[Federal Register Volume 68, Number 67 (Tuesday, April 8, 2003)]
[Notices]
[Pages 17106-17115]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-8438]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-25988; File No. 812-12897]


Metropolitan Life Investors USA Insurance Company, et al.

April 1, 2003.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order pursuant to section 26(c) of 
the Investment Company Act of 1940 (the ``Act'') approving certain 
substitutions of securities and for an order of exemption pursuant to 
section 17(b) of the Act.

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Applicants: MetLife Investors USA Insurance Company (``MetLife 
Investors USA''), Security Equity Life Insurance Company (``Security 
Equity Life''), MetLife Investors USA Separate Account A (``Separate 
Account A''), Security Equity Life Separate Account 10 (``Separate 
Account 10'' and Security Equity Life Separate Account 13 (``Separate 
Account 13'').

Filing Dates: The application was filed on October 24, 2002, and 
amended and restated on March 28, 2003.

Summary of Application: Applicants request an order to permit the 
substitutions by MetLife Investors and Security Equity Life of Class A 
shares of the MetLife Stock Index Portfolio (the ``Replacement 
Portfolio'') of Metropolitan Series Fund, Inc. (``Metropolitan 
Series'') and held by Separate Account A, Separate Account 10, and 
Separate Account 13 (each an ``Account,'' together, the ``Accounts'') 
for Initial Class shares of the Index 500 Portfolio (the ``Substituted 
Portfolio'') of the Fidelity Variable Insurance Products Fund II (``VIP 
Fund II'') to support variable annuity or variable life insurance 
contracts issued by MetLife Investors USA or Security Equity Life 
(collectively, the ``Contracts''). Applicants also request an order of 
the Commission exempting them, the Metropolitan Series, VIP Fund II, 
the Replacement Portfolio, and the Substituted Portfolio as well as the 
proposed substitution from section 17(a) of the 1940 Act to the extent 
necessary to permit MetLife Investors USA and Security Equity Life to 
carry out the proposed substitutions by redeeming the VIP Fund II 
shares in-kind and using the proceeds to purchase the shares issued by 
the Metropolitan Series.

Hearing or Notification of Hearing: An order granting the amended and 
restated application will be issued unless the Commission orders a 
hearing. Interested persons may request a hearing by writing to the 
Secretary of the Commission and serving Applicants with a copy of the 
request, personally or by mail. Hearing requests should be received by 
the Commission by 5:30 p.m. on April 25, 2003, and should be 
accompanied by proof of service on Applicants, in the form of an 
affidavit or, for lawyers, a certificate of service. Hearing requests 
should state the nature of the writer's interest, the reason for the 
request, and the issues contested. Persons may request notification of 
a hearing by writing to the Secretary of the Commission.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW., Washington, DC 20549. Applicants, c/o Christopher A. 
Martin, Esq., Metropolitan Life Insurance Company, 501 Boylston Street, 
Boston, MA 02116 and Richard C. Pearson, Esq., MetLife Investors USA 
Insurance Company, 22 Corporate Plaza Drive, Newport Beach, California 
92660. Copy to David S. Goldstein, Esq., Sutherland Asbill & Brennan 
LLP, 1275 Pennsylvania Avenue, NW, Washington, DC 20004-2415.

FOR FURTHER INFORMATION CONTACT: Alison White, Senior Counsel, or Lorna 
MacLeod, Branch Chief, Division of Investment Management, Office of 
Insurance Products, at (202) 942-0670.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee from 
the Public Reference Branch of the Commission, 450 5th Street, NW., 
Washington, DC 20549 (tel. (202) 942-8090).

Applicants Representations

    1. MetLife Investors USA is a stock life insurance company 
organized under Delaware law in 1960. MetLife Investors USA is 
authorized to transact the business of life insurance, including 
annuities, in the District of Columbia and all states except New York.
    2. MetLife Investors USA is a wholly-owned subsidiary of MetLife 
Investors USA Group, Inc. (``MLIG'') (formerly, Security First Group, 
Inc.). MLIG, in turn, is an indirect wholly-owned subsidiary of 
MetLife, Inc. (``MetLife''), the parent of Metropolitan Life Insurance 
Company (``MLIC''). MetLife is listed on the New York Stock Exchange 
and, through its affiliates, is a leading provider of insurance and 
financial products and services to individuals and groups. MetLife 
Investors USA Insurance Company changed its name from Security First 
Life Insurance Company on January 31, 2001.

[[Page 17107]]

    3. Security Equity Life is a stock life insurance company domiciled 
in New York. Security Equity Life was established in 1983 as a wholly-
owned subsidiary of Security Mutual Life Insurance Company of New York. 
Security Equity Life is admitted to sell life insurance and annuities 
in 40 states and the District of Columbia. Security Equity Life sells 
corporate-owned life insurance contracts in all of these jurisdictions 
and individual contracts to residents of New York. Security Equity Life 
is a wholly-owned subsidiary of GenAmerica Financial Corporation, an 
intermediate stock holding company, acquired by MetLife on January 6, 
2000.
    4. Separate Account A is a separate investment account of MetLife 
Investors USA established under Delaware law on May 29, 1980. Separate 
Account A currently has 60 subaccounts. Each subaccount invests in a 
corresponding portfolio of a registered management investment company. 
A number of variable annuity Contracts that invest in the Substituted 
Portfolio have been issued through Separate Account A (the, ``MetLife 
Investors Contracts'') and interests in the Account offered through 
such Contracts have been registered under the Securities Act of 1933, 
as amended (the ``1933 Act'') on Form N-4.
    5. MetLife Investors USA is the legal owner of the assets in 
Separate Account A. If, and to the extent so provided in the MetLife 
Investors Contracts, that portion of the assets of Separate Account A 
equal to its reserves and other liabilities under outstanding MetLife 
Investors Contracts are not chargeable with liabilities arising out of 
any other business MetLife Investors USA may conduct. Income, gains and 
losses, realized or unrealized, from the assets of Separate Account A 
are credited to or charged against the Account without regard to the 
other income, gains, or losses of MetLife Investors USA.
    6. Separate Account 10 is a separate investment account of Security 
Equity Life established under New York law on December 15, 1994. 
Separate Account 10 serves as one of several separate account funding 
vehicles for certain variable life insurance contracts that are exempt 
from registration under section 4(2) of the 1933 Act and Regulation D 
thereunder (the ``Security Equity Life PP Contracts''). Each separate 
account available as an investment option under the Security Equity 
Life PP Contracts invests in a corresponding portfolio of a registered 
management investment company; Separate Account 10 invests only in the 
Substituted Portfolio.
    7. Security Equity Life is the legal owner of the assets in 
Separate Account 10. If, and to the extent so provided in the Security 
Equity Life PP Contracts, that portion of the assets of Separate 
Account 10 equal to its reserves and other liabilities under 
outstanding Security Equity Life PP Contracts will not be charged with 
liabilities that arise from any other business that Security Equity 
Life may conduct. Income, gains and losses, whether or not realized, 
from the assets of Separate Account 10 are, in accordance with the 
Security Equity Life PP Contracts, credited to or charged against the 
Account without regard to the other income, gains, or losses of 
Security Equity Life.
    8. Separate Account 13 is a separate investment account of Security 
Equity Life established under New York law on December 30, 1994. 
Separate Account 13 currently has 20 subaccounts. Each subaccount 
invests in a corresponding portfolio of a registered management 
investment company. A number of variable life insurance Contracts that 
invest in the Substituted Portfolio have been issued through Separate 
Account 13 (the, ``Security Equity Life Contracts'') and interests in 
the Account offered through such Contracts have been registered under 
the 1933 Act on Form S-6.
    9. Security Equity Life is the legal owner of the assets in 
Separate Account 13. If, and to the extent so provided in the Security 
Equity Life Contracts, that portion of the assets of Separate Account 
13 equal to its reserves and other liabilities under outstanding 
Security Equity Life Contracts will not be charged with liabilities 
arising from any other business that Security Equity Life may conduct. 
Income, gains and losses, whether or not realized, from the assets of 
Separate Account 13 are, in accordance with the Security Equity Life 
Contracts, credited to or charged against the Account without regard to 
the other income, gains, or losses of Security Equity Life.
    10. The terms of the MetLife Investors Contracts permit Contract 
owners to transfer Contract value under the Contracts between and among 
the available subaccounts of Separate Account A and from such 
subaccounts to MetLife Investors USA's general account during the 
accumulation period and to exchange annuity units during the annuity 
period. Although MetLife Investors USA does not currently charge a fee 
for Contract value transfers or annuity unit exchanges, the Contracts 
reserve for it the right to impose a $10 charge for each transfer or 
exchange.
    11. The terms of the Security Equity Life PP Contracts permit 
Contract owners to transfer Contract value under the Contracts between 
and among the separate accounts available under the Contracts on any 
valuation day within the following guidelines: (a) Contract value 
cannot be allocated to more than five separate accounts at any one 
time, (b) transfer requests must be in writing and in a form acceptable 
to Security Equity Life, (c) except as described below, only one 
transfer is permitted in each Contract year, and (d) Security Equity 
Life reserves the right to limit the amount of any transfer. 
Notwithstanding this contractual limitation, Security Equity Life 
currently permits up to 12 transfers per Contract year between or among 
separate accounts that invest in underlying portfolios within a single 
series management investment company or in underlying portfolios 
managed by the same investment manager. All transfer requests made on a 
single valuation day count as a single transfer. Security Equity Life 
does not impose a charge for transfers.
    12. The terms of the Security Equity Life Contracts permit Contract 
owners to transfer Contract value under the contracts between and among 
available subaccounts on any valuation day within the following 
guidelines: (a) Contract value cannot be allocated to more than five 
subaccounts and the fixed account (i.e., Security Equity Life's general 
account) at any time, (b) transfer requests must be in writing and in a 
form acceptable to Security Equity Life, (c) except as described below, 
only one transfer is permitted in each Contract year, and (d) Security 
Equity Life reserves the right to limit the amount of any transfer. 
Notwithstanding this contractual limitation, Security Equity Life 
currently permits up to 12 transfers per Contract year between or among 
subaccounts. All transfer requests made on one valuation day count as a 
single transfer. Security Equity Life does not impose a charge for 
transfers.
    13. Under the Contracts, MetLife Investors USA and Security Equity 
Life reserve the right to substitute shares of one portfolio for shares 
of another, including a portfolio of a different management investment 
company. Three of the MetLife Investors Contracts require Contract 
owners to approve any substitution. None of the other MetLife Investors 
Contracts nor any of the Security Equity Life Contracts require such 
approval. The following is representative of the Contract provisions 
reserving this right to substitute that appears in the MetLife 
Investors Contracts and the Security Equity Life Contracts:


[[Page 17108]]



MetLife Investors Contracts That Require Contract Owner Approval

    The separate account may not change the fund shares of a series 
unless approved by a vote of the majority of the units entitled to 
vote and as provided by the [1940] Act.

MetLife Investors Contracts That Do Not Require Contract Owner 
Approval

    If shares of any fund should no longer be available for 
investment by a series or if in the judgment of the Company further 
investment in shares of any fund should become inappropriate in view 
of the purposes of the contracts, the Company may substitute for 
each fund share already purchased, shares of another fund or other 
securities, and apply future purchase payments under the contracts 
to the purchase of shares of another fund or other securities. The 
separate account may not change the fund shares of a series unless 
approved by the [1940] Act. The separate account may buy other 
securities for other series or contracts, or if requested by a 
contract owner, convert units from one series or contract to 
another.

Security Equity Life PP Contracts

    For any Separate Account, [Security Equity Life] has the right 
to substitute a new portfolio for the portfolio in which the 
Separate Account invests, to substitute new Separate Accounts, to 
combine two or more Separate Accounts, to cause a Separate Account 
that is managed directly by an investment manager to instead invest 
its assets in shares or units of portfolios managed by one or more 
investment managers, to cause a Separate Account that invests its 
assets in shares or units of a portfolio to instead be managed 
directly by an investment manager, and to eliminate any existing 
Separate Accounts or any other investment option. Subject to any 
required regulatory approvals, [Security Equity Life] reserves the 
right to transfer assets of a Separate Account to another Separate 
Account which [Security Equity Life] determines to be associated 
with the class of contracts to which the contract belongs.

Security Equity Life Contracts

    For any Separate Account Division, [Security Equity Life] has 
the right to substitute a new portfolio for the portfolio in which 
the Separate Account invests, to substitute new Separate Account 
Divisions, to combine two or more Separate Account Divisions, to 
cause a Separate Account Division that is managed directly by an 
investment manager to instead invest its assets in shares or units 
of portfolios managed by one or more investment managers, to cause a 
Separate Account Division that invests its assets in shares or units 
of a portfolio to instead be managed directly by an investment 
manager, and to eliminate any existing Separate Account Division or 
any other investment option. Subject to any required regulatory 
approvals, [Security Equity Life] reserves the right to transfer 
assets of a Separate Account Division to another Separate Account 
Division which [Security Equity Life] determines to be associated 
with the class of contracts to which the contract belongs.

    14. In the prospectuses for the Contracts, MetLife Investors USA 
and Security Equity Life disclose their right to substitute shares of 
one portfolio for shares of another. All of the prospectuses for the 
MetLife Investors Contracts disclose a requirement that approval of 
Contract owners invested in an affected portfolio is needed prior to 
any substitution, regardless of whether or not the related Contract 
requires such approval. Consistent with Contractual provisions, the 
prospectuses for the Security Equity Life Contracts and the private 
placement memoranda for the Security Equity Life PP Contracts do not 
disclose any such approval requirement. The following is representative 
disclosure about substitutions that appears in each prospectus and 
private placement memorandum:

MetLife Investors USA Prospectus

    MetLife Investors USA may substitute shares of another fund for 
Fund shares directly purchased and apply future Purchase Payments 
under the Contracts to the purchase of these substituted shares if 
the shares of a Fund are no longer available or further investment 
in such shares is determined to be inappropriate by MetLife 
Investors USA's management in view of the purposes of the Contracts. 
However, no substitution is allowed unless a majority of the Owners 
entitled to vote (those who have invested in the Series) and the SEC 
approves the substitution under the 1940 Act.

Security Equity Life Private Placement Memorandum

    For any Separate Account, subject to any required regulatory 
approvals, [Security Equity Life] has the right to substitute a new 
Underlying Portfolio for the Underlying Portfolio in which the 
Separate Account invests, to substitute new Separate Accounts, to 
combine two or more Separate Accounts, to cause a Separate Account 
that is managed directly by an investment manager to instead invest 
its assets in shares or units of an Underlying Portfolio, to cause a 
Separate Account that invests its assets in shares or units of an 
Underlying Portfolio to instead be managed directly by an investment 
manager, and to eliminate any existing Separate Account or any other 
investment option.

Security Equity Life VLI Prospectus

    [Security Equity Life] reserves the right, subject to compliance 
with applicable law, to make additions to, deletions from, or 
substitutions for the shares that are held by the Separate Account 
or that the Separate Account may purchase. Security Equity Life 
reserves the right to eliminate the shares of any of the Underlying 
Portfolios and to substitute the shares of another registered open-
end investment company if the shares of an Underlying Portfolio are 
no longer available for investment or if, in Security Equity Life's 
judgment, further investment in any Underlying Portfolio becomes 
inappropriate in view of the purposes of the Separate Account. 
[Security Equity Life] will not substitute any shares attributable 
to a Contract Holder's interest in a Division of a Separate Account 
without notice to the Contract Holder and prior approval of the SEC, 
to the extent required by the 1940 Act or other applicable law. 
Nothing contained in this Prospectus shall prevent the Separate 
Account from purchasing other securities for other series or classes 
of contracts, or from permitting a conversion between series or 
classes of contracts on the basis of requests made by Contract 
Holders.

    15. The VIP Fund II is registered as an open-end management 
investment company under the 1940 Act and currently offers 5 separate 
investment portfolios, one of which would be involved in the proposed 
substitution. The VIP Fund II issues a separate series of shares of 
beneficial interest in connection with each portfolio and has 
registered such shares under the 1933 Act on Form N-1A. Fidelity 
Management & Research Company (``FMR'') serves as the investment 
adviser to each portfolio.
    16. FMR and VIP Fund II on behalf of the Substituted Portfolio have 
entered into a subadvisory agreement with Deutsche Asset Management, 
Inc. (``DAMI'') to provide portfolio management services pursuant to 
which DAMI chooses the Substituted Portfolio's investments and places 
orders to buy and sell the Substituted Portfolio's investments. DAMI is 
a wholly-owned subsidiary of Deutsche Bank AG.
    17. In addition, FMR has also entered into a subadvisory agreement 
with FMR Co., Inc. (``FMRC'') on behalf of the Substituted Portfolio, 
pursuant to which FMRC may provide investment advisory services for the 
Substituted Portfolio.
    18. The Metropolitan Series is registered as an open-end management 
investment company under the 1940 Act and currently offers 20 separate 
investment portfolios, one of which would be involved in the proposed 
substitution. The Metropolitan Series issues a separate series of 
shares of beneficial interest in connection with each portfolio, and 
has registered such shares under the 1933 Act on Form N-1A. MetLife 
Advisers is the investment adviser of each portfolio of the 
Metropolitan Series. MetLife Advisers is an indirect wholly-owned 
subsidiary of MetLife.
    19. MetLife Advisers has a subadvisory agreement with MLIC whereby 
MLIC makes the day-to-day investment management decisions for the 
Replacement Portfolio. MLIC also manages its own investment assets and 
those of certain affiliated companies and other entities. As of 
December 31, 2002, MLIC had approximately $250 billion in

[[Page 17109]]

assets under management. MetLife Advisers is responsible for overseeing 
MLIC and for making recommendations to the Metropolitan Series' board 
of directors relating to hiring and replacing any subadviser. MetLife 
Advisers also performs general administrative and management services 
for the Metropolitan Series. MLIC's principal offices are located at 
One Madison Avenue, New York, New York 10010. MLIC also is the 
Metropolitan Series' principal underwriter and distributor.
    20. MetLife Investors Distribution Company (``MetLife Investors 
Distribution'') serves as principal underwriter and distributor for the 
MetLife Investors Contracts. MetLife Investors Distribution is an 
indirect wholly-owned subsidiary of MetLife. MetLife Investors 
Distribution is registered as a broker-dealer under the Securities 
Exchange Act of 1934, as amended (the ``1934 Act'') and is a member of 
the National Association of Securities Dealers, Inc (``NASD''). MetLife 
Investors Distribution may enter into selling agreements with other 
broker-dealers registered under the 1934 Act whose representatives are 
authorized to sell the MetLife Investors Contracts.
    21. Walnut Street Securities, Inc. (``Walnut Street'') serves as 
principal underwriter and distributor for Security Equity Life PP 
Contracts and Security Equity Life Contracts. Walnut Street is a 
wholly-owned subsidiary of GenAmerica Corporation. Walnut Street is 
registered as a broker-dealer under the 1934 Act and is a member of the 
NASD. Walnut Street may enter into selling agreements with other 
broker-dealers registered under the 1934 Act whose representatives are 
authorized to sell the Security Equity Life PP Contracts and Security 
Equity Life Contracts.
    22. MetLife Investors USA and Security Equity Life propose to 
substitute Class A shares of Replacement Portfolio for Initial Class 
shares of the Substituted Portfolio held in the Accounts (the 
``proposed substitutions''). At the current time, most variable life 
insurance and variable annuity contracts being actively marketed by 
MetLife affiliated life insurance companies that offer an S&P 500 Index 
investment portfolio, offer the Replacement Portfolio. The proposed 
substitutions are part of efforts by MetLife Investors USA and Security 
Equity Life to standardize investment options offered through variable 
life insurance and variable annuity contracts across all MetLife 
affiliated life insurance companies. Investment option standardization 
is expected to make such contracts more efficient to administer and 
oversee, thereby reducing costs to the companies and improving service 
to owners of all of the contracts. For example, one variable annuity 
operations center provides contract administration and contract owner 
services for most of the affiliated life insurance companies. 
Standardizing product features, such as investment options, will foster 
more efficient administration of the Contracts, thereby improving 
quality control and Owner satisfaction. Similarly, as part of this 
standardization process, several other mutual funds managed by 
companies affiliated with Metropolitan Life Insurance Company are being 
merged into investment portfolios of Metropolitan Series, including the 
MetLife Portfolio. This should, as with the proposed substitution, 
increase the Portfolio's net assets and lead to lower overall expenses 
for the Portfolio. By way of other examples, most sales representatives 
will only have to be familiar with one S&P 500 Index portfolio offering 
rather than several. Likewise, for most contracts, only one prospectus, 
rather than several, for an S&P 500 Index portfolio would have to be 
printed.
    23. Though not a principal reason for the proposed substitutions, 
the substitutions would have the effect of transferring Contract values 
to an investment portfolio managed by MLIC, an affiliated person of 
MetLife Investors USA and Security Equity Life, thereby increasing the 
management fees to MLIC.
    24. Applicants believe that replacing the Substituted Portfolio 
with the Replacement Portfolio is appropriate and in the best interests 
of Contract owners because the investment objectives and principal 
investment strategies of the Replacement Portfolio are substantially 
identical to those of the Substituted Portfolio so that Contract owners 
will have continuity in investment and risk expectations. In addition, 
the types of investment advisory and administrative services provided 
to the Replacement Portfolio are substantially the same as those 
provided to the Substituted Portfolio.
    25. Although net expenses for the Substituted Portfolio were 
slightly lower than those for the Replacement Portfolio for the year 
ended December 31, 2002, Applicants note that the expense ratio for the 
Substituted Portfolio before voluntary waivers and reimbursements was 
higher than that of the Replacement Portfolio. More significantly, 
Applicants propose to limit Contract charges (discussed below) 
attributable to Contract value invested in the Replacement Portfolio 
following the proposed substitutions, to a rate that would offset the 
expense ratio differential between the Substituted Portfolio's 2002 
expense ratio and the expense ratio for the Replacement Portfolio.
    26. Applicants believe that replacing the Substituted Portfolio 
with the Replacement Portfolio is appropriate and in the best interests 
of Contract owners because the Replacement Portfolio is larger than the 
Substituted Portfolio and has excellent prospects for future growth. 
Although almost all equity mutual funds have declined in size over the 
last two years (due primarily to equity market declines, but also as a 
result of investor redemptions), the Replacement Portfolio has, on a 
percentage basis, declined in size less than the Substituted Portfolio. 
In large part this is because it has gained new investors. As indicated 
above, the Applicants anticipate that, through mergers with affiliated 
funds and being added as an investment option in variable annuity and 
life insurance contracts of MetLife affiliated insurance companies, the 
Replacement Portfolio will continue to add new investors.
    Size and continued growth are important factors in the performance 
of an index portfolio because they have a critical impact on expense 
levels. The Replacement Portfolio had an expense ratio in 2002 of 
0.31%. Applicants believe that with the growth anticipated for the 
Portfolio, it has excellent prospects of maintaining or even lowering 
that ratio in future years. Although the Substituted Portfolio had an 
actual expense ratio of 0.28% for 2002, it achieved that ratio only 
after a reimbursement of 0.05% from FMR, its investment adviser. The 
reimbursement is voluntary and FMR may cease reimbursing the Portfolio 
at any time. In addition, FMR has the ability to seek repayment of the 
reimbursed amounts under certain circumstances in future years.
    Applicants also believe that replacing the Substituted Portfolio 
with the Replacement Portfolio is appropriate and in the best interests 
of Contract owners because the Replacement Portfolio has had better 
performance than the Substituted Portfolio. Although, being index 
portfolios, performance differences are very small, the Replacement 
Portfolio has consistently outperformed the Substituted Portfolio in 
recent years.
    27. The following chart sets out the investment objective and 
principal investment strategies of the Substituted Portfolio and the 
Replacement Portfolio, as stated in their respective prospectuses.

[[Page 17110]]



------------------------------------------------------------------------
         Substituted portfolio                Replacement portfolio
------------------------------------------------------------------------
Index 500 Portfolio....................  MetLife Stock Index Portfolio.
Investment Objective: Seeks investment   Investment Objective: To equal
 results that correspond to the total     the performance of the S&P 500
 return of common stocks publicly         Index.
 traded in the United States, as
 represented by the S&P 500 Index.
Principal Investment Strategies: The     Principal Investment
 Portfolio will normally invest at        Strategies: The Portfolio will
 least 80% of its assets in common        normally invest most of its
 stocks included in the S&P 500 Index.    assets in common stocks
 The Portfolio may not always hold all    included in the S&P 500 Index.
 of the same securities as the S&P 500    The Portfolio also expects to
 Index. The subadviser may use            invest, as a principal
 statistical sampling techniques to       investment strategy, in
 attempt to replicate the returns of      securities index futures
 the S&P 500 Index. Statistical           contracts and/or related
 sampling techniques attempt to match     options to simulate full
 the investment characteristics of the    investment in the S&P 500
 S&P 500 Index and the Portfolio by       Index while retaining
 taking into account such factors as      liquidity to facilitate
 capitalization, industry exposures,      trading, to reduce transaction
 dividend yield, price/earnings ratio,    costs, or to seek higher
 price/book ratio, and earnings growth.   return when these derivatives
 The Portfolio also expects to lend       are priced more attractively
 securities to earn income for the        than the underlying security.
 Portfolio. The Portfolio may lend its    Also, since the Portfolio
 securities to broker-dealers or other    attempts to keep transaction
 institutions to earn income. The         costs low, the portfolio
 Portfolio may also use various           manager generally will
 techniques, such as buying and selling   rebalance the Portfolio only
 futures contracts, to increase or        if it deviates from the S&P
 decrease its exposure to changing        500 Index by a certain
 security prices or other factors that    percent. MetLife monitors the
 affect security values.                  tracking performance of the
                                          Portfolio through examination
                                          of the ``correlation
                                          coefficient.'' A perfect
                                          correlation would produce a
                                          coefficient of 1.00. The
                                          Portfolio will attempt to
                                          maintain a target correlation
                                          coefficient of at least .95.
------------------------------------------------------------------------

    28. The following chart compares the total operating expenses 
(before and after any waivers and reimbursements) for the year ended 
December 31, 2002, expressed as an annual percentage of average daily 
net assets, of the Substituted Portfolio and the Replacement Portfolio. 
Neither the Initial Class shares of the Substituted Portfolio nor Class 
A shares of the Replacement Portfolio have adopted any plan pursuant to 
rule 12b-1 under the 1940 Act.

------------------------------------------------------------------------
                                      Substituted         Replacement
                                     portfolio (in       portfolio (in
                                       percent)            percent)
------------------------------------------------------------------------
                                       Index 500         MetLife Stock
                                       Portfolio           Portfolio
                                          (Initial Class)             (Class A)
Advisory Fees...................               0.24                0.25
Other Expenses..................               0.09                0.06
                                 ---------------------------------------
Total Operating Expenses........               0.33                0.31
Less Expense Waivers and                       0.05                 N/A
 Reimbursements.................
                                 ---------------------------------------
Net Operating Expenses..........               0.28                0.31
------------------------------------------------------------------------

    29. The following chart compares the fees paid for advisory and 
subadvisory services for the fiscal year ending December 31, 2002, 
expressed as an annual percentage of average daily net assets, by the 
Substituted Portfolio and the Replacement Portfolio.

----------------------------------------------------------------------------------------------------------------
          Substituted portfolio--Index 500 portfolio               Replacement portfolio--Metlife Stock Index
--------------------------------------------------------------                portfolio (Class A)
                                                              --------------------------------------------------
        Annual advisory fees          Annual subadvisory fees                            Annual subadvisory fees
                                       (paid by the Adviser)     Annual advisory fees     (paid by the Adviser)
----------------------------------------------------------------------------------------------------------------
0.24%...............................  DAMI 0.006%............  0.25%..................  At Cost.
                                      FMRC 0.12%.............
----------------------------------------------------------------------------------------------------------------

    30. By supplements dated March 5, 2003, to the May 1, 2002 
prospectuses for the MetLife Investors Contracts and February 28, 2003 
for May 1, 2000 prospectuses for the Security Equity Life Contracts and 
the private placement memoranda for the Security Equity Life PP 
Contracts and the Accounts, MetLife Investors USA and Security Equity 
Life notified owners of their Contracts of their intention to take the 
necessary actions, including seeking the orders requested by this 
application and obtaining approval from various groups of Contract 
owners (described below), to carry out the proposed substitutions as 
described herein.
    31. The supplements about the proposed substitutions advised 
Contract owners that from the date of the supplement until the date of 
the proposed substitutions, MetLife Investors USA and Security Equity 
Life will not (except as described in the next section) exercise any 
rights reserved under any Contract to impose restrictions or additional 
restrictions on or charges for transfers until at least 30 days after 
the proposed substitutions. Similarly, the supplements disclosed that, 
from the date of the supplement until the date of the proposed 
substitutions, MetLife Investors USA and Security Equity Life will 
permit Contract owners to make one transfer of Contract value out of 
the subaccount

[[Page 17111]]

currently holding shares of the Substituted Portfolio to another 
subaccount without the transfer being treated as one of a limited 
number of permitted transfers or a limited number of transfers 
permitted without a transfer charge. The supplements also advised 
Contract owners that if the proposed substitutions are carried out, 
then each Contract owner affected by a substitution will be sent a 
written notice (described immediately below) informing them of the fact 
and details of the substitutions.
    32. Within five days after the proposed substitutions, any Contract 
owners who are affected by a substitution will be sent a written notice 
informing them that the substitutions were carried out. The notice also 
will reiterate the facts that MetLife Investors USA and Security Equity 
Life: (a) will not exercise any rights reserved by it under any of the 
Contracts to impose restrictions or additional restrictions on or 
charges for transfers until at least 30 days after the proposed 
substitutions, and (b) will, for at least 30 days following the 
proposed substitutions, permit such Contract owners to make one 
transfer of Contract value out of the subaccount holding shares of the 
Replacement Portfolio to another subaccount without the transfer being 
treated as one of a limited number of permitted transfers or a limited 
number of transfers permitted without a transfer charge. Current 
prospectuses for the Replacement Portfolio will be sent to Contract 
owners on or before the time the notices are sent. The notice as 
delivered in certain jurisdictions also may explain that, under 
insurance regulations in those jurisdictions, Contract owners affected 
by the substitutions may exchange their Contract for a fixed-benefit 
life insurance contract or fixed-benefit annuity contract during the 60 
days following the substitutions.
    33. In addition, as described below, MetLife Investors USA will 
solicit approval of the proposed substitutions from owners of MetLife 
Investors Contracts by mailing them information statements and voting 
forms. Likewise, Security Equity Life will solicit approval of the 
proposed substitutions from owners of Security Equity Life PP Contracts 
and Security Equity Life Contracts by mailing them information 
statements and voting forms.
    34. MetLife Investors USA and Security Equity Life will effect the 
proposed substitutions following the issuance of the orders requested 
herein and the approval of the proposed substitutions by Contract 
owners (described below) as follows. As of the Effective Date, shares 
of the Substituted Portfolio will be redeemed in cash or in-kind by 
MetLife Investors USA and Security Equity Life. The proceeds of such 
redemptions will then be used to purchase shares of the Replacement 
Portfolio either by cash purchases or in-kind purchases, with each 
subaccount of the Accounts investing the proceeds of its redemption 
from the Substituted Portfolio in the Replacement Portfolio. All 
redemptions of shares of the Substituted Portfolio and purchases of 
shares of the Replacement Portfolio will be effected in accordance with 
rule 22c-1 under the 1940 Act.
    35. The proposed substitutions will take place at relative net 
asset value with no change in the amount of any Contract owner's 
Contract value or death benefit or in the dollar value of his or her 
investments in any of the Accounts. Contract owners will not incur any 
fees or charges as a result of the proposed substitutions, nor will 
their rights or MetLife Investors USA's or Security Equity Life's 
obligations under the Contracts be altered in any way. All applicable 
expenses incurred in connection with the proposed substitutions, 
including the costs of obtaining Contract owner approvals, brokerage 
commissions, legal, accounting, and other fees and expenses, will be 
paid by MetLife Investors USA or Security Equity Life. In addition, the 
proposed substitutions will not impose any tax liability on Contract 
owners. The proposed substitutions will not cause the Contract fees and 
charges currently being paid by existing Contract owners to be greater 
after the proposed substitutions than before the proposed 
substitutions. The proposed substitutions will not, of course, be 
treated as a transfer of Contract value or an exchange of annuity units 
for the purpose of assessing transfer charges or for determining the 
number of remaining permissible transfers in a Contract year. MetLife 
Investors USA and Security Equity Life will not exercise any right 
either may have under the Contracts to impose restrictions or 
additional restrictions on or charges for Contract value transfers or 
annuity unit exchanges under the Contracts for a period of at least 
thirty days following the proposed substitutions. One exception to this 
is that MetLife Investors USA and Security Equity Life may impose 
restrictions on transfers to prevent or limit ``market timing'' 
activities by Contract owners or agents of Contract owners.
    36. Prior to the proposed substitutions, MetLife Investors USA and 
Security Equity Life will permit Contract owners to make one transfer 
of Contract value (or annuity unit exchange) out of the Substituted 
Portfolio subaccount to another subaccount without the transfer (or 
exchange) being treated as one of a limited number of permitted 
transfers (or exchanges) or a limited number of transfers (or 
exchanges) permitted without a transfer charge. Likewise, for at least 
30 days following the proposed substitutions, MetLife Investors USA and 
Security Equity Life will permit Contract owners affected by the 
substitutions to make one transfer of Contract value (or annuity unit 
exchange) out of Replacement Portfolio subaccount to another subaccount 
without the transfer (or exchange) being treated as one of a limited 
number of permitted transfers (or exchanges) or a limited number of 
transfers (or exchanges) permitted without a transfer charge. All 
Contract owners, even those who are ``market timers,'' may avail 
themselves of the ``free'' transfer privilege both before and after the 
proposed substitutions.
    37. MetLife Investors USA and Security Equity Life are also seeking 
approval of the proposed substitutions from any state insurance 
regulators whose approval may be necessary or appropriate.
    38. To the extent that the annualized expenses of the Replacement 
Portfolio exceeds, for each fiscal period (such period being less than 
90 days) during the twenty-four months following the substitutions, 
0.28%, MetLife Investors USA and Security Equity Life will, for each 
Contract outstanding on the date of the proposed substitutions, make a 
corresponding reduction in separate account (or subaccount) expenses on 
the last day of such fiscal period, such that the amount of the 
Replacement Portfolio's expense ratio, together with those of the 
corresponding separate account (or subaccount) will, on an annualized 
basis, be no greater than the sum of 0.31% and the expense ratio of the 
separate account (or subaccount) for the 2002 fiscal year. In addition, 
for twenty-four months following the substitutions MetLife Investors 
USA and Security Equity Life will not increase asset-based fees or 
charges for Contracts outstanding on the day of the proposed 
substitutions. (Here, the term ``Contract'' means all of the MetLife 
Investors Contracts, Security Equity Life PP Contracts, and Security 
Equity Life Contracts currently offering a subaccount or separate 
account investing in the Substituted Portfolio).
    39. In accordance with the Contract provisions and/or prospectus 
disclosure for the MetLife Investors Contracts,

[[Page 17112]]

MetLife Investors USA will seek approval of the substitutions proposed 
for Separate Account A from MetLife Investors Contract owners. Such 
approval will be sought from the owners of each class of MetLife 
Investors Contracts voting as a separate group, and the substitutions 
will be carried out for each class of Contracts whose owners approve 
them. A class of Contracts refers to a Contract type distinguishable 
from other types by the product (marketing) designation and, in most 
cases, by its contract form as approved for sale in each jurisdiction. 
Contracts of the same class have the same features and charge 
structure.
    Approval is obtained by the affirmative vote of a majority of the 
class' outstanding interests in the Substituted Portfolio subaccount of 
Separate Account A (measured by the dollar value of accumulation units 
or annuity unit reserves). MetLife Investors USA will solicit approval 
of MetLife Investors Contract owners by sending them written voting 
forms accompanied by a voting information statement and other 
disclosure documents in a manner consistent with applicable 
requirements of Regulation 14A under the Securities Exchange Act of 
1934 (together, ``voting materials''). In particular, the relevant 
information statement will disclose, in substance, the information 
required by applicable items of Form N-14. Any beneficial financial 
interest that MetLife Investors USA may have in Separate Account A is 
immaterial in relation to the interests of Contract owners, and MetLife 
Investors USA will not cast any votes.
    40. Security Equity Life will seek approval of the substitutions 
proposed for Separate Accounts 10 from Security Equity Life PP Contract 
owners and for Separate Account 13 from Security Equity Life Contract 
owners. Such approval will be sought from the owners of Security Equity 
Life Contracts and Security Equity Life PP Contracts, each voting as a 
separate group, and the substitutions will be carried out for each 
group of Contracts whose owners approve them. Approval is obtained by 
the affirmative vote of the lesser of: (a) a majority of the 
outstanding interests in either Separate Account 10 or the Substituted 
Portfolio subaccount of Separate Account 13 (measured by the dollar 
value of accumulation units), or (b) 67% of such outstanding interests 
voted, if votes received represent a majority of such interests. 
Security Equity Life will solicit approval of Security Equity Life PP 
Contract owners and Security Equity Life Contract owners by sending 
them written voting materials of the same type sent by MetLife 
Investors USA. Any beneficial financial interest that Security Equity 
Life may have in either Separate Account 10 of Separate Account 13 is 
immaterial in relation to the interests of Contract owners and Security 
Equity Life will not cast any votes.
    41. Pursuant to rule 20a-1 under the Act, the voting materials for 
Separate Account A and Separate Account 13 will be filed with the 
Commission as proxy materials. Because Separate Account 10 is not a 
registered investment company, voting materials related to it will not 
be so filed, however, the voting materials will be substantially 
identical in all material respects to the voting materials for Separate 
Account 13. Applicants anticipate that voting materials will be sent to 
Contract owners on or about March 28, 2003. Unless extended by either 
MetLife Investors USA or by Security Equity Life, votes must be 
received by April 24, 2003 to be counted.
    42. The replacement of the Substituted Portfolio with the 
Replacement Portfolio is consistent with the protection of Contract 
owners and the purposes fairly intended by the policy and provisions of 
the 1940 Act and, thus, meets the standards necessary to support an 
order pursuant to section 26(c) of the 1940 Act.
    43. Although not identical, the investment objectives and principal 
investment strategies of the Replacement Portfolio are substantially 
the same as those of the Substituted Portfolio. The investment 
objective of the Substituted Portfolio is to seek investment results 
corresponding to the total return of common stocks publicly traded in 
the United States, as represented by the S&P 500 Index. The S&P 500 
Index consists of 500 common stocks, most of which are listed on the 
New York Stock Exchange. The stocks included in the S&P 500 Index are 
issued by companies among those whose outstanding stock have the 
largest aggregate market value, although stocks that are not among the 
500 largest are included in the S&P 500 Index for diversification 
purposes.
    44. The Substituted Portfolio normally invests at least 80% of its 
assets in common stocks included in the S&P 500 Index. The Portfolio 
may not always hold all of the same securities as the S&P 500 Index. 
DAMI uses statistical sampling techniques to attempt to replicate the 
returns of the S&P 500 Index. Statistical sampling techniques attempt 
to match the investment characteristics of the S&P 500 Index and the 
Portfolio by taking into account such factors as capitalization, 
industry exposures, dividend yield, price/earnings ratio, price/book 
ratio, and earnings growth. The Portfolio may lend its securities to 
broker-dealers or other institutions to earn income. The Portfolio may 
also use various techniques, such as buying and selling futures 
contracts, to increase or decrease its exposure to changing security 
prices or other factors that affect security values.
    45. The investment objective of the Replacement Portfolio is to 
equal the performance of the S&P 500 Index. The Replacement Portfolio 
normally invests most of its assets in common stocks included in the 
S&P 500 Index. The Replacement Portfolio is managed by purchasing all 
of the common stocks in the S&P 500 Index. The Replacement Portfolio 
also expects to invest, as a principal investment strategy, in 
securities index futures contracts and/or related options to simulate 
full investments in the S&P 500 Index while, at the same time, 
retaining liquidity, facilitating trading, reducing transaction costs, 
or seeking higher returns when these derivatives are priced more 
attractively than the underlying indicies. Also, since the Replacement 
Portfolio attempts to keep transaction costs low, the Replacement 
Portfolio subadviser generally will rebalance the Replacement Portfolio 
only if it deviates from the S&P 500 Index by a certain percent. The 
Replacement Portfolio may lend its securities to broker-dealers or 
other institutions to earn income. MLIC monitors the tracking 
performance of the Replacement Portfolio using the ``correlation 
coefficient.'' A perfect correlation results in a coefficient of 1.00. 
The Replacement Portfolio will attempt to maintain a target correlation 
coefficient of at least 0.95.
    46. The investment objectives of the two portfolios are virtually 
identical. Both portfolios seek to mirror the performance of the S&P 
500 Index. Further, both portfolios' principal investment strategies 
are substantially the same in that both portfolios are managed by 
investing portfolio assets in the common stocks comprising the S&P 500 
Index. Unlike the Replacement Portfolio, however, the Substituted 
Portfolio may not always hold all of the same securities as the S&P 500 
Index. Further, although the Substituted Portfolio may use various 
techniques, such as buying and selling futures contracts, to increase 
or decrease its exposure to changing security prices, the Replacement 
Portfolio invests, as a principal investment strategy, in securities 
index futures contracts and/or related options when such derivatives 
are priced more attractively than the

[[Page 17113]]

underlying security or to simulate full investments in the S&P 500 
Index--a strategy of potential benefit to Contract owners.
    47. FMR currently serves as investment adviser for the Substituted 
Portfolio. Investment management decisions for the Substituted 
Portfolio are made by DAMI and FMRC in their capacity as subadvisers. 
The investment adviser for the Replacement Portfolio is MetLife 
Advisers. MLIC carries out the daily investment management decisions 
for the Replacement Portfolio in its capacity as subadviser.
    48. Both the Replacement Portfolio and the Substituted Portfolio 
have assets of more than $2.4 billion as of December 31, 2002. The 
Substituted Portfolio's asset base, however, has declined from $5.5 
billion as of December 31, 1999.
    49. Since both portfolios hold a large percentage of its assets in 
the 500 securities of the S&P 500 Index in the same proportion as the 
index, the respective expense ratios of the portfolios are the primary 
cause of tracking error (i.e., the difference between the performance 
of the Substituted Portfolio or the Replacement Portfolio and the 
performance of the S&P 500 Index). For each of the last five years, the 
Substituted Portfolio's investment adviser voluntarily reimbursed a 
portion of the Portfolio's operating expenses. In fact, FMR retains the 
ability to be repaid for these expense reimbursements in future years 
in the amount that expenses fall below the 0.28% limit prior to the end 
of a fiscal year. Through imposition of the expense caps described 
above following the proposed substitutions, Contract owners affected by 
the proposed substitutions will incur total Portfolio and subaccount 
expenses for two years that are no higher than the total Portfolio and 
subaccount expenses that they incurred in the fiscal year ended 
December 31, 2002.
    50. The following table compares the respective asset levels, 
expense ratios, and performance data of the two portfolios, as well as 
performance data for the S&P 500 Index.

----------------------------------------------------------------------------------------------------------------
                                                             Expense
                                          Asset levels    ratios  (for
                                          (as of 12/31/     the year     Performance  (for periods ending 12/31/
               Portfolio                       02)        ended 12/31/                     02)
                                           (millions)       02)  (in
                                                            percent)
----------------------------------------------------------------------------------------------------------------
Index 500 Portfolio (Substituted                 $2,497            0.28  [sbull] 1 Year: -22.25%
 Portfolio).                                                             [sbull] 5 Year: -0.84%
                                                                         [sbull] 10 Year: 9.04%
MetLife Stock Index Portfolio                    $2,840            0.31  [sbull] 1 Year: -22.10%
 (Replacement Portfolio).                                                [sbull] 5 Year: -00.66%
                                                                         [sbull] 10 Year: 09.15%
S&P 500 Index..........................             N/A             N/A  [sbull] 1 Year: -22.09%
                                                                         [sbull] 5 Year: -00.58%
                                                                         [sbull] 10 Year: 09.34%
----------------------------------------------------------------------------------------------------------------

    51. The Applicants submit that, for all the reasons stated above, 
the proposed substitutions are consistent with the protection of 
investors and the purposes fairly intended by the policy and provisions 
of the 1940 Act.
    52. Because shares held by a separate account of an insurance 
company are owned by the insurance company, MetLife Investors USA, 
Security Equity Life and other life insurance company affiliates of 
MetLife Investors USA and Security Equity Life own of record all of the 
shares of the Replacement Portfolio. Therefore, Metropolitan Series and 
the Replacement Portfolio are arguably under the control of MetLife 
Investors USA and Security Equity Life (and its affiliates) 
notwithstanding the fact that Contract owners may be considered the 
beneficial owners of those shares held in the Accounts. If Metropolitan 
Series and the Replacement Portfolio are under MetLife Investors USA's 
and Security Equity Life's control, then any person controlling MetLife 
Investors USA and Security Equity Life, or any person under common 
control with MetLife Investors USA and Security Equity Life, is an 
affiliated person of Metropolitan Series and the Replacement Portfolio. 
Similarly, if Metropolitan Series and the Replacement Portfolio are 
under MetLife Investors USA's and Security Equity Life's control, then 
Metropolitan Series and the Replacement Portfolio are affiliated 
persons of MetLife Investors USA and Security Equity Life and also are 
affiliated persons of any persons that control MetLife Investors USA 
and Security Equity Life or are under common control with MetLife 
Investors USA and Security Equity Life.
    53. Regardless of whether or not MetLife Investors USA and Security 
Equity Life can be considered to control Metropolitan Series or the 
Replacement Portfolio, because MetLife Investors USA and Security 
Equity Life each own of record more than 5% of the shares of the 
Replacement Portfolio, each is an affiliated person of Metropolitan 
Series and of the Replacement Portfolio. Similarly, because more than 
5% of the Replacement Portfolio's shares are owned by each of MetLife 
Investors USA and Security Equity Life, Metropolitan Series and the 
Replacement Portfolio are affiliated persons of MetLife Investors USA 
and Security Equity Life and also are affiliated persons of affiliated 
persons of any person that controls MetLife Investors USA and Security 
Equity Life or is under common control with MetLife Investors USA and 
Security Equity Life. Likewise, because MetLife Investors USA and 
Security Equity Life may, from time to time, own of record more than 5% 
of the shares of the Substituted Portfolio, each may, from time to 
time, be an affiliated person of VIP Fund II and of the Substituted 
Portfolio. Similarly, VIP Fund II and the Substituted Portfolio are 
each affiliated persons of MetLife Investors USA and Security Equity 
Life and also are affiliated persons of affiliated persons of any 
person that controls MetLife Investors USA and Security Equity Life or 
is under common control with MetLife Investors USA and Security Equity 
Life.
    54. The proposed substitutions by MetLife Investors USA and 
Security Equity Life which may entail the purchase of shares of the 
Replacement Portfolio with portfolio securities of the Substituted 
Portfolio, therefore also may entail the purchase of such securities by 
the Replacement Portfolio and/or the sale of such securities by the 
Substituted Portfolio, each acting as principal, to the other and 
therefore may be in contravention of section 17(a) of the 1940 Act. In 
addition, the

[[Page 17114]]

participation of MetLife Investors USA and Security Equity Life in such 
purchase or sale transactions could be viewed as entailing the purchase 
of such portfolio securities from the Substituted Portfolio and the 
sale of such portfolio securities to the Replacement Portfolio by 
MetLife Investors USA and Security Equity Life each acting as 
principal, and therefore may be in contravention of section 17(a) of 
the 1940 Act.
    55. Any in-kind redemptions of Substituted Portfolio shares and 
purchases of Replacement Portfolio shares for purposes of the proposed 
substitutions will be effected in a manner consistent with the 
investment objective, principal investment strategies and other 
policies of the Substituted Portfolio and the Replacement Portfolio. 
Both the VIP Fund II and Metropolitan Series will agree on the terms of 
any in-kind redemption. If the two management companies cannot agree, 
the VIP Fund II will redeem Substituted Portfolio shares for cash. If 
the parties do agree, the Replacement Portfolio will receive an 
approximately proportionate amount of each of the Substituted 
Portfolio's holdings and cash at the time of the substitution, as 
determined by the investment adviser of the Substituted Portfolio. 
After the Replacement Portfolio receives these portfolio holdings, 
MetLife will review them and determine which holdings to retain for the 
Replacement Portfolio based on the overall context of the Portfolio's 
investment objective, principal investment strategies and other 
policies and consistent with its management of the Replacement 
Portfolio. The redemption of Substituted Portfolio shares in kind is 
intended to reduce the costs of the proposed substitutions.
    56. MetLife Investors USA and Security Equity Life assert that the 
terms under which any in-kind redemptions and purchases will be 
effected are reasonable and fair and will not involve overreaching on 
the part of any person principally because the transactions will not 
cause Contract owner interests to be diluted and because the 
transactions will conform to all but two of the conditions in rule 17a-
7. The proposed transactions will take place at relative net asset 
value in conformity with the requirements of section 22(c) of the 1940 
Act and rule 22c-1 thereunder with no change in the amount of any 
Contract owner's contract value or death benefit or in the dollar value 
of his or her investment in any of the Accounts. Contract owners will 
not suffer any adverse tax consequences as a result of the 
Substitution. The fees and charges under the Contracts will not 
increase because of the Substitution.
    57. Both the board of directors of Metropolitan Series and the 
board of trustees of VIP Fund II have adopted procedures, as required 
by rule 17a-7 under the Act, pursuant to which the Portfolios of each 
may purchase securities from or sell securities to their affiliates. 
MetLife Investors USA and Security Equity Life will carry out the 
proposed substitutions in conformity with all of the conditions of rule 
17a-7 and Metropolitan Series' and VIP Fund II's procedures thereunder, 
except that: (1) the consideration paid for the securities being 
purchased or sold will not be entirely cash, and (2) the board of 
directors of Metropolitan Series and the board of trustees of VIP Fund 
II will not separately review each portfolio security purchased and 
sold.
    58. Even though MetLife Investors USA and Security Equity Life may 
not rely on rule 17a-7, they believe that the rule's conditions outline 
the type of safeguards that result in transactions that are fair and 
reasonable to registered investment company participants and preclude 
overreaching in connection with an investment company by its affiliated 
persons. When the Commission first proposed and then adopted rule 17a-
7, it noted that the purpose of the rule was to eliminate the filing 
and processing of applications ``in circumstances where there appears 
to be no likelihood that the statutory finding for a specific exemption 
under section 17(b) could not be made'' by establishing ``conditions as 
to the availability of the exemption to those situations where the 
Commission, upon the basis of its experience, considers that there is 
no likelihood of overreaching of the investment companies participating 
in the transaction.''
    59. Applicants assert that where, as here, they or the relevant 
investment company would comply with most, but not all, of the 
conditions of the rule, the Commission should consider the extent to 
which the conditions that they propose to meet would protect investors 
under the circumstances of the particular proposed transaction and 
issue an order if compliance with those conditions would fully protect 
investors under such circumstances. The circumstances surrounding the 
proposed substitutions will be such as to offer the same degree of 
protection to the Substituted Portfolio and the Replaced Portfolio from 
overreaching that rule 17a-7 provides to them generally in connection 
with their purchase and sale of securities under that rule in the 
ordinary course of their business. In particular, because of the 
circumstances surrounding the proposed substitutions, VIP Fund II and 
the Replaced Portfolio could not ``dump'' undesirable securities on 
Metropolitan Series or the Substituted Portfolio, or retain its 
desirable securities for itself. Because both Portfolios are ``index 
funds'' that seek to match the performance of the same stock market 
index, both Portfolios hold substantially the same portfolio 
securities, and the Substituted Portfolio would receive from the 
Replaced Portfolio a pro-rata share of such securities held by the 
latter, the Replaced Portfolio would not have the opportunity to 
``dump'' undesirable securities on, or otherwise overreach, the 
Substituted Portfolio. Nor can MetLife Investors USA or Security Equity 
Life effect the proposed transactions at a price that is 
disadvantageous to either the Replaced Portfolio or the Substituted 
Portfolio. Although the transactions may not be entirely for cash and 
the boards (or directors or trustees) will not make the determinations 
required by paragraph (e)(3) of rule 17a-7, each will be effected based 
upon: (a) the independent market price of the portfolio securities 
valued as specified in paragraph (b) of rule 17a-7, and (b) the net 
asset value per share of the Substituted Portfolio and the Replacement 
Portfolio valued in accordance with the procedures disclosed in the 
registration statement of each and as required by rule 22c-1 under the 
Act. No brokerage commission, fee, or other remuneration will be paid 
to any party in connection with the transaction.
    60. The prohibitions of section 17(a) of the 1940 Act were designed 
to protect overreaching of an investment company primarily by its long-
standing or ``permanent'' affiliates (e.g., investment advisers and 
principal underwriters or their corporate parents) not other investment 
companies managed by an independent party that are only occasionally 
affiliates when a single party owns 5% or more of each of their shares. 
Applicants assert that, in the context of the proposed substitutions, 
board review of a lengthy, non-discretionary list of portfolio 
securities would not increase protection of Contract owners, but would 
only serve to distract directors' and trustees' attention from more 
important matters.
    61. Any in-kind redemptions and purchases will be carried out in a 
manner consistent with the policies of both the Substituted Portfolio 
and the Replacement Portfolio, as recited in their respective 
registration statements and in any reports by filed by either

[[Page 17115]]

with the Commission under the 1940 Act. Both the VIP Fund II, on behalf 
of the Substituted Portfolio, and Metropolitan Series, on behalf of the 
Replacement Portfolio, must agree on the terms of any in-kind 
redemption. If an agreement cannot be reached, the VIP Fund II will 
redeem Substituted Portfolio shares in cash.
    62. The proposed substitutions, as described herein, are consistent 
with the general purposes of the 1940 Act as stated in the Findings and 
Declaration of Policy in section 1 of the 1940 Act. The proposed 
transactions do not present any of the conditions or abuses that the 
1940 Act was designed to prevent. Securities to be provided by the 
Substituted Portfolio as redemption proceeds and subsequently 
contributed to the Replacement Portfolio to effect the in-kind 
purchases of Replacement Portfolio shares will be valued by the 
Replacement Portfolio at the values established by the Substituted 
Portfolio using its normal valuation procedures. Therefore, there will 
be no change in value to any Contract owner as a result of the 
Substitution. The Commission has granted relief to others based on 
similar facts.
    63. Applicants submit that, for all of the reasons stated above, 
(a) the terms of the proposed in-kind redemptions and purchases of 
shares described above, including the consideration to be paid or 
received, are reasonable and fair to Contract owners and do not involve 
overreaching on the part of any person, (b) the proposed in-kind 
redemptions and purchases of shares described above are consistent with 
the policies of Metropolitan Series and the Replacement Portfolio, as 
well as VIP Fund II and the Substituted Portfolio, as recited in the 
registration statements (and 1940 Act reports filed with the 
Commission) of each, and (c) the proposed in-kind redemptions and 
purchases of shares described above are consistent with the general 
purposes of the 1940 Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-8438 Filed 4-7-03; 8:45 am]
BILLING CODE 8010-01-P