Net assets in the MetLife Policyholder Trust decreased $2,575 million, or 20%, to $10,546 million for the year ended December 31, 2002 from $13,121 million for the comparable 2001 period. This decrease is primarily due to (i) a change in unrealized gains on the Trust Shares, (ii)the impact of withdrawals by Beneficiaries from the Trust and (iii)activity under the MetLife, Inc. Purchase and Sale Program. Unrealized gains decreased $2,234 million from the prior year and represent the difference between the fair value and the cost basis of the Trust Shares at December 31, 2002. In addition, a net decrease of 13,800,091 Trust Interests in connection with the MetLife, Inc. Purchase and Sale Program and a net decrease of 10,344,716 Trust Interests due to withdrawals by Beneficiaries from the Trust contributed to the decrease. Beginning on April 7, 2001, Beneficiaries were able to withdraw all, but generally, not less than all, of their allocated shares of Common Stock 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 $193 million and $147 million decrease in net assets, respectively. Net investment income of $83 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 $209 million were fully distributed to Beneficiaries.
The MetLife Policyholder Trust (the "Trust") was established under the Metropolitan Life Insurance Company ("Metropolitan Life") plan of reorganization (the "Plan") and pursuant to the MetLife Policyholder Trust Agreement (as amended, the "Trust Agreement"), dated as of November 3, 1999, by and among Metropolitan Life, MetLife, Inc. (the "Holding Company"), Wilmington Trust Company (not in its individual capacity, but solely as trustee for the Trust, the "Trustee") and ChaseMellon Shareholder Services LLC, as custodian (the "Custodian"), in connection with the conversion of Metropolitan Life from a mutual life insurance company to a stock life insurance company. The Trust is a single-purpose trust that does not engage in any other business or activity other than voting and holding the Trust Shares (as defined below) and certain closely-related activities, such as distributing cash dividends.
The Trust is not as of the date of this filing a party to any pending legal proceeding. However, the Trustee, the Holding Company, Metropolitan Life, and certain present and former individual directors and officers of Metropolitan Life are named as defendants in a lawsuit filed in the United States District Court for the Eastern District of Texas in July 2002 on behalf of a proposed class comprised of the settlement class in the Metropolitan Life sales practices class action settlement approved in December 1999 by the United States District Court for the Western District of Pennsylvania. Plaintiffs' allegations concern the treatment of the cost of the settlement in connection with the demutualization of Metropolitan Life and the adequacy and accuracy of the disclosure, particularly with respect to those costs. Plaintiffs seek compensatory, treble and punitive damages, as well as attorneys' fees and costs. The defendants' motion to transfer the lawsuit to the Western District of Pennsylvania was granted in February 2003. The defendants' motion to dismiss is pending. Plaintiffs have filed a motion for class certification which the Texas court has adjourned. The defendants believe they have meritorious defenses to the plaintiffs' claims and will contest them vigorously.