The following table sets forth selected financial information for the Trust. The financial information for the years ended December 31, 2007, 2006 and 2005 and at December 31, 2007 and 2006, has been derived from the Trust’s audited financial statements included elsewhere herein. The financial information for the years ended December 31, 2004 and 2003 and at December 31, 2005, 2004 and 2003 has been derived from the Trust’s audited financial statements not included herein. The following statements of changes in net assets and balance sheet data have been prepared in conformity with accounting principles generally accepted in the United States of America. The following information should be read in conjunction with and is qualified entirely by the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the financial statements appearing elsewhere herein.
Net assets in the Trust decreased $279 million, or 2%, to $16,062 million for the year ended December 31, 2007 from $16,340 million for the comparable 2006 period. This decrease is due to a decrease in net unrealized investment gains on the equity securities (referred to herein as Trust Shares), in addition to (i) the impact of withdrawals by Beneficiaries from the Trust, and (ii) activity under the MetLife, Inc. Purchase and Sale Program. Net unrealized investment gains, which represent the difference between the fair value and the cost basis of the Trust Shares, decreased $52 million from the prior year. A net reduction of 16,249,015 Trust Interests resulted from a decrease of 6,012,285 Trust Interests due to withdrawals by Beneficiaries from the Trust and a net decrease of
Net assets in the Trust increased $1,700 million, or 12%, to $16,340 million for the year ended December 31, 2006 from $14,640 million for the comparable 2005 period. This increase is primarily due to a change in net unrealized investment gains on the Trust Shares, partially offset by (i) the impact of withdrawals by Beneficiaries from the Trust, and (ii) activity under the MetLife, Inc. Purchase and Sale Program. Net unrealized investment gains, which represent the difference between the fair value and the cost basis of the Trust Shares, increased $2,008 million from the prior year. A net reduction of 21,872,631 Trust Interests resulted from a decrease of 10,682,756 Trust Interests due to withdrawals by Beneficiaries from the Trust and a net decrease of 11,189,875 Trust Interests in connection with issuances and redemptions under the MetLife, Inc. Purchase and Sale Program. The Trust Interests withdrawn primarily reflects the escheatment of unclaimed cash and shares of Common Stock. As part of Metropolitan Life’s demutualization and the Holding Company’s initial public offering, the Holding Company issued shares of its Common Stock to certain eligible policyholders of Metropolitan Life. Any unclaimed cash and Common Stock become property of the state of last known residence, as is the case with other types of unclaimed property. The schedule by which unclaimed property is escheated varies by state, but is generally within three to five years of abandonment. It is anticipated that the number of Trust Interests will continue to decrease over time as state dormancy periods expire. Beginning on April 7, 2001, Beneficiaries were able to withdraw all, but generally, not less than all, of their allocated shares of Common Stock in the Trust at any time by providing written notice to the Custodian. Net redemptions by Beneficiaries through the MetLife, Inc. Purchase and Sale Program and withdrawals by Beneficiaries from the Trust resulted in a $155 million and $152 million decrease in net assets, respectively, for the year ended December 31, 2006. Net investment income of $164 million, which consists of dividends received from the Holding Company on its Common Stock, and net realized investment gains recognized on the sale of Trust Shares sold in the Purchase and Sale Program of $432 million, were fully distributed to Beneficiaries.
Financial Statements at December 31, 2007 and 2006 and for the years ended December 31, 2007, 2006 and 2005:
Under the Plan and the Trust Agreement, each policyholder’s membership interest was extinguished and certain eligible policyholders of Metropolitan Life (the “Trust Eligible Policyholders”) received, in exchange for that interest, a number of interests in the Trust (“Trust Interests”) equal to the number of shares of common stock of the Holding Company, par value $0.01 per share (the “Common Stock”), allocated to them in accordance with the Plan. The assets of the Trust consist principally of the shares of Common Stock issued to the Trust (the “Trust Shares”) for the benefit of the Trust Eligible Policyholders and permitted transferees (collectively, the “Beneficiaries”). The Trust Shares are held in the name of the Trustee, on behalf of the Trust, which has legal title over the Trust Shares. The Beneficiaries do not have legal title to any part of the assets of the Trust. The Trust Interests represent undivided fractional interests in the Trust Shares and other assets of the Trust beneficially owned by a Trust Beneficiary through the Custodian. On April 7, 2000, the date of demutualization of Metropolitan Life, the Holding Company distributed to the Trust 494,466,664 shares of Common Stock for the benefit of policyholders of Metropolitan Life. Withdrawals by Beneficiaries of Trust Shares, transactions by Beneficiaries under the Purchase and Sale Program (as defined below), and escheatment of unclaimed Trust Shares resulted in a decrease in the number of Trust Shares from 276,904,422 at December 31, 2006 to 260,655,407 at December 31, 2007.
Equity securities are reported at their fair value based on the quoted market price, and unrealized investment gains and losses on securities are recorded in the Statements of Operations. Realized gains and losses on sales of
securities are determined on a first-in first-out basis. Regular cash dividends, if any, collected or received by the Trustee with respect to the Trust Shares are distributed by the Custodian to the Beneficiaries within 90 days after receipt by the Trustee. Distributions of all other cash dividends are made by the Custodian to the Beneficiaries on the first business day following the 30th day after the Trust receives the dividends. Alternatively, the Trustee may arrange with the Holding Company for the direct payment by the Holding Company of such cash dividends to the Beneficiaries. This alternative arrangement has been used since the inception of the Trust. All security transactions are recorded on a trade date basis.