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<TABLE>
<CAPTION>
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SEPARATE ACCOUNT D, E AND F
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STATEMENTS OF ASSETS AND LIABILITIES o DECEMBER 31, 1995
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STRATEGIC INCOME INCOME HIGH YIELD
SEPARATE ACCOUNT SEPARATE ACCOUNT SEPARATE ACCOUNT
D E F
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<S> <C> <C> <C>
ASSETS:
Investments:
Colonial Strategic Income Trust - Colonial Diversified Income Fund
(240,131 shares at net asset value of $7.22 per share; cost $1,853,584)... $ 1,733,743
Colonial Income Trust
(35,927 shares at net asset value of $6.64 per share; cost $237,436....... $ 238,554
Colonial High Yield Securities Trust
(15,872 shares at net asset value of $ 6.75 per share; cost $106,123...... $ 107,134
Receivable from Allmerica Financial Life Insurance and
Annuity Company (Sponsor) ................................................... -- 700 --
----------- ----------- -----------
Total assets............................................................... 1,733,743 239,254 107,134
LIABILITIES:
Payable to Allmerica Financial Life Insurance and
AnnuityCompany (Sponsor)..................................................... 3,631 -- 100
----------- ----------- -----------
Net assets................................................................. $ 1,730,112 $ 239,254 $ 107,034
=========== =========== ===========
Net asset distribution by category:
Individual variable annuity policies........................................... $ 1,730,112 $ 239,254 $ 107,034
=========== =========== ===========
Units outstanding, December 31, 1995........................................... 387,903 60,805 21,793
Net asset value per unit, December 31, 1995.................................... $ 4.460163 $ 3.934769 $ 4.911279
<CAPTION>
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
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STRATEGIC INCOME INCOME HIGH YIELD
SEPARATE ACCOUNT SEPARATE ACCOUNT SEPARATE ACCOUNT
D E F
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<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................................................... $ 136,564 $ 16,920 $ 10,184
--------- -------- --------
EXPENSES:
Mortality fees.............................................................. 14,003 1,757 954
Expense guarantee fees...................................................... 3,501 439 239
--------- -------- --------
Total expenses................................................................. 17,504 2,196 1,193
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Net investment income....................................................... 119,060 14,724 8,991
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REALIZED AND UNREALIZED (LOSS)
ON INVESTMENTS:
Net realized (loss)..................................... ................... (18,365) (313) (93)
Net unrealized gain..................................... ................... 179,333 24,522 7,552
--------- -------- --------
Net realized and unrealized gain on investments......... ................... 160,968 24,209 7,459
--------- -------- --------
Net increase in net assets from operations.............. ................... $ 280,028 $ 38,933 $ 16,450
========= ======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
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SEPARATE ACCOUNT D, E AND F
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STATEMENTS OF CHANGES IN NET ASSETS
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STRATEGIC INCOME INCOME HIGH YIELD
SEPARATE ACCOUNT D SEPARATE ACCOUNT E SEPARATE ACCOUNT F
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994 1995 1994
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<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income................................. $ 119,060 $ 127,602 $ 14,724 $ 14,932 $ 8,991 $ 21,864
Net realized (loss) from security transactions........ (18,365) (46,968) (313) (1,730) (93) (4,043)
Net unrealized gain (loss) on investments............. 179,333 (164,269) 24,522 (25,336) 7,552 (24,656)
----------- ------------ ---------- --------- --------- ----------
Net increase (decrease) in net assets from operations 280,028 (83,635) 38,933 (12,134) 16,450 (6,835)
FROM CAPITAL TRANSACTIONS:
Terminations.......................................... (68,652) (222,532) -- (21,300) (13,000) (400,494)
Annuity benefits...................................... -- (52,869) (3,240) (3,139) -- --
Other transfers from (to) the General Account of
Allmerica Financial Life Insurance and
Annuity Company (Sponsor)............................. (35,661) (32,265) (2,045) (9,607) -- (14,359)
----------- ------------ ---------- --------- --------- ----------
Net (decrease) in net assets from capital transactions (104,313) (307,666) (5,285) (34,046) (13,000) (414,853)
----------- ------------ ---------- --------- --------- ----------
Net increase (decrease) in net assets................. 175,715 (391,301) 33,648 (46,180) 3,450 (421,688)
NET ASSETS:
Beginning of year.................................. 1,554,397 1,945,698 205,606 251,786 103,584 525,272
----------- ------------ ---------- --------- --------- ----------
End of year........................................ $ 1,730,112 $ 1,554,397 $ 239,254 $ 205,606 $ 107,034 $ 103,584
=========== ============ ========== ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
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SEPARATE ACCOUNT D, E AND F
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NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
NOTE 1 - ORGANIZATION
Separate Accounts D, E and F (the Separate Accounts) are separate investment
accounts of Allmerica Financial Life Insurance and Annuity Company (formerly
named SMA Life Assurance Company) (the Company), established for the purpose of
separating from the general assets of the Company those assets used to fund the
variable portion of certain variable annuity policies issued by the Company.
Effective October 16, 1995, concurrent with the demutualization, State Mutual
Life Assurance Company of America changed their name to First Allmerica
Financial Life Insurance Company (First Allmerica). The Company is a
wholly-owned subsidiary of First Allmerica. Under applicable insurance law, the
assets and liabilities of the Separate Accounts are clearly identified and
distinguished from the other assets and liabilities of the Company. The Separate
Accounts cannot be charged with liabilities arising out of any other business of
the Company.
The Separate Accounts are registered collectively as a unit investment trust
under the Investment Company Act of 1940, as amended (the 1940 Act). The assets
of Separate Account D are invested in shares of Colonial Strategic Income
Trust-Colonial Diversified Income Fund; the assets of Separate Account E are
invested in shares of Colonial Income Trust; and the assets of Separate Account
F are invested in shares of Colonial High Yield Securities Trust. Each of the
Colonial Funds (the Funds) is registered under the 1940 Act as an open-end,
diversified series management investment company. The Funds are managed by
Colonial Management Associates, Inc. (Colonial) and each pays Colonial
investment advisory fees charged against the assets of such Fund.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Investments - Security transactions are recorded on the trade date. Shares of
the Funds held by each Separate Account are stated at the net asset value per
share of the respective Fund. Net realized gains and losses on securities sold
are determined on the average cost method. Dividends and capital gain
distributions are recorded on the ex-dividend date and are reinvested in
additional shares of the Fund at net asset value.
Federal Income Taxes - The Company is taxed as a "life insurance company"
under Subchapter L of the Internal Revenue Code and files a consolidated federal
income tax return with First Allmerica. The Company anticipates no tax liability
resulting from the operations of the Separate Accounts. Therefore, no provision
for income taxes has been charged against the Separate Accounts.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company makes a charge of 1.10% per annum based on the average daily net
assets of each Separate Account at each valuation date for mortality and expense
risks. This charge is deducted in the daily computation of unit values but is
paid to the Company on a monthly basis. The total annual charge may be increased
or decreased by the Board of Directors of the Company once each year but the
total charge may not exceed 1.25% per annum.
NOTE 4 - INTERNAL REVENUE SERVICE RULING 81-225 AND 82-54
Under the terms of Revenue Ruling 81-225 issued on September 25, 1981,
policyowners who purchased their policies after January 1, 1981 are treated as
currently in receipt of taxable distributions from the underlying mutual funds.
The Company must report annually to both the Internal Revenue Service and
policyowner any mutual fund distributions which are attributable to the policy.
Policyowners who purchased their policies prior to January 1, 1981 are
considered "grandfathered" under the terms of Revenue Ruling 81-225 and are not
considered currently in receipt of earnings from the underlying mutual funds. On
April 5, 1982, the Internal Revenue Service issued Revenue Ruling 82-54 which
clarified that the grandfathering protection applies if a protected policyowner
makes transfers among separate accounts under policy provisions.
NOTE 5 - DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code, a
variable annuity contract, other than a contract issued in connection with
certain types of employee benefit plans, will not be treated as an annuity
contract for federal income tax purposes for any period for which the
investments of the segregated asset account on which the contract is based are
not adequately diversified. The Code provides that the "adequately diversified"
requirement may be met if the underlying investments satisfy either a statutory
safe harbor test or diversification requirements set forth in regulations issued
by the Secretary of Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of
the Code. The Company believes that the Separate Accounts satisfy the current
requirements of the regulations, and it intends that the Separate Accounts will
continue to meet such requirements.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Allmerica
Financial Life Insurance and Annuity
Company and Policyowners
of Separate Accounts D, E, and F
of Allmerica Financial Life Insurance and Annuity Company
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of Separate Accounts D, E, and F
of Allmerica Financial Life Insurance and Annuity Company at December 31, 1995,
the results of each of their operations for the year then ended and the changes
in each of their net assets for each of the two years in the period then ended,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of Allmerica Financial Life Insurance and
Annuity Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of investments owned at December 31, 1995 by correspondence with
the Funds, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 23, 1996
