and Metropolitan Life's
general assets and surplus. Metropolitan Life does not anticipate that all its
total sales expenses will be recovered from the sales charges.
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
A-29
<PAGE>
special rules, which apply only to the amount derived from such proceeds,
Metropolitan Life will waive the 4% premium expense charges. 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 purchased. 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.
TRANSFER CHARGE
At the present time, no charge will be assessed against the cash value of a
Policy when amounts are transferred among the investment divisions of the
Separate Account and between the investment divisions and the Fixed Account.
Metropolitan Life reserves the right in the future to assess a charge of up to
$25 against each transfer. If made, the charge would be allocated among the
Fixed Account and each investment division of the Separate Account from which
amounts are transferred in the same proportion that the amounts transferred
from the Fixed Account and the amounts transferred from each investment
division bear to the total amount transferred, when the requested transfer is
effected. Thus, for example, if a request is received for a transfer of $100,
cash value in the amount of $100 would be deducted from the particular
investment division(s), with $100 being transferred to the requested new
investment division(s). The $25 would be deducted based on the cash value in
each investment division from which amounts are transferred at the time of the
transfer.
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 A-25) 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 A-15.
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 on the Separate Account on a Pro Rata
Basis. See "Payment and Allocation of Premiums--Issuance of a Policy," page A-
25, 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 Life 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.
A-30
<PAGE>
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 A-13), assuming the same
specified face amount in each case and assuming that the minimum death benefit
is not in effect. Since the death benefit under Option A remains constant while
the death benefit 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 A-13), 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,"
page A-31), 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, in the case of group conversions
which require unisex rates and in the case of Policies sold in connection with
executive bonus and split dollar deferred compensation plans), age and rate
class of the insured. The actual monthly cost of term insurance rates will be
based on Metropolitan Life'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 Life 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 Life's new rates for the Policies reflect actual mortality
experience. Metropolitan Life 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 Life currently places insureds into a standard rate class or
rate classes involving a higher or lower mortality risk. For Ages 18 and over,
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. During the first Policy year, there will be a Base
Administration Charge as described below plus a monthly charge equal to $0.25
per thousand dollars of specified face amount of the
A-31
<PAGE>
Policy. The Base Administration Charge is equal to $5 per month at Ages less
than eighteen, $15 per month at Ages eighteen to forty-nine, and $20 per month
at Ages fifty and above. After the first Policy year, the monthly
administration charge is $5 per month for Policies with a specified face amount
of $250,000 or more, $7 per month for Policies with a specified face amount of
$100,000 to $249,999, and $9 per month for Policies with a specified face
amount of less than $100,000. The monthly administration charge will be
determined by the specified face amount of the Policy at the time the monthly
deduction is made. Thus, any change in the specified face amount of a Policy
may result in a change in the monthly administration charge.
These charges will be used to compensate Metropolitan Life for expenses
incurred in the administration of the Policy as a multifunded policy. The first
year charge will also compensate Metropolitan Life 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 Life does not expect to derive a
profit from these charges. If a Policy is surrendered in the first Policy year,
the remaining Base Administration Charge for each of the full Policy months
remaining in the first Policy year will be deducted from the cash value of the
Policy in addition to any applicable surrender charge (see "Surrender Charge,"
below).
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 Life.
The amount of the charge is equivalent to an effective annual rate of .90% 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 Life 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 Life. If its estimates of future mortality and
expense experience are accurate, Metropolitan Life anticipates that it will
realize a profit from the mortality and expense risk charge; however if such
estimates are inaccurate, Metropolitan Life could incur a loss.
Charge for Income Taxes. Currently, no charge is made against the Separate
Account for income taxes. However, Metropolitan Life may decide to make such a
charge in the future (see "Federal Tax Matters--Taxation of Metropolitan Life,"
page A-53).
SURRENDER CHARGE
A sales charge will be deducted in the form of a surrender charge from the
cash value if the Policy is surrendered or terminated after a grace period
during the first fifteen Policy years. A sales charge will also be deducted
upon surrender or termination of a Policy during the first fifteen Policy years
after an increase in the specified face amount of a Policy. In each case, the
amount of the surrender charge is based on a charge per thousand dollars of
specified face amount which varies with the Age of the insured at the time of
the
A-32
<PAGE>
issue of the Policy or of the increase in the specified face amount and the
death benefit option chosen at the time of issue or increase by the Policy
owner. The surrender charges per thousand dollars of specified face amount are
as follows:
Option A:
<TABLE>
<CAPTION>
AGE AT POLICY YEARS SINCE ISSUE OR INCREASE
ISSUE OR -----------------------------------------------------------
INCREASE 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0- 5 $ 3 $ 3 $ 3 $ 3 $ 3 $ 2 $ 2 $ 2 $ 2 $ 2 $ 1 $ 1 $ 1 $ 1 $ 1
6-10 3 3 3 3 3 2 2 2 2 2 1 1 1 1 1
11-20 3 3 3 3 3 2 2 2 2 2 1 1 1 1 1
21-25 3 3 3 3 3 2 2 2 2 2 1 1 1 1 1
26-30 4 4 3 3 3 3 3 2 2 2 2 1 1 1 1
31-35 7 6 6 6 5 5 5 4 4 3 3 2 2 1 1
36-40 8 7 7 7 6 6 5 5 4 4 3 3 2 1 1
41-44 10 9 8 8 7 7 6 6 5 4 4 3 2 2 1
45-50 12 12 11 10 10 9 8 7 7 6 5 4 3 2 1
51-54 15 15 14 13 12 11 10 9 8 7 6 5 4 3 1
55-59 18 17 16 15 14 13 12 11 10 9 8 6 5 3 2
60-69 22 21 20 18 17 16 15 13 12 11 9 7 6 4 2
70-79 22 21 20 18 17 16 15 13 12 11 9 8 6 4 2
80 22 21 20 18 17 16 15 14 13 12 10 9 8 6 3
</TABLE>
Option B:
<TABLE>
<CAPTION>
AGE AT POLICY YEARS SINCE ISSUE OR INCREASE
ISSUE OR -----------------------------------------------------------
INCREASE 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0- 5 $ 4 $ 4 $ 3 $ 3 $ 3 $ 3 $ 3 $ 2 $ 2 $ 2 $ 2 $ 1 $ 1 $ 1 $ 1
6-10 4 4 4 4 3 3 3 3 2 2 2 1 1 1 1
11-20 5 5 5 4 4 4 3 3 3 2 2 2 1 1 1
21-25 7 7 6 6 6 5 5 4 4 3 3 2 2 1 1
26-30 10 8 7 7 7 6 6 5 4 4 3 3 2 1 1
31-35 12 12 11 10 10 9 8 7 6 5 4 4 3 2 1
36-40 15 14 13 12 12 11 10 9 8 7 6 5 4 3 1
41-44 20 20 19 18 17 16 14 13 12 10 9 7 5 4 2
45-50 24 24 24 22 21 19 17 16 14 12 10 8 6 4 2
51-54 27 27 26 24 23 21 19 18 16 14 12 10 7 5 3
55-59 30 29 27 25 24 22 20 18 16 14 12 10 8 5 3
60-69 32 30 29 27 25 23 22 20 18 15 13 11 8 6 3
70-79 36 34 33 31 29 27 25 23 20 18 16 13 10 7 4
80 40 38 36 34 32 30 28 26 24 22 19 17 14 11 6
</TABLE>
A total surrender charge at surrender or termination of a Policy will equal
the sum of any surrender charge based on the specified face amount at issue and
any surrender charges based on any increases in the specified face amount.
Thus, a surrender charge may apply to a surrender made more than fifteen years
A-33
<PAGE>
after issue of a Policy where a specified face amount increase has occurred
within fifteen years prior to the surrender. No surrender charge applies to any
increase in the specified face amount resulting from a change in the death
benefit option. Also, surrender charges are not reduced by a decrease in the
specified face amount. No surrender charges are assessed against partial
withdrawals or loans, but the amount of the applicable surrender charge
indicated above which would be deducted (disregarding the effect of the excess
sales charge limits discussed below) if the Policy were surrendered reduces the
amount of cash value which may be withdrawn or borrowed.
For example, if a Policy owner who is 25 years old purchases a Policy with a
specified face amount of $100,000 and chooses death benefit Option A, the
surrender charge in year five, assuming no increases in the specified face
amount, would be $300 ($3 X 100). If the Policy owner increases the specified
face amount by $50,000 in year 10 (when the Policy owner is 35 years old), the
surrender charge in year 15 would be $350, consisting of $100 ($1 X 100)
relating to the specified face amount at issue, and $250 ($5 X 50) relating to
the increase in the specified face amount. In year 20, the surrender charge
would be $150, consisting of 0 relating to the specified face amount at issue
(since the surrender takes place more than 15 years after the original issuance
of the Policy), and $150 ($3 X 50) relating to the increase in the specified
face amount.
During the first Policy year, in addition to the applicable surrender charge,
the remaining monthly Base Administration Charges will also be imposed upon
surrender of a Policy (see "Charges and Deductions--Monthly Policy Charges,"
page A-31).
Excess Sales Charge. With respect to the surrender or termination of a Policy
during the first two Policy years after issue or after an increase in the
specified face amount, the applicable surrender charge, together with all sales
charges previously deducted from premium payments, may not exceed the sum of
(i) 30% of premium payments in aggregate amount less than or equal to one
guideline annual premium, plus (ii) 10% of premium payments in aggregate amount
greater than one guideline annual premium but not more than two guideline
annual premiums, plus (iii) 9% of each premium payment in excess of two
guideline annual premiums. The cash surrender value of an in force Policy is
not affected by these limits.
GUARANTEE OF CERTAIN CHARGES
Metropolitan Life guarantees, and may not increase, the charges deducted from
premiums, the monthly administration charge, the surrender charge 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. The net asset value of Fund shares
is determined after deduction of the fee paid by the Fund at the annual rate of
.25% (.75% for the International Stock Portfolio and the Aggressive Growth
Portfolio) 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 UL, the Fixed
Account and the Metropolitan Series Fund?", page A-5 and in the attached
prospectus for the Fund. The net asset value of Fund shares also reflects
deduction of direct expenses from the assets of the Fund as more fully
described in the attached prospectus for the Fund.
A-34
<PAGE>
ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES, CASH SURRENDER VALUES AND
ACCUMULATED PREMIUMS
The tables on pages A-36 to A-43 illustrate the way in which a Policy's death
benefit, cash value and cash surrender 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 the payment of annual planned
premiums (see "Premiums--Premium Limitations," page A-26), for a specified face
amount of $100,000 for males aged 25 and 40. Each illustration assumes that the
insured is in Metropolitan Life's standard nonsmoker underwriting risk
classification. Illustrations for an insured in Metropolitan Life's standard
smoker underwriting risk classification would show, for the same age and
premium payments, lower cash values and cash surrender values and, therefore,
for the minimum death benefit and death benefit Option B, lower death benefits.
The differences between the cash values and the cash surrender values in the
first fifteen years are the surrender charges.
The death benefits, cash values and cash surrender values would be different
from those shown if the actual gross investment rates of return averaged 0%, 6%
or 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% or 12% but the
rates for each portfolio of the Fund varied above and below such averages.
The amounts shown for the death benefits, cash values and cash surrender
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 .90% 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 .392857% of the average daily value of
the aggregate net assets of the Fund (an average of the five available
portfolios of the Fund that have an investment management fee of .25% and the
two portfolios that have an investment management fee of .75%) and .283319% for
direct fund expenses. (See "Charges and Deductions," page A-29).
Columns on pages A-36, A-37, A-40 and A-41 are based on the guaranteed cost
of term insurance rates; columns on pages A-38, A-39, A-42 and A-43 are based
on the current cost of term insurance rates as presently in effect (see
"Monthly Deduction From Cash Value--Cost of Term Insurance Rate," page A-31).
Taking account of the charges for mortality and expense risks, investment
management services and other Fund expenses, the gross annual investment rates
of return of 0%, 6% and 12% correspond to actual (or net) annual rates of: -
1.55%, 4.36% and 10.26%, 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 Life," page A-
53).
The second column of the tables shows the amount which would accumulate if an
amount equal to the annual planned premium were invested to earn interest,
after taxes, at 5% compounded annually.
Upon request, Metropolitan Life will furnish an illustration reflecting the
proposed insured's age, sex, the specified face amount or premium amount
requested, frequency of planned periodic premium payments, death benefit option
selected and any available rider requested.
A-35
<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 TOTAL DEATH
TOTAL CASH VALUE(2) SURRENDER VALUE(2) BENEFIT(2)
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF
POLICY INTEREST ----------------------- -------------------------- --------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
------ ----------- ------ ------- -------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 998 $ 344 $ 380 $ 417 $ 102* $ 138* $ 175* $100,000 $100,000 $100,000
2...................... 2,045 986 1,090 1,198 686* 790* 898* 100,000 100,000 100,000
3...................... 3,145 1,618 1,831 2,061 1,318 1,531 1,761 100,000 100,000 100,000
4...................... 4,299 2,243 2,608 3,016 1,943 2,308 2,716 100,000 100,000 100,000
5...................... 5,512 2,859 3,418 4,069 2,559 3,118 3,769 100,000 100,000 100,000
6...................... 6,785 3,462 4,262 5,229 3,262 4,062 5,029 100,000 100,000 100,000
7...................... 8,122 4,053 5,140 6,505 3,853 4,940 6,305 100,000 100,000 100,000
8...................... 9,525 4,628 6,050 7,908 4,428 5,850 7,708 100,000 100,000 100,000
9...................... 10,999 5,188 6,994 9,449 4,988 6,794 9,249 100,000 100,000 100,000
10...................... 12,546 5,732 7,972 11,143 5,532 7,772 10,943 100,000 100,000 100,000
15...................... 21,525 8,132 13,354 22,453 8,032 13,254 22,353 100,000 100,000 100,000
20...................... 32,983 9,845 19,537 40,580 9,845 19,537 40,580 100,000 100,000 100,000
25...................... 47,608 10,667 26,551 69,754 10,667 26,551 69,754 100,000 100,000 133,230(3)
40...................... 120,498 1,693 51,870 306,321 1,693 51,870 306,321 100,000 100,000 373,711(3)
</TABLE>
- --------
(1) Assumes annual planned premium payments of $950 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 A-13 for further details.
* The values indicated take into account the Securities and Exchange
Commission limits on sales charges (see "Surrender Charge--Excess Sales
Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value
for purposes of determining whether a Policy will terminate and the amount
a Policy owner may borrow or partially withdraw is not affected by such
limits, may be less than stated above and could be zero.
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, CASH VALUE AND CASH SURRENDER 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 LIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-36
<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
TOTAL CASH VALUE(2) SURRENDER VALUE(2) TOTAL DEATH BENEFIT(2)
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF
POLICY INTEREST --------------------------- ---------------------------- -----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
------ ----------- ------- ------- -------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 998 $ 344 $ 380 $ 416 $ 78* $ 114* $ 150* $100,344 $100,380 $100,416
2...................... 2,045 983 1,087 1,195 491* 595* 703* 100,983 101,087 101,195
3...................... 3,145 1,613 1,825 2,055 1,013 1,225 1,455 101,613 101,825 102,055
4...................... 4,299 2,234 2,597 3,003 1,634 1,997 2,403 102,234 102,597 103,003
5...................... 5,512 2,845 3,401 4,048 2,245 2,801 3,448 102,845 103,401 104,048
6...................... 6,785 3,442 4,236 5,196 2,942 3,736 4,696 103,442 104,236 105,196
7...................... 8,122 4,025 5,103 6,457 3,525 4,603 5,957 104,025 105,103 106,457
8...................... 9,525 4,592 6,000 7,840 4,192 5,600 7,440 104,592 106,000 107,840
9...................... 10,999 5,143 6,928 9,355 4,743 6,528 8,955 105,143 106,928 109,355
10...................... 12,546 5,675 7,887 11,017 5,375 7,587 10,717 105,675 107,887 111,017
15...................... 21,525 7,988 13,094 21,980 7,888 12,994 21,880 107,988 113,094 121,980
20...................... 32,983 9,540 18,865 39,073 9,540 18,865 39,073 109,540 118,865 139,073
25...................... 47,608 10,094 24,995 65,764 10,094 24,995 65,764 110,094 124,995 165,764
40...................... 120,498 0(3) 37,741 273,677 0(3) 37,741 273,677 0(3) 137,741 373,677
</TABLE>
- --------
(1) Assumes annual planned premium payments of $950 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, cash surrender value and death benefit indicate
termination of insurance coverage in the absence of a sufficient additional
premium payment; see "Payment and Allocation of Premiums--Termination," on
page A-28 for further details.
* The values indicated take into account the Securities and Exchange
Commission limits on sales charges (see "Surrender Charge--Excess Sales
Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value
for purposes of determining whether a Policy will terminate and the amount
a Policy owner may borrow or partially withdraw is not affected by such
limits, may be less than stated above and could be zero.
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, CASH VALUE AND CASH SURRENDER 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 LIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-37
<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
TOTAL CASH VALUE(2) SURRENDER VALUE(2) TOTAL DEATH BENEFIT(2)
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF
POLICY INTEREST ------------------------ -------------------------- -------------------------- -----------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
------ ----------- ------- ------- -------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.............. $ 998 $ 344 $ 380 $ 417 $ 102* $ 138* $ 175* $100,000 $100,000 $100,000
2.............. 2,045 1,076 1,183 1,294 776* 883* 994* 100,000 100,000 100,000
3.............. 3,145 1,797 2,021 2,263 1,497 1,721 1,963 100,000 100,000 100,000
4.............. 4,299 2,508 2,896 3,331 2,208 2,596 3,031 100,000 100,000 100,000
5.............. 5,512 3,208 3,811 4,510 2,908 3,511 4,210 100,000 100,000 100,000
6.............. 6,785 3,897 4,766 5,811 3,697 4,566 5,611 100,000 100,000 100,000
7.............. 8,122 4,577 5,763 7,247 4,377 5,563 7,047 100,000 100,000 100,000
8.............. 9,525 5,246 6,805 8,831 5,046 6,605 8,631 100,000 100,000 100,000
9.............. 10,999 5,906 7,893 10,580 5,706 7,693 10,380 100,000 100,000 100,000
10.............. 12,546 6,541 9,014 12,493 6,341 8,814 12,293 100,000 100,000 100,000
15.............. 21,525 9,539 15,374 25,442 9,439 15,274 25,342 100,000 100,000 100,000
20.............. 32,983 12,149 23,106 46,488 12,149 23,106 46,488 100,000 100,000 103,204(3)
25.............. 47,608 14,252 32,431 80,484 14,252 32,431 80,484 100,000 100,000 153,725(3)
40.............. 120,498 14,872 73,626 364,746 14,872 73,626 364,746 100,000 100,000 444,990(3)
</TABLE>
- --------
(1) Assumes annual planned premium payments of $950 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 A-13 for further details.
* The values indicated take into account the Securities and Exchange
Commission limits on sales charges (see "Surrender Charge--Excess Sales
Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value
for purposes of determining whether a Policy will terminate and the amount
a Policy owner may borrow or partially withdraw is not affected by such
limits, may be less than stated above and could be zero.
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, CASH VALUE AND CASH SURRENDER 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 LIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-38
<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
TOTAL CASH VALUE(2) SURRENDER VALUE(2) TOTAL DEATH BENEFIT(2)
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF
POLICY INTEREST ------------------------ -------------------------- --------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
------ ----------- ------- ------- -------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 998 $ 344 $ 380 $ 416 $ 78* $ 114* $ 151* $100,344 $100,380 $100,416
2...................... 2,045 1,075 1,181 1,292 583* 689* 800* 101,075 101,181 101,292
3...................... 3,145 1,794 2,018 2,259 1,194 1,418 1,659 101,794 102,018 102,259
4...................... 4,299 2,503 2,891 3,324 1,903 2,291 2,724 102,503 102,891 103,324
5...................... 5,512 3,200 3,802 4,499 2,600 3,202 3,899 103,200 103,802 104,499
6...................... 6,785 3,887 4,752 5,794 3,387 4,252 5,294 103,887 104,752 105,794
7...................... 8,122 4,563 5,745 7,222 4,063 5,245 6,722 104,563 105,745 107,222
8...................... 9,525 5,228 6,780 8,797 4,828 6,380 8,397 105,228 106,780 108,797
9...................... 10,999 5,884 7,861 10,533 5,484 7,461 10,133 105,884 107,861 110,533
10...................... 12,546 6,512 8,971 12,430 6,212 8,671 12,130 106,512 108,971 112,430
15...................... 21,525 9,470 15,248 25,215 9,370 15,148 25,115 109,470 115,248 125,215
20...................... 32,983 12,005 22,792 45,792 12,005 22,792 45,792 112,005 122,792 145,792
25...................... 47,608 13,969 31,692 78,824 13,969 31,692 78,824 113,969 131,692 178,824
40...................... 120,498 13,232 65,447 352,617 13,232 65,447 352,617 113,232 165,447 452,617
</TABLE>
- --------
(1) Assumes annual planned premium payments of $950 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.
* The values indicated take into account the Securities and Exchange
Commission limits on sales charges (see "Surrender Charge--Excess Sales
Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value
for purposes of determining whether a Policy will terminate and the amount
a Policy owner may borrow or partially withdraw is not affected by such
limits, may be less than stated above and could be zero.
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, CASH VALUE AND CASH SURRENDER 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 LIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-39
<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
TOTAL CASH VALUE(2) SURRENDER VALUE(2) TOTAL DEATH BENEFIT(2)
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF
POLICY INTEREST ------------------------- --------------------------- --------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
------ ----------- ------- -------- -------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 1,313 $ 581 $ 632 $ 684 $ 231* $ 282* $ 334* $100,000 $100,000 $100,000
2...................... 2,691 1,337 1,483 1,636 821* 967* 1,120* 100,000 100,000 100,000
3...................... 4,138 2,055 2,345 2,658 1,355 1,645 1,958 100,000 100,000 100,000
4...................... 5,657 2,735 3,216 3,758 2,035 2,516 3,058 100,000 100,000 100,000
5...................... 7,252 3,374 4,095 4,940 2,774 3,495 4,340 100,000 100,000 100,000
6...................... 8,928 3,971 4,981 6,214 3,371 4,381 5,614 100,000 100,000 100,000
7...................... 10,686 4,525 5,872 7,586 4,025 5,372 7,086 100,000 100,000 100,000
8...................... 12,533 5,035 6,768 9,069 4,535 6,268 8,569 100,000 100,000 100,000
9...................... 14,472 5,498 7,667 10,670 5,098 7,267 10,270 100,000 100,000 100,000
10...................... 16,508 5,911 8,564 12,401 5,511 8,164 12,001 100,000 100,000 100,000
15...................... 28,322 7,026 12,832 23,397 6,926 12,732 23,297 100,000 100,000 100,000
20...................... 43,399 5,948 16,073 39,979 5,948 16,073 39,979 100,000 100,000 100,000
25...................... 62,642 1,412 16,911 66,574 1,412 16,911 66,574 100,000 100,000 100,000
</TABLE>
- --------
(1) Assumes annual planned premium payments of $1,250 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.
* The values indicated take into account the Securities and Exchange
Commission limits on sales charges (see "Surrender Charge--Excess Sales
Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value
for purposes of determining whether a Policy will terminate and the amount
a Policy owner may borrow or partially withdraw is not affected by such
limits, may be less than stated above and could be zero.
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, CASH VALUE AND CASH SURRENDER 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 LIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-40
<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
TOTAL CASH VALUE(2) SURRENDER VALUE(2) TOTAL DEATH BENEFIT(2)
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF
POLICY INTEREST ------------------------- -------------------------- --------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
------ ----------- ------- -------- -------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 1,313 $ 580 $ 631 $ 683 $ 230* $ 281* $ 333* $100,580 $100,631 $100,683
2...................... 2,691 1,331 1,476 1,628 631* 776* 928* 101,331 101,476 101,628
3...................... 4,138 2,041 2,327 2,639 741 1,027 1,339 102,041 102,327 102,639
4...................... 5,657 2,709 3,184 3,720 1,509 1,984 2,520 102,709 103,184 103,720
5...................... 7,252 3,332 4,042 4,876 2,132 2,842 3,676 103,332 104,042 104,876
6...................... 8,928 3,910 4,901 6,112 2,810 3,801 5,012 103,910 104,901 106,112
7...................... 10,686 4,440 5,758 7,434 3,440 4,758 6,434 104,440 105,758 107,434
8...................... 12,533 4,921 6,610 8,849 4,021 5,710 7,949 104,921 106,610 108,849
9...................... 14,472 5,351 7,453 10,362 4,551 6,653 9,562 105,351 107,453 110,362
10...................... 16,508 5,726 8,284 11,978 5,026 7,584 11,278 105,726 108,284 111,978
15...................... 28,322 6,559 11,951 21,741 6,459 11,851 21,641 106,559 111,951 121,741
20...................... 43,399 5,053 13,871 34,643 5,053 13,871 34,643 105,053 113,871 134,643
25...................... 62,642 137 12,207 51,047 137 12,207 51,047 100,137 112,207 151,047
</TABLE>
- --------
(1) Assumes annual planned premium payments of $1,250 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.
* The values indicated take into account the Securities and Exchange
Commission limits on sales charges (see "Surrender Charge--Excess Sales
Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value
for purposes of determining whether a Policy will terminate and the amount
a Policy owner may borrow or partially withdraw is not affected by such
limits, may be less than stated above and could be zero.
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, CASH VALUE AND CASH SURRENDER 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 LIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-41
<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
TOTAL CASH VALUE(2) SURRENDER VALUE(2) TOTAL DEATH BENEFIT(2)
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF
POLICY INTEREST ------------------------ -------------------------- ------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
------ ----------- ------- ------- -------- ------- ------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 1,313 $ 581 $ 632 $ 684 $ 231* $ 282* $ 334* $100,000 100,000 100,000
2...................... 2,691 1,546 1,699 1,858 1,030* 1,183* 1,342* 100,000 100,000 100,000
3...................... 4,138 2,483 2,798 3,138 1,783 2,098 2,438 100,000 100,000 100,000
4...................... 5,657 3,392 3,931 4,535 2,692 3,231 3,835 100,000 100,000 100,000
5...................... 7,252 4,272 5,099 6,061 3,672 4,499 5,461 100,000 100,000 100,000
6...................... 8,928 5,125 6,305 7,732 4,525 5,705 7,132 100,000 100,000 100,000
7...................... 10,686 5,952 7,552 9,563 5,452 7,052 9,063 100,000 100,000 100,000
8...................... 12,533 6,754 8,841 11,571 6,254 8,341 11,071 100,000 100,000 100,000
9...................... 14,472 7,531 10,175 13,776 7,131 9,775 13,376 100,000 100,000 100,000
10...................... 16,508 8,268 11,541 16,185 7,868 11,141 15,785 100,000 100,000 100,000
15...................... 28,322 11,424 18,983 32,231 11,324 18,883 32,131 100,000 100,000 100,000
20...................... 43,399 13,362 27,311 57,967 13,362 27,311 57,967 100,000 100,000 100,000
25...................... 62,642 13,722 36,606 100,431 13,722 36,606 100,431 100,000 100,000 122,526(3)
</TABLE>
- --------
(1) Assumes annual planned premium payments of $1,250 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 A-13 for further details.
* The values indicated take into account the Securities and Exchange
Commission limits on sales charges (see "Surrender Charge--Excess Sales
Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value
for purposes of determining whether a Policy will terminate and the amount
a Policy owner may borrow or partially withdraw is not affected by such
limits, may be less than stated above and could be zero.
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, CASH VALUE AND CASH SURRENDER 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 LIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-42
<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
TOTAL CASH VALUES(2) SURRENDER VALUE(2) TOTAL DEATH BENEFIT(2)
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF
POLICY INTEREST -------------------------------------------------- --------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
------ ----------- -- ------- --------------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1...................... $1,313 $ 580 $ 631 $ 683 $ 230* $ 281* $ 333* $100,580 $100,631 $100,683
2...................... 2,691 1,543 1,695 1,854 843* 995* 1,154* 101,543 101,695 101,854
3...................... 4,138 2,476 2,790 3,129 1,176 1,490 1,829 102,476 102,790 103,129
4...................... 5,657 3,379 3,916 4,518 2,179 2,716 3,318 103,379 103,916 104,518
5...................... 7,252 4,252 5,075 6,031 3,052 3,875 4,831 104,252 105,075 106,031
6...................... 8,928 5,096 6,268 7,684 3,996 5,168 6,584 105,096 106,268 107,684
7...................... 10,686 5,911 7,497 9,490 4,911 6,497 8,490 105,911 107,497 109,490
8...................... 12,533 6,698 8,764 11,465 5,798 7,864 10,565 106,698 108,764 111,465
9...................... 14,472 7,457 10,070 13,626 6,657 9,270 12,826 107,457 110,070 113,626
10...................... 16,508 8,173 11,400 15,975 7,473 10,700 15,275 108,173 111,400 115,975
15...................... 28,322 11,150 18,491 31,340 11,050 18,391 31,240 111,150 118,491 131,340
20...................... 43,399 12,725 25,905 54,809 12,725 25,905 54,809 112,725 125,905 154,809
25...................... 62,642 12,467 33,129 90,832 12,467 33,129 90,832 112,467 133,129 190,832
</TABLE>
- --------
(1) Assumes annual planned premium payments of $1,250 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.
* The values indicated take into account the Securities and Exchange
Commission limits on sales charges (see "Surrender Charge--Excess Sales
Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value
for purposes of determining whether a Policy will terminate and the amount
a Policy owner may borrow or partially withdraw is not affected by such
limits, may be less than stated above and could be zero.
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, CASH VALUE AND CASH SURRENDER 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 LIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-43
<PAGE>
POLICY RIGHTS
The description of rights under the Policy set forth below assumes that no
riders are in effect. See Appendix A, page A-85, for a discussion of how these
rights may be affected by certain riders under the Policy.
LOAN PRIVILEGES
Policy Loan. At any time, the Policy owner may borrow money from Metropolitan
Life 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 A-51.
Allocation of Policy Loan. Metropolitan Life 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. 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 Life 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 A-51.
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 fixed rate charged less a percentage
charge, based on expenses associated with Policy loans, determined by
Metropolitan Life. Presently, this charge is 2%. Thus, the interest rate
presently credited is 6%. The minimum rate credited to the Policy Loan Account
will be 4% per year. 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
A-44
<PAGE>
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 Life will notify the Policy
owner and any assignee of record. If a sufficient payment is not made to
Metropolitan Life 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 A-28).
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 Life 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 Life. The maximum amount available for surrenders or withdrawal
is the cash surrender value on the Date of Receipt of the request. No charge
will be imposed on partial withdrawals. See "Charges and Deductions--Surrender
Charge," page A-32 for a discussion of surrender charges. For any tax
consequences in connection with a partial withdrawal or surrender, see "Federal
Tax Matters," page A-51.
Surrenders. The Policy owner may surrender the Policy for its cash surrender
value. If the Policy is being surrendered, Metropolitan Life may require that
the Policy itself be returned along with the request. 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 A-85). 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
A-45
<PAGE>
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 A-15).
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 A-15), or that would result in total premiums paid exceeding the then
current maximum premium limitation determined by Internal Revenue Code rules
(see "Premiums--Premium Limitations," page A-26). A partial withdrawal will
also not be permitted unless the resulting cash surrender value would be
sufficient to pay at least two monthly deductions. 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 two monthly
deductions, Metropolitan Life 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, 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 A-27.
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 value will be transferred to the general account of
Metropolitan Life.
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 Life. 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
Metropolitan Life has 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.
A-46
<PAGE>
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 Life other
than those in the Separate Account and other separate accounts. Subject to
applicable law, Metropolitan Life 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 Life.
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 Life 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 Life is not obligated to credit interest at any higher rate,
although Metropolitan Life 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 A-13).
FIXED ACCOUNT CASH VALUE
Net premiums allocated to the Fixed Account are credited to the Policy.
Metropolitan Life 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. This is the rate that will be credited to the first $1,000
of cash value in the Fixed Account. Metropolitan Life may declare any rate of
interest in excess of 4% at any time to be credited to amounts of cash value in
the Fixed Account in excess of $1,000, subject to the following conditions:
Metropolitan Life will not change 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, Metropolitan Life will not change the rate of
excess interest for a period of twelve months from the date declared.
Metropolitan Life may also establish multiple bands of excess interest. This
means that different 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.
A-47
<PAGE>
ANY INTEREST METROPOLITAN LIFE 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 LIFE. THE POLICY OWNER
ASSUMES THE RISK THAT INTEREST CREDITED TO AMOUNTS OF CASH VALUE IN THE FIXED
ACCOUNT IN EXCESS OF $1,000 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 A-27, A-44 and A-45).
Metropolitan Life 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 A-50). Payments to pay premiums on another policy with Metropolitan Life
will not be delayed.
RIGHTS RESERVED BY METROPOLITAN LIFE
Metropolitan Life 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 Life will obtain Policy owner approval of
the changes and approval from any appropriate regulatory authority. Examples of
the changes Metropolitan Life 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.
. 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.
A-48
<PAGE>
. To change the way Metropolitan Life 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 Life 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 Life will notify the Policy owner of such change, and
the owner may then make a new choice of investment divisions or the Fixed
Account without charge.
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 Life 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 Life 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 Life 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 Life'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.
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 Life is not bound by an assignment or
A-49
<PAGE>
release thereof, unless it is in writing and is recorded at the Designated
Office. Metropolitan Life 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 Life 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 Life 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 Life 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 Life will not defer a loan used to pay premiums on
other policies issued by it.
As with traditional life insurance, Metropolitan Life 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 Life's surplus.
The description throughout this Prospectus of the features of the Policies is
subject to the specific terms of the Policies.
SALES AND ADMINISTRATION OF THE POLICIES
Metropolitan Life performs the sales and administrative services relating to
the Policies. The offices of Metropolitan Life 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 Life may name different Designated Offices for different
transactions.
Metropolitan Life acts as the principal underwriter (distributor) of the
Policies as defined in the 1940 Act (see "Distribution of the Policies," page
A-51). 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 Accounts One and Two of
Metropolitan Tower Life Insurance Company, a wholly-owned subsidiary of
Metropolitan Life, and Metropolitan Life Separate Account E of Metropolitan
Life, each of which is registered as a unit investment trust under the 1940
Act. Finally, Metropolitan Life acts as principal underwriter for a different
form of the flexible premium multifunded life insurance policy and for a
flexible premium variable universal life insurance policy, premiums for which
may also be allocated to the Separate Account.
Bonding. The directors, officers and employees of Metropolitan Life are
bonded in the amount of $50,000,000, subject to a $5,000,000 deductible.
A-50
<PAGE>
DISTRIBUTION OF THE POLICIES
The Policies will be sold by individuals who are 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 45% of the target premium
for a Policy where the Policy owner chooses death benefit Option A at issue and
55% of the Option A target premium for a Policy where Option B is chosen, plus,
in either case, 3% of the excess of the premium paid over the Option A target
premium. In no event will first year commissions for a Policy exceed 41.25% of
the federal guideline annual premium set forth in Section 7702 of the Internal
Revenue Code. Writing representatives may be required to return all or part of
the first year commission if the Policy is not continued through the second
Policy year. Renewal commissions in Policy years 2 through 4 will be 5% of
premiums paid and are payable to the writing representative. Renewal
commissions in Policy years 5 through 10 will be 2% of premiums paid. Renewal
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 and (ii) a commission not to
exceed 16% of renewal commissions paid to the writing representative in Policy
years 2 and later.
The commissions are paid by Metropolitan Life. They do not result in any
charges against the Policy in addition to those set forth under "Charges and
Deductions," page A-29. During 1992, such commissions aggregated approximately
$5,300,000.
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 Life 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.
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
diversification rules for the investments underlying the Policies, in order for
the Policies to be treated as life insurance. Metropolitan Life believes that
these diversification standards will be satisfied. There is a provision in the
regulations which allows for the correction of an inadvertent failure to
diversify. Failure to comply with the rules found in the regulations would
result in immediate taxation to Policy owners of all positive investment
experience credited to a Policy.
A-51
<PAGE>
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 Life reserves the right to amend the
Policies in any way necessary to avoid any such result.
Metropolitan Life 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 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 provided
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 7-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 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 of premiums necessary to fund
the lowest death benefit payable in the first 7 Policy years will not be
considered material modifications. 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 A-26).
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.
A-52
<PAGE>
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 a current 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 or 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 LIFE
Metropolitan Life 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 with respect to earnings
or capital gains which may be attributable to the Separate Account. If,
however, Metropolitan Life 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 Life 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 Life may decide to make
charges for such taxes against or provisions for such taxes in the Separate
Account. However, there is a 2% charge on premiums paid imposed for state
premium taxes.
A-53
<PAGE>
MANAGEMENT
The present directors and the senior officers and secretary of Metropolitan
Life are listed below, together with certain information concerning them:
DIRECTORS, OFFICERS-DIRECTORS
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES
NAME BUSINESS ADDRESS WITH METROPOLITAN LIFE
- ---- ---------------------- ----------------------
<S> <C> <C>
Theodossios
Athanassiades.......... President and Chief Operating Officer, President, Chief Operating
Metropolitan Life Insurance Company, Officer and Director
One Madison Avenue,
New York, NY 10010.
Joan Ganz Cooney........ Chairman, Executive Committee, Director
Children's Television Workshop,
One Lincoln Plaza,
New York, NY 10023.
John J. Creedon......... Retired President Director
and Chief Executive Officer,
Metropolitan Life Insurance Company,
200 Park Avenue, Suite 5700
New York, NY 10166.
A. Luis Ferre........... President, El Nuevo Dia, Director
P.O. Box 297,
San Juan, PR 00902.
James R. Houghton....... Chairman of the Board and Director
Chief Executive Officer,
Corning Incorporated,
Corning, NY 14830.
Harry P. Kamen.......... Chairman of the Board and Chairman of the Board, Chief
Chief Executive Officer, Executive Officer
Metropolitan Life Insurance Company, and Director
One Madison Avenue,
New York, NY 10010.
Helene L. Kaplan........ Of Counsel, Skadden, Arps, Slate, Director
Meagher & Flom,
919 Third Avenue,
New York, NY 10022.
</TABLE>
A-54
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES
NAME BUSINESS ADDRESS WITH METROPOLITAN LIFE
---- ---------------------- ----------------------
<S> <C> <C>
George M. Keller........ Retired Chairman of the Board, Director
Chevron Corporation,
555 Market Street, Suite 1429,
San Francisco, CA 94105-2870.
Melvin R. Laird......... Senior Counsellor for National and Director
International Affairs,
Reader's Digest
1730 Rhode Island Ave., N.W.,
Suite 212,
Washington, DC 20036.
Richard J. Mahoney...... Chairman of the Board and Director
Chief Executive Officer,
Monsanto Company,
800 N. Lindbergh Blvd.,
St. Louis, MO 63167.
Allen E. Murray......... Chairman of the Board Director
and Chief Executive Officer,
Mobil Corporation,
P.O. Box 2072
New York, NY 10163.
John J. Phelan, Jr. .... Retired Chairman and Chief Executive Director
Officer, New York Stock Exchange,
Inc., 237 Park Avenue,
21st Floor,
New York, NY 10017.
John B. M. Place........ Former Chairman of the Board, Director
Crocker National Corporation,
111 Sutter Street, 4th Fl.,
San Francisco, CA 94104.
Roscoe Robinson, Jr. ... General, U.S. Army (retired) , Director
7440 Mason Lane,
Falls Church, VA 22042
Robert G. Schwartz...... Retired Chairman of the Board, Director
President and Chief Executive Officer,
Metropolitan Life Insurance Company,
200 Park Avenue, Suite 5700
New York, NY 10166
</TABLE>
A-55
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES
NAME BUSINESS ADDRESS WITH METROPOLITAN LIFE
---- ---------------------- ----------------------
<S> <C> <C>
William S. Sneath....... Retired Chairman of the Board, Director
Union Carbide Corporation,
41 Leeward Lane,
Riverside, CT 06878.
John R. Stafford........ Chairman of the Board Director
and Chief Executive Officer,
American Home Products Corporation,
685 Third Avenue,
New York, NY 10017.
</TABLE>
OFFICERS*
<TABLE>
<CAPTION>
NAME OF OFFICER POSITION WITH METROPOLITAN LIFE
--------------- -------------------------------
<S> <C>
Stewart G. Nagler.............. Senior Executive Vice-President
Gerald Clark................... Executive Vice-President
Robert J. Crimmins............. Executive Vice-President
John D. Moynahan, Jr. ......... Executive Vice-President
William G. Poortvliet.......... Executive Vice-President
Catherine A. Rein.............. Executive Vice-President
Richard M. Blackwell........... Senior Vice-President and General Counsel
Anthony C. Cannatella.......... Senior Vice-President
Paul R. Crotty................. Senior Vice-President
James B. Digney................ Senior Vice-President
John J. Falzon................. Senior Vice-President
William T. Friedewald.......... Senior Vice-President and Chief Medical Director
Bruce J. Goodman............... Senior Vice-President
Frederick P. Hauser............ Senior Vice-President & Controller
C. Robert Henrikson............ Senior Vice-President
Jeffrey J. Hodgman............. Senior Vice-President
David A. Levene................ Senior Vice-President and Chief Actuary
Francis P. Lynch............... Senior Vice-President
</TABLE>
- --------
* The principal occupation of each officer during the last five years has been
as an officer of Metropolitan Life. The business address of each officer is 1
Madison Avenue, New York, New York 10010.
A-56
<PAGE>
<TABLE>
<CAPTION>
NAME OF OFFICER POSITION WITH METROPOLITAN LIFE
--------------- -------------------------------
<S> <C>
Richard N. Maurer.......................... Senior Vice-President
John C. Morrison........................... Senior Vice-President
Mwafak S. Peress........................... Senior Vice-President
Dominick A. Prezzano....................... Senior Vice-President
Leo T. Rasmussen........................... Senior Vice-President
Vincent P. Reusing......................... Senior Vice-President
Robert E. Sollmann, Jr..................... Senior Vice-President
Thomas L. Stapleton........................ Senior Vice-President & Tax Director
George B. Trotta........................... Senior Vice-President
Arthur G. Typermass........................ Senior Vice-President & Treasurer
James A. Valentino......................... Senior Vice-President
Richard S. Walsh........................... Senior Vice-President
Judy E. Weiss.............................. Senior Vice-President
Harvey M. Young............................ Senior Vice-President
Nicholas D. Latrenta....................... Vice-President and Secretary
</TABLE>
A-57
<PAGE>
VOTING RIGHTS
RIGHT TO INSTRUCT VOTING OF FUND SHARES
In accordance with its view of present applicable law, Metropolitan Life 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 Life
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
Life.
DISREGARD OF VOTING INSTRUCTIONS
Notwithstanding contrary Policy owner voting instructions, Metropolitan Life
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 Life'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 Life 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.
A-58
<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. Policy owners whose premiums are
automatically remitted under a check-o-matic allotment deduction or certain
payroll deduction plans do not receive confirmation of premium payments from
Metropolitan Life apart from that provided by their bank or employer. 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 A-26).
In addition, an owner will be sent semiannual reports containing financial
statements for the Fund, as required by the 1940 Act.
STATE REGULATION
Metropolitan Life is subject to regulation and supervision by the Insurance
Department of the State of New York, 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. Where required, a copy of the form of
Policy has been filed with, and approved by, insurance officials in each
jurisdiction where the Policies are sold. Metropolitan Life intends to satisfy
the necessary requirements to sell the Policies in all fifty states and the
District of Columbia as soon as possible.
Metropolitan Life is required to submit annual statements of its operations,
including financial statements, to the insurance departments of the various
jurisdictions in which is 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 Life 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 Christopher P. Nicholas, Associate General Counsel of Metropolitan
Life. Messrs. Freedman, Levy, Kroll & Simonds, Washington, D.C., have acted as
special counsel on certain matters relating to the federal securities laws.
A-59
<PAGE>
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, Vice-President of Metropolitan Life, as stated in her opinion
filed as an exhibit to the registration statement.
FINANCIAL STATEMENTS
The financial statements of Metropolitan Life included in this Prospectus
should be considered only as bearing upon the ability of Metropolitan Life to
meet its obligations under the Policies.
A-60
<PAGE>
INDEPENDENT AUDITORS' REPORT
Metropolitan Life Insurance Company:
We have audited the accompanying balance sheets of Metropolitan Life Insurance
Company (the Company) as of December 31, 1992 and 1991 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, 1992 and 1991
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.
As described in Note 1, in 1992 the Company changed its method of computing
investment valuation reserves as prescribed by the Insurance Department of the
State of New York.
DELOITTE & TOUCHE
New York, N.Y.
February 11, 1993
A-61
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
BALANCE SHEETS DECEMBER 31, 1992 AND 1991
<TABLE>
<CAPTION>
NOTES 1992 1991
----- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
ASSETS
Bonds................................................... 3 $ 57,477 $ 52,432
Stocks.................................................. 2,3 3,168 4,489
Mortgage loans.......................................... 2,3 17,422 20,232
Real estate............................................. 8,672 7,942
Policy loans............................................ 3 3,099 2,661
Cash and short-term Investments......................... 1,224 1,432
Other Invested assets................................... 2 4,389 3,899
Premiums deferred and uncollected....................... 1,405 1,286
Investment income due and accrued....................... 1,369 1,383
Separate Account assets................................. 19,512 14,591
Other assets............................................ 441 452
-------- --------
TOTAL ASSETS.................................. $118,178 $110,799
======== ========
LIABILITIES AND SURPLUS
Reserves for life and health insurance and annuities.... 4,5 $ 66,539 $ 63,266
Policy proceeds and dividends left with the Company..... 4 2,728 2,635
Dividends due to policyholders.......................... 1,380 1,481
Premium deposit funds................................... 4 16,717 17,725
Other policy liabilities................................ 3,699 3,677
Investment valuation reserves........................... 1,506 1,515
Separate Account liabilities............................ 19,260 14,423
Other liabilities....................................... 1,332 1,311
-------- --------
Total liabilities................................. 113,161 106,033
-------- --------
SURPLUS:
Special contingency reserves......................... 585 739
Unassigned funds..................................... 4,432 4,027
-------- --------
Total surplus..................................... 5,017 4,766
-------- --------
TOTAL LIABILITIES AND SURPLUS................. $118,178 $110,799
======== ========
</TABLE>
See accompanying notes to financial statements.
A-62
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND SURPLUS FOR THE YEARS ENDED DECEMBER 31, 1992 AND
1991
<TABLE>
<CAPTION>
NOTES 1992 1991
----- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
INCOME:
Premiums, annuity considerations and deposit funds.... 5 $19,933 $19,462
Considerations for supplementary contracts and divi-
dend accumulations.................................... 1,582 1,447
Net investment income................................. 7,332 7,585
Other income.......................................... 5 145 (6)
------- -------
Total income.......................................... 28,992 28,488
------- -------
BENEFITS AND EXPENSES:
Benefit payments (other than dividends)............... 20,501 21,689
Changes to reserves, deposit funds and other policy
liabilities........................................... 587 (124)
Insurance expenses and taxes.......................... 2,454 2,333
Net transfers to Separate Accounts.................... 3,501 2,691
------- -------
Total benefits and expenses before dividends to poli- 27,043 26,589
cyholders............................................. ------- -------
NET GAIN FROM OPERATIONS BEFORE DIVIDENDS TO POLICY-
HOLDERS AND FEDERAL INCOME TAXES...................... 1,949 1,899
DIVIDENDS TO POLICYHOLDERS............................. 1,600 1,779
------- -------
NET GAIN FROM OPERATIONS BEFORE FEDERAL INCOME TAXES... 349 120
FEDERAL INCOME TAXES (EXCLUDING TAX ON CAPITAL GAINS).. 6 210 56
------- -------
NET GAIN FROM OPERATIONS............................... 139 64
NET REALIZED CAPITAL GAINS............................. 6 86 173
------- -------
NET INCOME............................................. 225 237
SURPLUS ADDITIONS (DEDUCTIONS):........................
Change in General Account net unrealized capital gains
or (losses)........................................... (151) 134
Change in investment valuation reserves............... 8 (471)
Other adjustments--net................................ 169 560
------- -------
NET CHANGE IN SURPLUS.................................. 251 460
SURPLUS AT BEGINNING OF YEAR........................... 4,766 4,306
------- -------
SURPLUS AT END OF YEAR................................. $ 5,017 $ 4,766
======= =======
</TABLE>
See accompanying notes to financial statements.
A-63
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOW FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
<TABLE>
<CAPTION>
1992 1991
------- -------
(IN MILLIONS)
<S> <C> <C>
CASH PROVIDED:
Premiums, annuity considerations and deposit funds received. $19,835 $20,098
Considerations for supplementary contracts and dividend ac-
cumulations received........................................ 1,582 1,447
Net investment income received.............................. 7,050 7,143
Other income received....................................... 158 19
------- -------
Total receipts......................................... 28,625 28,707
------- -------
Benefits paid (other than dividends)........................ 18,975 20,025
Insurance expenses and taxes paid........................... 2,462 2,300
Net transfers to Separate Accounts.......................... 3,532 2,692
Dividends paid to policyholders............................. 1,650 1,804
Federal income taxes paid (excluding tax on capital gains).. 53 (189)
Other--net.................................................. 443 (492)
------- -------
Total payments......................................... 27,115 26,140
------- -------
Net cash from operations.................................... 1,510 2,567
Proceeds from long-term investments sold, matured or repaid
after deducting tax
on capital gains of $392 for 1992 and $289 for 1991....... 47,151 26,529
Other cash provided......................................... 183 261
------- -------
Total cash provided......................................... 48,844 29,357
------- -------
CASH APPLIED:
Cost of long-term investments acquired...................... 48,779 31,562
Other cash applied.......................................... 273 359
------- -------
Total cash applied.......................................... 49,052 31,921
------- -------
NET CHANGE IN CASH AND SHORT-TERM INVESTMENTS................ (208) (2,564)
CASH AND SHORT-TERM INVESTMENTS:
BEGINNING OF YEAR............................................ 1,432 3,996
------- -------
END OF YEAR.................................................. $ 1,224 $ 1,432
======= =======
</TABLE>
See accompanying notes to financial statements.
A-64
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
For The Years Ended December 31, 1992 and 1991
1. ACCOUNTING POLICIES
Metropolitan Life Insurance Company (the Company) is primarily engaged in the
sale of insurance and annuity products. The Company's financial statements are
prepared on the basis of accounting practices prescribed or permitted by the
Insurance Department of the State of New York, which practices are generally
accepted accounting principles for mutual life insurance companies. 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 Reserves
Bonds qualifying for amortization are stated at amortized cost, all other
bonds at prescribed values. Unaffiliated preferred stocks are principally
stated at cost; unaffiliated common stocks are carried at market value.
Mortgage loans are stated at their amortized indebtedness. Short-term
investments generally mature within a year and are carried at amortized cost
which approximates estimated fair value. Policy loans are stated at unpaid
principal balances.
Investments in subsidiaries are stated at equity in net assets and are
included in stocks. Changes in net assets, excluding additional amounts
invested, are included in unrealized capital gains or losses. Dividends from
subsidiaries are reported by the Company as earnings in the year the dividends
are declared.
Also, in accordance with New York State Insurance Law and regulations, non-
insurance company acquisitions are valued in accordance with generally accepted
accounting principles under the purchase method of accounting. The purchase
price is allocated to the subsidiary's net assets based on its fair value at
the date of acquisition. The excess of the purchase price over the fair value
of the net assets acquired is amortized on a straight-line basis.
Investment real estate, other than joint ventures and real estate
subsidiaries, is stated at depreciated cost, with such depreciation calculated
by the constant yield method if purchased prior to December 1990 and the
straight-line method if purchased thereafter. Investments in real estate joint
ventures, included in other invested assets, and real estate subsidiaries,
included in stocks, are reported on the equity method and adjusted to reflect
the constant yield method of depreciation for real estate assets acquired by
such entities prior to December 1990.
Investments in non-real estate partnerships are included in other invested
assets and are generally carried on the equity basis. In 1992 the Company
changed the method of determining the carrying value of such partnerships.
Under the new method, the carrying value reflects the Company's share of
unrealized gains and losses relating to the market value of publicly traded
common stock held by the partnerships. The
A-65
<PAGE>
1991 carrying value reflected only the Company's share of operating income or
losses from the partnerships. This change had the effect of increasing other
invested assets by $317 million at December 31, 1992 which was substantially
offset by an increase in investment valuation reserves.
Impairments of individual assets that are considered to be other than
temporary are recognized when incurred.
Mandatory reserves have been established for general account investments in
accordance with guidelines prescribed by insurance regulatory authorities. For
1992 such reserves consisted of an Asset Valuation Reserve (AVR) for all
invested assets and an Interest Maintenance Reserve (IMR), which defers the
recognition of realized capital gains and losses (net of tax) attributable to
interest rate fluctuations on fixed income investments over the estimated
remaining duration of the investments sold. Prior to 1992, mandatory investment
valuation reserves consisted of a Mandatory Securities Valuation Reserve (MSVR)
for bonds and stocks in accordance with a prescribed formula. The Company also
establishes voluntary investment valuation reserves for certain general account
invested assets. Changes to the MSVR, AVR and voluntary investment reserves are
reported as direct additions to or deductions from surplus. Transfers to the
IMR are deducted from realized capital gains; IMR amortization is included in
net investment income.
Net realized capital gains are presented net of federal capital gains tax and
transfers to the IMR on the accompanying statements of operations and surplus.
Policy Reserves
Reserves for life insurance policies are computed generally on the net level
premium method or, for permanent plans of individual life insurance sold after
1976 and certain term plans sold after 1982, on the Commissioners' Reserve
Valuation Method. Reserves for individual annuity contracts are computed on the
net level premium method, the net single premium method or the Commissioners'
Annuity Reserve Valuation Method, as appropriate. Reserves for group annuity
contracts are computed on the net single premium method. The reserves are based
on mortality, morbidity and interest rates permitted by New York State
Insurance Law. Such reserves are sufficient to provide for contractual
surrender values.
Periodically, to reflect changes in circumstance, the Company may change the
assumptions or methodologies used to calculate reserves. During 1992, the
Company and certain of its wholly-owned life insurance subsidiaries changed
their bases of determining certain life insurance policy reserves. These
changes in reserve valuation bases increased the Company's surplus by $131
million during 1992.
Income and Expenses
Premiums are generally recognized when due. Investment income is reported as
earned. Expenses, including acquisition costs and federal income taxes, are
charged to operations as incurred.
Separate Account Operations
Investments held in the Separate Accounts (stated at market value) and
liabilities of the Separate Accounts (including participants' corresponding
equity in the Separate Accounts) 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.
A-66
<PAGE>
Fair Value Information
The estimated fair value amounts of financial instruments included herein
have been determined by the Company using market information available as of
December 31, 1992 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 herein are not necessarily indicative of the amounts
the Company could realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect
on the estimated fair value amounts.
2. UNCONSOLIDATED SUBSIDIARIES AND OTHER AFFILIATES
The Company's subsidiary operations primarily include insurance, real estate
investment and brokerage activities, investment management and advisory
services, mortgage originations and servicing, and commercial financing. At
December 31, 1992, subsidiary assets, liabilities and revenues were $18,271
million, $16,469 million and $4,491 million, respectively. Comparable amounts
for 1991 were $17,279 million, $15,541 million and $3,889 million. Dividends
from subsidiaries amounted to $58 million in 1992 and $68 million in 1991.
The unamortized excess of the purchase price of non-insurance subsidiaries
over the fair value of assets acquired was $133 million at December 31, 1992
and $137 million at December 31, 1991.
The Company incurs charges on behalf of its subsidiaries which are reimbursed
pursuant to agreements for shared use of property, personnel and facilities.
Charges under such agreements were approximately $299 million and $234 million
in 1992 and 1991, respectively.
The Company's net equity in joint ventures and other partnerships was $4,372
million and $3,872 million at December 31, 1992 and 1991, respectively. The
Company's share of income from such entities was $64 million and $118 million
for 1992 and 1991, respectively.
Many of the Company's real estate joint ventures have loans with the Company.
The carrying values of such mortgages were $2,022 million and $3,141 million at
December 31, 1992 and 1991, respectively. The Company had other loans
outstanding to its affiliates with carrying values of $1,944 million and $1,429
million at December 31, 1992 and 1991, respectively.
3. INVESTMENTS
Debt Securities
The carrying value, gross unrealized gain (loss) and estimated fair value of
bonds and redeemable preferred stocks (debt securities), by category, as of
December 31, 1992 and 1991 are shown below. For debt securities that are
publicly traded, estimated fair value was obtained from an independent market
pricing service. Publicly traded securities represented approximately 70
percent of the carrying value and estimated fair value of the total debt
securities as of December 31, 1992 and 70 percent of the carrying value and 71
percent of the estimated fair value of the total debt securities as of December
31, 1991. For all other debt securities, estimated fair value was determined by
management, based on interest rates, maturity, credit quality and average life.
A-67
<PAGE>
<TABLE>
<CAPTION>
GROSS ESTIMATED
CARRYING UNREALIZED FAIR
VALUE GAIN (LOSS) VALUE
-------- ------- ------ ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
December 31, 1992:
Bonds:
U.S. Treasury securities
and obligations of U.S.
government
corporations and agen-
cies.................... $11,305 $ 575 $ (117) $11,763
States and political sub-
divisions............... 1,151 126 -- 1,277
Foreign governments...... 918 72 (2) 988
Corporate................ 26,437 1,651 (129) 27,959
Mortgage-backed securi-
ties.................... 14,877 794 (85) 15,586
Other.................... 2,789 142 (21) 2,910
------- ------- ------ -------
Total bonds................ $57,477 $ 3,360 $ (354) $60,483
======= ======= ====== =======
Redeemable preferred $ 67 $ 18 $ (1) $ 84
stocks.................... ======= ======= ====== =======
December 31, 1991:
Bonds:
U.S. Treasury securities
and obligations of U.S.
government
corporations and agen-
cies.................... $11,900 $ 700 $ (106) $12,494
States and political sub-
divisions............... 886 96 -- 982
Foreign governments...... 593 72 -- 665
Corporate................ 23,019 1,655 (121) 24,553
Mortgage-backed securi-
ties.................... 13,855 1,203 (41) 15,017
Other.................... 2,179 129 (8) 2,300
------- ------- ------ -------
Total bonds................ $52,432 $ 3,855 $ (276) $56,011
======= ======= ====== =======
Redeemable preferred $ 99 $ -- $ (29) $ 70
stocks.................... ======= ======= ====== =======
</TABLE>
The carrying value and estimated fair value of bonds, by contractual
maturity, at December 31, 1992 are shown below. Bonds not due at a single
maturity date have been included in the 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.
<TABLE>
<CAPTION>
ESTIMATED
CARRYING FAIR
VALUE VALUE
-------- ---------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less................................ $ 2,256 $ 2,307
Due after one year through five years.................. 13,115 13,587
Due after five years through ten years................. 11,103 11,554
Due after ten years.................................... 16,126 17,449
------- -------
Subtotal............................................. 42,600 44,897
Mortgage-backed securities............................. 14,877 15,586
------- -------
Total.............................................. $57,477 $60,483
======= =======
</TABLE>
Proceeds from the sales of debt securities during 1992 and 1991 were $41,460
million and $23,493 million, respectively. During 1992 and 1991, respectively,
gross gains of $676 million and $379 million, and gross losses of $152 million
and $54 million were realized on those sales.
A-68
<PAGE>
Mortgage Loans
As of December 31, 1992, the carrying value and estimated fair value of
mortgage loan investments were $17,422 million and $18,312 million,
respectively. The fair value was estimated based on discounted projected cash
flows using interest rates currently being offered for loans to borrowers with
comparable credit ratings and for the same maturities. Mortgage loans are
collateralized by properties located throughout the United States and Canada.
Approximately 15% and 12% of the properties are located in California and
Illinois, respectively. Generally, the Company (as the lender) requires that a
minimum of one-fourth of the purchase price of the underlying real estate be
paid by the borrower.
As of December 31, 1992 and 1991, the mortgage loan investments were
categorized as follows:
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
Office Buildings............................................... 37% 39%
Retail......................................................... 18% 17%
Residential.................................................... 22% 22%
Agricultural................................................... 12% 10%
Other.......................................................... 11% 12%
--- ----
100% 100%
=== ====
</TABLE>
Policy Loans
As of December 31, 1992, the carrying value and estimated fair value of
policy loans were $3,099 million and $2,793 million, respectively. Estimated
fair value was based on discounted projected cash flows using U. S. Treasury
rates to approximate current interest rates and Company experience to project
patterns of loan accrual and repayment.
Off-Balance Sheet Financial Instruments
The Company has a securities lending program whereby large blocks of
securities are loaned to third parties, primarily major brokerage firms. As of
December 31, 1992 and 1991, the estimated fair values of loaned securities were
$4,693 million and $3,980 million, respectively. Company policy requires a
minimum of 102 percent of the fair value of the loaned securities to be
separately maintained as collateral for the loans. The collateral is recorded
in memorandum records and not reflected in the accompanying balance sheets. To
further minimize the credit risks related to this lending program, the Company
regularly monitors the financial condition of counterparties to these
agreements.
During the normal course of business, the Company agrees with independent
parties to purchase or sell bonds over fixed or variable periods of time. The
off-balance sheet risks related to changes in the quality of the underlying
bonds and to fluctuations in interest rates are mitigated by the fact that
commitment periods are generally short in duration and provisions in the
agreements release the Company from its commitments in case of significant
changes in the financial condition of the independent party or the issuer of
the bond. As of December 31, 1992, the principal amount of purchase agreements
outstanding was $696 million. There were no sales agreements outstanding as of
December 31, 1992. The net estimated fair value of the purchase agreements
outstanding as of December 31, 1992 was a $1 million off-balance sheet
unrealized gain. The estimated fair value was based on fees currently charged
to enter into similar arrangements or on the estimated cost to terminate the
outstanding agreements. As of December 31, 1991, the principal amounts of
purchase and sales agreements outstanding were $1,657 million and $13 million,
respectively.
A-69
<PAGE>
Assets on Deposit
As of December 31, 1992, the Company had $4,818 million of assets on deposit
with regulatory agencies.
4. INVESTMENT CONTRACT LIABILITIES
Investment contracts represent policies or contracts that do not incorporate
significant insurance risk as of the reporting date. Included in reserves for
life and health insurance and annuities, policy proceeds and dividends left
with the Company and premium deposit funds are amounts classified as investment
contracts. The carrying values and estimated fair values of such investment
contracts were $30,715 million and $31,979 million, respectively, as of
December 31, 1992. The fair values for these liabilities are estimated using
discounted projected cash flows, based on interest rates currently being
offered for similar contracts with maturities consistent with those remaining
for the contracts being valued.
Premium deposit funds and policy proceeds and dividends left with the Company
also include other liabilities without defined durations. The estimated fair
value of such liabilities, which generally are of short duration or have
periodic adjustments of interest rates, approximated the carrying value of
$2,404 million at December 31, 1992.
5. REINSURANCE AND OTHER INSURANCE TRANSACTIONS
The Company has entered into reinsurance agreements with certain of its life
insurance subsidiaries. Reserves for insurance assumed pursuant to these
agreements are included in reserves for life and health insurance and annuities
and amounted to $1,083 million and $1,005 million at December 31, 1992 and
1991, respectively.
In the normal course of business, the Company assumes and cedes reinsurance
with other insurance companies. The financial statements are shown net of
reinsurance ceded. The amounts related to reinsurance agreements, including
agreements described above but excluding certain agreements for which the
Company provides administrative services, are as follows:
<TABLE>
<CAPTION>
1992 1991
---- ----
(IN
MILLIONS)
<S> <C> <C>
Reinsurance premiums assumed $331 $326
Reinsurance ceded:
Premiums..................................................... 90 63
Other income................................................. 51 1
Reduction in insurance liabilities (at December 31).......... 36 35
</TABLE>
A contingent liability exists with respect to reinsurance ceded should the
reinsurers be unable to meet their obligations.
During 1992, the Company entered into an assumption and exchange agreement
with the Insurance Department of the State of New York as rehabilitator of a
New York life insurance company. Under the terms of the agreement, subject to
final court and policyholder approval, in 1993 the Company may take over as
much as $1,460 million of life insurance and annuity reserves from the life
insurance company and will receive assets having a fair value equal to the
reserves transferred.
A-70
<PAGE>
During 1991, the Company entered into two arrangements with Mutual Life
Insurance Company of New York (MONY). Under one arrangement, the Company agreed
to assume a portion of MONY's guaranteed interest contract (GIC) business and
the Company received mortgage loans, other assets and cash totalling $300
million and recorded liabilities of an equal amount. In addition, during 1991
MONY's GIC customers were offered the opportunity to exchange their GIC
contracts for those of the Company. $385 million of assets and liabilities were
transferred to the Company under the exchange agreement.
6. FEDERAL INCOME TAXES
The Company's federal income tax return is consolidated with certain
affiliates. The consolidating companies have executed a tax allocation
agreement. Under this agreement, the federal income tax provision is computed
on a separate return basis. Members receive reimbursement to the extent that
their losses and other credits result in a reduction of the current year's
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 amount of federal income tax expense includes an equity tax calculated by a
prescribed formula that incorporates a differential earnings rate between stock
and mutual life insurance companies. In addition, certain policy acquisition
costs are deferred and amortized over a ten-year period for tax purposes.
As of January 1, 1992, the Company's U.S. non-insurance subsidiaries adopted
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS No. 109). Under SFAS No. 109, such subsidiaries recognize deferred
tax liabilities and assets for the expected future tax consequences of events
that have been recognized in their financial statements. The adoption of SFAS
No. 109 had the effect of increasing the Company's investment in its
subsidiaries by $101 million at December 31, 1992, which was substantially
offset by an increase in investment valuation reserves.
Total income taxes on operations and realized capital gains of $545 million
and $413 million were incurred in 1992 and 1991, respectively.
7. PENSION PLANS AND POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
The Company has defined benefit pension plans covering all eligible employees
and sales representatives. The Company is both the sponsor and administrator of
these plans and makes annual contributions equal to the amounts accrued for
pension expense during the period. In 1992 and 1991, the United States tax-
qualified plan was fully funded under the Employee Retirement Income Security
Act of 1974 (ERISA). As a result, the Company did not make a contribution to
the plan in either year. Total pension expense of other plans of the Company
amounted to $10 million in 1992 and $9 million in 1991.
A comparison of accumulated plan benefits and plan net assets for the Company
is presented below:
<TABLE>
<CAPTION>
JANUARY 1
-------------
1992 1991
------ ------
(IN MILLIONS)
<S> <C> <C>
Actuarial present value of accumulated plan benefits:
Vested................................................... $1,135 $1,050
Nonvested................................................ 86 107
------ ------
Total...................................................... $1,221 $1,157
====== ======
Plan assets available for benefits......................... $2,102 $1,813
====== ======
</TABLE>
A-71
<PAGE>
The assumed rates of return used in determining the actuarial present value
of accumulated plan benefits were 8.5 percent (for both 1992 and 1991) in the
United States and 7 percent (for 1992) and 8 percent (for 1991) in Canada.
Several factors in addition to assumed rates of return, such as expected
retirement dates and mortality, enter into the determination of the actuarial
present value of accumulated plan benefits.
In addition to these pension plans, the Company sponsors a Savings and
Investment Plan available for substantially all employees under which the
Company matches a portion of employee contributions. During 1992 and 1991, the
Company contributed $45.7 million and $38.4 million, respectively, to the plan.
The Company also provides certain health care and life insurance benefits for
retired employees through insurance contracts. Substantially all of the
Company's employees may, in accordance with the plans applicable to such
benefits, become eligible for these benefits if they attain retirement age,
with sufficient service, while working for the Company. During 1991, $33
million was added to the reserve previously established to provide for a
portion of the future costs of postretirement health care. At December 31, 1992
and 1991, the balances of such reserves were approximately $265 million and
$300 million, respectively.
8. LEASES
Lease Income
During 1992 and 1991, the Company received $1,343 million and $1,063 million,
respectively, in lease income related to its real estate portfolio. In
accordance with standard industry practice, certain of the Company's lease
agreements with retail tenants result in income that is contingent on the level
of the tenants' sales revenues.
Lease Expense
The Company has entered into various lease agreements for office space, data
processing and other equipment. Rental expense under such leases was $193
million and $188 million for the years ended December 31, 1992 and 1991,
respectively. Future gross minimum rental payments under non-cancelable leases
are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
Year ending December 31,
1993......................... $ 95
1994......................... 83
1995......................... 63
1996......................... 45
1997......................... 27
Thereafter................... 49
----
Total...................... $362
====
</TABLE>
9. OTHER COMMITMENTS AND CONTINGENCIES
Guarantees
The Company has entered into a support agreement with a subsidiary whereby
the Company has agreed to maintain the subsidiary's net worth at one dollar or
more. At December 31, 1992, the subsidiary's assets, which principally consist
of loans to affiliates, amounted to $1,994 million and its net worth amounted
to $10 million.
A-72
<PAGE>
The Company has entered into arrangements with certain of its subsidiaries
and affiliates to assist such subsidiaries and affiliates in meeting various
jurisdictions' regulatory requirements regarding capital and surplus. The
Company has also entered into a support arrangement with respect to the
reinsurance obligations of a subsidiary. No material payments have been made
under these arrangements and it is the opinion of management that any payments
required pursuant to these arrangements would not likely have a material
adverse effect on the Company's financial position.
Litigation
Various litigation, claims and assessments against the Company, in addition
to those otherwise provided for in the financial statements, have arisen in the
course of the Company's business, including its activities as an insurer,
employer, investor and taxpayer. In certain of these matters, very large and/or
indeterminate amounts are sought. While it is not feasible to predict or
determine the ultimate outcome of these matters, it is the opinion of
management that their outcome is not likely to have a material adverse effect
on the Company's financial position or the results of its operations.
Unused Lines of Credit
As of December 31, 1992, the Company had unused lines of credit under
agreements with various banks having a principal amount of $700 million and an
estimated fair value of $.8 million. The estimated fair value was based on fees
currently charged to enter into similar agreements.
A-73
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Metropolitan Life Insurance Company:
We have audited the accompanying statement of assets and liabilities of the
Growth, Income, Money Market, Diversified, Equity Income, International Stock
and Stock Index Divisions of Metropolitan Life Separate Account UL as of
December 31, 1992 and the related statements of operations and of changes in
net assets for the periods presented. 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 at December 31, 1992 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,
Equity Income, International Stock and Stock Index Divisions of Metropolitan
Life Separate Account UL at December 31, 1992 and the results of their
operations and the changes in their net assets for the periods presented in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
New York, New York
February 25, 1993
A-74
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1992
<TABLE>
<CAPTION>
MONEY EQUITY INTERNATIONAL STOCK
GROWTH INCOME MARKET DIVERSIFIED INCOME STOCK INDEX
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
----------- ---------- -------- ----------- ---------- ------------- --------
ASSETS:
<S> <C> <C> <C> <C> <C> <C> <C>
Investments in Metropol-
itan Series Fund,Inc.
at Value (Note 1A):
Growth Portfolio
(659,717 shares; cost
$14,095,027)........... $14,327,067 -- -- -- -- -- --
Income Portfolio
(220,213 shares; cost
$2,795,212)............ -- $2,691,440 -- -- -- -- --
Money Market Portfolio
(30,075 shares; cost
$326,110).............. -- -- $316,418 -- -- -- --
Diversified Portfolio
(620,846 shares; cost
$8,409,253)............ -- -- -- $8,429,230 -- -- --
Equity Income Portfolio
(104,785 shares; cost
$1,133,308)............ -- -- -- -- $1,170,029 -- --
International Stock
Portfolio (23,261
shares; cost $205,878). -- -- -- -- -- $200,722 --
Stock Index Portfolio
(16,143 shares; cost -- -- -- -- -- -- $214,223
$214,252).............. ----------- ---------- -------- ---------- ---------- -------- --------
Total Investments... 14,327,067 2,691,440 316,418 8,429,230 1,170,029 200,722 214,223
Receivable from Metro-
politan Life
Insurance Co. ......... -- -- -- -- -- 602 --
Total Assets........ 14,327,067 2,691,440 316,418 8,429,230 1,170,029 201,324 214,223
LIABILITIES............. 7,310 2,810 333 4,361 1,815 -- 70
----------- ---------- -------- ---------- ---------- -------- --------
NET ASSETS.............. $14,319,757 $2,688,630 $316,085 $8,424,869 $1,168,214 $201,324 $214,153
=========== ========== ======== ========== ========== ======== ========
</TABLE>
See Notes to Financial Statements.
A-75
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
PERIOD MAY 1,
1992
(COMMENCEMENT
OF
OPERATIONS)
THROUGH
DECEMBER 31,
FOR THE YEAR ENDED DECEMBER 31, 1992 1992
------------------------------------------------------------------ -------------
MONEY EQUITY INTERNATIONAL STOCK
GROWTH INCOME MARKET DIVERSIFIED INCOME STOCK INDEX
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
---------- -------- -------- ----------- -------- ------------- -------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends (Note 2).... $1,314,382 $189,175 $11,961 $683,704 $57,122 $ 1,922 $6,180
Expenses:
Mortality and expense
charges (Note 3)...... 63,110 11,810 1,835 36,254 5,084 823 285
---------- -------- ------- -------- ------- ------- ------
Net investment income... 1,251,272 177,365 10,126 647,450 52,038 1,099 5,895
---------- -------- ------- -------- ------- ------- ------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVEST-
MENTS:
Net realized gain
(loss) from security
transactions.......... 4,423 16,886 (1,185) 2,283 3,455 (1,739) 32
Unrealized appreciation
(depreciation) of in-
vestments............. (34,881) (111,828) (3,474) (143,759) 30,691 (5,221) (30)
---------- -------- ------- -------- ------- ------- ------
Net realized and
unrealized gain (loss)
on investments (Note
1B)................... (30,458) (94,942) (4,659) (141,476) 34,146 (6,960) 2
---------- -------- ------- -------- ------- ------- ------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $1,220,814 $ 82,423 $ 5,467 $505,974 $86,184 ($5,861) $5,897
========== ======== ======= ======== ======= ======= ======
</TABLE>
See Notes to Financial Statements.
A-76
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY EQUITY
GROWTH INCOME MARKET DIVERSIFIED INCOME
DIVISION DIVISION DIVISION DIVISION DIVISION
----------------------- -------------------- ------------------ ---------------------- --------------------
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------------------
1992 1991 1992 1991 1992 1991 1992 1991 1992 1991
----------- ---------- ---------- -------- -------- -------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DE-
ASSETS:
From operations:
Net investment
income (loss).. $ 1,251,272 $ 147,240 $ 177,365 $ 33,237 $ 10,126 $ 9,135 $ 647,450 $ 76,224 $ 52,038 $ 13,918
Net realized
from security
transactions... 4,423 (2,671) 16,886 (18) (1,185) (217) 2,283 (1,146) 3,455 (968)
Unrealized ap-
preciation (de-
preciation) of (34,881) 277,810 (111,828) 9,611 (3,474) (4,136) (143,759) 177,000 30,691 10,633
investments.... ----------- ---------- ---------- -------- -------- -------- ---------- ---------- ---------- --------
Net increase
(decrease) in
net assets re-
sulting from 1,220,814 422,379 82,423 42,830 5,467 4,782 505,974 252,078 86,184 23,583
operations..... ----------- ---------- ---------- -------- -------- -------- ---------- ---------- ---------- --------
From capital
transactions:
Net premiums.... 14,877,419 3,029,706 2,842,164 714,759 286,372 197,154 8,546,771 1,860,889 1,155,039 303,255
Portfolio Trans-
fers........... (673,200) (160,491) (289,538) (27,533) (55,434) (13,629) (501,159) (113,162) (82,431) (10,602)
Other transfers. (3,942,387) (1,043,672) (577,407) (140,790) (76,734) (80,090) (1,915,484) (722,539) (257,683) (107,801)
----------- ---------- ---------- -------- -------- -------- ---------- ---------- ---------- --------
Net increase in
net assets re-
sulting from
capital transac- 10,261,832 1,825,543 1,975,219 546,436 154,204 103,435 6,130,128 1,025,188 814,925 184,852
tions........... ----------- ---------- ---------- -------- -------- -------- ---------- ---------- ---------- --------
NET CHANGE IN NET
ASSETS.......... 11,482,646 2,247,922 2,057,642 589,266 159,671 108,217 6,636,102 1,277,266 901,109 208,435
Net Assets--be-
ginning of peri- 2,837,111 589,189 630,988 41,722 156,414 48,197 1,788,767 511,501 267,105 58,670
od.............. ----------- ---------- ---------- -------- -------- -------- ---------- ---------- ---------- --------
Net Assets--end $14,319,757 $2,837,111 $2,688,630 $630,988 $316,085 $156,414 $8,424,869 $1,788,767 $1,168,214 $267,105
of period....... =========== ========== ========== ======== ======== ======== ========== ========== ========== ========
<CAPTION>
INTERNATIONAL STOCK
STOCK INDEX
DIVISION DIVISION
--------------------------- -------------
FOR THE
PERIOD
FOR THE PERIOD MAY 1, 1992
JULY 1, 1991 (COMMENCEMENT
FOR THE (COMMENCEMENT OF
YEAR OF OPERATIONS) OPERATIONS)
ENDED TO TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1992 1991 1992
------------ -------------- -------------
<S> <C> <C> <C>
INCREASE (DE-
CREASE) IN NET
ASSETS:
From operations:
Net investment
income (loss).. $ 1,099 $ 150 $ 5,895
Net realized
gain (loss)
from security
transactions... (1,739) 7 32
Unrealized ap-
preciation (de-
preciation) of (5,221) 65 (30)
investments.... -------- ------- --------
Net increase
(decrease) in
net assets re-
sulting from (5,861) 222 5,897
operations..... -------- ------- --------
From capital
transactions:
Net premiums.... 248,940 15,874 247,746
Portfolio Trans-
fers........... 5,334 (103) (6,357)
Other transfers. (59,497) (3,585) (33,133)
-------- ------- --------
Net increase in
net assets re-
sulting from
capital transac- 194,777 12,186 208,256
tions........... -------- ------- --------
NET CHANGE IN NET
ASSETS.......... 188,916 12,408 214,153
Net Assets--be-
ginning of peri- 12,408 -- --
od.............. -------- ------- --------
Net Assets--end $201,324 $12,408 $214,153
of period....... ======== ======= ========
</TABLE>
See Notes to Financial Statements.
A-77
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1992
Metropolitan Life Separate Account UL (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 Life Insurance Company
("Metropolitan Life") on December 13, 1988, and registered as a unit investment
trust on January 5, 1990. The assets of the Separate Account are the property
of Metropolitan Life.
A summary of significant accounting policies, all of which are in accordance
with generally accepted accounting 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, 1992 is
included as Note 5. The methods used to value the Fund's investments at
December 31, 1992 are described in Note 1A of the Fund's 1992 Annual
Report.
B.SECURITY TRANSACTIONS
Purchases and sales are recorded on the trade date. Realized gains and
losses on sales of investments are determined on the basis of identified
cost.
C.FEDERAL INCOME TAXES
In the opinion of counsel of Metropolitan Life, the Separate Account
will be treated as a part of Metropolitan Life and its operations, and
the Separate Account will not be taxed separately as a "regulated
investment company" under existing law. Metropolitan Life is taxed as a
life insurance company. The policies permit Metropolitan Life to charge
against the Separate Account any taxes, or reserves for taxes,
attributable to the maintenance or operation of the Separate Account.
Metropolitan Life does not anticipate, under existing law, that any
federal income taxes will be charged against the Separate Account in
determining the value of amounts under a policy.
D. NET PREMIUMS
Metropolitan Life deducts a sales load and a state premium tax charge
from premiums before amounts are allocated to the Separate Account. A
charge is also imposed in connection with certain of the policies to
recover a portion of the Federal income taxes imposed.
A-78
<PAGE>
2. DIVIDENDS
On April 23, 1992 and December 14, 1992 the Fund declared dividends for all
shareholders of record on April 27, 1992 and December 22, 1992, respectively.
The amount of dividends received by the Separate Account was $2,264,446. The
dividends were paid to Metropolitan Life on April 28, 1992 and December 23,
1992, respectively, and were immediately reinvested in additional shares of the
portfolios in which the investment divisions invest. As a result of this
reinvestment, the number of shares of the Fund held by each of the seven
investment divisions increased by the following: Growth Portfolio 60,978
shares, Income Portfolio 15,455 shares, Money Market Portfolio 1,138 shares,
Diversified Portfolio 50,572 shares, Equity Income Portfolio 5,156 shares,
International Stock Portfolio 218 shares, and Stock Index Portfolio 461 shares.
3. EXPENSES
Metropolitan Life applies a daily charge against the Separate Account for the
mortality and expense risks assumed by Metropolitan Life. This charge is
equivalent to an effective annual rate of .90% of the average daily value of
the net assets in the Separate Account which are attributable to the policies.
4. NEW DIVISION
On May 1, 1992, the Separate Account commenced the operation of the Stock
Index Division.
A-79
<PAGE>
5. METROPOLITAN SERIES FUND, INC.
A SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1992
<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
Automotive............. $ 2,420,475 (0.7%) $ 1,292,288 (0.4%)
Banking................ 28,899,969 (8.2%) 15,156,651 (4.5%)
Building............... 4,038,925 (1.1%) 2,148,150 (0.6%)
Business Services...... 33,618,422 (9.6%) 17,887,797 (5.3%)
Chemical............... 5,376,525 (1.5%) 2,849,525 (0.9%)
Drug................... 14,674,775 (4.2%) 7,529,475 (2.3%)
Electronics............ 21,454,132 (6.1%) 11,538,251 (3.5%)
Financial Services..... 8,208,300 (2.3%) 4,357,025 (1.3%)
Food & Beverage........ 7,718,700 (2.2%) 4,021,525 (1.2%)
Forest Products........ 8,345,775 (2.4%) 4,353,775 (1.3%)
Hospital Supply........ 16,975,713 (4.8%) 8,918,038 (2.7%)
Hotel & Restaurant..... 10,452,913 (3.0%) 5,589,075 (1.7%)
Insurance.............. 26,025,406 (7.4%) 13,700,619 (4.1%)
Metal & Mining......... 3,967,300 (1.1%) 2,085,500 (0.6%)
Oil.................... 19,046,375 (5.4%) 9,752,925 (2.9%)
Oil Service............ 11,748,438 (3.3%) 6,165,176 (1.8%)
Personal Care.......... 4,100,688 (1.2%) 2,235,188 (0.7%)
Printing & Publishing.. 9,848,963 (2.8%) 5,193,175 (1.6%)
Recreation............. 25,528,415 (7.3%) 13,415,919 (4.0%)
Retail Trade........... 26,189,193 (7.5%) 13,846,729 (4.1%)
Telephone.............. 20,969,600 (6.0%) 10,893,600 (3.3%)
Textile & Apparel...... 5,460,225 (1.6%) 3,493,725 (1.0%)
Tobacco................ 6,330,700 (1.8%) 3,396,300 (1.0%)
Utilities--Electric.... 5,913,600 (1.7%) 3,062,400 (0.9%)
------------ ------------
Total Common Stock..... 327,313,527 (93.2%) 172,882,831 (51.7%)
------------ ------------
CONVERTIBLE PREFERRED
STOCKS..................
LONG-TERM DEBT SECURI-
TIES
Corporate Bonds........
Banking................ $ 4,385,447 (2.8%) 1,160,148 (0.3%)
Electric Utility....... 522,040 (0.3%)
Financial Services..... 17,600,617 (11.3%) 17,983,633 (5.4%)
Government Backed...... 2,722,789 (1.8%) 4,062,900 (1.2%)
Industrials............ 12,358,042 (7.9%) 10,817,744 (3.2%)
Mortgage Backed........ 3,730,682 (2.4%) 3,915,493 (1.2%)
Telephone.............. 2,564,855 (1.6%) 1,360,944 (0.4%)
------------ ------------
Total Corporate Bonds.. 43,884,472 (28.1%) 39,300,862 (11.7%)
------------ ------------
Foreign Obligations.... 15,355,765 (9.8%) 6,888,402 (2.1%)
Federal Agency Obliga-
tions.................. 39,461,987 (25.3%) 39,276,347 (11.8%)
Federal Treasury Obli-
gations................ 48,496,384 (31.0%) 45,551,127 (13.6%)
Federal Treasury Obli-
gations Zero Coupon 5,633,722 (1.7%)
------------ ------------
Total Long-Term Debt
Securities............. 147,198,608 (94.2%) 136,650,460 (40.9%)
------------ ------------
SHORT-TERM OBLIGATIONS
Bankers Acceptances.... $ 5,962,175 (10.7%)
Commercial Paper....... 26,266,317 (7.5%) 14,395,000 (9.2%) 31,959,869 (57.7%) 34,563,000 (10.3%)
Federal Agency Obliga-
tions.................. 4,702,311 (8.5%)
Federal Treasury Obli-
gations................ 12,677,093 (22.9%)
Federal Treasury Obli-
gations Zero Coupon....
------------ ------------ ----------- ------------
Total Short Term Obli-
gations................ 26,266,317 (7.5%) 14,395,000 (9.2%) 55,301,448 (99.8%) 34,563,000 (10.3%)
------------ ------------ ----------- ------------
TOTAL INVESTMENTS....... 353,579,844 (100.7%) 161,593,608 (103.4%) 55,301,448 (99.8%) 344,096,291 (102.9%)
------------ ------------ ----------- ------------
Other Assets Less Lia-
bilities............... (2,552,014) (0.7%) (5,348,484) (3.4%) 110,056 (0.2%) (9,616,248) (2.9%)
------------ ------------ ----------- ------------
NET ASSETS.............. $351,027,830 (100.0%) $156,245,124 (100.0%) $55,411,504 (100.0%) $334,480,043 (100.0%)
============ ============ =========== ============
</TABLE>
A-80
<PAGE>
<TABLE>
<CAPTION>
EQUITY INCOME
PORTFOLIO
--------------------
VALUE
(NOTE 1A)
<S> <C> <C>
COMMON STOCK
Business Services........................................ $ 590,538 (3.4%)
Chemical................................................. 189,525 (1.1%)
Diversified.............................................. 286,600 (1.7%)
Drug..................................................... 410,000 (2.4%)
Electronics.............................................. 511,750 (3.0%)
Food & Beverage.......................................... 75,375 (0.4%)
Forest Products.......................................... 550,525 (3.2%)
Hospital Supply.......................................... 208,000 (1.2%)
Hotel & Restaurant....................................... 355,875 (2.0%)
Insurance................................................ 947,475 (5.5%)
Machinery................................................ 369,450 (2.1%)
Natural Gas.............................................. 203,400 (1.2%)
Oil...................................................... 1,025,785 (5.9%)
Oil Service.............................................. 380,125 (2.2%)
Paper.................................................... 177,000 (1.0%)
Recreation............................................... 172,500 (1.0%)
Retail Trade............................................. 1,353,263 (7.8%)
Telephone................................................ 336,600 (1.9%)
Tobacco.................................................. 163,200 (0.9%)
Utilities--Electric...................................... 1,620,263 (9.4%)
-----------
Total Common Stock....................................... 9,927,249 (57.3%)
-----------
PREFERRED STOCKS
Metals & Mining.......................................... 173,438 (1.0%)
Office Equipment......................................... 185,500 (1.1%)
Retail Trade............................................. 448,625 (2.6%)
-----------
Total Preferred Stocks................................... 807,563 (4.7%)
-----------
CONVERTIBLE PREFERRED STOCKS
Automotive............................................... 475,800 (2.8%)
Banking.................................................. 693,854 (4.0%)
Machinery................................................ 159,250 (0.9%)
Metal & Mining........................................... 348,800 (2.0%)
Oil...................................................... 334,225 (1.9%)
Oil Service.............................................. 246,925 (1.4%)
Retail Trade............................................. 185,632 (1.1%)
-----------
Total Convertible Preferred Stocks....................... 2,444,486 (14.1%)
-----------
</TABLE>
A-81
<PAGE>
<TABLE>
<CAPTION>
EQUITY INCOME
PORTFOLIO
---------------------
VALUE
(NOTE 1A)
<S> <C> <C>
LONG-TERM DEBT SECURITIES
Corporate Bonds
Industrials.............................................. $ 1,329,777 (7.7%)
-----------
Total Corporate Bonds.................................... 1,329,777 (7.7%)
-----------
CONVERTIBLE BONDS
Banking.................................................. 582,000 (3.4%)
Metal & Mining........................................... 243,125 (1.4%)
Oil Services............................................. 730,750 (4.2%)
Recreation............................................... 154,500 (0.9%)
-----------
Total Convertible Bonds.................................. 1,710,375 (9.9%)
-----------
VARIABLE RATE EXCHANGE DEBT............................... 462,000 (2.6%)
-----------
SHORT-TERM OBLIGATIONS
Commercial Paper......................................... 785,000 (4.5%)
-----------
Total Short Term Obligations............................. 785,000 (4.5%)
-----------
TOTAL INVESTMENTS......................................... 17,466,450 (100.8%)
Other Assets Less Liabilities............................ (138,949) (0.8%)
-----------
NET ASSETS................................................ $17,327,501 (100.0%)
===========
</TABLE>
A-82
<PAGE>
<TABLE>
<CAPTION>
STOCK INDEX
PORTFOLIO
-----------
VALUE
(NOTE 1A)
<S> <C> <C>
COMMON STOCK
Aerospace................................................ $ 2,343,264 (1.6%)
Airlines................................................. 583,813 (0.4%)
Automotive............................................... 3,513,714 (2.4%)
Banking.................................................. 7,077,561 (4.9%)
Beverages................................................ 9,193,311 (6.4%)
Building & Construction.................................. 1,531,146 (1.1%)
Chemical................................................. 5,534,058 (3.8%)
Coal..................................................... 47,600 (0.0%)
Container................................................ 350,836 (0.2%)
Cosmetics................................................ 1,047,488 (0.7%)
Drug..................................................... 9,355,121 (6.5%)
Electrical Connectors.................................... 299,000 (0.2%)
Electrical Equipment..................................... 4,702,133 (3.2%)
Electronics.............................................. 3,752,595 (2.6%)
Financial Services....................................... 2,795,042 (1.9%)
Foods.................................................... 5,057,705 (3.5%)
Hospital Management...................................... 500,601 (0.4%)
Hospital Supply.......................................... 3,878,564 (2.7%)
Hotel and Restaurant..................................... 1,180,400 (0.8%)
Insurance................................................ 4,437,083 (3.1%)
Leisure.................................................. 149,763 (0.1%)
Machinery & Tools........................................ 2,233,552 (1.5%)
Metals--Aluminum......................................... 484,151 (0.3%)
Metals--Gold............................................. 277,088 (0.2%)
Metals--Miscellaneous.................................... 725,347 (0.5%)
Metals--Steel & Iron..................................... 200,100 (0.1%)
Miscellaneous............................................ 2,882,726 (2.0%)
Office & Business Equipment.............................. 4,311,721 (3.0%)
Oil--Crude Producers..................................... 146,863 (0.1%)
Oil--Domestic............................................ 3,578,450 (2.5%)
Oil--International....................................... 8,330,775 (5.8%)
Oil Services............................................. 1,101,115 (0.8%)
Paper.................................................... 1,940,131 (1.3%)
Photography.............................................. 591,863 (0.4%)
Printing & Publishing.................................... 2,303,820 (1.6%)
Railroad................................................. 1,699,878 (1.2%)
Retail Trade............................................. 10,828,423 (7.5%)
Services................................................. 929,251 (0.6%)
Shoes.................................................... 493,125 (0.3%)
Soaps.................................................... 2,878,975 (2.0%)
Textiles & Apparel....................................... 421,363 (0.3%)
Tire & Rubber............................................ 446,013 (0.3%)
Toys & Musical Instruments............................... 120,836 (0.1%)
Transportation--Trucking................................. 238,250 (0.2%)
Utilities--Electric...................................... 6,009,990 (4.2%)
Utilities--Gas Distribution.............................. 980,314 (0.7%)
Utilities--Gas Pipeline.................................. 481,418 (0.3%)
Utilities--Telephone..................................... 11,597,293 (8.0%)
Video.................................................... 2,761,793 (1.9%)
------------
Total Common Stock....................................... 136,325,422 (94.2%)
------------
SHORT-TERM OBLIGATIONS
Federal Treasury Obligations............................. 3,088,742 (2.2%)
------------
TOTAL SHORT-TERM OBLIGATIONS............................. 3,088,742 (2.2%)
------------
TOTAL INVESTMENTS........................................ 139,414,164 (96.4%)
Other Assets Less Liabilities............................ 5,277,464 (3.6%)
------------
NET ASSETS................................................ $144,691,628 (100.0%)
============
</TABLE>
A-83
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL
STOCK PORTFOLIO
---------------------
VALUE
(NOTE 1A)
<S> <C> <C>
COMMON STOCK
Automotive............................. $ 226,470 (1.2%)
Banking................................ 1,500,270 (7.9%)
Broadcasting........................... 121,741 (0.6%)
Building & Construction................ 1,363,029 (7.2%)
Chemical............................... 973,194 (5.1%)
Computers and Business Equipment....... 91,306 (0.5%)
Conglomerates.......................... 270,278 (1.4%)
Drug and Healthcare.................... 243,889 (1.3%)
Electrical Equipment................... 1,045,394 (5.5%)
Electronics............................ 522,351 (2.7%)
Financial Services..................... 444,166 (2.3%)
Foods and Beverage..................... 183,938 (1.0%)
Household Appliances................... 139,602 (0.7%)
Insurance.............................. 1,340,239 (7.1%)
Leisure................................ 202,227 (1.1%)
Machinery & Tools...................... 223,979 (1.2%)
Metals--Gold........................... 401,452 (2.1%)
Metals--Steel & Iron................... 287,395 (1.5%)
Mining................................. 374,305 (2.0%)
Miscellaneous........................... 3,568,091 (18.8%)
Non-Ferrous Metals..................... 75,207 (0.4%)
Oil and Gas............................ 768,925 (4.0%)
Paper.................................. 189,820 (1.0%)
Railroad............................... 116,335 (0.6%)
Retail Grocery......................... 343,211 (1.8%)
Retail Trade........................... 401,240 (2.1%)
Transportation--Trucking............... 91,624 (0.5%)
Utilities--Telephone................... 469,557 (2.5%)
-----------
Total Common Stock..................... 15,979,235 (84.1%)
-----------
Foreign Currency........................ 2,779,691 (14.6%)
-----------
Convertible Bonds....................... 202,013 (1.1%)
-----------
-----------
SHORT-TERM OBLIGATIONS
Repurchase Agreement................... 340,000 (1.8%)
-----------
Total Short-Term Obligations........... 340,000 (1.8%)
-----------
TOTAL INVESTMENTS....................... 19,300,939 (101.6%)
Other Assets Less Liabilities.......... (302,917) (1.6%)
-----------
NET ASSETS.............................. $18,998,022 (100.0%)
===========
</TABLE>
A-84
<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 Life's approval.
Choice of Income Plans. See "Policy Benefits--Optional Income Plans," page A-
24 and "Policy Rights--Surrenders," page A-45, 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.
A-85
<PAGE>
Limitations. If the payee is not a natural person, the choice of an income
plan will be subject to Metropolitan Life's approval. A collateral assignment
will modify a prior choice of income plan. The amount 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
Life but never less than 3% per year. Life income payments will be based on a
rate set by Metropolitan Life 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. At the present time, this rider
is not available if the long term care benefit rider has been selected.
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.
A-86
<PAGE>
Long Term Care Benefit. This rider provides for the accelerated payment of a
portion of the death benefit for the long term care of the insured. Such care
can be provided either in a qualified convalescent facility or at home when the
insured has a qualifying disability. The benefit payments are made each month
and continue as long as the insured remains disabled, the maximum benefit under
the rider has not been paid and, once payments start, no change in either the
death benefit option or the specified face amount of the Policy is elected by
the Policy owner. Exercising certain rights under the Policy (including the
existence of a Policy loan) may affect the benefits payable under this rider,
and receipt of payments under this rider may limit exercise of certain Policy
rights. These effects as well as the size of the monthly benefit payment and
the maximum benefit are stated in the rider. The rider is available at issue
only.
Each time a benefit payment is made, the death benefit under the Policy is
reduced by the amount of the payment. In addition, the specified face amount,
the cash value, the cash surrender value and any outstanding Policy loan are
reduced by the same proportion as the benefit payment divided by the death
benefit prior to the payment. Such reduction in the outstanding Policy loan is
effected by deducting that proportionate amount from the monthly benefit
payment.
The benefit payments 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.
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. A payment of all the
discounted death benefit will not be subject to any surrender charges.
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.
A-87
<PAGE>
Bulk
Rate
Zip+4
Barcoded
U.S.
Postage
Paid
MetLife Customer Service Center--Warwick Rutland,
P.O. Box 520 VT
Warwick, RI 02887-0520 Permit
ADDRESS CORRECTION REQUESTED 220
FORWARDING AND RETURN
POSTAGE GUARANTEED
UL II
FLEXIBLE PREMIUM MULTIFUNDED LIFE
PROSPECTUSES FOR
. FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICIES
ISSUED BY
METROPOLITAN LIFE INSURANCE COMPANY
. METROPOLITAN SERIES FUND, INC.
[LOGO] METROPOLITAN LIFE (R)
AND AFFILIATED COMPANIES
ML-FP2 (4/93 EDITION) PRINTED IN U.S.A.
<PAGE>
Bulk
Rate
Zip+4
Barcoded
U.S.
Postage
Paid
Rutland,
VT
MetLife Customer Service Center--Tulsa Permit
P.O. Box 21889 220
Tulsa, OK 74121-1889
ADDRESS CORRECTION REQUESTED
FORWARDING AND RETURN
POSTAGE GUARANTEED
UL II
FLEXIBLE PREMIUM MULTIFUNDED LIFE
PROSPECTUSES FOR
. FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICIES
ISSUED BY
METROPOLITAN LIFE INSURANCE COMPANY
. METROPOLITAN SERIES FUND, INC.
[LOGO] METROPOLITAN LIFE (R)
AND AFFILIATED COMPANIES
ML-FP2 (4/93 EDITION) PRINTED IN U.S.A.
<PAGE>
PART II
REPRESENTATION WITH RESPECT TO FEES AND CHARGES
Metropolitan Life represents that the fees and charges deducted under the
Policies offered and sold pursuant to 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 Life under the
Policies. Metropolitan Life 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
Life 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 representation applies to all policies issued pursuant
to this Registration Statement, including those sold on the terms specifically
described in the prospectuses contained herein, or any variations therein
based on supplements, amendments, endorsements or other riders to such
policies or prospectuses, or otherwise.
CONTENTS OF REGISTRATION STATEMENT
This amended Registration Statement comprises the following papers and
documents:
The facing sheet.
Cross-Reference Table.
The Supplement to the Prospectus, consisting of 47 pages.
The Prospectus, consisting of 87 pages.
Undertaking to File Reports as filed with the initial filing of this
Registration Statement on January 5, 1990.
Undertaking pursuant to Rule 484(b)(1) under the Securities Act of 1933
as filed with the initial filing of this Registration Statement on
January 5, 1990.
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).
Freedman, Levy, Kroll & Simonds as filed with Pre-Effective Amendment
No. 1 to this Registration Statement on April 6, 1990.
Deloitte & Touche LLP.
The following exhibits:
<TABLE>
<CAPTION>
<C> <S> <C>
1.A (1) --Resolution of Board of Directors of Metropolitan Life
effecting the establishment of Metropolitan Life Separate
Accounts................................................... ****
(2) --Not Applicable
(3) --(a) Not Applicable
--(b) Form of Selected Broker Agreement..................... *
--(c) Schedule of sales commissions......................... *
(4) --Not applicable
(5) --(a) Specimen Flexible Premium Multifunded Life Insurance
Policy (including any alternate pages as required by
state law) with form of riders, if any.................. **
--(b) New York Endorsement to Flexible Premium Multifunded
Life Insurance Policy................................... *
--(c) Riders for Long-term Care and Accelerated Death
Benefit..................................................... ***
--(d) Additional alternate pages required by state law...... ***
--(e) Additional alternate pages required by state law...... *****
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S> <C> <C>
(6) --(a) Charter and By-Laws of Metropolitan Life....... *****
--(b) Amendment to By-laws........................... *****
(7) --Not Applicable
(8) --Not Applicable
(9) --Not Applicable
(10) --Application Form for Flexible Premium Multifunded
Life Insurance Policy and Form of Receipt and
Temporary Insurance Agreement....................... *
<CAPTION>
<C> <S> <C> <C>
2. --See Exhibit 1.A(5) above
3. --Opinion and consent of Counsel as to the legality
of the securities being registered.................. *
4. --Not Applicable
5. --Not Applicable
6. --Opinion and consent of Anthony E. Amodeo........... @
8. --Powers of Attorney................................. ****
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)
12. --Memoranda describing certain procedures filed
pursuant to Rule 6e--3(T)(b)(12)(iii)............... **
27. --Financial Data Schedule (inapplicable)
</TABLE>
- --------
* Incorporated by reference to the initial filing of this Registration
Statement on January 5, 1990.
** Incorporated by reference to the filing of Pre-Effective Amendment No. 1
to this Registration Statement on April 6, 1990.
*** Incorporated by reference to the filing of Post-Effective Amendment No.
1 to this Registration Statement on March 1, 1991.
**** Incorporated by reference to the filing of Post-Effective Amendment No.
5 to the Registration Statement of Separate Account UL (File No. 33-
47927) on April 30, 1997, except for Robert H. Benmosche's power of
attorney, which is incorporated by reference to the Registration
Statement of Separate Account UL (File No. 333-40161) filed on November
13, 1997, Stewart G. Nagler's power of attorney, which is incorporated
by reference to the filing of Post-Effective Amendments No. 6 filed on
December 23, 1997 to the Registration Statement of Separate Account UL
(File 33-47927) and Jon F. Danski's power of attorney, which is
incorporated by reference to Pre-Effective Amendment No. 1 to
Registration Statement of Separate Account UL (File No. 333-40161) filed
on April 2, 1998.
***** Incorporated by reference to the filing of Post-Effective Amendment No.
2 to this Registration Statement on February 28, 1992.
@ Incorporated by reference to the filing of Post-Effective Amendment No.
4 to this Registration Statement on April 22, 1994.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, METROPOLITAN
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 20TH DAY OF APRIL, 1998.
METROPOLITAN LIFE
INSURANCE COMPANY
(Seal)
/s/ Gary A. Beller
By: ________________________________
GARY A. BELLER SENIOR EXECUTIVE
VICE-PRESIDENT & GENERAL COUNSEL
/s/ Ruth Gluck
Attest: _____________________________
RUTH GLUCK, 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
*
- ------------------------------------- Chairman, Chief
HARRY P. KAMEN Executive Officer
and Director
(Principal
Executive Officer)
* President, Chief
- ------------------------------------- Operating Officer
and Director
ROBERT H. BENMOSCHE
* Senior Executive
- ------------------------------------- Vice-President,
Chief Investment
GERALD CLARK Officer and
Director
* Senior Executive
- ------------------------------------- Vice-President and
STEWART G. NAGLER Chief Financial
Officer (Principal
Financial Officer)
* Senior Vice-
- ------------------------------------- President and
Controller
JON F. DANSKI (Principal
Accounting Officer)
* Director
- -------------------------------------
CURTIS H. BARNETTE
* Director
- -------------------------------------
JOAN GANZ COONEY
/s/ Christopher P. Nicholas
*By _________________________________ April 20, 1998
CHRISTOPHER P. NICHOLAS, ESQ.
ATTORNEY-IN-FACT
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE DATE
* Director
- ------------------------------------
BURTON A. DOLE, JR.
* Director
- ------------------------------------
JAMES R. HOUGHTON
* Director
- ------------------------------------
HELENE L. KAPLAN
* Director
- ------------------------------------
CHARLES M. LEIGHTON
* Director
- ------------------------------------
ALLEN E. MURRAY
* Director
- ------------------------------------
JOHN J. PHELAN, JR.
* Director
- ------------------------------------
HUGH B. PRICE
* Director
- ------------------------------------
ROBERT G. SCHWARTZ
* Director
- ------------------------------------
RUTH J. SIMMONS, PH.D.
* Director
- ------------------------------------
WILLIAM S. SNEATH
Director
*
- ------------------------------------
WILLIAM C. STEERE, JR.
/s/ Christopher P. Nicholas
*By ________________________________ April 20, 1998
CHRISTOPHER P. NICHOLAS, ESQ.
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
METROPOLITAN LIFE SEPARATE ACCOUNT UL, 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 20TH DAY OF APRIL, 1998.
METROPOLITAN LIFE SEPARATE ACCOUNT
UL
(REGISTRANT)
By: METROPOLITAN LIFE INSURANCE
COMPANY
(DEPOSITOR)
(Seal) /s/ Gary A. Beller
By: _____________________________
GARY A. BELLER
SENIOR EXECUTIVE VICE-PRESIDENT
AND GENERAL COUNSEL
/s/ Ruth Gluck
Attest: _____________________________
RUTH GLUCK, ESQ.
ASSISTANT SECRETARY
II-5
<PAGE>
INDEPENDENT AUDITORS' CONSENT
Metropolitan Life Insurance Company:
We consent to the use in this Post-Effective Amendment No. 6 to the
Registration Statement No. 33-32813 of Metropolitan Life Separate Account UL
on Form S-6 of our report dated March 31, 1998 relating to Metropolitan Life
Separate Account UL appearing in the Prospectus Supplement, which is a part of
such Registration Statement and of our report dated February 12, 1998, except
for Note 17, as to which the date is March 12, 1998, relating to Metropolitan
Life Insurance Company also appearing in the Prospectus Supplement, and to the
reference to us under the heading "Experts" in such Prospectus Supplement.
/s/ Deloitte &
Touche
- ---------------------
Deloitte & Touche LLP
New York, New York
April 20, 1998
II-6
