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PROSPECTUS SUPPLEMENT
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FULCRUM SEPARATE ACCOUNT
(Supplement to Prospectus dated November 18, 1996)
The "Fund Expenses" description and tables in the "Annual and Transaction
Expenses" section of the prospectus is amended in its entirety to read as
follows:
FUND EXPENSES
(annual basis as percentage of average daily net assets)
Beginning February 1, 1997, a performance based advisory fee is in effect for
the five Portfolios of the Palladian Trust. The base fee is 2.00%, but the
actual fee may vary from between 0.00% to 4.00%, depending on the Portfolio's
performance. The base fee of 2.00% will be paid if the Portfolio's performance
(net of all fees and expenses, including the advisory fee) is between 1.5 and
3.0 percentage points higher than the applicable benchmark index. A fee of
4.00% will be paid only if the Portfolio's performance (net of all fees and
expenses, including the advisory fee) is at least 7.5 percentage points
higher than the applicable benchmark index. No fee will apply if the
Portfolio's performance is more than 3.0 percentage points lower than the
applicable benchmark index; see the prospectus of The Palladian Trust for
more details. Because of this variation, expense information assuming fees of
0.00%, 2.00% and 4.00% is shown below. The fee, however, could be any figure
between 0.00% and 4.00%.
EXAMPLE 1 - ASSUMING ADVISORY FEE OF 0.00% FOR THE PORTFOLIOS
OF THE PALLADIAN TRUST
(For the fee to be 0.00% a Portfolio's performance, net of all fees and
expenses, would have to be more than 3.0 percentage points below the
benchmark index.)
OTHER EXPENSES
(AFTER ANY TOTAL
MANAGEMENT APPLICABLE OPERATING
FUND FEES REIMBURSEMENT) EXPENSES
- -------------------------------------------------------------------------------
Value Portfolio 0.00%(1) 0.70%(2) 0.70%
Growth Portfolio 0.00%(1) 0.70%(2) 0.70%
International Growth Portfolio 0.00%(1) 1.20%(2) 1.20%
Global Strategic Income Portfolio 0.00%(1) 1.20%(2) 1.20%
Global Interactive/Telecomm Portfolio 0.00%(1) 1.20%(2) 1.20%
Money Market Fund 0.29% 0.07%(3) 0.36%
Prospectus Supplement Dated March 13, 1997
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EXAMPLE 2 - ASSUMING ADVISORY FEE OF 2.00% FOR THE PORTFOLIOS
OF THE PALLADIAN TRUST
(For the fee to be 2.00%, a Portfolio's performance, net of all fees and
expenses, would have to be between 1.5 and 3.0 percentage points higher than
the benchmark index.)
OTHER EXPENSES
(AFTER ANY TOTAL
MANAGEMENT APPLICABLE OPERATING
FUND FEES REIMBURSEMENT) EXPENSES
- -------------------------------------------------------------------------------
Value Portfolio 2.00%(1) 0.70%(2) 2.70%
Growth Portfolio 2.00%(1) 0.70%(2) 2.70%
International Growth Portfolio 2.00%(1) 1.20%(2) 3.20%
Global Strategic Income Portfolio 2.00%(1) 1.20%(2) 3.20%
Global Interactive/Telecomm Portfolio 2.00%(1) 1.20%(2) 3.20%
Money Market Fund 0.29% 0.07%(3) 0.36%
EXAMPLE 3 - ASSUMING ADVISORY FEE OF 4.00% FOR THE PORTFOLIOS
OF THE PALLADIAN TRUST
(For the fee to be 4.00%, a Portfolio's performance, net of all fees and
expenses, would have to be at least 7.5 percentage points higher than the
benchmark index.)
OTHER EXPENSES
(AFTER ANY TOTAL
MANAGEMENT APPLICABLE OPERATING
FUND FEES REIMBURSEMENT) EXPENSES
- -------------------------------------------------------------------------------
Value Portfolio 4.00%(1) 0.70%(2) 4.70%
Growth Portfolio 4.00%(1) 0.70%(2) 4.70%
International Growth Portfolio 4.00%(1) 1.20%(2) 5.20%
Global Strategic Income Portfolio 4.00%(1) 1.20%(2) 5.20%
Global Interactive/Telecomm Portfolio 4.00%(1) 1.20%(2) 5.20%
Money Market Fund 0.29% 0.07%(3) 0.36%
(1) Beginning February 1, 1997, a performance-based advisory fee is in
effect, which fee may vary anywhere from 0.00% to 4.00%.
(2) The Manager has agreed to limit operating expenses and reimburse those
expenses to the extent that the Portfolio's "other expenses" (i.e. expenses
other than management fees) from September 11, 1996 through at least December
31, 1997 exceed the following expense limitations: Value Portfolio, 0.70%;
Growth Portfolio, 0.70%; International Growth Portfolio, 1.20%, Global
Strategic Income Portfolio, 1.20%; and Global Interactive/Telecomm Portfolio,
1.20%. For the two years following the date that the expense limitation ends,
each Portfolio will reimburse the Manager for any fees it waived or expenses
it reimbursed pursuant to the expense limitation, provided that such
reimbursement would not cause the Portfolio's "other expense" ratio to exceed
the expense limitation set forth above. After this two year period, the
Portfolio's reimbursement liability to the Manager will cease. In addition,
if at any time the investment management agreement between the Manager and
the Portfolio terminates, the Portfolio's reimbursement liability to the
Manager will cease.
(3) Under the Management Agreement with Allmerica Investment Trust, Allmerica
Investment Management Company, Inc. ("Manager") has declared a voluntary
expense limitation of 0.60% for the Money Market Fund.
THE FOLLOWING EXAMPLES DEMONSTRATE THE CUMULATIVE EXPENSES WHICH WOULD BE
PAID AT 1-YEAR AND 3-YEARS ASSUMING A $1,000 INVESTMENT A SUB-ACCOUNT AND A
5% ANNUAL RETURN ON ASSETS, AS REQUIRED BY RULES OF THE SECURITIES AND
EXCHANGE COMMISSION.
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THE INFORMATION GIVEN UNDER THE FOLLOWING EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESSER THAN THOSE SHOWN. IN PARTICULAR, BECAUSE THE ADVISORY FEE OF THE FIVE
PORTFOLIOS OF THE PALLADIAN TRUST MAY VARY FROM 0.00% TO 4.00% DEPENDING ON
PERFORMANCE, THREE SEPARATE EXAMPLES ARE PROVIDED: EXAMPLE (1) ASSUMES THAT
NO ADVISORY FEE IS PAID FOR EACH OF THE FIVE PORTFOLIOS; EXAMPLE (2) ASSUMES
THAT THE ADVISORY FEE FOR THE FIVE PORTFOLIOS IS PAID AT THE ANNUAL RATE OF
2.00%; AND EXAMPLE (3) ASSUMES THAT THE ADVISORY FEE IS PAID AT THE ANNUAL
RATE OF 4.00%
(a) If, at the end of the applicable period, you surrender your Contract or
annuitize* under a commutable variable period certain option or a
noncommutable period certain option of less than ten years or any fixed
period certain option, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets:
EXAMPLE 1 - ASSUMING ADVISORY FEE OF 0.00% FOR THE PORTFOLIOS OF THE
PALLADIAN TRUST
FUND 1 YEAR 3 YEARS
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Value Portfolio $83 $115
Growth Portfolio $83 $115
International Growth Portfolio $88 $129
Global Strategic Income Portfolio $88 $129
Global Interactive/Telecomm Portfolio $88 $129
Money Market Fund $80 $105
EXAMPLE 2 - ASSUMING ADVISORY FEE OF 2.00% FOR THE PORTFOLIOS OF THE
PALLADIAN TRUST
FUND 1 YEAR 3 YEARS
---------------------------------------------------------------------
Value Portfolio $102 $171
Growth Portfolio $102 $171
International Growth Portfolio $107 $185
Global Strategic Income Portfolio $107 $185
Global Interactive/Telecomm Portfolio $107 $185
Money Market Fund $ 80 $105
EXAMPLE 3 - ASSUMING ADVISORY FEE OF 4.00% FOR THE PORTFOLIOS OF THE
PALLADIAN TRUST
FUND 1 YEAR 3 YEARS
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Value Portfolio $121 $225
Growth Portfolio $121 $225
International Growth Portfolio $126 $239
Global Strategic Income Portfolio $126 $239
Global Interactive/Telecomm Portfolio $126 $239
Money Market Fund $ 80 $105
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1 Note: In order to have a 5% annual return and a management fee of 4%,
the performance of the Portfolios of the Palladian Trust would have to
be 9% before the deduction of the 4% fee resulting in performance of 5%
and the benchmark index would have to decrease at least 2.5 percentage
points (meaning the Portfolio's performance after fees and expenses was
at least 7.5 percentage points better than the benchmark index).
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(b) If, at the end of the applicable period, you annuitize* under a life
option or a noncommutable period certain option of ten years or longer, or if
you do not surrender or annuitize your Contract, you would pay the following
expenses on a $1,000 investment, assuming a 5% annual return on assets:
EXAMPLE 1 - ASSUMING ADVISORY FEE OF 0.00% FOR THE PORTFOLIOS OF THE
PALLADIAN TRUST
FUND 1 YEAR 3 YEARS
---------------------------------------------------------------------
Value Portfolio $22 $69
Growth Portfolio $22 $69
International Growth Portfolio $27 $84
Global Strategic Income Portfolio $27 $84
Global Interactive/Telecomm Portfolio $27 $84
Money Market Fund $19 $58
EXAMPLE 2 - ASSUMING ADVISORY FEE OF 2.00% FOR THE PORTFOLIOS OF THE
PALLADIAN TRUST
FUND 1 YEAR 3 YEARS
---------------------------------------------------------------------
Value Portfolio $42 $128
Growth Portfolio $42 $128
International Growth Portfolio $47 $142
Global Strategic Income Portfolio $47 $142
Global Interactive/Telecomm Portfolio $47 $142
Money Market Fund $19 $ 58
EXAMPLE 3 - ASSUMING ADVISORY FEE OF 4.00% FOR THE PORTFOLIOS OF THE
PALLADIAN TRUST(1)
FUND 1 YEAR 3 YEARS
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Value Portfolio $62 $184
Growth Portfolio $62 $184
International Growth Portfolio $67 $198
Global Strategic Income Portfolio $67 $198
Global Interactive/Telecomm Portfolio $67 $198
Money Market Fund $19 $ 58
As required in rules promulgated under the 1940 Act, the Contract Fee is
reflected in the examples by a method to show the "average" impact on an
investment in the Variable Account. The total Contract Fees collected are
divided by the total average net assets attributable to the Contracts. The
resulting percentage is 0.075%, and the amount of the Contract Fee is assumed
to be $0.75 in the examples.
*The Contract Fee is not deducted after annuitization. No contingent deferred
sales charge is assessed at the time of annuitization under an option
including a life contingency or under a noncommutable period certain option
of ten years or longer.
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1 Note: In order to have a 5% annual return and a management fee of 4%, the
performance of the Portfolios of the Palladian Trust would have to be 9%
before the deduction of the 4% fee resulting in performance of 5% and the
benchmark index would have to decrease at least 2.5 percentage points
(meaning the Portfolio's performance after fees and expenses was at least 7.5
percentage points better than the benchmark index).
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