<PAGE>
File Number 2-53204
811-2558
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 40
----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 31
----
Separate Account VA-C of Allmerica Financial Life Insurance and Annuity Company
- -------------------------------------------------------------------------------
(Exact Name of Trust)
Allmerica Financial Life Insurance and Annuity Company
------------------------------------------------------
(Name of Depositor)
440 Lincoln Street
Worcester Massachusetts 01653
-----------------------------
(Complete address of depositor's principal executive offices)
(508) 855-1000
(Registrant's telephone number including area code)
Abigail M. Armstrong, Secretary and Counsel
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester MA 01653
(Name and complete address of agent for service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
---
X on April 30, 1996 pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a) (1)
---
on (date) pursuant to paragraph (a) (1)
---
on (date) pursuant to paragraph (a) (2) of Rule 485
---
VARIABLE ANNUITY POLICIES
Pursuant to Reg. Section 270.24f-2 of the Investment Company Act of 1940,
Registrant has registered an indefinite amount of its securities under the
Securities Act of 1933. The Rule 24f-2 Notice for the issuer's fiscal year
ended December 31, 1995 was filed on February 29, 1996.
<PAGE>
CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF
ITEMS CALLED FOR BY FORM N-4
FORM N-4 ITEM NO. CAPTION IN PROSPECTUS
1. . . . . . . . . . . . . . Cover Page
2. . . . . . . . . . . . . . "Special Terms"
3. . . . . . . . . . . . . . "Summary"; "Annual and Transaction Expenses"
4. . . . . . . . . . . . . . Omitted
5. . . . . . . . . . . . . . "Description of the Company, the Separate
Account and the Trust"
6. . . . . . . . . . . . . . "Charges and Deductions:
7. . . . . . . . . . . . . . "The Variable Annuity Policies"
8. . . . . . . . . . . . . . Omitted
9. . . . . . . . . . . . . . "Death Benefit"
10 . . . . . . . . . . . . . "Purchase Payments"; "Computation of Policy
Values and Annuity Payments"
11 . . . . . . . . . . . . . "Surrender"; "Partial Redemption"
12 . . . . . . . . . . . . . "Federal Tax Considerations"
13 . . . . . . . . . . . . . "Legal Matters"
14 . . . . . . . . . . . . . "Table of Contents of the Statement of
Additional Information"
FORM N-4 ITEM NO. CAPTION IN STATEMENT OF ADDITIONAL INFORMATION
15 . . . . . . . . . . . . . "Cover Page"
16 . . . . . . . . . . . . . "Table of Contents"
17 . . . . . . . . . . . . . "General Information and History"
18 . . . . . . . . . . . . . "Services"
19 . . . . . . . . . . . . . "Underwriters"
20 . . . . . . . . . . . . . "Underwriters"
21 . . . . . . . . . . . . . "Performance Information"
22 . . . . . . . . . . . . . "Annuity Payments"
23 . . . . . . . . . . . . . "Financial Statements"
<PAGE>
This Prospectus describes individual variable annuity policies ("Policies")
offered by Allmerica Financial Life Insurance and Annuity Company for sale to
individuals and businesses in connection with retirement plans which may or may
not qualify for special federal income tax treatment. (For information about
the tax status when used with a particular type of plan, see "FEDERAL TAX
CONSIDERATIONS".) The following is a summary of information about these
Policies. More detailed information can be found under the referenced captions
in this Prospectus.
This Prospectus generally describes only the variable accumulation and variable
annuity aspects of the Policies, except where fixed values or fixed annuity
payments are specifically mentioned. Certain additional information about the
Policies is contained in a Statement of Additional Information, dated April 30,
1996 as may be amended from time to time, which has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
Table of Contents for the Statement of Additional Information is listed on page
14 of this Prospectus. The Statement of Additional Information is available
upon request and without charge. To obtain the Statement of Additional
Information, fill out and return the attached request card or contact Allmerica
Financial Individual Customer Services, Allmerica Financial Life Insurance and
Annuity Company, 440 Lincoln Street, Worcester, Massachusetts 01653.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS OF THE
ALLMERICA INVESTMENT TRUST.
INVESTORS SHOULD RETAIN A COPY OF THIS PROSPECTUS FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE POLICIES ARE OBLIGATIONS OF ALLMERICA FINANCIAL LIFE INSURANCE AND
ANNUITY COMPANY AND ARE DISTRIBUTED BY ALLMERICA INVESTMENTS, INC. THE
POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK OR CREDIT UNION. THE POLICIES ARE NOT INSURED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), OR ANY OTHER
FEDERAL AGENCY. INVESTMENTS IN THE POLICIES ARE SUBJECT TO VARIOUS RISKS,
INCLUDING THE FLUCTUATION OF VALUE AND POSSIBLE LOSS OF PRINCIPAL.
DATED APRIL 30, 1996
<PAGE>
TABLE OF CONTENTS
SPECIAL TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ANNUAL AND TRANSACTION EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . 7
CONDENSED FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . .10
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
WHAT IS AN ANNUITY?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
RIGHT TO REVOKE INDIVIDUAL RETIREMENT ANNUITY . . . . . . . . . . . . . . . .12
RIGHT TO REVOKE OR SURRENDER IN SOME STATES . . . . . . . . . . . . . . . . .12
DESCRIPTION OF THE COMPANY, THE SEPARATE ACCOUNTS, AND THE TRUST . . . . . . .13
VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
A. Contingent Deferred Sales Charge. . . . . . . . . . . . . . . . . . .15
B. Charge for Administrative Expense . . . . . . . . . . . . . . . . . .16
C. Premium Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
D. Annual Charge Against Separate Account Assets . . . . . . . . . . . .17
THE VARIABLE ANNUITY POLICIES. . . . . . . . . . . . . . . . . . . . . . . . .18
A. Purchase Payments . . . . . . . . . . . . . . . . . . . . . . . . . .18
B. Transfer Privilege. . . . . . . . . . . . . . . . . . . . . . . . . .18
C. Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
D. Partial Redemption. . . . . . . . . . . . . . . . . . . . . . . . . .19
E. Death Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
F. The Spouse of the Annuitant as Beneficiary. . . . . . . . . . . . . .20
G. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
H. Electing the Form of Annuity and Annuity Date . . . . . . . . . . . .21
I. Description of Variable Annuity Options . . . . . . . . . . . . . . .22
J. Norris Decision . . . . . . . . . . . . . . . . . . . . . . . . . . .23
K. Computation of Policy Values and Annuity Payments . . . . . . . . . .22
FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . .25
A. Qualified and Non-Qualified Policies. . . . . . . . . . . . . . . . .25
B. Taxation of the Policies in General . . . . . . . . . . . . . . . . .25
C. Tax Withholding and Penalties . . . . . . . . . . . . . . . . . . . .26
D. Provisions Applicable to Qualified Employee Benefit Plans . . . . . .26
E. Qualified Employee Pension and Profit Sharing Trusts and
Qualified Annuity Plans . . . . . . . . . . . . . . . . . . . . . . .26
F. Self-Employed Individuals . . . . . . . . . . . . . . . . . . . . . .27
G. Individual Retirement Account Plans . . . . . . . . . . . . . . . . .27
H. Simplified Employee Pensions. . . . . . . . . . . . . . . . . . . . .27
I. Public School Systems and Certain Tax-Exempt Organizations . . . . .28
J. Texas Optional Retirement Program . . . . . . . . . . . . . . . . . .28
K. Section 457 Plans for State Governments and Tax-Exempt Entities . . .28
L. Non-individual Owners . . . . . . . . . . . . . . . . . . . . . . . .28
2
<PAGE>
TABLE OF CONTENTS (continued)
REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
CHANGES IN OPERATION OF THE SEPARATE ACCOUNTS. . . . . . . . . . . . . . . . .29
CHANGE OF NAME OF THE SEPARATE ACCOUNTS. . . . . . . . . . . . . . . . . . . .29
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
FURTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
APPENDIX A - MORE INFORMATION ABOUT THE GENERAL ACCOUNT. . . . . . . . . . . .30
APPENDIX B - INFORMATION ABOUT DISCONTINUED POLICIES . . . . . . . . . . . . .31
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY. . . . . . . . . . . . . . . . . . . . . . . . 2
TAXATION OF THE SEPARATE ACCOUNTS AND THE COMPANY. . . . . . . . . . . . . . . 3
SERVICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
UNDERWRITERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ANNUITY PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3
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SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated meanings:
ACCUMULATED VALUE: the sum of the value of all Accumulation Units in the
Separate Accounts and of the value of all accumulations in the General Account
of the Company then credited to the Policy, on any date before the date annuity
payments are to begin.
ACCUMULATION UNIT: a measure of the Policy Owner's interest in a Separate
Account before annuity payments begin.
ANNUITANT: the person designated in the Policy to whom the Annuity is to be
paid.
ANNUITY DATE: the date on which annuity payments begin.
ANNUITY UNIT: a measure of the value of the periodic annuity payments under the
Policy.
FIXED AMOUNT ANNUITY: an Annuity providing for payments which remain fixed in
amount throughout the annuity payment period.
GENERAL ACCOUNT: all the assets of the Company other than those held in a
Separate Account.
SEPARATE ACCOUNT: Separate Accounts VA-A, VA-B, VA-C, VA-G and VA-H, which are
separate investment accounts of the Company.
SURRENDER VALUE: the Accumulated Value of the Policy minus any contingent
deferred sales charge applicable upon surrender.
VALUATION DATE: a day on which the net asset value of the shares of any of the
Funds is determined and unit values of the Policies are determined. Valuation
dates currently occur on each day on which the New York Stock Exchange is open
for trading, and on such other days (other than a day during which no payment,
partial withdrawal, or surrender of a Policy was received) when there is a
sufficient degree of trading in a Fund's portfolio securities such that the
current net asset value of the Policies may be materially affected.
VALUATION PERIOD: the interval between two consecutive Valuation Dates.
VARIABLE ANNUITY: an Annuity providing for payments varying in amount in
accordance with the investment experience of the Growth Fund, the Investment
Grade Income Fund, or the Money Market Fund of Allmerica Investment Trust.
4
<PAGE>
SUMMARY
INVESTMENT OPTIONS. The Policies permit net purchase payments to be allocated
to Separate Account VA-A, Separate Accounts VA-B or VA-C, or Separate Accounts
VA-G or VA-H (called collectively the "Separate Accounts"), all separate
investment accounts of Allmerica Financial Life Insurance and Annuity Company
("Company"). Separate Accounts VA-A, VA-C, and VA-H are available in connection
with retirement plans which meet the requirements of Sections 401, 403, 408, or
457 of the Internal Revenue Code. Separate Accounts VA-A, VA-B, and VA-G are
available in connection with all other retirement plans. The Separate Accounts
are registered as unit investment trusts under the Investment Company Act of
1940, as amended, (the "1940 Act") but such registration does not involve the
supervision of the management or investment practices or policies of the
Separate Accounts by the Securities and Exchange Commission (the "SEC"). For
information about the Separate Accounts and the Company, see "DESCRIPTION OF THE
COMPANY, THE SEPARATE ACCOUNTS, AND THE TRUST".
Each Separate Account invests its assets without sales charge in a corresponding
investment series of the Allmerica Investment Trust (the "Trust"). The Trust is
a no-load, open-end, diversified series investment company. Three of its
investment series are offered under the Policies: the Growth Fund, the
Investment Grade Income Fund, and the Money Market Fund (the "Funds"). Each of
the Funds operates pursuant to different investment objectives, discussed below.
The Trust was established for the purpose of providing a vehicle for the
investment of assets of various separate investment accounts established by
First Allmerica Financial Life Insurance Company ("First Allmerica"), the
Company, or other affiliated life insurance companies. Shares of the Trust are
not offered to the general public but solely to such separate investment
accounts.
The Policies also permit purchase payments to be allocated to accumulate at a
fixed rate of interest in the Company's General Account with net principal and
minimum interest guaranteed by the Company. For more information see APPENDIX
A, "MORE INFORMATION ABOUT THE GENERAL ACCOUNT".
INVESTMENT IN THE SEPARATE ACCOUNTS. The value of each Separate Account will
vary daily depending on the performance of the investments made by the
underlying Fund.
Separate Account VA-A invests in shares of the Growth Fund. The investment
objective of the Growth Fund is to achieve long-term growth of capital through
investments primarily in common stocks and securities convertible into common
stocks that are believed to represent significant underlying value in relation
to current market prices. Realization of current income, if any, is incidental
to this objective.
Separate Accounts VA-B and VA-C invest in shares of the Investment Grade Income
Fund. The Investment Grade Income Fund is invested in a diversified portfolio
of fixed income securities with the objective of seeking as high a level of
total return (including both income and realized and unrealized capital gains)
as is consistent with prudent investment management.
Separate Accounts VA-G and VA-H invest in shares of the Money Market Fund. The
Money Market Fund is invested in a diversified portfolio of high-quality,
short-term debt instruments with the objective of obtaining maximum current
income consistent with the preservation of capital and liquidity.
There can be no assurance that the investment objectives of the Funds can be
achieved or that the value of a Policy will equal or exceed the aggregate amount
of the purchase payments made under the Policy. For more information about the
investments of the Funds, see "DESCRIPTION OF THE COMPANY, THE SEPARATE
ACCOUNTS, AND THE TRUST".
Dividends or capital gains distributions received from a Fund are reinvested in
additional shares of that Fund, which are retained as assets of the Separate
Account.
TRANSFERS BETWEEN ACCOUNTS. The Policies permit amounts to be transferred among
the Separate Accounts and between the Separate Accounts and the General Account
of the Company prior to the Annuity Date, subject to certain limitations
described under "Transfer Privilege".
ANNUITY PAYMENTS. At retirement the owner of a Policy ("Policy Owner") may
select variable annuity payments based on one or more of the Separate Accounts,
fixed-amount annuity payments, or a combination of fixed-amount and variable
annuity payments. Fixed-amount annuity payments are guaranteed by the Company.
See "THE VARIABLE ANNUITY POLICIES" for information about annuity payment
options, selecting the Annuity Date, and how annuity payments are calculated.
5
<PAGE>
TYPES OF POLICIES. The Company offers two types of Policies -- Single Payment
Policies and Elective Payment Policies. These two types differ as to the minimum
initial purchase payment, the permissibility of subsequent payments, and
charges. Under Elective Payment Policies, purchase payments are not limited as
to frequency and number, but no payments may be submitted within one month of
the Annuity Date. Under Single Payment Policies, additional purchase payments
are permitted only during the first policy year.
REVOCATION RIGHTS. An individual purchasing a Policy intended to qualify as an
Individual Retirement Annuity ("IRA") may revoke the Policy at any time between
the date of the application and the date 10 days after receipt of the Policy.
In certain states any Policy owner may have special revocation rights. For more
information about revocation rights, see "RIGHT TO REVOKE INDIVIDUAL RETIREMENT
ANNUITY" and "RIGHT TO REVOKE OR SURRENDER IN SOME STATES".
PAYMENTS MINIMUMS AND MAXIMUMS. Under a Single Payment Policy, the minimum
payment is $10,000. During the first policy year only, the Company will permit
additional payments under a Single Payment Policy. Under an Elective Payment
Policy, the initial and each subsequent elective payment must be at least $50 if
made in connection with the monthly automatic payment plan, or a payroll
deduction plan. In all other instances the initial purchase payment under an
Elective Payment Policy must be at least $600 and subsequent payments must be at
least $50. However, in cases where the contribution on behalf of an employee
under an employer-sponsored retirement plan is less than $600 but more than $300
annually, the Company may issue a Policy on the employee, if the plan's average
annual contribution per eligible plan participant is at least $600.
The Company reserves the right to set maximum limits on the aggregate purchase
payments made under the Policy. In addition, the Internal Revenue Code imposes
maximum limits on contributions under qualified annuity plans. Because of such
maximum annual limits applicable to Section 408 annuities and because of the
minimum payment limitations imposed by the Company on single payment Policies,
Section 408 single payment annuities may be purchased only with "rollover
contributions", as defined by the Internal Revenue Code. See "FEDERAL TAX
CONSIDERATIONS".
CHARGES AND DEDUCTIONS. For a complete discussion of charges, see "CHARGES AND
DEDUCTIONS".
A. CONTINGENT DEFERRED SALES CHARGE. No sales charge is deducted from purchase
payments at the time the payments are made. However, depending on the length of
time the Policy has been in force, a contingent deferred sales charge may be
assessed for a surrender, partial redemption, or election of an annuity for a
specified number of years.
B. ADMINISTRATIVE EXPENSE. Deductions for administrative expense differ for
Single Payment and Elective Payment Policies. No administrative charge is
deducted from a Single Payment Policy. Under Elective Payment Policies, a
policy fee of $9 will be deducted semi-annually from the Accumulated Value under
the Policy for administrative expense when the Accumulated Value is less than
$10,000.
C. PREMIUM TAXES. A deduction for state premium taxes, if any, may be made as
described under "Premium Taxes". Premium taxes currently range from 0% to 3.50%.
D. SEPARATE ACCOUNT ASSET CHARGE. A daily charge, currently equivalent to
1.25% per annum, is made on the value of each Separate Account at each Valuation
Date. The charge is retained by the Company for certain risks and expenses it
assumes.
SURRENDER OR PARTIAL REDEMPTION. At any time before the Annuity Date, the
Policy Owner has the right either to surrender the Policy in full and receive
its current value, minus any applicable contingent deferred sales charge, or to
redeem a portion of the Policy's value subject to certain limits and any
applicable contingent deferred sales charge. There may be tax
consequences for surrender or redemptions. For further information, see
"Surrender" and "Partial Redemption", "Contingent Deferred Sales Charge", and
"FEDERAL TAX CONSIDERATIONS".
DEATH BENEFIT. If the Annuitant should die before the Annuity Date, a death
benefit will be paid to the beneficiary. This death benefit is equal to the
greater of (1) the Accumulated Value under the Policy or (2) of the sum of the
gross payment(s) made under the Policy minus the amount of all partial
redemptions. See "Death Benefit".
SALES OF POLICIES. The Policies are sold by agents of the Company who are
registered representatives of Allmerica Investments, Inc., a broker-dealer
affiliate of the Company. The Policies also may be purchased from certain other
broker-dealers which are members of the National Association of Securities
Dealers, Inc., and whose representatives are authorized by applicable law to
sell variable annuity policies. See "Sales Expense".
The Company has outstanding certain variable annuity policies which are no
longer sold: individual qualified and non-qualified stipulated payment
contracts (discontinued March 31, 1971); all individual qualified and
non-qualified flexible payment, elective payment and single payment policies
sold prior to February 12, 1980; and group policies. This Prospectus does not
fully describe those contracts or the rights of policy owners thereunder but
does contain certain financial, historical and other information. For additional
information, see "INFORMATION ABOUT DISCONTINUED POLICIES".
6
<PAGE>
ANNUAL AND TRANSACTION EXPENSES
The purpose of the following tables is to assist the Policy Owner in
understanding the various costs and expenses that a Policy Owner will bear
directly or indirectly under the Elective Payment Policies and the Single
Payment Policies. The tables reflect charges under the Policies, expenses of the
Separate Accounts, and expenses of the Funds of Allmerica Investment Trust. In
addition to the charges and expenses described below, in some states premium
taxes may be applicable.
The examples demonstrate the cumulative expenses which would be paid by the
Policy Owner at 1-year, 3-year, 5-year, and 10-year intervals under certain
contingencies. Each example assumes a $1,000 investment in a Separate Account
and a 5% annual return on assets. Because the expenses of the Funds of
Allmerica Investment Trust differ, separate examples are used to illustrate the
expenses incurred by a Policy Owner on an investment in Separate Account VA-A,
in Separate Accounts VA-B and VA-C, and in Separate Accounts VA-G and VA-H.
Similarly, examples are given for both Elective Payment Policies and Single
Payment Policies because their charges differ.
<TABLE>
<CAPTION>
ELECTIVE SINGLE PAYMENT
PAYMENT POLICIES
POLICIES --------------
--------
<S> <C> <C> <C>
POLICY OWNER TRANSACTION EXPENSES
- ---------------------------------
Contingent Deferred Sales Charge Policy Year
The charge (as a percentage of amount 1-3 7% 5%
surrendered in excess of the amount, 4 6% 4%
if any, which may be surrendered free 5 5% 3%
of charge) will be assessed upon 6 4% 2%
surrender, redemption, or annuitization 7 3% 1%
under a period certain option, within 8 2% 0%
the indicated time periods. 9 1% 0%
ANNUAL POLICY FEE
- -----------------
A $9 semi-annual policy fee is deducted only
when the Accumulated Value under an Elective
Payment Policy is $10,000 or less. $18 None
SEPARATE ACCOUNT ANNUAL EXPENSES
- --------------------------------
(as a percentage of average account value)
Mortality and Expense Risk Fees 1.15% 1.15%
-------- ---------------
Other Separate Account Fees 0.10% 0.10%
Total Separate Account Annual Expenses 1.25% 1.25%
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Investment
Growth Fund Grade Money Market Fund
----------- Income Fund -----------------
-----------
FUND ANNUAL EXPENSES
--------------------
<S> <C> <C> <C>
Management Fees 0.46% 0.41% 0.29%
Other Fund Expenses 0.08% 0.12% 0.07%
Total Fund Annual Expenses 0.54% 0.53% 0.36%
</TABLE>
Under the Management Agreement with the Trust, the investment manager, Allmerica
Investment Management Company, Inc. ("Allmerica Investment") has declared a
voluntary expense limitation of 1.20% of average net assets for the Growth Fund,
1.00% for the Investment Grade Income Fund, and 0.60% for the Money Market Fund.
The declaration of a voluntary expense limitation in any year does not bind
Allmerica Investment to declare future expense limitations with respect to any
Fund.
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.
<TABLE>
<CAPTION>
Separate Account VA-A : GROWTH FUND
Elective Payment Policies#
(Accumulated Value less than $10,000) Single Payment Policies
------------------------------------- -----------------------
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) If you surrender your policy or
annuitize* under a period certain
option at the end of the applicable
period:
You would pay the following
expenses on a $1,000
investment, assuming 5%
annual return on assets: $94 $136 $168 $250 $65 $106 $130 $213
(b) If you annuitize* under a life option
at the end of the applicable time
period or if you do NOT surrender or
annuitize your policy:
You would pay the
following expenses on a
$1,000 investment,
assuming 5% annual
return on assets:
$22 $67 $115 $248 $18 $57 $98 $213
</TABLE>
- ---------------
# The expense information given in the examples for Elective Payment
Policies is applicable to an Elective Payment Policy with an Accumulated Value
less than $10,000. Except for the contingent deferred sales charge, charges
under an Elective Payment Policy with an Accumulated Value greater than $10,000
are the same as the charges under a Single Payment Policy. As a result, the
expense information given on line (b) for Single Payment Policies also applies
to Elective Payment Policies with an Accumulated Value greater than $10,000. On
line (a), the aggregate expenses incurred by a Policy owner on a $1,000
investment at the end of 1, 3, 5, and 10 years would be $91, $126, $151, and
$213, respectively.
8
<PAGE>
A semi-annual policy fee of $9 is deducted only from an Elective Payment
Policy when its Accumulated Value is $10,000 or less. Pursuant to requirements
of the 1940 Act, the policy fee has been reflected in the examples by a method
intended to show the "average" impact of the policy fee on an investment in the
Separate Account. The total policy fees collected under the Policies by the
Company in 1990 are divided by the total average net assets attributable to the
Elective Payment Policies which were subject to the charge. The resulting
percentage is 0.34%, and the amount of the policy fee is assumed to be $3.40 in
the Examples.
* The policy fee is not deducted after annuitization. No contingent
deferred sales charge is assessed at the time of annuitization in any policy
year under an option including a life contingency.
<TABLE>
<CAPTION>
Separate Account VA-B and VA-C : INVESTMENT GRADE INCOME FUND
Elective Payment Policies#
(Accumulated Value less than $10,000) Single Payment Policies
------------------------------------- -----------------------
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) If you surrender your policy or
annuitize* under a period certain
option at the end of the applicable
period:
You would pay the following
expenses on a $1,000
investment, assuming 5%
annual return on assets: $94 $136 $168 $250 $65 $107 $131 $215
(b) If you annuitize* under a life option
at the end of the applicable time
period or if you do NOT surrender or
annuitize your policy:
You would pay the following
expenses on a $1,000 investment,
assuming 5% annual return
on assets:
$22 $68 $116 $250 $19 $58 $99 $215
</TABLE>
- ---------------
# The expense information given in the examples for Elective Payment
Policies is applicable to an Elective Payment Policy with an Accumulated Value
less than $10,000. Except for the contingent deferred sales charge, charges
under an Elective Payment Policy with an Accumulated Value greater than $10,000
are the same as the charges under a Single Payment Policy. As a result, the
expense information given on line (b) for Single Payment Policies also applies
to Elective Payment Policies with an Accumulated Value greater than $10,000. On
line (a), the aggregate expenses incurred by a Policyowner on a $1,000
investment at the end of 1, 3, 5, and 10 years would be $91, $127, $152, and
$215, respectively.
A semi-annual policy fee of $9 is deducted only from an Elective Payment
Policy when its Accumulated Value is $10,000 or less. Pursuant to requirements
of the 1940 Act, the policy fee has been reflected in the Examples by a method
intended to show the "average" impact of the policy fee on an investment in the
Separate Account. The total policy fees collected under the Policies by the
Company in 1990 are divided by the total average net assets attributable to the
Elective Payment Policies which were subject to the charge. The resulting
percentage is 0.34%, and the amount of the policy fee is assumed to be $3.40 in
the examples.
* The policy fee is not deducted after annuitization. No contingent
deferred sales charge is assessed at the time of annuitization in any policy
year under an option including a life contingency.
<TABLE>
<CAPTION>
Separate Account VA-G and VA-H : MONEY MARKET FUND
Elective Payment Policies#
(Accumulated Value less than $10,000) Single Payment Policies
------------------------------------- -----------------------
1 year 3 years 5years 10 years 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) If you surrender your policy
or annuitize* under a period
certain option at the end of
the applicable period:
You would pay the following
expenses on a $1,000 investment,
assuming 5% annual return
on assets: $93 $133 $162 $237 $64 $103 $124 $201
<PAGE>
(b) If you annuitize* under a life
option at the end of the applicable
time period or if you do NOT surrender
or annuitize your policy:
You would pay the following
expenses on a $1,000 investment,
assuming 5% annual return
on assets:
$21 $64 $110 $237 $17 $54 $92 $201
</TABLE>
- ---------------
# The expense information given in the examples for Elective Payment
Policies is applicable to an Elective Payment Policy with an Accumulated Value
less than $10,000. Except for the contingent deferred sales charge, charges
under an Elective Payment Policy with an Accumulated Value greater than $10,000
are the same as the charges under a Single Payment Policy. As a result, the
expense information given on line (b) for Single Payment Policies also applies
to Elective Payment Policies with an Accumulated Value greater than $10,000. On
line (a), the aggregate expenses incurred by a Policyowner on a $1,000
investment at the end of 1, 3, 5, and 10 years would be $90, $123, $145, and
$201, respectively.
A semi-annual policy fee of $9 is deducted only from an Elective Payment
Policy when its Accumulated Value is $10,000 or less. Pursuant to requirements
of the 1940 Act, the policy fee has been reflected in the Examples by a method
intended to show the "average" impact of the policy fee on an investment in the
Separate Account. The total policy fees collected under the Policies by the
Company in 1990 are divided by the total average net assets attributable to the
Elective Payment Policies which were subject to the charge. The resulting
percentage is 0.34%, and the amount of the policy fee is assumed to be $3.40 in
the examples.
* The policy fee is not deducted after annuitization. No contingent
deferred sales charge is assessed at the time of annuitization in any policy
year under an option including a life contingency.
CONDENSED FINANCIAL INFORMATION
Allmerica Financial Life Insurance and Annuity Company
Separate Accounts - Non-Qualified
VA-A,VA-B,VA-G
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Separate Account VA-A
Non-Qualified
Unit Value:
Beginning of Period 5.324 5.382 5.107 4.827 3.477 3.519 2.826 2.36 2.327 1.951
End of Period 6.983 5.324 5.382 5.107 4.827 3.477 3.519 2.826 2.36 2.327
Number of Units 6,073 6,979 8615 8796 6756 5226 3959 3536 4021 2769
Outstanding at
End of Period
(in thousands)
Separate Account VA-B
Non-Qualified
Unit Value:
Beginning of Period 3.234 3.374 3.084 2.882 2.495 2.331 2.072 1.932 1.929 1.75
End of Period 3.765 3.234 3.374 3.084 2.882 2.495 2.331 2.072 1.932 1.929
Number of Units 2,107 2,619 3095 2963 2223 1935 1469 1223 1241 1092
Outstanding at
End of Period
(in thousands)
Separate Account VA-G
Non-Qualified
Net Unit Value:
Beginning of Period 1.716 1.671 1.643 1.603 1.527 1.425 1.318 1.239 1.177 1.12
End of Period 1.793 1.716 1.671 1.643 1.603 1.527 1.425 1.318 1.239 1.177
Number of Units 639 1,037 1801 4266 4690 6618 3835 3131 1547 180
Outstanding at
End of Period
(in thousands)
</TABLE>
*The Separate Accounts were reorganized as unit investment trusts effective
April 29, 1985. April 26, 1985 was the last Valuation Date prior to the
reorganization
10
<PAGE>
Allmerica Financial Life Insurance and Annuity Company
Separate Accounts - Non-Qualified
VA-A,VA-C,VA-H
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Separate Account VA-A
Qualified
Unit Value:
Beginning of Period 5.586 5.646 5.358 5.064 3.648 3.691 2.965 2.476 2.441 2.047
End of Period 7.327 5.586 5.646 5.358 5.064 3.648 3.691 2.965 2.476 2.441
Number of Units 22,039 24,341 29,955 30,048 25,116 20,557 16,499 14,094 14,612 9,926
Outstanding at
End of Period
(in thousands)
Separate Account VA-C
Qualified
Unit Value:
Beginning of Period 3.262 3.043 3.111 2.906 2.519 2.353 2.091 1.951 1.950 1.771
End of Period 3.798 3.262 3.043 3.111 2.906 2.519 2.353 2.091 1.951 1.950
Number of Units 5,488 6,476 7,969 7,092 6,321 4,835 3,865 2,969 2,930 4,349
Outstanding at
End of Period
(in thousands)
Separate Account VA-H
Qualified
Unit Value:
Beginning of Period 1.730 1.685 1.650 1.616 1.540 1.437 1.329 1.249 1.187 1.129
End of Period 1.808 1.730 1.685 1.650 1.616 1.540 1.437 1.329 1.249 1.187
Number of Units 3,029 3,335 5,133 9,359 12,669 9,094 3,948 2,130 2,226 431
Outstanding at
End of Period
(in thousands)
</TABLE>
*The Separate Accounts were reorganized as unit investment trusts effective
April 29, 1985. April 26, 1985 was the last Valuation Date prior to the
reorganization
11
<PAGE>
PERFORMANCE INFORMATION
For its Elective and Single Payment Annuity policies, the Company from time to
time may advertise the "total return" of the Separate Accounts and the "yield"
and "effective yield" of Separate Account VA-G or Separate Account VA-H. Both
the total return and yield figures are based on historical earnings and are not
intended to indicate future performance.
The "total return" of a Separate Account refers to the total of the income
generated by an investment in the Separate Account and of the changes in the
value of the principal (due to realized and unrealized capital gains or losses)
for a specified period, reduced by certain charges, and expressed as a
percentage of the investment.
The "yield" of Separate Account VA-G or Separate Account VA-H refers to the
income generated by an investment in the Separate Account over a seven-day
period (which period will be specified in the advertisement). This income is
then "annualized", by assuming that the income generated in the specific week is
generated over a 52-week period. This annualized yield is shown as a percentage
of the investment. The "effective yield" calculation is similar, but when
annualized, the income earned by an investment in the Separate Account is
assumed to be reinvested. Thus the "effective yield" will be slightly higher
than the "yield" because of the compounding effect of this assumed reinvestment.
The total return, yield, and effective yield figures are adjusted to reflect the
Separate Account's asset charges. The total return figures also reflect the
contingent deferred sales load which would be assessed if the investment were
completely redeemed at the end of the specified period. The $9 semi-annual
administrative charge under Elective Payment policies with an Accumulated Value
of $10,000 or less is not included in the calculations; if a policy is subject
to the charge, the performance with respect to a Separate Account would be
reduced to the extent by which a portion of the charge is assessed to the policy
value in that Separate Account.
The Company may also advertise supplemental total return performance
information. Supplemental total return refers to the total of (1) the income
generated by an investment in the Separate Account and (2) the changes of value
of the principal (due to realized and unrealized capital gains or losses),
adjusted by the Separate Account's annual asset charges, and expressed as a
percentage of the investment. Because it is assumed that the investment is NOT
redeemed at the end of the specified period, the contingent deferred sales load
is NOT included in the calculation of supplemental total return.
Performance information for a Separate Account may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S & P
500"), Dow Jones Industrial Average ("DJIA"), Shearson Lehman Aggregate Bond
Index or other unmanaged indices so that investors may compare a Separate
Account's results with those of a group of unmanaged securities widely regarded
by investors as representative of the securities markets in general; (ii) other
groups of variable annuity separate accounts or other investment products
tracked by Lipper Analytical Services, a widely used independent research firm
which ranks mutual funds and other investment products by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications, or persons, such as Morningstar, Inc., who rank such investment
products on overall performance or other criteria; or (iii) the Consumer Price
Index (measure for inflation) to assess the real rate of return from an
investment in the Separate Account. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for any Separate Account reflects only the performance
of a hypothetical investment in the Separate Account during the particular time
period on which the calculations are based. Performance information should be
considered in light of the investment objectives and policies, characteristics
and quality of the portfolio of the Fund of the Trust in which the Separate
Account invests and the market conditions during the given time period, and
should not be considered as a representation of what may be achieved in the
future.
12
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY. . . . . . . . . . . . . . . . . . . . . . . .2
TAXATION OF THE SEPARATE ACCOUNTS AND THE COMPANY. . . . . . . . . . . . . . .3
SERVICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
UNDERWRITERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
ANNUITY PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
WHAT IS AN ANNUITY?
In general, an annuity is a policy designed to provide a retirement income in
the form of monthly payments for the lifetime of the purchaser or an individual
chosen by the purchaser. The retirement income payments are called annuity
payments and the individual receiving the payments is called the Annuitant.
Annuity payments may begin immediately after a lump sum purchase is made or may
begin after an investment period during which the amount necessary to provide
the desired amount of retirement income is accumulated.
Under an annuity policy, the insurance company assumes a mortality risk and an
expense risk. The mortality risk arises from the insurance company's guarantee
that annuity payments will continue for the life of the Annuitant, regardless of
how long the Annuitant lives or how long all Annuitants as a group live. The
expense risk arises from its guarantee that charges will not be increased beyond
the limits specified in the policy, regardless of actual costs of operations.
The Policy Owner's purchase payments, less any applicable deductions, are
invested by the insurance company. After retirement, annuity payments are paid
to the Annuitant for life or for such other period chosen by the Policy Owner.
In the case of a "fixed" annuity, the value of these annuity payments is
guaranteed by the insurance company, which assumes the risk of making the
investments to enable it to make these guaranteed payments. For more
information about fixed annuities see APPENDIX A, "MORE INFORMATION ABOUT THE
GENERAL ACCOUNT".
With a variable annuity, the value of the Policy and the annuity payments are
not guaranteed but will vary depending on the investment performance of a
portfolio of securities. Any investment gains or losses are reflected in the
value of the Policy and in the annuity payments. If the portfolio increases in
value, the value of the Policy increases. If the portfolio decreases in value,
the value of the Policy decreases.
RIGHT TO REVOKE INDIVIDUAL RETIREMENT ANNUITY
An individual purchasing a Policy intended to qualify as an Individual
Retirement Annuity ("IRA") may revoke the Policy at any time between the date of
the application and the date 10 days after receipt of the Policy and receive a
refund of the entire purchase payment. In order to revoke the Policy, the
Policy Owner must mail or deliver the Policy (if it has already been received),
to the agent through whom the Policy was purchased, to the principal office of
the Company at 440 Lincoln Street, Worcester, Massachusetts 01653, or to any
local agency of the Company. Mailing or delivery must occur on or before 10
days after receipt of the Policy for revocation to be effective.
If on the date of revocation the Surrender Value of the Policy exceeds the total
purchase payment, the Company will treat the revocation request as a request for
surrender (see "Surrender") and will pay the Policy Owner the Surrender Value of
the Policy.
The Separate Accounts' liability under this provision is limited to the Policy
Owner's Accumulated value in each Separate Account on the date of cancellation.
Any additional amounts refunded to the Policy Owner will be paid by the Company.
RIGHT TO REVOKE OR SURRENDER IN SOME STATES
In Georgia, Indiana, Michigan, Missouri, North Carolina, Oklahoma, South
Carolina, Texas, Utah, Washington and West Virginia, any Policy Owner may
revoke the Policy at any time within 10 days (20 in Idaho) after receipt of
the Policy and receive a refund of the entire purchase price, as described
under "RIGHT TO REVOKE INDIVIDUAL RETIREMENT ANNUITY", above.
In all other states, a Policy Owner may surrender the Policy at any time
within 10 days (or the number of days required by state law if more than 10)
after receipt of the Policy. The Company will pay to the Policy Owner an amount
equal to the sum of (i) the difference between the premium paid, including fees,
and any amount allocated to a Separate Account and (ii) the Accumulated Value of
the Policy (on the date the surrender request is received by the Company)
attributable to any amount allocated to a Separate Account. If the Policy was
purchased as an IRA, the IRA revocation right described above may be utilized in
lieu of the special surrender right.
13
<PAGE>
DESCRIPTION OF THE COMPANY, THE SEPARATE ACCOUNTS, AND THE TRUST
THE COMPANY - The Company is a life insurance company organized under the laws
of Delaware in July, 1974. Its Principal Office is located at 440 Lincoln
Street, Worcester, Massachusetts 01653, Telephone 508-855-1000. The Company is
subject to the laws of the state of Delaware governing insurance companies and
to regulation by the Commissioner of Insurance of Delaware. In addition, the
Company is subject to the insurance laws and regulations of other states and
jurisdictions in which it is licensed to operate. As of December 31, 1995, the
Company had over $5 billion in assets and over $18 billion of life insurance
in force.
Effective October 1, 1995, the Company changed its name from SMA Life Assurance
Company to Allmerica Financial Life Insurance and Annuity Company. The Company
is an indirect wholly-owned subsidiary of First Allmerica Financial Life
Insurance Company ("First Allmerica"), which in turn is a wholly-owned
subsidiary of Allmerica Financial Corporation ("AFC"). First Allmerica,
originally organized under the laws of Massachusetts in 1844 as a mutual life
insurance company and known as State Mutual Life Assurance Company of America,
converted to a stock life insurance company on October 16, 1995 and adopted its
present name. First Allmerica is the fifth oldest life insurance company in
America. As of December 31, 1995 First Allmerica and its subsidiaries
(including the Company) had over $11 billion in combined assets and over
$35.2 billion in life insurance in force.
THE SEPARATE ACCOUNTS. Separate Account VA-A, Separate Account VA-B, Separate
Account VA-C, Separate Account VA-G, and Separate Account VA-H are separate
investment accounts of the Company. The assets used to fund the variable
portions of the Policies are set aside in the Separate Accounts, and are kept
separate and apart from the general assets of the Company. Each Separate
Account is administered and accounted for as part of the general business of the
Company, but the income, capital gains, or capital losses of each Separate
Account are allocated to such Separate Account, without regard to other income,
capital gains, or capital losses of the Company. Under Delaware law, the assets
of each Separate Account may not be charged with any liabilities arising out of
any other business of the Company.
Separate Account VA-A was authorized by vote of the Board of Directors of the
Company on March 31, 1967. Separate Accounts VA-B and VA-C were authorized by
vote of the Board of Directors of the Company on July 30, 1974. Separate
Accounts VA-G and VA-H were authorized by vote of the Board of Directors of the
Company on February 24, 1983.
The Separate Accounts were organized originally as diversified management
investment companies. Each Separate Account invested directly in a diversified
portfolio of securities which was managed by a Board of Managers. Effective
April 29, 1985, each Separate Account converted to a unit investment trust
investing exclusively in shares of a particular Fund of Allmerica Investment
Trust, as described below. Each separate Account meets the definition of
"separate account" under federal securities laws.
THE TRUST. Allmerica Investment Trust, is an open-end, diversified management
investment company registered under the 1940 Act. Such registration does not
involve supervision by the SEC of the investments or investment policy of the
Funds.
The Trust was established as a Massachusetts business trust on October 11,
1984, for the purpose of providing a vehicle for the investment of assets of
various separate investment accounts established by First Allmerica, the
Company, or other affiliated life insurance companies. Three investment funds
of the Trust are offered under the Policies: the Growth Fund, the Investment
Grade Income Fund, and the Money Market Fund. Each fund of the Trust has a
different investment objective which it pursues through separate investment
policies.
Shares of the funds of the Trust are currently issued to separate accounts of
the Company which issue variable annuity contracts or variable life insurance
policies ("mixed funding"). It is conceivable that in the future such mixed
funding may be disadvantageous for variable annuity Policy Owners or variable
life Policy Owners. Although the Company and the Trust do not currently foresee
any such disadvantages, the Trustees of the Trust intend to monitor events in
order to identify any material conflicts between such Policy Owners and to
determine what action, if any, should be taken. If the Trustees were to
conclude that separate funds should be established for the variable life and the
variable annuity separate accounts, the Company will bear the attendant
expenses.
Below is a summary of investment objectives of the funds of the Trust. MORE
DETAILED INFORMATION REGARDING THE INVESTMENT OBJECTIVES, RESTRICTIONS AND
RISKS, EXPENSES PAID BY THE FUNDS, AND OTHER RELEVANT INFORMATION REGARDING THE
TRUST AND ITS FUNDS MAY BE FOUND IN THE CURRENT PROSPECTUS FOR THE TRUST, WHICH
ACCOMPANIES THIS PROSPECTUS AND SHOULD BE READ CAREFULLY BEFORE INVESTING.
There can be no assurance that the investment objectives of the funds can be
achieved or that the value of a Policy will equal or exceed the aggregate amount
of the purchase payments made under the Policy.
INVESTMENT OBJECTIVE AND POLICIES OF THE GROWTH FUND. Separate Account VA-A
invests solely in shares of the Growth Fund. The investment objective of the
Growth Fund is to achieve long-term growth of capital through investing
primarily in common stocks and securities convertible into common stocks that
are believed to represent significant underlying value in relation to current
market prices. Realization of current investment income, if any, is incidental
to this objective. The Growth Fund is not
14
<PAGE>
limited to investments in any particular type of company, and may invest in any
company which, in the opinion of management, is likely to further its investment
objectives. Investments may include, but are not limited to, developing or
well-established companies, whether small or large. The Growth Fund proposes to
keep its assets fully invested, but may maintain reasonable amounts in cash or
in high-grade, short-term debt securities to meet current expenses and
anticipated redemptions, and during temporary periods pending investment in
accordance with its policies.
The Growth Fund normally will invest substantially all of its assets in
equity-type securities, including common stocks, warrants, and those preferred
stocks and debt securities convertible into or carrying rights to purchase
common stock or to participate in earnings, and real estate securities to the
extent permitted by the Growth Fund's investment restrictions.
The Growth Fund may invest in both listed and unlisted securities. The Growth
Fund also may invest in foreign, as well as domestic, securities.
INVESTMENT OBJECTIVE AND POLICIES OF THE INVESTMENT GRADE INCOME FUND. Separate
Accounts VA-B and VA-C invest solely in shares of the Investment Grade Income
Fund. The objective of the Investment Grade Income Fund is to seek as high a
level of total return, which includes capital appreciation as well as income, as
is consistent with prudent investment management. The Fund will invest in a
diversified portfolio of investment-grade debt securities and money market
instruments. The Fund intends to be fully invested at all times, but because of
current or anticipated money market and economic conditions, fiscal and monetary
policies and trends in short and long-term interest rates and yields, will
invest in money market instruments and in debt securities of short,
intermediate, and long-term maturities in such proportions as from time to time,
in management's judgment, seem appropriate to best achieve its objective. The
Investment Grade Income Fund may also invest in financial futures contracts and
related options.
INVESTMENT OBJECTIVE AND POLICIES OF THE MONEY MARKET FUND. Separate Accounts
VA-G and VA-H invest solely in shares of the Money Market Fund. The investment
objective of the Money Market Fund is to obtain maximum current income
consistent with preservation of capital and liquidity.
The Money Market Fund seeks to achieve its objective by investing in high
quality money market instruments. The Money Market Fund will purchase
obligations that mature within 397 days from the date of purchase and will
manage the portfolio to maintain a dollar-weighted maturity of 90 days or less.
Pursuant to Rule 2a-7 under the Act, the assets of the Money Market Fund will be
valued based upon the amortized cost method.
INVESTMENT ADVISORY SERVICES. Allmerica Investment Management Company, Inc.
("Allmerica Investment"), an indirect wholly owned subsidiary of First
Allmerica, serves as investment adviser of the Trust. Pursuant to a Management
Agreement between the Trust and Allmerica Investment, Allmerica Investment has
entered into agreements ("Sub-Adviser Agreements") with other investment
advisers ("Sub-Advisers") under which each Sub-Adviser manages the investments
of one or more of the funds. Miller, Anderson & Sherrerd is the Sub-adviser of
the Growth Fund. Allmerica Asset Management, Inc., an indirect wholly owned
subsidiary of First Allmerica, is the Sub-Adviser of the Investment Grade Income
Fund and the Money Market Fund. For a more thorough discussion of the Management
and Sub-adviser Agreements or of the investment policies of the Funds, see the
Prospectus of the Trust.
VOTING RIGHTS
The Company will vote fund shares held by each Separate Account in accordance
with instructions received from Policy Owners and, after the Annuity Date, from
Annuitants. Each person having a voting interest in a Separate Account will be
provided with proxy materials of the underlying Fund together with a form with
which to give voting instructions to the Company. Fund shares for which no
timely instructions are received will be voted in proportion to the instructions
which are received.
The number of votes which a Policy Owner or Annuitant may cast will be
determined by the Company as of the record date established by the Fund.
During the accumulation period, the number of Fund shares attributable to each
Policy Owner will be determined by dividing the dollar value of the Separate
Account Accumulation Units credited to the Policy by the net asset value of one
Fund share.
During the annuity period, the number of fund shares attributable to each
Annuitant will be determined by dividing the reserve held in each Separate
Account for the Annuitant's variable annuity by the net asset value of one fund
share. Ordinarily, the Annuitant's voting interest in the Fund will decrease as
the reserve for the variable annuity is depleted.
15
<PAGE>
CHARGES AND DEDUCTIONS
Deductions under the Policies and charges against the assets of the Separate
Accounts are described below. Other deductions and expenses paid out of the
assets of the Funds of the Trust are described in the Prospectus and Statement
of Additional Information of the Trust.
A. CONTINGENT DEFERRED SALES CHARGE. No charge for sales expense is deducted
from purchase payments at the time the payments are made. However, a contingent
deferred sales charge may be deducted from the Accumulated Value of the Policy
in the case of surrender and/or partial redemption of the Policy or at the time
annuity payments begin, within certain time limits described below.
For all Single Payment Policies, and after the first policy year for Elective
Payment Policies, up to 10% of the Accumulated Value of a Policy may be redeemed
each year without a contingent deferred sales charge. If more than one partial
redemption is made during the policy year, on each subsequent redemption the
Policy Owner may redeem free of charge an amount equal to 10% of the Accumulated
Value of the Policy at that time, less the total of any prior redemptions in the
same policy year to which no charge was applied. This right is not cumulative
from policy year to policy year. In the case of a total surrender of the
Policy, up to 10% of the Accumulated Value may not be subject to change. The
rules concerning partial redemptions will apply. In the event that a redemption
is made in excess of the amount which may be redeemed free of charge, only the
excess (the "Excess Amount") will be subject to a surrender charge.
The charge is applied as a percentage of the Excess Amount redeemed, but in no
event will the total contingent deferred sales charges exceed a maximum limit of
8% of total gross purchase payments under an Elective Payment Policy or 6.5% of
the total gross purchase payments under a Single Payment Policy. Such total
charge equals the aggregate of all applicable contingent deferred sales charges
for surrender, partial redemptions, and annuitization (as described below).
CHARGES FOR SURRENDER AND PARTIAL REDEMPTION. If a Policy is surrendered, or if
an Excess Amount is redeemed, a contingent deferred sales charge is imposed if
the Policy has been in force for less than nine full policy years under an
Elective Payment Policy, or less than seven full policy years under a Single
Payment Policy.
The contingent deferred sales charges differ for Elective Payment and Single
Payment Policies:
(1) For Elective Payment Policies:
Policy year in
which Surrender Charge as Percentage
or Partial of Excess
Redemption Occurs Amount Redeemed*
----------------- --------------------
1-3 7%
4 6%
5 5%
6 4%
7 3%
8 2%
9 1%
(2) For Single Payment Policies:
Policy year in
Policy year in
which Surrender Charge as Percentage
or Partial of Excess
Redemption Occurs Amount Redeemed*
----------------- --------------------
1-3 5%
4 4%
5 3%
6 2%
7 1%
* Subject to the maximum limit described above.
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The charge is applied as a percentage of the Excess Amount. The amount redeemed
equals the amount requested by the Policy Owner plus the charge, if any.
In the case of a surrender, the amount received by the Policy Owner is equal to
the entire Accumulated Value under the Policy net of the contingent deferred
sales charge or any tax withholding, if applicable. Subject to the same rules
that are applicable to partial redemptions, up to 10% of the Accumulated Value
of the Policy will not be subject to the charge.
Where a Policy Owner who is trustee under a pension plan surrenders, in whole or
in part, a Policy on a terminating employee, the trustee will be permitted to
reallocate all or a part of the total Accumulated Value under the Policy to
other policies issued by the Company and owned by the trustee, with no deduction
for any otherwise applicable contingent deferred sales charge. Any such
reallocation will be at the unit values for the Separate Account(s) as of the
valuation date on which a written, signed request is received at the Company's
principal office.
No contingent deferred sales charge is deducted if any Policy is surrendered, or
if a portion of Accumulated Value is redeemed, after expiration of the time
periods shown in the tables above.
For further information on surrender and partial redemption, including minimum
requirements on amount redeemed and amount remaining under the Policy in the
case of partial redemption, and important tax considerations, see "Surrender"
and "Partial Redemption" under "THE VARIABLE ANNUITY POLICIES", and "FEDERAL TAX
CONSIDERATIONS".
CHARGE AT THE TIME ANNUITY PAYMENTS BEGIN. If a period certain option is chosen
(Option V or the comparable fixed annuity option), a contingent deferred sales
charge will be deducted from the Accumulated Value of the Policy if the Annuity
Date occurs at any time during the surrender charge period of nine full policy
years under Elective Payment Policies or seven full policy years under Single
Payment Policies. The charge is the same as that which would apply had the
policy been surrendered on the Annuity Date, subject to the maximum limitation
described above.
No contingent deferred sales charge is imposed at the time of annuitization in
any policy year under an option involving a life contingency (Options I, II,
III, IV-A, IV-B or the comparable fixed annuity options).
If an owner of a fixed annuity policy issued by the Company wishes to elect a
variable annuity option, the Company may permit such owner to exchange, at the
time of annuitization, the fixed policy for a Policy offered in this Prospectus.
The proceeds of the fixed policy, minus any contingent deferred sales charge
applicable under the fixed policy will be applied towards the variable annuity
option desired by the owner. The policy years will be computed from the issue
date of the fixed policy for purposes of determining the applicability of any
contingent deferred sales charge under the Policy upon annuitization. The
number of Annuity Units under the option will be calculated using the Annuity
Unit values as of the 15th of the month preceding the Annuity Date.
SALES EXPENSE. The Company pays sales commissions on the purchase payments of
Elective and Single Payment Policies equal to 5% and 3%, respectively, to
registered representatives of Allmerica Investments, Inc. Managers who
supervise the agents will receive overriding commissions ranging up to no more
than 2% of purchase payments.
The Company intends to recoup the commissions and other sales expenses through a
combination of anticipated contingent deferred sales charges, described above,
and the investment earnings on amounts allocated to accumulate on a fixed basis
in excess of the interest credited on fixed accumulations by the Company. There
is no additional charge to Policy Owners or to the Separate Accounts. Any
contingent deferred sales charges assessed on a Policy will be retained by the
Company except for amounts it may pay to Allmerica Investments, Inc. for
services it performs and expenses it may incur as principal underwriter and
general distributor.
B. CHARGE FOR ADMINISTRATIVE EXPENSE. There is no administrative expense
charge deducted from a Single Payment Policy.
Under Elective Payment Policies, a $9 policy fee currently is deducted twice a
year, whenever the Accumulated Value under the Policy is $10,000 or less. No
fee is deducted when the Accumulated Value is greater than $10,000. The policy
fee will be deducted from the Accumulated Value of the Policy as of the fourth
Friday of March and September of each year. No charge will be made if the
Policy has been in force less than 90 days, or after the Annuity Date.
Where policy value has been allocated to more than one account (General Account
and/or one or more of the Separate Accounts), a percentage of the total $9
policy fee will be deducted from the policy value in each account. The amount
of the charge deducted from each account will be equal to the percentage which
the policy value in that account represents of the total Accumulated Value under
the Policy. The deduction of the policy fee will result in cancellation of a
number of the Policy's Accumulation Units in the account. The number of
Accumulation Units cancelled will be equal in value to the percentage of the $9
amount deducted from the account.
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<PAGE>
After the first policy year, deduction of policy fees under Elective Payment
Policies will not reduce the effective interest rate credited to Policy amounts
allocated to the Company's General Account below the minimum rate guaranteed for
such amounts. See APPENDIX A, "MORE INFORMATION ABOUT THE GENERAL ACCOUNT".
The portion of the total Policy fees applicable to amounts allocated to the
General Account will be reduced or eliminated, as necessary, when full deduction
would result in an effective rate of interest below the minimum rate guaranteed.
Deductions for administrative expense are designed to reimburse the Company for
the cost of administration and related expenses and are not expected to be a
source of profit. The administrative functions and expense assumed by the
Company in connection with the Separate Accounts and the Policies include, but
are not limited to, clerical, accounting, actuarial and legal services, rent,
postage, telephone, office equipment and supplies, expenses of preparing and
printing registration statements, expense of preparing and typesetting
prospectuses and the cost of printing prospectuses not allocable to sales
expense, filing and other fees.
SALES AND ADMINISTRATIVE EXPENSE UNDER PREVIOUS SERIES OF POLICIES. The
previous series of the Company's Policies provided for sales and administrative
charges to be deducted from purchase payments. For more information see
Appendix B. "INFORMATION ABOUT DISCONTINUED POLICIES".
C. PREMIUM TAXES. Some states and municipalities impose a premium tax on
variable annuity policies. State premium taxes currently range up to 3.50%.
The Company makes a charge for state and municipal premium taxes, where
applicable. In accordance with the law of the state involved, the premium tax
charge usually is deducted in one of two ways:
(1) The premium tax charge is deducted at the time the purchase payment is
received; or
(2) The premium tax charge is deducted at the time annuity payments begin.
Where permitted by state law, it is the Company's policy to follow the practice
in (2) above. However, if no amount for premium tax was deducted at the time
the purchase payment was received, but subsequently tax is determined to be due
prior to the Annuity Date, the Company reserves the right to deduct the premium
tax from the Policy value at the time such determination is made.
D. ANNUAL CHARGES AGAINST SEPARATE ACCOUNT ASSETS. The Company currently makes
a charge of 1.25% on an annual basis of the daily value of each Separate
Account's assets. The charge is for the mortality risk and expense risk which
the Company assumes in relation to the variable portion of the Policies. The
total charge may be increased or decreased by the Board of Directors of the
Company, but not more often than annually, and it may not exceed 1.275% on an
annual basis. No other charges are deducted from the assets of the Separate
Accounts.
Because the Separate Accounts purchase shares of Allmerica Investment Trust, the
value of the net assets of the Separate Accounts will reflect the investment
advisory fee and other expenses incurred by the Funds of the Trust. The
Prospectus and Statement of Additional Information of the Trust contain
additional information concerning expenses of the Funds.
MORTALITY AND EXPENSE RISKS. The mortality risk arises from the Company's
guarantee that it will make annuity payments in accordance with annuity rate
provisions established at the time the Policy is issued for the life of the
Annuitant (or in accordance with the annuity option selected), no matter how
long the Annuitant (or other payee) lives and no matter how long all Annuitants
as a class live. The expense risk arises from the Company's guarantee that the
charges it makes will not exceed the limits described in the Policies and in
this Prospectus.
If the charge for mortality and expense risks is not sufficient to cover actual
mortality experience and expenses, the Company will absorb the losses. If
expenses are less than the amounts provided, the difference will be a profit to
the Company. To the extent this charge results in a profit to the Company, such
profit will be available for use by the Company for, among other things, the
payment of distribution, sales and other expenses. For assuming these risks the
Company currently receives an amount equivalent to an annual charge of 1.15% of
the daily value of each Separate Account.
Since mortality and expense risks involve future contingencies which are not
subject to precise determination in advance, it is not feasible to identify
specifically the portion of the charge which is applicable to each. The
Company estimates that a reasonable allocation might be 0.80% for mortality risk
and 0.35% for expense risk.
CONTINGENCY RESERVE FEE. In accordance with the requirements of New York
Insurance law, the Company has established a Contingency Reserve Fund in order
to provide against possible liabilities arising out of the Policies in excess of
the amounts allocated to the Separate Accounts. Of the total charge of 1.25%
described above, 0.10% is allocated to reimburse the Company for the
establishment of the Contingency Reserve Fund.
18
<PAGE>
THE VARIABLE ANNUITY POLICIES
The Policies are designed for use in connection with several types of retirement
plans as well as for sale to individuals. Participants under such plans, as
well as Policy Owners, Annuitants, and beneficiaries, are cautioned that the
rights of any person to any benefits under the Policies may be subject to the
terms and conditions of the plans themselves, regardless of the terms and
conditions of the Policies.
The Policies offered by the Prospectus may be purchased from representatives of
Allmerica Investments, Inc., a registered broker-dealer under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc. (NASD). Allmerica Investments, Inc., 440 Lincoln Street,
Worcester, Massachusetts, 01653, is indirectly wholly-owned by First Allmerica.
The Policies also may be purchased from certain independent broker-dealers which
are NASD members.
Policy Owners may direct any inquiries to Allmerica Financial Annuity Customer
Services, Allmerica Financial Life Insurance and Annuity Company, 440 Lincoln
Street, Worcester, Massachusetts 01653.
A. PURCHASE PAYMENTS. Purchase payments under both Elective Payment Policies
and Single Payment Policies are payable to the Company. The initial payment
will be credited to the Policy as of the date that a properly completed
application and the payment is received by the Company at its principal office.
If an application is incomplete, or does not specify how payments are to be
allocated, the initial purchase payment will be returned within five business
days.
Additional payments subsequently will be credited to the Policy at the unit
values computed as of the Valuation Date that a purchase payment is received at
the Company's principal office.
The Policy Owner may change allocation instructions for new payments by giving
the Company written notice of the change. Any change in allocation instructions
will take effect with the first purchase payment received with or after the new
instructions are received by the Company.
Under Elective Payment Policies, purchase payments are not limited as to
frequency and number, but there are certain limitations as to amount. The
initial payment generally must be at least $600. Under a salary deduction or a
monthly automatic payment plan the minimum initial payment is $50. In all
cases, each subsequent payment must be at least $50. (Where the
contribution on behalf of an employee under an employer-sponsored retirement
plan is less than $600 but more than $300 annually, the Company may issue a
Policy on the employee, if the plan's average annual contribution per eligible
plan participant is at least $600.) Payments may be made at any time prior to
the policy month preceding the Annuity Date. Total elective payments may not
exceed the maximum limit specified in the Policy. If the payments are divided
among two or more accounts, a net amount of at least $10 of each payment must be
allocated to each account.
Under Single Payment Policies, the minimum purchase payment is $10,000. The
Company will establish a maximum single payment for each Policy. If payments
are divided between two or more accounts, at least $500 must be allocated to
each account.
With respect to Policies issued to a plan qualified under Sections 401, 403, 408
or 457 of the Code, the plan may impose limits on the rights set forth in this
Prospectus, such as the right to redeem the Policy.
B. TRANSFER PRIVILEGE. At any time prior to the Annuity Date, subject to the
Company's then current rules, a Policy Owner may have amounts transferred among
the Separate Accounts or between a Separate Account and the General Account
without imposition of any charge for sales or administrative expense. Transfer
values will be effected at the Accumulation Value next computed after receipt of
the transfer order. The Company will make transfers pursuant to written or
telephone requests. A properly completed authorization form must be on file
before telephone requests will by honored. The policy of the Company and its
agents and affiliates is that they will not be responsible for losses resulting
from acting upon telephone requests reasonably believed to be genuine. The
Company will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine; otherwise, the Company may be liable for
any losses due to unauthorized or fraudulent instructions. The procedures the
Company follows for transactions initiated by telephone include requirements
that callers on behalf of a Policy Owner identify themselves by name and
identify the Annuitant by name, date of birth and social security number. All
transfer instructions by telephone are tape recorded.
Effective November 1, 1995, automatic transfers may also be made from policy
value allocated to the Company's General Account (a) to one or more of the
Separate Accounts or (b) in order to reallocate policy value among the Separate
Accounts. Automatic transfers from the General Account may be made on a
monthly, bimonthly, or quarterly basis, provided that: (i) the amount of each
monthly transfer cannot exceed 10% of policy value in the General Account as of
the date of the first transfer; (ii) each bimonthly transfer cannot exceed 20%
of policy value in the General Account as of the date of the first transfer;
(iii) each quarterly transfer cannot exceed 25% of policy value in the General
Account as of the date of the first transfer. No other transfers are permitted
from the General Account except during the 30-day period beginning on each
policy anniversary.
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<PAGE>
During that 30 day annual "window" period, any amount (up to 100%) of policy
value in the General Account may be transferred.
These rules are subject to change by the Company.
The Policy Owner may have automatic transfers of at least $100 each made on a
periodic basis from Separate Account VA-G or VA-H (which invest in the Money
Market Fund) to one or more of the other Separate Accounts available to the
Policy Owner or reallocate Policy value among the available Separate Accounts.
Automatic transfers may be made on a monthly, bimonthly, quarterly, semiannual
or annual schedule.
The transfer privilege is subject to the consent of the Company. The Company
reserves the right to impose limitations on transfers including, but not limited
to: (1) the minimum amount that may be transferred, (2) the minimum amount
that may remain in a Separate Account following a transfer from that Separate
Account, (3) the minimum period of time between transfers involving the General
Account, and (4) the maximum amount that may be transferred each time from the
General Account.
C. SURRENDER. At any time prior to the Annuity Date, a Policy Owner may
surrender the Policy and receive its Accumulated Value, less applicable charges.
The Policy Owner must return the Policy and a signed written request,
satisfactory to the Company, to the Company's principal office. The amount
payable to the Policy Owner upon surrender ("Surrender Amount") will be based on
the Accumulated Value of the Policy as of the Valuation Date on which the
request is received at the Company's principal office.
Before the Annuity Date a contingent deferred sales charge will be deducted upon
surrender if the Policy has been in force for less than nine full policy years
under Elective Payment Policies or less than seven full policy years under
Single Payment Policies. See "CHARGES AND DEDUCTIONS".
After the Annuity Date, only Policies under which future annuity payments are
limited to a specified period may be surrendered. The Surrender Amount is the
commuted value of any unpaid installments, computed on the basis of the assumed
interest rate incorporated into the annuity payments. No contingent deferred
sales charge is imposed after the Annuity Date.
The Surrender Amount is normally payable within seven days following the
Company's receipt of the surrender request. The Company reserves the right to
defer surrenders and partial redemptions of amounts in each Separate Account
during any period which (1) trading on the New York Stock Exchange is restricted
as determined by the SEC or such Exchange is closed for other than weekends and
holidays, (2) the SEC has by order permitted such suspension, or (3) an
emergency, as determined by the SEC, exists such that disposal of portfolio
securities or valuation of assets of each Separate Account is not reasonably
practicable.
The right is reserved by the Company to defer surrenders and partial redemptions
of amounts allocated to the Company's General Account for a period not to exceed
six months.
The surrender rights of Policy Owners who are participants under Section 403(b)
plans or who are participants in the Texas Optional Retirement Program (Texas
ORP) are restricted; see "FEDERAL TAX CONSIDERATIONS, I. Public School Systems
and Certain Tax Exempt Organizations and J. Texas Optional Retirement Program".
For important tax consequences which may result from surrender, see "FEDERAL TAX
CONSIDERATIONS".
D. PARTIAL REDEMPTION. At any time prior to the Annuity Date, a Policy Owner
may redeem a portion of the Accumulated Value of his or her Policy, subject to
the limits stated below. The Policy Owner must file a signed written request,
satisfactory to the Company, for redemption at the Company's Principal Office.
The written request must indicate the dollar amount the Policy Owner wishes to
receive and the accounts from which such amount is to be redeemed. The amount
redeemed equals the amount requested by the Policy Owner plus any applicable
contingent deferred sales charge as described under "CHARGES AND DEDUCTIONS".
Where allocations have been made to more than one account, a percentage of the
partial redemption may be allocated to each such account. A partial redemption
from a Separate Account will result in cancellation of a number of units
equivalent in value to the amount redeemed, computed as of the Valuation Date
that the request is received at the Company's principal office.
Each partial redemption must be in a minimum amount of $500 under a Single
Payment Policy or $100 under an Elective Payment Policy. No partial redemption
will be permitted if the Accumulated Value remaining under the Policy would be
reduced to less than $2,000 under a Single Payment Policy or to less than $1,000
under an Elective Payment Policy. Partial redemptions will be paid in
accordance with the time limitations described under "Surrender".
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<PAGE>
After the Annuity Date, only Policies under which future variable annuity
payments are limited to a specified period (Option V) may be partially redeemed.
A partial redemption after the Annuity Date will result in cancellation of a
number of Annuity Units equivalent in value to the amount redeemed.
For important restrictions on withdrawals which are applicable to Policy Owners
who are participants under Section 403(b) plans or under the Texas ORP, see
"FEDERAL TAX CONSIDERATIONS, I. Public School Systems and Certain Tax Exempt
Organizations and J. Texas Optional Retirement Program".
For important tax consequences which may result from partial redemptions, see
"FEDERAL TAX CONSIDERATIONS".
E. DEATH BENEFIT. If the Policy is issued to an individual, the Policy Owner
must also be the Annuitant. This restriction does not apply to Policies issued
to Trustees, corporations, other entities, or to Policies issued pursuant to a
state's Uniform Gifts to Minors Act. If the Annuitant's death occurs prior to
the Annuity Date, a death benefit will be paid to the beneficiary. The death
benefit is equal to the greater of
(1) the Accumulated Value under the Policy or (2) the total amount of gross
payment(s) made under the Policy minus the amount of all partial redemptions.
The death benefit generally will be paid to the beneficiary in one sum.
However, the beneficiary may, by written request, elect one of the following
options:
(1) The payment of the one sum may be delayed for a period not to exceed
five years from the date of the Annuitant's death.
(2) The death benefit may be paid in installments. Payments must begin
within one year from the date of the Annuitant's death, and are payable
over the life expectancy of the beneficiary.
(3) All or a portion of the death benefit may be used to provide a life
annuity for the beneficiary. Benefits must begin within one year from
the date of the Annuitant's death and are payable over a period not
extended beyond the life expectancy of the beneficiary. Any annuity
benefits will be provided in accordance with the annuity options of the
Policy.
If there is more than one beneficiary, the death benefit will be paid in one sum
unless the Company consents to pay an annuity option chosen by the
beneficiaries.
If the Annuitant's death occurs on or after the Annuity Date but before the
completion of all guaranteed monthly annuity payments, any unpaid amounts or
installments will be paid to the beneficiary. The Company must pay the
remaining payments at least as rapidly as under the payment option in effect on
the date of the Annuitant's death. If there is more than one beneficiary, the
commuted value of such installments, computed on the basis of the assumed
interest rate incorporated in the annuity option table on which such payments
are based, shall be paid to the beneficiaries in one sum.
With respect to any death benefit, the Accumulated Value under the Policy shall
be based on unit values next computed after due proof of the Annuitant's death
has been received at the Company's principal office. If the beneficiary elects
to receive the death benefit in one sum, the death benefit will be paid within
seven business days. If the beneficiary (other than a spousal beneficiary of an
IRA See."F. The Spouse of the Annuitant as Beneficiary") has not elected an
annuity option within one year from the date notice of death is received by the
Company; the Company will pay a death benefit in one sum. The death benefit
will reflect any earnings or losses experienced during the period and any
withdrawals.
F. THE SPOUSE OF THE ANNUITANT AS BENEFICIARY. When a non-qualified Policy is
issued to an entity other than an individual, the Policy Owner may name the
Annuitant. If the Annuitant's spouse is named as beneficiary ("spousal
beneficiary") and if the Annuitant dies prior to the Annuity Date, at the
written request of the spousal beneficiary and with the consent of the Company
the spousal beneficiary will become the Annuitant. The death benefit will not be
paid and all other rights and benefits provided in the Policy will continue.
However, all or a portion of the death benefit may be withdrawn without charge
within one year of the date on which notice of death is received at the
Company's principal office.
If a non-qualified Policy is issued to an individual (except pursuant to a
state's Uniform Gifts to Minors Act), or a qualified Policy is issued in
connection with a retirement plan qualified under Section 403(b) or 408 of the
Code, the Policy Owner must be the Annuitant. If such Annuitant dies prior to
the Annuity Date and the Annuitant's spouse is named beneficiary under the
Policy ("Spousal Beneficiary"), at the written request of the spousal
beneficiary and with the consent of the Company, the spousal beneficiary will
become the Owner and Annuitant and will have all rights described above.
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<PAGE>
G. ASSIGNMENT. The right to assign the Policy is available only to the Policy
Owner. However, Policies sold in connection with IRA plans and certain other
qualified plans are not assignable. Assignability of a Policy issued in
connection with an HR-10 Plan may be restricted. For more information about
these plans, see "FEDERAL TAX CONSIDERATIONS".
The Company will not be deemed to have knowledge of an assignment unless it is
made in writing and filed at the Company's principal office. The Company will
not assume responsibility for determining the validity of any assignment. If an
assignment of the Policy is in effect on the Annuity Date, the Company reserves
the right to pay to the assignee, in one sum, that portion of the Surrender
Value of the Policy to which the assignee appears to be entitled. The Company
will pay the balance, if any, in one sum to the Policy Owner in full settlement
of all liability under the Policy. The interest of the Annuitant and of any
beneficiary will be subject to any assignment.
H. ELECTING THE FORM OF ANNUITY AND THE ANNUITY DATE. Subject to certain
restrictions described below, the Policy Owner has the right (1) to select the
annuity option under which annuity payments are to be made, and (2) to determine
whether payments are to be made on a fixed or a variable basis, or a combination
fixed and variable basis. Annuity payments are determined on the basis of the
annuity tables in the Policy, by the annuity option selected by the Policy
Owner, and by the investment performance of the Separate Account(s) selected.
To the extent a fixed annuity is selected, Accumulated Value will be transferred
to the General Account of the Company, and the annuity payments will be fixed in
amount. See APPENDIX A, "MORE INFORMATION ABOUT THE GENERAL ACCOUNT".
Under a variable annuity, a payment equal to the value of the number of Annuity
Units in the Separate Account(s) is made each month. Since the value of an
Annuity Unit in a Separate Account will reflect the investment performance of
the Separate Account, the amount of each monthly payment will vary.
The annuity option selected must produce an initial payment of at least $50 (at
least $20 in New York). If a combination of fixed and variable payments is
selected, the initial payment on each basis must be at least $50. If the
annuity option(s) selected does not produce initial payments which meet these
minimums, the Company will pay the Accumulated Value in one sum. Once annuity
payments have commenced, the Annuitant cannot make partial redemptions or
surrender the annuity benefit and receive a lump sum settlement in lieu thereof,
except in the case where future annuity payments are limited to a period certain
(only under Option V or a comparable fixed option). Only beneficiaries entitled
to receive remaining payments for a period certain may elect to instead receive
a lump sum settlement.
The Annuity Date is selected by the Policy Owner. The Annuity Date may be the
first day of any month on or after the Annuitant's 50th birthday but before the
Annuitant's 75th birthday, with certain exceptions the Company may arrange. The
Owner may elect to change the Annuity Date by sending a request to the Company's
principal office at least one month before the new Annuity Date. The new
Annuity Date must be the first day of any month occurring on or after
the Annuitant's 50th birthday but before the Annuitant's 85th birthday. The new
Annuity Date must be within the life expectancy of the Annuitant. The Company
shall determine such life expectancy at the time a change in Annuity Date is
requested. The Internal Revenue Code and the terms of qualified plans impose
limitations on the age at which annuity payments may commence and the type of
annuity option selected. See "FEDERAL TAX CONSIDERATIONS" for further
information.
For Policies issued on and after April 1, 1985, if the Policy Owner does not
elect otherwise, annuity payments will be made in accordance with Option 1, a
variable life annuity with 120 monthly payments guaranteed. For Policies issued
prior to April 1, 1985, annuity payments will commence in accordance with the
fixed annuity option comparable to Option 1. If payments commence under a fixed
annuity option due to the Policy Owner's failure to elect otherwise, for a
period of one year the Annuitant may elect to convert future annuity benefits to
a variable annuity option involving a life contingency, without the imposition
of any fee or charge. The Company will notify the Annuitant of the first-year
conversion privilege at the time annuity payments commence.
Changes in either the Annuity Date or annuity option can be made up to one month
prior to the Annuity Date.
I. DESCRIPTION OF VARIABLE ANNUITY OPTIONS. The Company currently provides the
variable annuity options described below. Variable annuity options may be
funded through the Growth Fund or the Money Market Fund, or both.
The Company also provides fixed-amount annuity options, not described here,
which are comparable to the variable annuity options. Regardless of how
payments were allocated during the accumulation period, any one of the variable
annuity options, or any one of the fixed-amount options may be selected, or any
one of the variable annuity options may be selected in combination with any one
of the fixed-amount annuity options. Other annuity options may be offered by
the Company.
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<PAGE>
OPTION I--Variable Life Annuity with 120 Monthly Payments Guaranteed
A variable annuity payable monthly during the lifetime of the payee with the
guarantee that if the payee should die before 120 monthly payments have been
paid, the monthly annuity payments will continue to the beneficiary until a
total of 120 monthly payments have been paid.
OPTION II--Variable Life Annuity
A variable annuity payable monthly during the lifetime of the payee. It would
be possible under this option for the Annuitant to receive only one annuity
payment if the Annuitant dies prior to the due date of the second annuity
payment, two annuity payments if the Annuitant dies before the due date of the
third annuity payment, etc.
OPTION III--Unit Refund Variable Life Annuity
A variable annuity payable monthly during the lifetime of the payee with the
guarantee that if (1) exceeds (2) where:
(1) is the dollar amount of the Accumulated Value applied under this option
divided by the dollar amount of the first monthly payment under this
option, and
(2) is the number of monthly payments paid prior to the death of the payee,
then monthly variable annuity payments will be continued to the beneficiary
until the number of such payments equals the number determined in (1) above.
OPTION IV-A--Joint and Survivor Variable Life Annuity
A monthly variable annuity payable jointly to two payees during their joint
lifetime, and then continuing thereafter during the lifetime of the surviving
payee, where the amount of each such monthly payment to the surviving payee is
based on the same number of Annuity Units which applied during the joint
lifetime of the two payees. One of the payees must be the person designated as
the Annuitant in the Policy or the beneficiary electing this option. There is
no minimum number of payments under this option.
OPTION IV-B--Joint and Two-thirds Survivor Variable Life Annuity
A monthly variable annuity payable jointly to two payees during their joint
lifetime, and then continuing thereafter during the lifetime of the surviving
payee, where the amount of each such monthly payment to the surviving payee is
based upon two-thirds of the number of Annuity Units which applied during the
joint lifetime of the two payees. One of the payees must be the person
designated as the Annuitant in the Policy or the beneficiary electing this
option. There is no minimum number of payments under this option.
OPTION V--Variable Annuity Certain
A monthly variable annuity payable for a stipulated number of years from one to
30 years as selected.
It should be noted that Option V does not involve a life contingency. In the
computation of the payments under this option, the charges for annuity rate
guarantees and for the mortality and expense risk, which include a factor for
mortality risks, is made. Although not contractually required to do so, the
Company currently follows a practice of permitting persons receiving payments
under Option V to elect to convert to a variable annuity involving a life
contingency. The Company may discontinue or change this practice at any time,
but not with respect to Policy Owners who have elected Option V prior to the
date of any change. See "FEDERAL TAX CONSIDERATIONS" for a discussion of the
possible adverse tax consequences of selecting Option V.
J. NORRIS DECISION.
In the case of ARIZONA GOVERNING COMMITTEE V. NORRIS, the United States Supreme
Court ruled that in connection with retirement benefit options offered under
certain employer-sponsored employee benefit plans, annuity options based on
sex-distinct actuarial tables are not permissible under Title VII of the Civil
Rights Act of 1964. The ruling requires that benefits derived from
contributions paid into a plan after August 1, 1983 be calculated without regard
to the sex of the employee.
Annuity benefits attributable to payments received by the Company on or before
August 1, 1983 under a Policy issued in connection with an employer-sponsored
benefit plan affected by the NORRIS decision will be based on the greater of the
Company's sex-distinct Non-Guaranteed Current Annuity Option Rates or the
applicable sex-distinct guaranteed rates described in such Policy. Annuity
benefits attributable to payments received by the Company after August 1, 1983
under such plans will be based on the greater of the Company's unisex
Non-Guaranteed Current Annuity Option Rates or the guaranteed male rates
described in such Policy, regardless of whether the Annuitant is male or female.
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Although the Company believes that the Supreme Court ruling does not affect
Policies funding IRA plans that are not employer-sponsored, except in California
the Company will apply certain aspects of the ruling to annuity benefits
attributable to payments received after August 1, 1983 under such Policies.
Such benefits will be based on the greater of the guaranteed male annuity rates
described in the Policies or the Company's sex-distinct Non-Guaranteed Current
Annuity Option Rates. In California, state law requires that all annuity
benefits arising out of Policies that are not issued in connection with
employer-sponsored plans affected by the NORRIS decision must be based on
sex-distinct annuity option rates. In Montana and Massachusetts, Policies are
based on unisex rates.
K. COMPUTATION OF POLICY VALUES AND ANNUITY PAYMENTS.
THE ACCUMULATION UNIT. Each net purchase payment is allocated to the account(s)
selected by the Policy Owner. Allocations to the Separate Accounts are credited
to the Policy in the form of Accumulation Units. Accumulation Units are
credited separately for each Separate Account. The number of Accumulation Units
of each Separate Account credited to the Policy is equal to the portion of the
net purchase payment allocated to the Separate Account, divided by the dollar
value of the applicable Accumulation Unit as of the Valuation Date the payment
is received at the Company's principal office. The number of Accumulation Units
resulting from each payment will remain fixed unless changed by a subsequent
split of Accumulation Unit value, a transfer, a partial redemption or surrender.
The dollar value of an Accumulation Unit of each Separate Account varies from
Valuation Date to Valuation Date based on the investment experience of that
Separate Account and will reflect the investment performance, expenses and
charges of the Funds of Allmerica Investment Trust. The value of an
Accumulation Unit was set at $1.00 on the first Valuation Date for each Separate
Account.
Allocations to the General Account are not converted into Accumulation Units,
but are credited interest at a rate periodically set by the Company. See
APPENDIX A, "MORE INFORMATION ABOUT THE GENERAL ACCOUNT".
The Accumulated Value under the Policy is determined by multiplying the number
of Accumulation Units in each Separate Account by the value of the applicable
Accumulation Unit on that Valuation Date, adding the products, and adding the
amount of the accumulations in the General Account, if any.
ADJUSTED GROSS INVESTMENT RATE. At each Valuation Date an adjusted gross
investment rate for each Separate Account for the Valuation Period then ended is
determined from the investment performance of that Separate Account for the
Valuation Period. Such rate is (1) the investment income of that Separate
Account for the Valuation Period, plus capital gains and minus capital losses of
that Separate Account for the Valuation Period, whether realized or unrealized,
adjusted for provisions made for taxes, if any, divided by (2) the amount of
that Separate Account's assets at the beginning of the Valuation Period. The
adjusted gross investment rate may be either positive or negative.
NET INVESTMENT RATE AND NET INVESTMENT FACTOR. The net investment rate for a
Separate Account's variable accumulations for any Valuation Period is equal to
the adjusted gross investment rate of the Separate Account for such Valuation
Period decreased by the equivalent for such period of 1.25% per annum. The
annual charge of 1.25% may be increased or decreased by the Board of Directors
of the Company but may not exceed 1.275% per annum.
The net investment factor is 1.000000 plus the applicable net investment rate.
The dollar value of an Accumulation Unit as of a given Valuation Date is
determined by multiplying the dollar value of the corresponding Accumulation
Unit as of the immediately preceding Valuation Date by the appropriate net
investment factor.
For an illustration of Accumulation Unit calculation using a hypothetical
example see "ANNUITY PAYMENTS" in the Statement of Additional Information.
THE ANNUITY UNIT. The Annuity Unit is a measure of the value of the Annuitant's
monthly annuity payments under a variable annuity option on and after the
Annuity Date. The value of an Annuity Unit in each Separate Account was set at
$1.00 on the Valuation Date of the first variable annuity payment from such
Separate Account. The value of an Annuity Unit under a Separate Account on any
Valuation Date thereafter is equal to the value of such unit on the immediately
preceding Valuation Date, multiplied by the product of (1) the net investment
factor of the Account for the current Valuation Period and (2) a factor to
adjust benefits to neutralize the assumed interest rate. The assumed interest
rate, discussed below, is incorporated in the applicable variable annuity option
offered in the Policy.
DETERMINATION OF THE FIRST AND SUBSEQUENT ANNUITY PAYMENTS. The first monthly
annuity payment is based upon the Accumulated Value as of a date not more than
four weeks preceding the date the first annuity payment is due. Currently,
variable annuity payments are made on the first of the month based on unit
values as of the 15th day of the preceding month.
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The Policy provides annuity rates which determine the dollar amount of the first
monthly payment under each form of annuity for each $1,000 of applied value
(Accumulated Value applied under a specific option to provide annuity income
payments, minus any applicable premium tax). The annuity rates in the Policy
are based on the Progressive Annuity Table assuming all births in 1925.
The amount of the first monthly payment depends upon the form of annuity
selected, the sex and age of the Annuitant and the value of the amount applied
under the annuity option (however, see "J. Norris Decision"). The variable
annuity options offered by the Company are based on a 3 1/2% assumed interest
rate. Variable payments are affected by the assumed interest rate used in
calculating the annuity option rates. Variable annuity payments will increase
over periods when the actual net investment result of the Separate Account(s)
funding the annuity exceeds the equivalent of the assumed interest rate for the
period. Variable annuity payments will decrease over periods when the actual
net investment result of the respective Separate Account is less than the
equivalent of the assumed interest rate for the period.
The dollar amount of the first monthly annuity payment under a particular option
is determined by multiplying (1) the Accumulated Value applied under that option
(after deduction for applicable contingent deferred sales charge and premium
tax, if any) divided by $1,000, by (2) the applicable amount of the first
monthly payment per $1,000 of value. The dollar amount of the first monthly
variable annuity payment is then divided by the value of an Annuity Unit of the
selected Separate Account(s), as of the Valuation Date used to calculate the
first monthly payment, to determine the number of Annuity Units represented by
the first payment. This number of Annuity Units remains fixed under
all annuity options except the joint and two-thirds survivor annuity option.
In each subsequent month, the dollar amount of the annuity payment is determined
by multiplying this fixed number of Annuity Units by the value of an Annuity
Unit on the applicable Valuation Date.
After the first variable annuity payment the dollar amount of each monthly
variable annuity payment will vary with the variations in the value of the
Annuity Unit of the selected Separate Account(s). The dollar amount of each
fixed amount monthly annuity payment will not change, except under the joint and
two-thirds survivor annuity option.
The Company may from time to time offer its Policy Owners both fixed and
variable annuity rates more favorable than those contained in the Policy. Any
such rates will be applied uniformly to all Policy Owners of the same class.
For an illustration of variable annuity payment calculation using a hypothetical
example, see "ANNUITY PAYMENTS" in the Statement of Additional Information.
FEDERAL TAX CONSIDERATIONS
The effect of federal income taxes on the value of a Policy, on redemptions or
surrenders, on annuity payments, and on the economic benefit to the Policy
Owner, Annuitant, or beneficiary depends upon a variety of factors. The
following discussion is based upon the Company's understanding of current
federal income tax laws as they are interpreted as of the date of this
Prospectus. No representation is made regarding the likelihood of continuation
of current federal income tax laws or of current interpretations by the Internal
Revenue Service (IRS).
IT SHOULD BE RECOGNIZED THAT THE FOLLOWING DISCUSSION OF FEDERAL INCOME TAX
ASPECTS OF AMOUNTS RECEIVED UNDER VARIABLE ANNUITY POLICIES IS NOT EXHAUSTIVE,
DOES NOT PURPORT TO COVER ALL SITUATIONS AND IS NOT INTENDED AS TAX ADVICE. A
QUALIFIED TAX ADVISER SHOULD ALWAYS BE CONSULTED WITH REGARD TO THE APPLICATION
OF LAW TO INDIVIDUAL CIRCUMSTANCES.
The Company intends to make a charge for any effect which the income, assets, or
existence of the Policies or the Separate Accounts may have upon its tax. The
Separate Accounts presently are not subject to tax, but the Company reserves the
right to assess a charge for taxes should the Separate Accounts at any time
become subject to tax. Any charge for taxes will be assessed on a fair and
equitable basis in order to preserve equity among classes of Policy Owners.
Any charge for taxes with respect to a Separate Account will be made as though
that Separate Account were a separate taxable entity. Accordingly, the charge
for taxes may be made irrespective of whether any taxes are payable currently by
the Company. Conversely, if any Separate Account would be entitled to a tax
refund on a separate entity basis at any such time, an equivalent amount will be
credited to that Separate Account by the Company at the time the Separate
Account would have become entitled to the refund if it were a separate taxable
entity. Under such policy, the Company may derive a temporary or permanent
benefit in the form of reduced taxes. Any federal income taxes applicable to
assets of the Company in the Separate Accounts and not attributable to the
Policies shall be paid by the Company and shall not affect Accumulations or
Annuity Unit values.
The Separate Accounts are considered to be a part of and taxed with the
operations of the Company. The Company is taxed as a life insurance company
under subchapter L of the Internal Revenue Code ("Code"). The Company files a
consolidated tax return with its parent, Allmerica Financial, and other
affiliates.
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The Internal Revenue Service has issued regulations relating to the
diversification requirements for variable annuity and variable life insurance
contracts under Section 817(h) of the Code. The regulations provide that the
investments of a segregated asset account underlying a variable annuity contract
are adequately diversified if no more than 55% of the value of its assets is
represented by any one investment, no more than 70% by any two investments, no
more than 80% by any three investments, and no more than 90% by any four
investments. If the investments are not adequately diversified, the income on a
contract, for any taxable year of the Policy Owner, would be treated as ordinary
income received or accrued by the Policy Owner. It is anticipated that the
Funds of the Allmerica Investment Trust will comply with the diversification
requirements.
A. QUALIFIED AND NON-QUALIFIED POLICIES. From a federal tax viewpoint there
are two types of variable annuity Policies, qualified Policies and non-qualified
Policies. A qualified Policy is one that is purchased in connection with a
retirement plan which meets the requirements of Sections 401, 403, 408, or 457
of the Code, while a non-qualified Policy is one that is not so purchased. The
tax treatment for certain partial redemptions or surrenders will vary according
to whether they are made from a qualified Policy or a non-qualified Policy. For
more information on the tax provisions applicable to qualified Policies, see
Sections D through J, below.
B. TAXATION OF THE POLICIES IN GENERAL. The Company believes that the Policies
described in this Prospectus will, with certain exceptions (see K below), be
considered annuity policies under Section 72 of the Internal Revenue Code (the
"Code"). This section provides for the taxation of annuities. The following
discussion concerns annuities subject to Section 72. Section 72(e)(11)(A)(ii)
requires that all annuity policies issued by the same insurance company to the
same Policy Owner during any 12-month period be treated as a single Policy in
determining taxable distributions under Section 72(e).
With certain exceptions, any increase in the Accumulated Value of the Policy is
not taxable to the Policy Owner until received by such Owner. If the Policy is
surrendered or amounts are withdrawn prior to the Annuity Date, to the extent of
the amount withdrawn any investment gain in value over the cost basis of the
policy would be taxed as ordinary income. Under the current provisions of the
Code, amounts received under a non-qualified Policy prior to the annuity
commencement date (including payments made upon the death of the Annuitant or
Policy Owner), or as non-periodic payments after the annuity commencement
date, are generally first attributable to any investment gains credited to the
Policy over the taxpayer's basis (if any) in the Policy. Such amounts will be
treated as income subject to federal income taxation.
If the Policy Owner transfers (assigns) the Policy to another individual as a
gift, the Code provides that the Policy Owner will incur taxable income at the
time of the transfer. The amount of the taxable income is equal to the excess,
if any, of the cash surrender value of the Policy over the Policy Owner's basis
at the time of the gift. An exception is provided for certain transfers between
spouses.
When annuity payments are commenced under the Policy, generally a portion of
each payment may be excluded from gross income. The excludable portion is
generally determined by a formula that establishes the ratio that the cost basis
of the Policy bears to the expected return under the Policy. The portion of the
payment in excess of the excludable amount is taxable as ordinary income. Once
all cost basis in the Policy is recovered, the entire payment is taxable. If
the last Annuitant dies before cost basis is recovered, a deduction for the
difference is allowed on the Annuitant's final tax return.
C. TAX WITHHOLDING AND PENALTIES. The Code requires withholding with respect
to payments or distributions from employee benefit plans, annuities, and IRAs,
unless a taxpayer elects not to have withholding. In addition, the Code
requires reporting to the IRS of the amount of income received with respect to
payment or distributions from annuities.
In certain situations, the Code provides for a tax penalty if, prior to death,
disability or attainment of age 59 1/2, a Policy Owner makes a withdrawal or
receives any amount under the Policy, unless the distribution is in the form of
a life annuity. The penalty is 10% of the amount includible in income by the
Policy Owner.
The 10% penalty tax may be imposed on the withdrawal of the investment gains if
the withdrawal is made prior to age 59-1/2. The penalty tax will not be imposed
after age 59-1/2, or if the withdrawal follows the death of the Policy Owner
(or, if the Policy Owner is not an individual, the death of the primary
Annuitant, as defined in the Code), or in the case of the "total disability" (as
defined in the Code) of the Annuitant. Furthermore, under Section 72 of the
Code, this penalty tax will not be imposed, irrespective of age, if the amount
received is one of a series of "substantially equal" periodic payments made at
least annually for the life or life expectancy of the payee. This requirement
is met when the Policy Owner elects to have distributions made over the Policy
Owner's life expectancy, or over the joint life expectancy of the Policy Owner
and the beneficiary. The requirement that the amount to be paid out as one of a
series of "substantially equal" periodic payments is met when the number of
units withdrawn to make each distribution is substantially the same.
The tax treatment of certain partial redemptions or surrenders of the
non-qualified Policies offered by this Prospectus will vary according to whether
the amount redeemed or surrendered is allocable to an investment in the Policy
made before or after certain dates.
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D. PROVISIONS APPLICABLE TO QUALIFIED EMPLOYER PLANS. The tax rules applicable
to qualified employer plans, as defined by the Code, vary according to the type
of plan and the terms and conditions of the plan itself. Therefore, the
following is general information about the use of the Policies with various
types of qualified plans. The rights of any person to any benefits under such
qualified plans will be subject to the terms and conditions of the qualified
plans themselves regardless of the terms and conditions of the Policy issued in
connection with such qualified plans.
A loan to a participant or beneficiary from plans qualified under Sections 401
and 403 or an assignment or pledge of an interest in such a plan is generally
treated as a distribution. This general rule does not apply to loans which
contain certain repayment terms and do not exceed a specified maximum amount, as
required under Section 72(p).
E. QUALIFIED EMPLOYEE PENSION AND PROFIT SHARING TRUSTS AND QUALIFIED ANNUITY
PLANS. When an employee (including a self-employed individual) or one or more
of the employee's beneficiaries receives a "lump sum" distribution (a
distribution from a qualified plan described in Code Section 401(a) within one
taxable year equal to the total amount payable with respect to such an employee)
the taxable portion of such distribution may qualify for special treatment under
a special five-year income averaging provision of the Code. The employee must
have had at least 5 years of participation under the plan, and the lump sum
distribution must be made after the employee has attained age 59 1/2 or on
account of his or her death, separation from the employer's service (in the case
of a common-law employee) or disability (in the case of a self-employed
individual). Such treatment can be elected for only one taxable year once the
individual has reached age 59 1/2. An employee who attained age 50 before
January 1, 1986 may elect to treat part of the taxable portion of a lump-sum
distribution as long-term capital gain and may also elect 10-year averaging
instead of five-year averaging.
Qualified plans may accept non-deductible voluntary employee contributions up to
certain limits.
The Company can provide prototype plans for certain of the pension or profit
sharing plans for review by your legal counsel. For information, ask your
agent.
F. SELF-EMPLOYED INDIVIDUALS. The Self-Employed Individuals Tax Retirement Act
of 1962, as amended, frequently referred to as "H.R. 10", allows self-employed
individuals and partners to establish qualified pension and profit sharing
trusts and annuity plans to provide benefits for themselves and their employees.
These plans generally are subject to the same rules and requirements applicable
to corporate qualified plans, with some special restrictions imposed on
"owner-employees." An "owner-employee" is an employee who (1) owns the entire
interest in an unincorporated trade or business, or (2) owns more than 10% of
either the capital interest or profits interest in a partnership.
G. INDIVIDUAL RETIREMENT ACCOUNT PLANS. Any individual who earns
"compensation" (as defined in the Code and including alimony payable under a
court decree) from employment or self-employment, whether or not he or she is
covered by another qualified plan, may establish an Individual Retirement
Account or Annuity plan ("IRA") for the accumulation of retirement savings on a
tax-deferred basis. Income from investments is not included in "compensation".
The assets of an IRA may be invested in, among other things, annuity policies
including the Policies offered by this Prospectus.
Contributions to the IRA may be made by the individual or on behalf of the
individual by an employer. IRA contributions may be deductible up to the lesser
of (1) $2,000 or (2) 100% of compensation. The deduction is reduced
proportionately for adjusted gross income between $40,000 and $50,000 (between
$25,000 and $35,000 for unmarried taxpayers and between $0 and $10,000 for a
married taxpayer filing separately) if the taxpayer and his or her spouse file a
joint return and either is an active participant in an employer sponsored
retirement plan.
An individual and a working spouse each may have an IRA with the above-described
limit on each. An individual with an IRA may establish an additional IRA for a
non-working spouse if they file a joint return. Contributions to the two IRAs
together are deductible up to the lesser of $2,250 or 100% of compensation.
No deduction is allowed for contributions made for the year in which the
individual attains age 70 1/2 and years thereafter. Contributions for that year
and for years thereafter will result in certain adverse tax consequences.
Non-deductible contributions may be made to IRAs until the year in which the
individual attains age 70 1/2. Although these contributions may not be
deducted, taxes on their earnings are deferred until received. The maximum
permissible non-deductible contribution is $2,000 ($2,250 for a taxpayer and
non-working spouse). These limits are reduced by the amount of any deductible
contributions made by the taxpayer.
Contributions may be made with respect to a particular year until the due date
of the individual's federal income tax return for that year, not including
extensions. However, for reporting purposes, the Company will regard
contributions as being applicable to the year made unless it receives notice to
the contrary.
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All annuity payments and other distributions under an IRA will be taxed as
ordinary income unless the owner has made non-deductible contributions. In
addition, a minimum level of distributions must begin no later than April 1
following the year in which the individual attains age 70 1/2, and failure to
make adequate distributions at this time may result in certain adverse tax
consequences to the individual.
Distributions from all of an individual's IRAs are treated as if they were a
distribution from one IRA and all distributions during the same taxable year are
treated as if they were one distribution. An individual who makes a
non-deductible contribution to an IRA or receives a distribution from an IRA
during the taxable year must provide certain information on the
individual's tax return to enable the IRS to determine the proportion of the IRA
balance which represents non-deductible contributions. If the required
information is provided, that part of the amount withdrawn which is
proportionate to the individual's aggregate non-deductible contributions over
the aggregate balance of all of the individual's IRAs, is excludable from
income.
Distributions which are a return of a non-deductible contribution are
non-taxable, as they represent a return of basis. If the required information
is not provided to the IRS, distributions from an IRA to which both deductible
and non-deductible contributions have been made are presumed to be fully
taxable.
H. SIMPLIFIED EMPLOYEE PENSIONS. Employees may establish simplified employee
pensions ("SEPs") under Code Section 408(k) if certain requirements are met. A
SEP is an IRA to which the employer contributes under a written formula.
Currently, a SEP may accept employer contributions each year up to $30,000 or
15% of compensation (as defined), whichever is less. To establish SEPs the
employer must make a contribution for every employee age 21 and over who has
performed services for the employer for at least three of the five immediately
preceding calendar years and who has earned at least $300 for the year.
The employer's contribution is excluded from the employee's gross income for the
taxable year for which it was made up to the $30,000/15% limit. In addition to
the employer's contribution, the employee may contribute 100% of the employee's
earned income, up to $2,000, to the SEP, but such contributions will be subject
to the rules described above in "F. Individual Retirement Account Plans."
These plans are subject to the general employer's deduction limitations
applicable to all corporate qualified plans.
I. PUBLIC SCHOOL SYSTEMS AND CERTAIN TAX-EXEMPT ORGANIZATIONS. Under the
provisions of Section 403(b) of the Code, payments made for annuity policies
purchased for employees under annuity plans adopted by public school systems and
certain organizations which are tax exempt under Section 501(c)(3) of the Code
are excludable from the gross income of such employees to the extent that the
aggregate purchase payments for such annuity policies in any year do not exceed
the maximum contribution permitted under the Code.
For tax years beginning after 1988, a Policy qualifying under Section 403(b) of
the Code must provide that withdrawals or other distributions attributable to
salary reduction contributions (including earnings thereon) may not begin before
the employee attains age 59 1/2, separates from service, dies, or becomes
disabled. In the case of hardship a Policy Owner may withdraw amounts
contributed by salary reduction, but not the earnings on such amounts. Even
though a distribution may be permitted under these rules (e.g., for hardship or
after separation from service), it may nonetheless be subject to a 10% penalty
tax as a premature distribution, in addition to income tax.
The distribution restrictions are effective for years beginning after December
31, 1988, but only with respect to amounts that were not held under the Policy
as of that date.
J. TEXAS OPTIONAL RETIREMENT PROGRAM. Under a Code Section 403(b) annuity
policy issued as a result of participation in the Texas Optional Retirement
Program, distributions may not be received except in the case of the
participant's death, retirement or termination of employment in the Texas public
institutions of higher education. These restrictions are imposed by reason of
an opinion of the Texas Attorney General interpreting the Texas laws governing
the Optional Retirement Program.
K. SECTION 457 PLANS FOR STATE GOVERNMENTS AND TAX-EXEMPT ENTITIES. Code
Section 457 allows employees of a state, one of its political subdivisions, or
certain tax-exempt entities to participate in eligible government deferred
compensation plans. An eligible plan, by its terms, must not allow deferral of
more than $7,500 or 33 1/3% of a participant's includible compensation for the
taxable year, whichever is less. Includible compensation does not include
amounts excludable under the eligible deferred compensation plan or amounts paid
into a Code Section 403(b) annuity. The amount a participant may defer must be
reduced dollar-for-dollar by elective deferrals under a SEP, 401(k) plan or a
deductible employee contribution to a 501(c)(18) plan. Under eligible deferred
compensation plans the state, political subdivision, or tax-exempt entity will
be owner of the Policy.
If an employee also participates in another eligible plan or contributes to a
Code Section 403(b) annuity, a single limit of $7,500 will be applied for all
plans. Additionally, the employee must designate how much of the $7,500 or 33
1/3% limitation will be allocated among the various plans. Contributions to an
eligible plan will serve to reduce the maximum exclusion allowance for a Code
Section 403(b) annuity.
Amounts received by employees under such plans generally are includible in gross
income in the year of receipt.
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L. NON-INDIVIDUAL OWNERS. Non-individual Owners of deferred annuity contracts
(e.g., a corporation) generally will be currently taxed on any increase in the
cash surrender value of the deferred annuity attributable to contributions made
after February 28, 1986. This rule does not apply to immediate annuities or to
deferred annuities held by a qualified pension plan, an IRA, a 403(b) plan,
estates, employers with respect to terminated pension plans, or a nominee or
agent holding a contract for the benefit of an individual. Corporate-owned
annuities may result in exposure to the alternative minimum tax, to the extent
that such corporate-owned annuities result in an increase in a corporation's
book income. For tax years beginning after 1989, corporate-owned annuities may
result in exposure to the alternative minimum tax, to the extent that income on
the annuities increases the corporation's adjusted current earnings.
REPORTS
A Policy Owner is sent a report semi-annually which states certain financial
information about the Funds of Allmerica Investment Trust. The Company will
also furnish an annual report to the Policy Owner containing a statement of his
or her account, including unit values and other information required by
applicable law, rules and regulations.
CHANGES IN OPERATION OF THE SEPARATE ACCOUNTS
The Company reserves the right, subject to compliance with applicable law, to
(1) transfer assets from any Separate Account to another of the Company's
separate accounts having assets of the same class, (2) to operate any Separate
Account as a management investment company under the 1940 Act or in any other
form permitted by law, (3) to deregister any Separate Account under the 1940 Act
in accordance with the requirements of the 1940 Act and (4) to substitute the
shares of any other registered investment company for the Fund shares held by a
Separate Account, in the event that Fund shares are unavailable for Separate
Account investment, or if the Company shall determine that further investment in
such Fund shares is inappropriate in view of the purpose of the Separate
Account. In no event will the changes described above be made without notice to
Policy Owners in accordance with the 1940 Act.
CHANGE OF NAME OF THE SEPARATE ACCOUNTS
The Company reserves the right, subject to compliance with applicable law, to
change the names of the Separate Accounts.
LEGAL MATTERS
There are no legal proceedings pending to which any Separate Account is a party.
FURTHER INFORMATION
A Registration Statement under the Securities Act of 1933 relating to this
offering has been filed with the Securities and Exchange Commission. Certain
portions of the Registration Statement and amendments have been omitted from
this Prospectus pursuant to the rules and regulations of the Commission. The
omitted information may be obtained from the Commission's principal office in
Washington, D.C., upon payment of the Commission's prescribed fees.
APPENDIX A
MORE INFORMATION ABOUT THE GENERAL ACCOUNT
Because of exemption and exclusionary provisions in the securities laws,
interests in the General Account are not generally subject to regulation under
the provisions of the Securities Act of 1933 or the Investment Company Act of
1940. Disclosures regarding the fixed portion of the annuity contract and the
General Account may be subject to the provisions of the Securities Act of 1933
concerning the accuracy and completeness of statements made in the Prospectus.
The disclosures in this APPENDIX A have not been reviewed by the Securities and
Exchange Commission.
The General Account of the Company is made up of all of the general assets of
the Company other than those allocated to any Separate Account. Allocations to
the General Account become part of the assets of the Company and are used to
support insurance and annuity obligations.
A portion or all of net purchase payments may be allocated to accumulate at a
fixed rate of interest in the General Account. Such net amounts are guaranteed
by the Company as to principal and a minimum rate of interest. Under Elective
Payment Policies, the minimum interest which may be credited on amounts
allocated to the General Account is 4.5% compounded annually for the first five
policy years, 4% compounded annually for the next five policy years, and 3.5%
compounded annually thereafter. Under Single Payment Policies, the minimum
interest which may be credited on amounts allocated to the General Account is
3.5% compounded annually. Additional "Excess Interest" may or may not be
credited at the sole discretion of the Company.
29
<PAGE>
If a Policy is surrendered, or if an Excess Amount is redeemed, while the Policy
is in force and before the Annuity Date, a contingent deferred sales charge is
imposed if such event occurs before the Policy has been in force for nine full
policy years under an Elective Payment Policy, or seven full policy years under
a Single Payment Policy. Surrenders and redemptions are made on a
last-in/first-out basis.
LOANS FROM THE GENERAL ACCOUNT (QUALIFIED POLICIES ONLY)
Loans will be permitted only for TSAs and Policies issued to a plan qualified
under Section 401(a) of the Code. Loans are permitted only from a Policy's
accumulation in the General Account. The maximum loan amount is the amount
determined under the Company's maximum loan formula for qualified plans. The
minimum loan amount is $2,500. Loans will be secured by a security interest in
the Policy. Loans are subject to applicable retirement legislation and their
taxation is determined under the Federal income tax laws. The amount borrowed
will be transferred to a fixed, minimum guarantee loan assets account in the
Company's General Account, where it will accrue interest at a specified rate
below the then current loan interest rate. Generally, loans must be repaid
within five (5) years.
The amount of the death benefit, the amount payable on a full surrender and the
amount applied to provide an annuity on the Annuity Date will be reduced to
reflect any outstanding loan balance (plus accrued interest thereon). Partial
withdrawals may be restricted by the maximum loan limitation.
APPENDIX B
INFORMATION ABOUT DISCONTINUED POLICIES
This Prospectus is sent to owners of certain discontinued series of the
Company's variable annuity Policies including group annuity contracts (Group
Contracts) sold to fund Code Section 403(b) annuity plans, discontinued May 1,
1980, a series of individual flexible payment variable annuity contracts
(Flexible Contracts) discontinued October 15, 1975, and a series of individual
elective payment variable annuity Policies (Elective Policies) discontinued
February 12, 1980. Such policies differ in some respects from the Policies
described in this Prospectus. The significant differences between the
discontinued contracts and the Policies described in this Prospectus are
summarized below. For more detailed information contract holders should refer
to their contract or to the prospectus received at the time of purchase.
A. DISCONTINUED GROUP CONTRACTS. The discontinued Group Contracts differ from
the Policies described in this Prospectus in the following significant respects:
MASTER CONTRACTS. Under Group Contracts, a Master Group Contract is issued to
the employer. Enrolled employees are issued participation certificates which
set forth the participant's benefits under the contracts.
ACCUMULATION ACCOUNTS. Accumulation in the Separate Accounts investing in the
Investment Grade Income Fund and the Money Market Fund is not available under
Group Contracts.
SALES AND ADMINISTRATIVE EXPENSE CHARGE. Under Group Contracts, a charge for
sales and administrative expense is made from each purchase payment which
differs depending on whether the optional special minimum death benefit (MDB)
was purchased. Without the MDB the charge is 6.5% of each purchase payment
during the first 10 years of participation and 5.0% of each payment made
thereafter; with the MDB, the charge is 7.0% during the first 10 years of
participation and 6.0% thereafter.
SPECIAL MINIMUM DEATH BENEFIT. Under the optional MDB referred to above, in the
event of the participant's death on or before the Annuity Date, the death
benefit is the greater of (a) and (b) where (a) is the participant's accumulated
value as of the valuation date coincident with or next following receipt by the
Company of due proof of the participant's death and (b) is 100% of the purchase
payments made on the participant's behalf minus the dollar amount of all partial
redemptions if death occurs prior to the participant's 65th birthday and 75% of
the purchase payments made on the participant's behalf minus the dollar amount
of all redemptions if death occurs thereafter. The appropriate amount will be
paid to the beneficiary in one sum unless an annuity option is elected by the
beneficiary. Without the MDB, the pre-retirement death benefit is equal to the
participant's accumulated value.
ASSET CHARGE. Under the Group Contracts, the maximum limitation on the asset
charge is 1.50%.
PURCHASE PAYMENT MINIMUM. Under Group Contracts, each purchase payment must be
at least $25 for each participant. If the payment is split between the fixed
and variable accounts, the minimum which can be allowed to an account is $10.
ASSUMED INTEREST RATE. When electing a variable annuity option, the Participant
selects an assumed interest rate of 3 1/2% or 5%. If the investment performance
for a particular period is greater than the assumed interest rate for the same
period, the annuity payments will increase; if the investment performance is
less than the assumed interest rate, the payment will decrease.
30
<PAGE>
B. DISCONTINUED FLEXIBLE CONTRACTS. The discontinued Flexible Contracts differ
from the Policies described in this Prospectus in the following significant
respects:
ACCUMULATION ACCOUNTS. Accumulation in the Separate Accounts investing in the
Investment Grade Income Fund and the Money Market Fund is not available under
Flexible Contracts. In addition, under Flexible Contracts prior to the 1969
series, accumulation on a fixed basis is not available.
SALES AND ADMINISTRATIVE EXPENSE CHARGES. Under Flexible Contracts a deduction
is made from purchase payments for sales and administrative expense as follows:
<TABLE>
<CAPTION>
Portion
Representing
Portion Administrative
Portion of Percentage Representing and Other
Total Payments Deduction Sales Charge Expense Charge
-------------- --------- ------------ --------------
<S> <C> <C> <C>
First $10,000 10.0% 8.0% 2.0%
Next 15,000 9.0 6.5 2.5
Next 25,000 8.0 5.5 2.5
Next 25,000 7.0 5.0 2.0
Next 25,000 6.0 4.0 2.0
Balance 5.0 3.5 1.5
</TABLE>
There is no semi-annual policy fee under Flexible Contracts.
SURRENDER CHARGE. Under Flexible Contracts a charge is made on amounts
withdrawn or on contract surrenders during the first five contract years equal
to 2% of the amount surrendered or withdrawn.
ASSET CHARGE. Under Flexible Contracts, the maximum limitation on the asset
charge is 1.50%.
PRE-RETIREMENT DEATH BENEFIT. Under Flexible Contracts the pre-retirement death
benefit is equal to the accumulated value; there is no minimum death benefit.
PAYMENT MINIMUMS. Under Flexible Contracts, payments after the first must be at
least $100 or $25 in connection with the monthly automatic payment plan or any
employee benefit plan or for dividend transfers from insurance policies or
annuities written by First Allmerica.
VOTING RIGHTS. Under Flexible Contracts the owner has voting rights after the
Annuity Date.
ASSUMED INTEREST RATE. Under Flexible Contracts, annuity options are available
with a 3 1/2% or a 5% assumed interest rate as described above under
"Discontinued Group Contracts".
C. DISCONTINUED ELECTIVE POLICIES. The discontinued Elective Policies differ
from the Policies described in this Prospectus in the following significant
respects:
ACCUMULATION ACCOUNTS. Accumulation under the Money Market Account is not
available under Elective Policies.
SALES AND ADMINISTRATIVE EXPENSE CHARGE. Under Elective Policies a deduction is
made from purchase payments for sales and administrative expense as follows:
31
<PAGE>
(1) Under elective payment variable annuity Policies, the charge for sales
and administrative expense during the first ten contract years is a
percentage of total purchase payments based on the following table:
<TABLE>
<CAPTION>
Portion
Representing
Portion Charge for
Portion of Percentage Representing Administrative
Total Payments Deduction Sales Charge Expense
-------------- --------- ------------ -------
<S> <C> <C> <C>
First $12,000 8.75% 6.50% 2.25%
Next 13,000 8.25 6.00 2.25
Next 25,000 7.25 5.00 2.25
Next 25,000 6.25 4.25 2.00
Next 25,000 5.25 3.50 1.75
Balance 4.25 2.75 1.50
</TABLE>
After the tenth Policy anniversary, all payments under elective payment Policies
will be charged at the rate of 4.25%.
(2) Where a purchase payment under an elective payment Policy arises from
amounts payable under insurance Policies or annuities (such as death
benefits, maturities under endowment contracts, surrender values and
dividends) written by First Allmerica, insurance policies written by
the Company, or death benefits under fixed or variable annuities
written by the Company, the charge for sales and administrative expense
which is applied to such payment is based on the following table:
<TABLE>
<CAPTION>
Portion
Representing
Portion Charge for
Portion of Percentage Representing Administrative
Total Payments Deduction Sales Charge Expense
-------------- --------- ------------ -------
<S> <C> <C> <C>
First $12,000 5.50% 3.25% 2.25%
Next 13,000 4.50 2.25 2.25
Next 25,000 3.50 1.50 2.00
Balance 2.50 75 1.75
</TABLE>
After the tenth Policy anniversary, all payments will be charged
at the rate of 2.50%.
There is no surrender or withdrawal charge on Elective Policies.
There is no semi-annual policy fee on Elective Policies.
ASSUMED INTEREST RATE. Under Elective Policies, annuity options are available
with a 3 1/2% or a 5% assumed interest rate as described above under
"Discontinued Group Contracts".
PARTIAL REDEMPTION AND REPAYMENT UNDER NON-QUALIFIED CONTRACTS. Upon written
request signed by the Policy Owner filed at the Company's principal office, an
owner of an Elective Policy may redeem a portion of the accumulated value of his
or her Policy, subject to limits described below, and such amounts may be repaid
fully or in part at any time within a two-year period from the date of the
redemption without imposition of a charge for sales and administrative expense.
A transaction fee of $20 will be deducted from the amount of any such
redemption. Each partial redemption and each repayment must be in a minimum
amount of $200. Because the transaction fee is deducted at the time an amount
is redeemed, the Policy Owner should utilize this Policy provision only where he
or she intends to repay such amounts. Further, a Policy Owner considering
utilizing this provision to redeem small amounts should consider whether the
charge for sales and administrative expense, applicable upon repayment of such
amounts in absence of this provision, would be less than the $20 transaction
fee. If any amount is repaid at a time when the annuity rates contained in the
Company's then currently offered variable annuity Policies are less favorable
than the annuity rates contained in the Policy Owner's Policy, the Company
reserves the right to apply such less favorable rates to the portion of the
Policy's accumulated value attributable to the repayment.
A partial redemption will result in cancellation of a number of units equivalent
in value to the amount of the partial redemption, including the $20 transaction
fee as of the Valuation Date the request is received at the Company's principal
office. At the time a repayment is made, a number of units will be credited
equivalent to the amount repaid as of the Valuation Date the repayment is
received at the Company's principal office.
Partial redemption and repayment will not be permitted if the total of all
partial redemptions outstanding at any one time would exceed the total amount of
all payments made under the Policy, exclusive of repayments, minus the amount of
any partial redemptions or, if the withdrawal would reduce the owner's
accumulated value under the Policy to less than $500.
32
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
INDIVIDUAL VARIABLE ANNUITY POLICIES
STATEMENT OF ADDITIONAL INFORMATION
Separate Account VA-A
Separate Account VA-B Separate Account VA-G
Separate Account VA-C Separate Account VA-H
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS OF THE ABOVE LISTED SEPARATE ACCOUNTS DATED
APRIL 30, 1996 ("THE PROSPECTUS"). THE PROSPECTUS MAY BE OBTAINED FROM
INDIVIDUAL CUSTOMER SERVICES, ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY
COMPANY, 440 LINCOLN STREET, WORCESTER, MASSACHUSETTS 01653.
DATED APRIL 30, 1996
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY. . . . . . . . . . . . . . . . . . . . . . . . 2
TAXATION OF THE SEPARATE ACCOUNTS AND THE
COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
UNDERWRITERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ANNUITY PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
GENERAL INFORMATION AND HISTORY
Separate Account VA-A, Separate Account VA-B, Separate Account VA-C, Separate
Account VA-G, and Separate Account VA-H are separate investment accounts of
Allmerica Financial Life Insurance and Annuity Company ("Company"). The Company
was formerly known as SMA Life Assurance Company until October 1, 1995. The
Company is a life insurance company organized under the laws of Delaware in July
1974. Its principal office is located at 440 Lincoln Street, Worcester,
Massachusetts 01653, telephone (508) 855-1000. The Company is an indirectly
wholly-owned subsidiary of First Allmerica Life Insurance Company (First
Allmerica) which in turn is a wholly-owned subsidiary of Allmerica Financial
Corporation ("AFC"). First Allmerica, 440 Lincoln Street, Worcester,
Massachusetts, is the fifth oldest life insurance company in America. First
Allmerica originally organized under the laws of Massachusetts in 1844 as a
mutual life insurance company and known as State Mutual Life Assurance Company
of America converted to stock life insurance company on October 16, 1995, and
adopted its present name.
The Separate Accounts were organized originally as open-end management
investment companies under the 1940 Act. The reorganization of the Separate
Accounts as unit investment trusts was approved by Policy Owners on April 18,
1985 and was effective on April 29, 1985.
Separate Account VA-A (named the American Variable Annuity Fund before January
1, 1982) was authorized by vote of the Board of Directors of the Company on
March 31, 1967. Separate Accounts VA-B and VA-C (named the A.V.A. Income Fund
and the A.V.A. Qualified Income Fund, respectively, before January 1, 1982) were
authorized by vote of the Board of Directors of the Company on July 30, 1974.
Separate Accounts VA-G and VA-H were authorized by vote of the Board of
Directors of the Company on February 24, 1983.
As of December 31, 1995, 0% of the assets of Separate Account VA-H was
attributable to the capital contributed by the Company to establish the Account.
-2-
<PAGE>
TAXATION OF THE SEPARATE
ACCOUNT AND THE COMPANY
The Separate Accounts are considered to be a part of and taxed with the
operations of the Company. The Company is taxed as a life insurance company
under subchapter L of the Code and files a consolidated tax return with its
parent and affiliated companies.
The Company intends to make a charge for any effect which the income, assets, or
existence of the Separate Account may have upon its tax. The Separate Accounts
presently are not subject to tax, but the Company reserves the right to assess a
charge for taxes should the Separate Accounts at any time become subject to tax.
Such charge for taxes, if any, will be assessed on a fair and equitable basis in
order to preserve equity among classes of Policy Owners and with respect to each
Separate Account as though that Separate Account were a separate taxable entity.
Accordingly, the charge for taxes may be made irrespective of whether any taxes
are payable currently by the Company. Conversely, if any Separate Account would
be entitled to a tax refund on a separate entity basis at any such time, an
equivalent amount will be credited to that Separate Account by the Company at
such time as the Separate Account would have become entitled to such refund if a
separate taxable entity. Under such policy, the Company may derive a temporary
or permanent benefit in the form of reduced taxes. Any federal income taxes
applicable to assets of the Company in the Separate Accounts and not
attributable to the Policies shall be paid by the Company and shall not affect
Accumulation or Annuity Unit values.
SERVICES
CUSTODIAN OF SECURITIES. The Company serves as custodian of the assets of the
Separate Account. Fund shares owned by the Separate Accounts are held on an
open account basis with Separate Account ownership of Fund shares reflected on
the records of the Funds and not represented by any transferable stock
certificates.
EXPERTS. The financial statements of the Company as of December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995
and of the Separate Accounts of the Company as of December 31, 1995 and for
the two years then ended, included in this Statement of Additional
Information constituting part of the Registration Statement, have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of the Company included herein should be considered
only as bearing on the ability of the Company to meet its obligations under the
Policies.
UNDERWRITERS
Allmerica Investments, Inc., a registered broker-dealer under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc. (NASD), serves as principal underwriter and general distributor
for the Policies pursuant to a contract between Allmerica Investments, Inc., the
Company, and the Separate Accounts. Allmerica Investments, Inc. distributes the
Policies on a best efforts basis. Allmerica Investments, Inc., 440 Lincoln
Street, Worcester, Massachusetts 01653 was organized in 1969 as a wholly-owned
subsidiary of First Allmerica and is, at present, indirectly wholly-owned by
First Allmerica.
The Policies offered by this Prospectus are offered continuously and may be
purchased from NASD registered representatives of Allmerica Investments, Inc.
and from certain independent broker-dealers which are NASD members and whose
representatives are authorized by applicable law to sell variable annuity
policies.
Commissions are paid by the Company to its licensed insurance agents on sales of
the Policies. The Company intends to recoup the commission and other sales
expense through a combination of anticipated surrender, partial redemption,
and/or annuitization charges the investment earnings on amounts allocated to
accumulate on a fixed basis in excess of the interest credited on fixed
accumulations by the Company, and the profit, if any, from the mortality and
expense risk charge.
-3-
<PAGE>
All persons selling the Policies are required to be licensed by their respective
state insurance authorities for the sale of variable annuity policies.
Registered representatives of Allmerica Investments, Inc. receive commissions on
the purchase payments of elective and single payment Policies equal to 5% and
3%, respectively. Managers who supervise the agents will receive overriding
commissions ranging up to no more than 2% of purchase payments. Independent
broker-dealers receive commissions of 5% and 4%, respectively, of which a
portion is paid to their registered representatives.
The aggregate amount of commissions paid to representatives of Allmerica
Investments, Inc. with respect to sales of the Company's Variable Annuity
Policies was $_____________ in 1995, $26,842,152.00 in 1994 and $21,276.666.00
in 1993.
These commissions are paid by the Company and do not result in any charge to
Policy Owners or to the Separate Account in addition to the charges described
under "CHARGES AND DEDUCTIONS" in the Prospectus.
ANNUITY PAYMENTS
The method by which the Accumulated Value under the Policy is determined is
described in detail under "K. Computation of Policy Values and Annuity
Payments"" in the Prospectus.
ILLUSTRATION OF ACCUMULATION UNIT CALCULATION USING HYPOTHETICAL EXAMPLE. The
Accumulation Unit calculation for a daily Valuation Period may be illustrated by
the following hypothetical example: Assume that the assets of a separate
account at the beginning of a one-day Valuation Period were $5,000,000; that the
value of an Accumulation Unit on the previous date was $1.135000; and that
during the Valuation Period, the investment income and net realized and
unrealized capital gains exceed net realized and unrealized capital losses by
$1,675. The Accumulation Unit value at the end of the current Valuation Period
would be calculated as follows:
(1) Accumulation Unit Value - Previous Valuation Period. . . . . . . $ 1.135000
(2) Value of Assets - Beginning of Valuation Period. . . . . . . . . $5,000,000
(3) Excess of investment income and net gains over
capital losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,675
(4) Adjusted Gross Investment Rate for the
valuation period (3):(2). . . . . . . . . . . . . . . . . . . . . . . 0.000335
(5) Annual Charge (one day equivalent of 1.25% per annum). . . . . . . 0.000034
(6) Net Investment Rate (4)-(5). . . . . . . . . . . . . . . . . . . . 0.000301
(7) Net Investment Factor 1.000000 + (6) . . . . . . . . . . . . . . . 1.000301
(8) Accumulation Unit Value - Current Period (1)x(7) . . . . . . . . $ 1.135342
Conversely, if unrealized capital losses and charges for expenses and taxes
exceeded investment income and net realized capital gains by $1,675, the
accumulated unit value at the end of the Valuation Period would have been
$1.134581.
The method for determining the amount of annuity payments is described in detail
under "K. Computation of Policy Values and Annuity Payments" in the Prospectus.
ILLUSTRATION OF VARIABLE ANNUITY PAYMENT CALCULATION USING HYPOTHETICAL EXAMPLE.
The determination of the Annuity Unit value and the variable annuity payment may
be illustrated by the following hypothetical example: Assume an Annuitant has
40,000 Accumulation Units in a Separate Account, and that the value of an
Accumulation Unit on the Valuation Date used to determine the amount of the
first variable annuity payment is $1.120000. On this basis, the Accumulated
Value of the Policy is $44,800 (40,000 x $1.120000). Assume also that the
Policy Owner elects an option for which the first monthly
-4-
<PAGE>
payment is $6.57 per $1,000 of Accumulated Value applied. Assuming no premium
tax or contingent deferred sales charge, the first monthly payment would be
44.800 multiplied by 6.57 or $294.34.
Assume that the Annuity Unit value for the assumed rate of 3-1/2% per annum for
the Valuation Date as of which the first payment was calculated was $1.100000.
(Annuity Unit values will not be the same as Accumulation Unit values because
the former reflect the 3-1/2% assumed interest rate used in the annuity rate
calculations. See "The Annuity Unit".) When this is divided into the first
monthly payment the number of Annuity Units represented by that payment is
determined to be 267.5818. The value of this same number of Annuity Units will
be paid in each subsequent month under most options. Assume further that the
net investment factor for the Growth Account for the Valuation Period applicable
to the next annuity payment is 1.000190. Multiplying this factor by .999906
(the one-day adjustment factor for the assumed interest rate of 3-1/2% per
annum) produces a factor of 1.000096. This is then multiplied by the Annuity
Unit value on the immediately preceding Valuation Date (assumed here to be
$1.105000). The result is an Annuity Unit value of $1.105106 for the current
monthly payment. The current monthly payment is then determined by multiplying
the number of Annuity Units by the current Annuity Unit value, or 267.5818 times
$1.105106, which produces a current monthly payment of $295.71.
PERFORMANCE INFORMATION
TOTAL RETURN
"Total Return" refers to the total of the income generated by an investment in a
Separate Account and of the changes of value of the principal invested (due to
realized and unrealized capital gains or losses) for a specified period, reduced
by the Separate Account's asset charge and any applicable contingent deferred
sales load which would be assessed upon complete redemption of the investment.
The Total Return figures are calculated by standardized methods prescribed by
rules of the Securities and Exchange Commission. The quotations are computed by
finding the average annual compounded rates of return over the specified periods
that would equate the initial amount invested to the ending redeemable values,
according to the following formula:
n
P(1 + T) = ERV
Where: P = a hypothetical initial payment to the Separate Account of $1,000
T = average annual total return
n = number of years
ERV = the ending redeemable value of the $1,000 payment at the end of the
specified period
The calculation of Total Return includes the annual charges against the assets
of the Separate Account. Prior to April 29, 1985 this charge is 1.50% on an
annual basis. From that date to February 15, 1991 the charge was 0.90% on an
annual basis. Since February 15, 1991, the charge has been 1.25% on an annual
basis. The calculation of ending redeemable value assumes the policy was issued
at the beginning of the period and a complete surrender of the policy at the
end of the period. The deduction of the contingent deferred sales charge, if
any, applicable at the end of the period is included in the calculation,
according to the following schedule:
-5-
<PAGE>
(1) For Elective Payment Policies:
<TABLE>
<CAPTION>
POLICY YEAR IN WHICH CHARGE AS PERCENTAGE
COMPLETE REDEMPTION OCCURS OF AMOUNT REDEEMED*
<S> <C>
1-3 7%
4 6%
5 5%
6 4%
7 3%
8 2%
9 1%
</TABLE>
(2) For Single Payment Policies:
<TABLE>
<CAPTION>
POLICY YEAR IN WHICH CHARGE AS PERCENTAGE
COMPLETE REDEMPTION OCCURS OF AMOUNT REDEEMED*
<S> <C>
1-3 5%
4 4%
5 3%
6 2%
7 1%
</TABLE>
*Subject to the maximum limit described in the prospectus.
No contingent deferred sales charge is deducted upon expiration of the periods
specified above. After the first policy year, 10% of the amount redeemed is not
subject to the contingent sales load.
The calculations of Total Return for the Elective Payment policies does not
include the deduction of the $9 semi-annual charge for administrative expenses,
which is deducted from Elective payment policies with an Accumulated Value of
$10,000 or less. If a policy were subject to this charge, its Total Return with
respect to a Separate Account would be reduced to the extent by which a portion
of the charge is assessed to policy value in that Separate Account.
SUPPLEMENTAL TOTAL RETURN INFORMATION
The Supplemental Total Return information in this section refers to the total of
the income generated by an investment in a Separate Account and of the changes
of value of the principal invested (due to realized and unrealized capital gains
or losses) for a specified period reduced by the Separate Account's asset
charges. However, it is assumed that the investment is NOT redeemed at the end
of each period. Because the contingent deferred sales load is NOT included in
the calculations, the Supplemental Total Return information is the same for both
Elective Payment Policies and Single Payment Policies.
The quotations of Supplemental Total Return are computed by finding the average
annual compounded rates of return over the specified periods that would equate
the initial amount invested to the ending values, according to the following
formula:
-6-
<PAGE>
n
P(1 + T) = EV
Where: P = a hypothetical initial payment to the Separate Account of $1,000
T = average annual total return
n = number of years
EV = the ending value of the $1,000 payment at the end of the
specified period
The calculation of Supplemental Total Return reflects the annual charge against
the assets of the Separate Account. Prior to April 29, 1985 this charge was
1.50% on an annual basis. From that date to February 15, 1991 the charge was
0.90% on an annual basis. Since February 15, 1991, the charge has been 1.25% on
an annual basis. The ending value assumes that the policy is NOT redeemed at
the end of the specified period, and there is therefore no adjustment for the
contingent deferred sales charge that would be applicable if the policy was
redeemed at the end of the period.
The calculations of Supplemental Total Return for the Elective Payment policies
does not include the deduction of the $9 semi-annual charge for administrative
expenses, which is deducted from Elective Payment policies with an Accumulated
Value of $10,000 or less. If a policy were subject to this charge, its
Supplemental Total Return with respect to a Separate Account would be reduced to
the extent by which a portion of the charge is assessed to policy value in that
Separate Account.
YIELD AND EFFECTIVE YIELD - SEPARATE ACCOUNTS VA-G AND VA-H
Set forth below is yield and effective yield information for Separate Accounts
VA-G and VA-H, for the seven-day period ended December 31, 1995:
<TABLE>
<CAPTION>
VA-G VA-H
----- -----
<S> <C> <C>
Yield 5.69% 5.69%
Effective 5.53% 5.53%
</TABLE>
The yield and effective yield figures are calculated by standardized methods
prescribed by rules of the Securities and Exchange Commission. Under those
methods, the yield quotation is computed by determining the net change
(exclusive of capital changes) in the value of a hypothetical pre-existing
account having a balance of one accumulation unit of the respective Separate
Account at the beginning of the period, subtracting a charge reflecting the
annual 0.90% deduction for mortality and expense risk, dividing the difference
by the value of the account at the beginning of the same period to obtain the
base period return, and then multiplying the return for a seven-day base period
by (365/7), with the resulting yield carried to the nearest hundredth of one
percent.
Separate Accounts VA-G and VA-H compute effective yield by compounding the
unannualized base period return by using the formula:
(365/7)
Effective Yield = [(base period return + 1) ] - 1
The calculations of yield and effective yield do NOT reflect the $9 semi-annual
charge for administrative expenses which deducted from Elective Payment policies
with Accumulated Value of $10,000 or less. If a policy were subject to this
charge, its yield or effective yield with respect to a Separate Account would be
reduced to the extent by which a portion of the charge is assessed to policy
value in the Separate Account.
FINANCIAL STATEMENTS
Financial Statements are included for Separate Accounts VA-A, VA-B, VA-C, VA-G
and VA-H of Allmerica Financial Life Insurance and Annuity Company and for the
Company.
-7-
<PAGE>
ALLMERICA FINANCIAL
LIFE INSURANCE AND
ANNUITY COMPANY
(formerly SMA Life Assurance Company)
STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1995
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
December 31, 1995
Statutory Financial Statements
Report of Independent Accountants . . . . . . . . . . . . . . . . . 1
Statement of Assets, Liabilities, Surplus and Other Funds . . . . . 3
Statement of Operations and Changes in Capital and Surplus. . . . . 4
Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Statutory Financial Statements . . . . . . . . . . . . . . 6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Allmerica Financial Life Insurance and Annuity Company
(formerly known as SMA Life Assurance Company)
We have audited the accompanying statutory basis statement of assets,
liabilities, surplus and other funds of Allmerica Financial Life Insurance and
Annuity Company as of December 31, 1995 and 1994, and the related statutory
basis statements of operations and changes in capital and surplus, and of cash
flows for each of the three years ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described more fully in Note 1 to the financial statements, the Company
prepared these financial statements using accounting practices prescribed or
permitted by the Insurance Department of the State of Delaware, which practices
differ from generally accepted accounting principles. The effects on the
financial statements of the variances between the statutory basis of accounting
and generally accepted accounting principles, although not reasonably
determinable, are presumed to be material.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Allmerica Financial Life Insurance and Annuity Company as of December 31,
1995 and 1994, or the results of its operations or its cash flows for each of
the three years ended December 31, 1995.
<PAGE>
To the Board of Directors and Stockholder of
Allmerica Financial Life Insurance and Annuity Company
(formerly known as SMA Life Assurance Company)
Page 2
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets, liabilities, surplus and other funds of
Allmerica Financial Life Insurance and Annuity Company as of December 31, 1995
and 1994, and the results of its operations and its cash flows for each of the
three years ended December 31, 1995, on the basis of accounting described in
Note 1.
As discussed in Note 1 to the financial statements, the Company's parent, State
Mutual Life Assurance Company of America, converted from a Massachusetts mutual
life insurance company to a Massachusetts stock life insurance company on
October 16, 1995. In connection with this transaction, the Company changed its
name to Allmerica Financial Life Insurance and Annuity Company and its parent
became a wholly-owned subsidiary of Allmerica Financial Corporation.
/s/Price Waterhouse LLP
- ------------------------
Price Waterhouse LLP
Boston, MA
February 5, 1996
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
STATEMENT OF ASSETS, LIABILITIES, SURPLUS AND
OTHER FUNDS
as of December 31,
(In thousands)
<TABLE>
<CAPTION>
ASSETS 1995 1994
---- ----
<S> <C> <C>
Cash $ 7,791 $ 7,248
Investments:
Bonds 1,659,575 1,595,275
Stocks 18,132 12,283
Mortgage loans 239,522 295,532
Policy loans 122,696 116,600
Real estate 40,967 51,288
Short term investments 3,500 45,239
Other invested assets 40,196 27,443
----------- -----------
Total cash and investments 2,132,379 2,150,908
Premiums deferred and uncollected (1,231) 5,452
Investment income due and accrued 38,413 39,442
Other assets 6,060 10,569
Assets held in separate accounts 2,978,409 1,869,695
----------- -----------
$ 5,154,030 $ 4,076,066
----------- -----------
----------- -----------
LIABILITIES, SURPLUS AND OTHER FUNDS
Liabilities:
Policy liabilities:
Life reserves $ 856,239 $ 890,880
Annuity and other fund reserves 865,216 928,325
Accident and health reserves 167,246 121,580
Claims payable 11,047 11,720
----------- -----------
Total policy liabilities 1,899,748 1,952,505
Expenses and taxes payable 20,824 17,484
Other liabilities 27,499 36,466
Asset valuation reserve 31,556 20,786
Obligations related to separate account business 2,967,547 1,859,502
----------- -----------
Total liabilities 4,947,174 3,886,743
----------- -----------
Surplus and Other Funds:
Common stock, $1,000 par value
Authorized - 10,000 shares
Issued and outstanding - 2,517 shares 2,517 2,517
Paid-in surplus 199,307 199,307
Unassigned surplus (deficit) 4,282 (13,621)
Special contingency reserves 750 1,120
----------- -----------
Total surplus and other funds 206,856 189,323
----------- -----------
$ 5,154,030 $ 4,076,066
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
STATEMENT OF OPERATIONS AND
CHANGES IN CAPITAL AND SURPLUS
for the year ended December 31,
(In thousands)
<TABLE>
<CAPTION>
REVENUE 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Premiums and other considerations:
Life $ 156,864 $ 195,633 $ 189,285
Annuities 729,222 707,172 660,143
Accident and health 31,790 31,927 35,718
Reinsurance commissions and reserve adjustments 20,198 4,195 2,309
---------- ---------- ----------
Total premiums and other considerations 938,074 938,927 887,455
Net investment income 167,470 170,430 177,612
Realized capital losses, net of tax (2,295) (17,172) (7,225)
Other revenue 37,466 26,065 19,055
---------- ---------- ----------
Total revenue 1,140,715 1,118,250 1,076,897
---------- ---------- ----------
POLICY BENEFITS AND OPERATING EXPENSES
Policy benefits:
Claims, surrenders and other benefits 391,254 331,418 275,290
Increase (decrease) in policy reserves (22,669) 40,113 15,292
---------- ---------- ----------
Total policy benefits 368,585 371,531 290,582
Operating and selling expenses 150,215 164,175 160,928
Taxes, except capital gains tax 26,536 22,846 19,066
Net transfers to separate accounts 556,856 553,295 586,539
---------- ---------- ----------
Total policy benefits and operating expenses 1,102,192 1,111,847 1,057,115
---------- ---------- ----------
NET INCOME 38,523 6,403 19,782
CAPITAL AND SURPLUS, BEGINNING OF YEAR 189,323 182,216 171,941
Unrealized capital gains (losses) on investments 8,279 12,170 (9,052)
Transfer from (to) asset valuation reserve (10,770) (9,822) 1,974
Other adjustments (18,499) (1,644) (2,429)
---------- ---------- ----------
CAPITAL AND SURPLUS, END OF YEAR $ 206,856 $ 189,323 $ 182,216
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
STATEMENT OF CASH FLOWS
for the year ended December 31,
(In thousands)
<TABLE>
<CAPTION>
CASH FLOW FROM OPERATING ACTIVITIES 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Premiums, deposits and other income $ 964,129 $ 962,147 $ 902,725
Allowances and reserve adjustments on
reinsurance ceded 20,693 3,279 22,185
Net investment income 170,949 173,294 182,843
Net increase in policy loans (6,096) (7,585) (7,812)
Benefits to policyholders and beneficiaries (393,472) (330,900) (298,612)
Operating and selling expenses and taxes (153,504) (193,796) (171,533)
Net transfers to separate accounts (608,480) (600,760) (634,021)
Federal income tax (excluding tax on capital gains) (6,771) (19,603) (4828)
Other sources (applications) (13,642) 19,868 7,757
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (26,194) 5,944 (1,296)
---------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Sales and maturities of long term investments:
Bonds 572,640 478,512 386,414
Stocks 481 63 64
Real estate and other invested assets 13,008 3,008 11,094
Repayment of mortgage principal 55,202 65,334 79,844
Capital gains tax (400) (968) (3,296)
Acquisition of long term investments:
Bonds (640,339) (508,603) (466,086)
Stocks (44) - -
Real estate and other invested assets (11,929) (24,544) (2,392)
Mortgage loans (415) (364) (2,266)
Other investing activities (3,206) 18,934 (27,254)
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (15,002) 31,372 (23,878)
---------- ---------- ----------
Net change in cash and short term investments (41,196) 37,316 (25,174)
CASH AND SHORT TERM INVESTMENTS
Beginning of the year 52,487 15,171 40,345
---------- ---------- ----------
End of the year $ 11,291 $ 52,487 $ 15,171
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
NOTES TO STATUTORY FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION - Allmerica Financial Life Insurance and
Annuity Company ("Allmerica Financial" or the "Company", formerly SMA Life
Assurance Company) is a wholly owned subsidiary of SMA Financial Corp., which is
wholly owned by First Allmerica Financial Life Insurance Company ("First
Allmerica", formerly, State Mutual Life Assurance Company of America), a stock
life insurance company. On October 16, 1995, First Allmerica converted from a
mutual life insurance company to a stock life insurance company. Concurrent
with this transaction, First Allmerica became a wholly owned subsidiary of
Allmerica Financial Corporation ("AFC").
The stockholder's equity of the Company is being maintained at a minimum level
of 5% of general account assets by First Allmerica in accordance with a policy
established by vote of First Allmerica's Board of Directors.
The Company's financial statements have been prepared on the basis of accounting
practices prescribed or permitted by the Insurance Department of the State of
Delaware and in conformity with practices prescribed by the National Association
of Insurance Commissioners (NAIC), which while common in the industry, vary in
some respects from generally accepted accounting principles. Significant
differences include:
- Bonds considered to be "available-for-sale" or "trading" are not
carried at fair value and changes in fair value are not recognized
through surplus or the statement of operations, respectively;
- The Asset Valuation Reserve, represents a reserve against possible
losses on investments and is recorded as a liability through a charge
to surplus. The Interest Maintenance Reserve is designed to include
deferred realized gains and losses (net of applicable federal income
taxes) due to interest rate changes and is also recorded as a
liability, however, the deferred net realized investment gains and
losses are amortized into future income generally over the original
period to maturity of the assets sold. These liabilities are not
required under generally accepted accounting principles;
- Total premiums, deposits and benefits on certain investment-type
contracts are reflected in the statement of operations, instead of
using the deposit method of accounting;
- Policy acquisition costs, such as commissions, premium taxes and other
items, are not deferred and amortized in relation to the revenue/gross
profit streams from the related contracts;
- Benefit reserves are determined using statutorily prescribed interest,
morbidity and mortality assumptions instead of using more realistic
expense, interest, morbidity, mortality and voluntary withdrawal
assumptions with provision made for adverse deviation;
- Amounts recoverable from reinsurers for unpaid losses are not recorded
as assets, but as offsets against the respective liabilities;
- Deferred federal income taxes are not provided for temporary
differences between amounts reported in the financial statements and
those included in the tax returns;
- Certain adjustments related to prior years are recorded as direct
charges or credits to surplus;
- Certain assets, designated as "non-admitted" assets (principally
agents' balances), are not recorded as assets, but are charged to
surplus; and,
- Costs related to other postretirement benefits are recognized only for
employees that are fully vested.
6
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
The preparation of financial statements in accordance with practices prescribed
or permitted by the Insurance Department of the State of Delaware and in
conformity with practices prescribed by the NAIC requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Certain reclassifications have been made to prior year amounts to conform with
the current year presentation.
VALUATION OF INVESTMENTS - Investments in bonds are carried principally at
amortized cost, in accordance with NAIC guidelines. Preferred stocks are
carried generally at cost and common stocks are carried at market value. Policy
loans are carried principally at unpaid principal balances.
Mortgage loans on real estate are stated at unpaid principal balances, net of
unamortized discounts. Mortgage loans are reduced for losses expected by
management to be realized on transfers of mortgage loans to real estate (upon
foreclosure), on the disposition or settlement of mortgage loans and on mortgage
loans which management believes may not be collectible in full. In determining
the amount of the loss, management considers, among other things, the estimated
fair value of the underlying collateral. Investment real estate and real estate
acquired through foreclosure are carried at the lower of depreciated cost or
market value. Depreciation is generally calculated using the straight-line
method.
An asset valuation reserve (AVR) for bonds, mortgage loans, stocks, real estate,
and other invested assets is maintained by appropriations from surplus in
accordance with a formula specified by the NAIC and is classified as a
liability.
FINANCIAL INSTRUMENTS - In the normal course of business, the Company enters
into transactions involving various types of financial instruments including
investments such as bonds, stocks and mortgage loans and investment and loan
commitments. These instruments involve credit risk and also may be subject to
risk of loss due to interest rate fluctuations. The Company evaluates and
monitors each financial instrument individually and, when appropriate, obtains
collateral or other security to minimize losses.
RECOGNITION OF PREMIUM INCOME AND ACQUISITION COSTS - In general, premiums are
recognized as revenue over the premium paying period of the policies;
commissions and other costs of acquiring the policies are charged to operations
when incurred.
SEPARATE ACCOUNTS - Separate account assets and liabilities represent segregated
funds administered and invested by the Company for the benefit of certain
variable annuity and variable life contract holders. Assets consist principally
of bonds, common stocks, mutual funds, and short term obligations at market
value. The investment income, gains, and losses of these accounts generally
accrue to the contract holders and therefore, are not included in the Company's
net income. Appreciation and depreciation of the Company's interest in the
separate accounts, including undistributed net investment income, is reflected
in capital and surplus.
INSURANCE RESERVES AND ANNUITY AND OTHER FUND RESERVES - Reserves for life
insurance, annuities, and accident and health insurance are established in
amounts adequate to meet the estimated future obligations of policies in
force. These liabilities are computed based upon mortality, morbidity and
interest rate assumptions applicable to these coverages, including provision
for adverse deviation. Reserves are computed using interest rates ranging
from 3% to 6% for individual life insurance policies, 3% to 5 1/2% for
accident and health policies and 3 1/2% to 9 1/2% for annuity contracts.
Mortality, morbidity and withdrawal assumptions for all policies are based on
the Company's own experience and industry standards. The assumptions vary by
plan, age at issue, year of issue and duration. Claims reserves are computed
based on historical experience modified for expected trends in frequency and
severity. Withdrawal characteristics of annuity and other fund reserves vary
by contract. At December 31, 1995 and 1994, approximately 84% and 77%,
respectively, of the contracts (included in both the general account and
separate accounts of the Company) were not subject to discretionary
withdrawal or were subject to withdrawal at book value less surrender charge.
All policy liabilities and accruals are based on the various estimates discussed
above. Although the adequacy of these amounts cannot be assured, management
believes that it is more likely than not that policy liabilities and accruals
will be sufficient to meet future obligations of policies in force. The amount
of liabilities and accruals, however, could be revised in the near term if the
estimates discussed above are revised.
7
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
FEDERAL INCOME TAXES - AFC, its life insurance subsidiaries, First Allmerica and
Allmerica Financial and its non-insurance domestic subsidiaries file a
life-nonlife consolidated United States federal income tax return. Entities
included within the consolidated group are segregated into either a life
insurance or non-life insurance company subgroup. The consolidation of these
subgroups is subject to certain statutory restrictions on the percentage of
eligible non-life taxable operating losses that can be applied to offset life
company taxable income. Allmerica P&C and its subsidiaries file a separate
United States Federal income tax return.
The federal income tax allocation policies and procedures are subject to written
agreement between the companies. The federal income tax for all subsidiaries in
the consolidated return of AFC is calculated on a separate return basis. Any
current tax liability is paid to AFC. Tax benefits resulting from taxable
operating losses or credits of AFC's subsidiaries are not reimbursed to the
subsidiary until such losses or credits can be utilized by the subsidiary on a
separate return basis.
CAPITAL GAINS AND LOSSES - Realized capital gains and losses, net of applicable
capital gains tax or benefit, exclusive of those transferred to the interest
maintenance reserve ("IMR"), are included in the statement of operations.
Unrealized capital gains and losses are reflected as direct credits or charges
to capital and surplus. The IMR, which is included in other liabilities,
establishes a reserve for realized gains and losses, net of tax, resulting from
changes in interest rates on short and long term fixed income investments. Net
realized gains and losses charged to the IMR are amortized into net investment
income over the remaining life of the investment sold. The Company uses the
seriatim method of amortization for interest related gains and losses arising
from the sale of mortgages, and uses the group method to amortize interest
related gains and losses arising from all other fixed income investments.
NOTE 2 - INVESTMENTS
BONDS - The carrying value and fair value of investments in bonds are as
follows:
<TABLE>
<CAPTION>
December 31, 1995
Gross Gross
Carrying Unrealized Unrealized Fair
(In thousands) Value Appreciation Depreciation Value
----- ------------ ------------ -----
<S> <C> <C> <C> <C>
Federal government bonds $ 67,039 $ 3,063 $ - $ 70,102
State, local and government agency bonds 13,607 2,290 23 15,874
Foreign government bonds 12,121 772 249 12,644
Corporate securities 1,471,422 55,836 6,275 1,520,983
Mortgage-backed securities 95,385 951 - 96,336
---------- ---------- ---------- ----------
Total $1,659,574 $ 62,912 $ 6,457 $1,715,939
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
December 31, 1995
Gross Gross
Carrying Unrealized Unrealized Fair
(In thousands) Value Appreciation Depreciation Value
----- ------------ ------------ -----
Federal government bonds $ 17,651 $ 8 $ 762 $ 16,897
State, local and government agency bonds 1,110 54 - 1,164
Foreign government bonds 31,863 83 3,735 28,211
Corporate securities 1,462,871 8,145 56,011 1,415,005
Mortgage-backed securities 81,780 268 1,737 80,311
---------- ---------- ---------- ----------
Total $1,595,275 $ 8,558 $ 62,245 $1,541,588
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
8
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
The carrying value and fair value by contractual maturity at December 31, 1995,
are shown below. Actual maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties or the Company may have the right to put or
sell the obligation back to the issuer. Mortgage-backed securities are
classified based on expected maturities.
<TABLE>
<CAPTION>
Carrying Fair
(In thousands) Value Value
----- -----
<S> <C> <C>
Due in one year or less $ 250,578 $ 258,436
Due after one year through five years 736,003 763,179
Due after five years through ten years 538,897 558,445
Due after ten years 134,097 135,880
---------- ----------
Total $1,659,575 $1,715,940
---------- ----------
---------- ----------
</TABLE>
MORTGAGE LOANS AND REAL ESTATE - Mortgage loans and real estate investments, are
diversified by property type and location. Real estate investments have been
obtained primarily through foreclosure. Mortgage loans are collateralized by
the related properties and are generally no more than 75% of the property value
at the time the original loan is made. At December 31, 1995 and 1994, mortgage
loan and real estate investments were distributed by the following types and
geographic regions:
<TABLE>
<CAPTION>
(In thousands)
Property Type 1995 1994
- ------------- ---- ----
<S> <C> <C>
Office buildings $ 127,149 $ 140,292
Residential 59,934 57,061
Retail 29,578 72,787
Industrial/Warehouse 38,192 39,424
Other 25,636 37,256
----------- -----------
Total $ 280,489 $ 346,820
----------- -----------
----------- -----------
Geographic Region 1995 1994
- ----------------- ---- ----
South Atlantic $ 86,410 $ 92,934
East North Central 55,991 72,704
Middle Atlantic 38,666 48,688
Pacific 32,803 39,892
West North Central 21,486 27,377
Mountain 9,939 12,211
New England 24,886 26,613
East South Central 5,487 6,224
West South Central 4,821 20,177
---------- ----------
Total $ 280,489 $ 346,820
---------- ----------
---------- ----------
</TABLE>
Reserves for mortgage loans and real estate reflected in the above amounts were
$18.9 million and $21.0 million at December 31, 1995 and 1994, respectively.
9
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
NET INVESTMENT INCOME - The components of net investment income for the year
ended December 31 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Bonds $ 122,318 $ 123,495 $ 126,729
Stocks 1,653 1,799 953
Mortgage loans 26,356 31,945 40,823
Real estate 9,139 8,425 9,493
Policy loans 9,486 8,797 8,215
Other investments 3,951 1,651 674
Short term investments 2,252 1,378 840
---------- ---------- ----------
175,155 177,490 187,727
Less investment expenses 9,703 9,138 11,026
---------- ---------- ----------
Net investment income, before IMR amortization 165,452 168,352 176,701
IMR amortization 2,018 2,078 911
---------- ---------- ----------
Net investment income $ 167,470 $ 170,430 $ 177,612
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES - Realized capital gains (losses) on
investments for the years ended December 31 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Bonds $ 727 $ 645 $ 10,133
Stocks (263) (62) 16
Mortgage loans (1,083) (17,142) (83)
Real estate (1,892) 605 (2,044)
--------- --------- ---------
(2,511) (15,954) 8,022
Less income tax 400 968 3,296
--------- --------- ---------
Net realized capital gains (losses) before transfer to IMR (2,911) (16,922) 4,726
Net realized capital gains transferred to IMR 616 (250) (11,951)
--------- --------- ---------
Net realized capital gains (losses) $ (2,295) $(17,172) $ (7,225)
--------- --------- ---------
--------- --------- ---------
</TABLE>
Proceeds from voluntary sales of investments in bonds during 1995, 1994 and 1993
were $22.4 million, $17.9 million, and $13.2 million, respectively. Gross gains
of $4.3 million, $3.0 million, and $4.5 million and gross losses of $5.2
million, $4.6 million, and $ .5 million, respectively, were realized on those
sales.
NOTE 3 - FAIR VALUE DISCLOSURES OF FINANCIAL INFORMATION
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" requires disclosure of fair value information
about certain financial instruments (insurance contracts, real estate, goodwill
and taxes are excluded) for which it is practicable to estimate such values,
whether or not these instruments are included in the balance sheet. The fair
values presented for certain financial instruments are estimates which, in many
cases, may differ significantly from the amounts which could be recognized upon
immediate liquidation. In cases where market prices are not available,
estimates of fair value are based on discounted cash flow analyses which utilize
current interest rates for similar financial instruments which have comparable
terms and credit quality.
10
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
FINANCIAL ASSETS:
CASH AND SHORT TERM INVESTMENTS - The carrying amounts reported in the statement
of assets, liabilities, surplus and other funds approximate fair value.
BONDS - Fair values are based on quoted market prices, if available. If a
quoted market price is not available, fair values are estimated using
independent pricing sources or internally developed pricing models using
discounted cash flow analyses.
STOCKS - Fair values are based on quoted market prices, if available. If a
quoted market price is not available, fair values are estimated using
independent pricing sources or internally developed pricing models.
MORTGAGE LOANS - Fair values are estimated by discounting the future contractual
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings. The fair value of below investment grade
mortgage loans is limited to the lesser of the present value of the cash flows
or book value.
POLICY LOANS - The carrying amount reported in the statement of assets,
liabilities, surplus and other funds approximates fair value since policy loans
have no defined maturity dates and are inseparable from the insurance contracts.
FINANCIAL LIABILITIES:
ANNUITY AND OTHER FUND RESERVES (WITHOUT MORTALITY/MORBIDITY FEATURES) - Fair
values for the Company's liabilities under individual annuity contracts are
estimated based on current surrender values.
The estimated fair values of the financial instruments as of December 31 were as
follows:
<TABLE>
<CAPTION>
1995 1996
---- ----
Carrying Fair Carrying Fair
(In thousands) Value Value Value Value
----- ----- ----- -----
<S> <C> <C> <C> <C>
Financial Assets:
Cash $ 7,791 $ 7,791 $ 7,248 $ 7,248
Short term investments 3,500 3,500 45,239 45,239
Bonds 1,659,575 1,715,940 1,595,275 1,541,588
Stocks 18,132 18,414 12,283 12,590
Mortgage loans 239,522 250,196 295,532 291,704
Policy loans 122,696 122,696 116,600 116,600
Financial Liabilities:
Individual annuity contracts 803,099 797,024 869,230 862,662
Supplemental contracts without life
contingencies 16,796 16,796 16,673 16,673
Other contract deposit funds 632 632 1,105 1,105
</TABLE>
11
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
NOTE 4 - FEDERAL INCOME TAXES
The federal income tax provisions for 1995, 1994 and 1993 were $17.4 million,
$13.1 million and $8.6 million, respectively, which include taxes applicable to
realized capital gains of $.4 million, $1.0 million and $3.3 million.
The effective federal income tax rates were 27%, 67% and 30% in 1995, 1994 and
1993, respectively. The differences between the federal statutory rate and the
Company's effective tax rates are primarily related to decreases in taxable
income for the write-offs of mortgage loans; and increases in taxable income for
differences in policyholder liabilities for federal income tax purposes and
financial reporting purposes and the deferral of policy acquisition costs for
federal tax purposes.
The consolidated federal income tax returns are routinely audited by the
Internal Revenue Service (IRS) and provisions are routinely made in the
financial statements in anticipation of the results of these audits. The IRS
has completed its examination of all of the consolidated federal income tax
returns through 1988. In management's opinion, adequate tax liabilities have
been established for all years. However, the amount of these liabilities could
be revised in the near term if estimates of the Company's ultimate liability are
revised.
NOTE 5 - REINSURANCE
The Company participates in reinsurance to reduce overall risks, including
exposure to large losses and to permit recovery of a portion of direct losses.
Reinsurance contracts do not relieve the Company from its obligation to its
policyholders. Reinsurance financial data for the years ended December 31, is
as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Reinsurance premiums assumed $ 3,442 $ 3,788 $ 4,190
Reinsurance premiums ceded
42,914 17,430 14,798
Deduction from insurance
liability including
reinsurance recoverable on
unpaid claims 82,227 46,734 42,805
</TABLE>
Individual life premiums ceded to First Allmerica aggregated $6.8 million, $7.8
million and $9.0 million in 1995, 1994 and 1993, respectively. The Company has
also entered into various reinsurance agreements with First Allmerica under
which certain insurance risks related to individual accident and health
business, premium income and related expenses are assumed by the Company from
First Allmerica. Premiums assumed pursuant to these agreements aggregated $3.4
million, $3.8 million and $4.2 million in 1995, 1994 and 1993, respectively .
During the year Allmerica Financial entered into a coinsurance agreement to
reinsure substantially all of its yearly renewable term life insurance.
Premiums ceded and reinsurance credits taken under this agreement amounted to
$25.4 million and $20.7 million, respectively. At December 31, 1995, the
deduction from insurance liability, including reinsurance recoverable on unpaid
claims under this agreement was $12.7 million.
NOTE 6 - ACCIDENT AND HEALTH POLICY AND CLAIM LIABILITIES
The Company regularly updates its estimates of policy and claims liabilities as
new information becomes available and further events occur which may impact the
resolution of unsettled claims for its accident and health line of business.
Changes in prior estimates are generally reflected in results of operations in
the year such changes are determined to be needed and recorded.
The policy and claims liabilities related to the Company's accident and health
business were $169.7 million and $123.5 million at December 31, 1995 and 1994,
respectively. Accident and health policy and claims liabilities have been
re-estimated for all prior years and were increased by $42.5 million, $10.9
million and $13.2 million, in 1995, 1994 and 1993, respectively, including $21.9
million and $2.8 million recorded as an adjustment to surplus in 1995 and 1993,
respectively. The unfavorable development is primarily due to reserve
strengthening and adverse experience in the Company's individual accident and
health line of business.
12
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
NOTE 7 - DIVIDEND RESTRICTIONS
Delaware has enacted laws governing the payment of dividends to stockholders by
insurers. These laws affect the dividend paying ability of the Company.
Pursuant to Delaware's statute, the maximum amount of dividends and other
distributions that an insurer may pay in any twelve month period, without the
prior approval of the Delaware Commissioner of Insurance, is limited to the
greater of (i) 10% of its statutory policyholder surplus as of the preceding
December 31 or (ii) the individual company's statutory net gain from operations
for the preceding calendar year (if such insurer is a life company) or its net
income (not including realized capital gains) for the preceding calendar year
(if such insurer is not a life company). Any dividends to be paid by an
insurer, whether or not in excess of the aforementioned threshold, from a source
other than statutory earned surplus would also require the prior approval of the
Delaware Commissioner of Insurance. At January 1, 1996, the Company could pay
dividends of $4.3 million to First Allmerica, without prior approval.
NOTE 8 - OTHER RELATED PARTY TRANSACTIONS
First Allmerica provides management, operating personnel and facilities on a
cost reimbursement basis to the Company. Expenses for services received from
First Allmerica were $ 85.8 million, $102.5 million and $98.9 million in 1995,
1994 and 1993, respectively. The net amounts payable to First Allmerica and
affiliates for accrued expenses and various other liabilities and receivables
were $12.6 million and $8.3 million at December 31, 1995 and 1994, respectively.
NOTE 9 - FUNDS ON DEPOSIT
In March 1994, the Company voluntarily withdrew from being licensed in New York.
In connection with the withdrawal First Allmerica, which is licensed in New
York, became qualified to sell the products previously sold by Allmerica
Financial in New York. The Company agreed with the New York Department of
Insurance to maintain, through a custodial account in New York, a security
deposit, the market value of which will at all times equal 102% of all
outstanding general account liabilities of the Company for New York
policyholders, claimants and creditors. As of December 31, 1995, the carrying
value and fair value of the assets or deposit was $295.0 million and $303.6
million, respectively, which is in excess of the required amount.
Additional securities with a carrying value of $4.2 million and $3.9 million
were on deposit with various other state and governmental authorities as of
December 31, 1995 and 1994, respectively.
NOTE 10 - LITIGATION
The Company has been named a defendant in various legal proceedings arising in
the normal course of business. In the opinion of management, based on the
advice of legal counsel, the ultimate resolution of these proceedings will not
have a material effect on the Company's financial statements.
13
<PAGE>
- -------------------------------------------------------------------------------
VARIABLE ANNUITY SEPARATE ACCOUNTS
STATEMENTS OF ASSETS AND LIABILITIES - DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
GROWTH INVESTMENT GRADE INCOME MONEY MARKET
SEPARATE ACCOUNT SEPARATE ACCOUNT SEPARATE ACCOUNT
VA-A VA-B VA-C VA-G VA-H
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment in shares of Allmerica
Investment Trust . . . . . . . . . . . . . . . . $ 212,132,498 $ 7,923,356 $ 20,870,690 $ 1,185,296 $ 5,459,266
Receivable from Allmerica Financial
Life Insurance and Annuity Company (Sponsor). . . -- 10,221 -- -- 19,382
-------------- ----------- ------------ ----------- -----------
Total assets. . . . . . . . . . . . . . . . . 212,132,498 7,933,577 20,870,690 1,185,296 5,478,648
LIABILITIES:
Payable to Allmerica Financial Life Insurance and
Annuity Company (Sponsor). . . . . . . . . . . . 511,251 -- 26,281 38,713 --
-------------- ----------- ------------ ----------- -----------
Net assets . . . . . . . . . . . . . . . . . . . . $ 211,621,247 $ 7,933,577 $ 20,844,409 $ 1,146,583 $ 5,478,648
------------- ----------- ------------ ----------- -----------
------------- ----------- ------------ ----------- -----------
Net asset distribution by category:
Qualified variable annuity policies. . . . . . . $ 166,239,911 -- $ 20,844,409 -- $ 5,478,648
Non-qualified variable annuity policies. . . . . 45,381,336 $ 7,933,577 -- $ 1,146,583 --
------------- ----------- ------------ ----------- -----------
$ 211,621,247 $ 7,933,577 $ 20,844,409 $ 1,146,583 $ 5,478,648
------------- ----------- ------------ ----------- -----------
------------- ----------- ------------ ----------- -----------
Units outstanding and net asset value per unit:
Post-1974 Series:
Qualified units outstanding,
December 31, 1995. . . . . . . . . . . . . . . . 22,038,924 -- 5,488,771 -- 3,029,681
Net asset value per qualified unit,
December 31, 1995. . . . . . . . . . . . . . . . $ 7.327159 -- $ 3.797646 -- $ 1.808325
Non-qualified units outstanding,
December 31, 1995. . . . . . . . . . . . . . . . 6,073,471 2,107,392 -- 639,321 --
Net asset value per non-qualified unit,
December 31, 1995. . . . . . . . . . . . . . . . $ 6.984326 $ 3.764642 -- $ 1.793440 --
Pre-1974 Series:
Qualified units outstanding,
December 31, 1995 . . . . . . . . . . . . . . . 638,576 -- -- -- --
Net asset value per qualified unit,
December 31, 1995. . . . . . . . . . . . . . . . $ 7.449724 -- -- -- --
Non-qualified units outstanding,
December 31, 1995. . . . . . . . . . . . . . . . 417,148 -- -- -- --
Net asset value per non-qualified unit,
December 31, 1995. . . . . . . . . . . . . . . . $ 7.101169 -- -- -- --
</TABLE>
- -------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
GROWTH INVESTMENT GRADE INCOME MONEY MARKET
SEPARATE ACCOUNT SEPARATE ACCOUNT SEPARATE ACCOUNT
VA-A VA-B VA-C VA-G VA-H
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . $ 20,691,251 $523,375 $ 1,370,910 $ 81,788 $ 328,593
EXPENSES:
Mortality and expense risk fee . . . . . . . . . . 2,216,795 91,842 240,377 16,439 66,092
Administrative expenses . . . . . . . . . . . . . 192,764 7,986 20,903 1,429 5,747
------------- ----------- ------------ ----------- -----------
Total expenses . . . . . . . . . . . . . . . . . 2,409,559 99,828 261,280 17,868 71,839
------------- ----------- ------------ ----------- -----------
Net investment income . . . . . . . . . . . . . . 18,281,692 423,547 1,109,630 63,920 256,754
------------- ----------- ------------ ----------- -----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain . . . . . . . . . . . . . . . . 5,514,889 11,339 58,373 -- --
Net unrealized . . . . . . . . . . . . . . . . . . 29,631,205 795,662 2,036,801 -- --
------------- ----------- ------------ ----------- -----------
Net realized and unrealized
gain on investments . . . . . . . . . . . . . . . 35,146,094 807,001 2,095,174 -- --
------------- ----------- ------------ ----------- -----------
Net increase in net assets
from operations. . . . . . . . . . . . . . . . . $ 53,427,786 $ 1,230,548 $ 3,204,804 $ 63,920 $ 256,754
------------- ----------- ------------ ----------- -----------
------------- ----------- ------------ ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
82
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
VARIABLE ANNUITY SEPARATE ACCOUNTS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
GROWTH INVESTMENT GRADE INCOME
SEPARATE ACCOUNT VA-A SEPARATE ACCOUNT VA-B
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . $ 18,281,692 $ 9,845,607 $ 423,547 $ 448,045
Net realized gain (loss) from security transactions. . . . 5,514,889 6,548,274 11,339 (1,349)
Net unrealized gain (loss) on investments. . . . . . . . . 29,631,205 (18,669,593) 795,662 (862,779)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from operations. . . 53,427,786 (2,275,712) 1,230,548 (416,083)
------------- ------------- ------------- -------------
FROM CAPITAL TRANSACTIONS:
Net purchase payments . . . . . . . . . . . . . . . . . . . 8,793,945 10,489,533 169,420 159,236
Terminations . . . . . . . . . . . . . . . . . . . . . . . (13,131,309) (14,302,061) (367,424) (579,689)
Annuity benefits . . . . . . . . . . . . . . . . . . . . . (728,749) (1,828,037) (23,752) (6,040)
Other transfers from (to) the General Account of
Allmerica Financial Life Insurance and
Annuity Company (Sponsor). . . . . . . . . . . . . . . . . (16,350,798) (35,084,901) (1,544,182) (1,133,064)
------------- ------------- ------------- -------------
Net decrease in net assets from capital transactions. . . . (21,416,911) (40,725,466) (1,765,938) (1,559,557)
------------- ------------- ------------- -------------
Net increase(decrease) in net assets. . . . . . . . . . . . 32,010,875 (43,001,178) (535,390) (1,975,640)
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . 179,610,372 222,611,550 8,468,967 10,444,607
------------- ------------- ------------- -------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . $ 211,621,247 $ 179,610,372 $ 7,933,577 $ 8,468,967
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE INCOME MONEY MARKET
SEPARATE ACCOUNT VA-C SEPARATE ACCOUNT VA-G
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . $ 1,109,630 $ 1,155,100 $ 63,920 $ 60,833
Net realized gain (loss) from security transactions. . . . 58,373 (35,786) -- --
Net unrealized gain (loss) on investments. . . . . . . . . 2,036,801 (2,212,717) -- --
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from operations. . . 3,204,804 (1,093,403) 63,920 60,833
------------- ------------- ------------- -------------
FROM CAPITAL TRANSACTIONS:
Net purchase payments . . . . . . . . . . . . . . . . . . . 929,097 1,374,331 293,603 245,690
Terminations . . . . . . . . . . . . . . . . . . . . . . . (1,808,663) (2,222,511) (164,851) (256,150)
Annuity benefits . . . . . . . . . . . . . . . . . . . . . (39,575) (53,233) -- (115)
Other transfers from (to) the General Account of
Allmerica Financial Life Insurance and
Annuity Company (Sponsor). . . . . . . . . . . . . . . . . (2,569,540) (4,004,650) (824,897) (1,282,493)
------------- ------------- ------------- -------------
Net decrease in net assets from capital transactions. . . . (3,488,681) (4,906,063) (696,145) (1,293,068)
------------- ------------- ------------- -------------
Net increase(decrease) in net assets. . . . . . . . . . . . (283,877) (5,999,466) (632,225) (1,232,235)
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . 21,128,286 27,127,752 1,778,808 3,011,043
End of year . . . . . . . . . . . . . . . . . . . . . . . . $ 20,844,409 $ 21,128,286 $ 1,146,583 $ 1,778,808
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
<CAPTION>
- --------------------------------------------------------------------------------------------
MONEY MARKET
SEPARATE ACCOUNT VA-H
YEAR ENDED DECEMBER 31,
1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . $ 256,754 $ 171,346
Net realized gain (loss) from security transactions. . . . -- --
Net unrealized gain (loss) on investments. . . . . . . . . -- --
------------- -------------
Net increase (decrease) in net assets from operations. . . 256,754 171,346
------------- -------------
FROM CAPITAL TRANSACTIONS:
Net purchase payments . . . . . . . . . . . . . . . . . . . 936,057 2,636,131
Terminations . . . . . . . . . . . . . . . . . . . . . . . (919,556) (1,537,902)
Annuity benefits . . . . . . . . . . . . . . . . . . . . . (51,143) (14,100)
Other transfers from (to) the General Account of
Allmerica Financial Life Insurance and
Annuity Company (Sponsor). . . . . . . . . . . . . . . . . (513,509) (4,136,601)
------------- -------------
Net decrease in net assets from capital transactions. . . . (548,151) (3,052,472)
------------- -------------
Net increase(decrease) in net assets. . . . . . . . . . . . (291,397) (2,881,126)
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . 5,770,045 8,651,171
------------- -------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . $ 5,478,648 $ 5,770,045
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
83
<PAGE>
VARIABLE ANNUITY SEPARATE ACCOUNTS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
NOTE 1 - ORGANIZATION
Separate Accounts VA-A, VA-B, VA-C, VA-G, and VA-H (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 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 individually as unit investment trusts
under the Investment Company Act of 1940, as amended (the 1940 Act). Each
Separate Account invests exclusively in a corresponding investment portfolio of
the Allmerica Investment Trust (the Trust) managed by Allmerica Investment
Management Company, Inc., a wholly-owned subsidiary of First Allmerica. The
Trust is an open-end, diversified series management investment company
registered under the 1940 Act.
The Separate Accounts have two types of variable annuity policies,
"qualified" policies and "non-qualified" policies. A qualified policy is one
that is purchased in connection with a retirement plan which meets the
requirements of Section 401, 403, 408, or 457 of the Internal Revenue Code,
while a non-qualified policy is one that is not purchased in connection with one
of the indicated retirement plans. The tax treatment for certain partial
redemptions or surrenders will vary according to whether they are made from a
qualified policy or a non-qualified policy.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Investments - Security transactions are recorded on the trade date.
Investments in shares of the Trust are stated at the net asset value per share
of the respective investment portfolio of the Trust. 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 respective investment portfolio of the
Trust 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 - INVESTMENTS
The number of shares owned, aggregate cost, and net asset value per share of
each Separate Accounts investment in the Trust at December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PORTFOLIO INFORMATION
SEPARATE INVESTMENT NUMBER OF AGGREGATE NET ASSET
ACCOUNT PORTFOLIO SHARES COST VALUE PER SHARE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VA-A Growth 97,487,361 $ 167,197,946 $ 2.176
VA-B}
VA-C} Investment Grade Income 25,778,018 27,504,617 1.117
VA-G}
VA-H} Money Market 6,644,562 6,644,562 1.000
</TABLE>
84
<PAGE>
VARIABLE ANNUITY SEPARATE ACCOUNTS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995, CONTINUED
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company makes a charge of 1.25% 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 1.275% per
annum. On February 15, 1991, the Board of Directors of the Company
increased the charge from .90% to 1.25% on policies issued in the 1974 and
later series. The total charge on policies issued prior to 1974 will remain
at .90% per annum due to a contract fee limit.
Allmerica Investments, Inc., (Allmerica Investments), a wholly-owned
subsidiary of First Allmerica, is principal underwriter and general
distributor of the Separate Accounts, and does not receive any compensation
for sales of the Variable Annuity policies. Commissions are paid to
registered representatives of Allmerica Investments by the Company. As the
current series of policies have a contingent deferred sales charge, no
deduction is made for sales charges at the time of the sale. For the year
ended December 31, 1995, the Company received $182,881, $6,508,
$33,678, $4,994, and $16,931 for contingent deferred sales charges
applicable to Separate Accounts VA-A, VA-B,
VA-C, VA-G and VA-H, respectively.
NOTE 5 - POLICYOWNERS AND SPONSOR TRANSACTIONS
Transactions from policyowners and sponsor were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994
---- ----
UNITS AMOUNT UNITS AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Separate Account VA-A - Growth
Qualified
Issuance of units 2,446,022 $ 13,708,847 3,217,242 $ 18,088,383
Redemption of units (4,800,730) (29,131,802) (8,895,152) (49,863,496)
-------------- -------------- --------------
Net decrease (2,354,708) $ (15,422,955) (5,677,910) $ (31,775,113)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Non-Qualified
Issuance of units 381,215 $ 2,366,959 724,261 $ 4,025,736
Redemption of units (1,346,936) (8,360,915) (2,396,939) (12,976,089)
-------------- -------------- --------------
Net decrease (965,721) $ (5,993,956) (1,672,678) $ (8,950,353)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Separate Account VA-B - Investment Grade Income
Issuance of units 152,455 $ 526,670 219,814 $ 728,534
Redemption of units (663,641) (2,292,608) (696,519) (2,288,091)
-------------- --------------
Net decrease (511,186) $ (1,765,938) (476,705) $ (1,559,557)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Separate Account VA-C - Investment Grade Income
Issuance of units 545,307 $ 1,941,190 866,192 $ 2,892,853
Redemption of units (1,532,585) (5,429,871) (2,359,679) (7,798,916)
--------------
Net decrease (987,278) $ (3,488,681) (1,493,487) $ (4,906,063)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Separate Account VA-G - Money Market
Issuance of units 924,240 $ 1,607,507 663,363 $ 1,116,875
Redemption of units (1,321,725) (2,303,652 (1,428,113) (2,409,943)
--------------
Net decrease (397,485) (696,145) (764,750) $ (1,293,068)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Separate Account VA-H- Money Market
Issuance of units 1,993,328 $ 3,534,916 1,591,663 $ 2,706,234
Redemption of units (2,299,109) (4,083,067) (3,389,635) (5,758,706)
--------------
Net decrease (305,781) $ (548,151) (1,797,972) $ (3,052,472)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
85
<PAGE>
VARIABLE ANNUITY SEPARATE ACCOUNTS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995, CONTINUED
NOTE6 - 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.
NOTE 7 - PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of the Trust shares by the
Separate Accounts during the year ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
SEPARATE
ACCOUNT INVESTMENT PORTFOLIO PURCHASES SALES
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
VA-A Growth $ 24,080,609 $ 27,155,722
VA-B}
VA-C} Investment Grade Income 3,149,925 6,919,770
VA-G}
VA-H} Money Market 4,117,548 5,040,212
------------ ------------
Totals $ 31,348,082 $ 39,115,704
------------ ------------
------------ ------------
</TABLE>
86
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Allmerica
Financial Life Insurance and Annuity
Company and Policyowners
of Separate Accounts VA-A, VA-B, VA-C,
VA-G, and VA-H 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
VA-A, VA-B, VA-C, VA-G, and VA-H 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 Trust,
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 23, 1996
87
<PAGE>
<PAGE>
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS
FINANCIAL STATEMENTS INCLUDED IN PART A
None
FINANCIAL STATEMENTS INCLUDED IN PART B
Financial Statements for Separate Accounts VA-A, VA-B, VA-C,
VA-G and VA-H
Financial Statements for Allmerica Financial Life Insurance and
Annuity Company
FINANCIAL STATEMENTS INCLUDED IN PART C
None
(b) EXHIBITS
Exhibit 1 - Vote Authorizing Establishment of Registrant was filed previously
on February 21, 1986, and is incorporated herein by reference.
Exhibit 2 - Not Applicable. Pursuant to Rule 26a-2, the Insurance Company
may hold the assets of the Registrant NOT pursuant to a trust
indenture or other such instrument.
Exhibit 3 - Sales and Administrative Services Agreement, Specimen Variable
Annuity Dealer Agreement, Schedule of Sales Commissions, were
previously filed as Exhibit 1(3)a, 1(3)b and 1(3)c of
Registrant's Form S-6, filed March 1, 1985 and are incorporated
herein by reference.
Exhibit 4 Elective Payment and Single Payment Policy forms were previously
filed as Exhibit 1(5) of Registrant's Form S-6 filed March 1,
1985 and Exhibit 4 of Registrant's Form N-4 filed
February 21, 1986, and are incorporated herein be reference.
Exhibit 5 - Application Forms were previously filed as Exhibit 1(10) of
Registrant's Form S-6 filed March 1, 1985, and are incorporated
herein by reference.
Exhibit 6 - The Depositor's Articles of Incorporation and Bylaws, were
previously filed in Post-Effective Amendment No. ____
on ______________ and are incorporated by reference herein.
Exhibit 7 - Not Applicable.
Exhibit 8 - AUV Calculation Services Agreement with The Shareholder Services
Group dated March 31, 1995 was previously filed on Maly 1, 1995,
and is incorporated herein by reference.
Exhibit 9 - Consent and Opinion of Counsel.
Exhibit 10 - Consent of Independent Accountants.
Exhibit 11 - None.
Exhibit 12 - None.
Exhibit 13 - None.
Exhibit 14 - Not Applicable.
Exhibit 15 - Service Agreement dated November 1, 1995 between Fidelity
Investment Institutional Operations Company and Allmerica
Financial Life Insurance and Annuity Company is filed herewith.
Exhibit 16 - Consent of newly elected Directors
Exhibit 27 - Financial Data Schedules filed herewith.
<PAGE>
Item No. 25. DIRECTORS AND EXECUTIVE OFFICERS OF THE DEPOSITOR.
The principal business address of all the following Directors and
Officers is:
440 Lincoln Street
Worcester, Massachusetts 01653
DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
Name and Position Principal Occupation(s) During the Past 5 Years
- ----------------- ----------------------------------------------
<S> <C>
Bruce C. Anderson Director of First Allmerica since 1996;
Director and Vice President Vice President, First Allmerica
Abigail M. Armstrong Secretary of First America since 1996;
Secretary and Counsel Counsel, First Allmerica
Mark R. Colborn Vice President and Controller, First Allmerica
Vice President and Controller
Kruno Huitzingh Director of First Allmerica since 1996;
Director, Vice President and Vice President & Chief Information Officer,
Chief Information Officer First Allmerica since 1993; Executive Vice
President, Chicago Board Options Exchange,
1985 to 1993
John F. Kelly Director of First Allmerica since 1996; Senior
Director Vice President, General Counsel and Assistant
Secretary, First Allmerica
John F. O'Brien Director, Chairman of the Board, President
Director and Chairman and Chief Executive Officer of First
of the Board Allmerica
Edward J. Parry, III Vice President and Treasurer, First Allmerica
Vice President and Treasurer since 1993; Assistant Vice President to 1992
to 1993; Manager, Price Waterhouse, 1987 to
1992
Richard M. Reilly Director of First Allmerica since 1996; Vice
Director and Vice President President, First Allmerica; Director and
President, Allmerica Investments, Inc.;
Director and President Allmerica Investment
Management Company, Inc. since 1992, Director
and Executive Vice President, 1990 to 1992
Larry C. Renfro Director of First Allmerica since 1996; Vice
President, First Allmerica
Theodore J. Rupley Director of First Allmerica since 1996;
Director President, The Hanover Insurance Company
since 1992; President, Fountain Powerboats,
1992; President, Metropolitan Property &
Casualty Company, 1986-1992
Philip J. Soule Director of First Allmerica since 1996; Vice
Director President, First Allmerica
Eric Simonsen Director of First Allmerica since 1996; Vice
Director, Vice President and President and Chief Financial Officer, First
Financial Officer Allmerica
Diane E. Wood Director of First Allmerica since 1996; Vice
Director and Vice President President, First Allmerica
</TABLE>
Item 26. PERSONS UNDER COMMON CONTROL WITH REGISTRANT. See attached
organization chart.
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
AAM Equity Fund 440 Lincoln Street Massachusetts Grantor
Worcester, MA 01653 Trust
Allmerica Asset 440 Lincoln Street Investment advisory
Management, Worcester, MA 01653 service
Inc.
Allmerica Employees 440 Lincoln Street Insurance Agency
Insurance Agency, Inc. Worcester, MA 01653
<PAGE>
Allmerica Financial 440 Lincoln Street Insurance Agency
Services Insurance Worcester, MA 01653
Agency, Inc.
Allmerica Funds 440 Lincoln Street Investment Company
Worcester, MA 01653
Allmerica Institutional 440 Lincoln Street Accounting, marketing
Services, Inc. (formerly Worcester, MA 01653 and shareholder
known as 440 Financial services for
Group of Worcester, Inc.) investment companies
Allmerica Investment 440 Lincoln Street Investment advisory
Management Company, Inc. Worcester, MA 01653 services
Allmerica Investments, Inc. 440 Lincoln Street Securities, retail
Worcester, MA 01653 broker-dealer
Allmerica Investment Trust 440 Lincoln Street Investment Company
Worcester, MA 01653
Allmerica Property and 440 Lincoln Street Investment Company
Casualty Companies, Inc. Worcester, MA 01653
Allmerica Securities Trust 440 Lincoln Street Investment Company
Worcester, MA 01653
Allmerica Services, Inc. 440 Lincoln Street Service Company
Worcester, MA 01653
Allmerica Trust Company, 440 Lincoln Street Limited purpose
N.A. Worcester, MA 01653 national trust
company
AMGRO, Inc. 472 Lincoln Street Premium financing
Worcester, MA 01653
APC Funding Corp. 440 Lincoln Street Special purpose
Worcester, MA 01653 funding vehicle for
commercial paper
Beltsville Drive 440 Lincoln Street Real estate
Properties Worcester, MA 01653 partnership
Limited Partnership
Citizens Corporation 440 Lincoln Street Holding Company
Worcester, MA 01653
Citizens Insurance Company 645 West Grand River Multi-line fire &
Howell, MI 48843 casualty insurance
Citizens Insurance Company 3950 Priority Way Multi-line fire &
of the Midwest South Drive, Suite 200 casualty insurance
Indianapolis, IN 46280
Citizens Insurance Company 8101 N. High Street Multi-line fire &
of Ohio P.O. Box 342250 casualty insurance
Columbus, OH 43234
Citizens Management, Inc. 645 West Grand River Services Management
Howell, MI 48843 Company
Greendale Special 440 Lincoln Street Massachusetts Grantor
Placement Fund Worcester, MA 01653 Trust
The Hanover American 100 North Parkway Multi-line fire &
Insurance Company Worcester, MA 01653 casualty insurance
<PAGE>
The Hanover Insurance 100 North Parkway Multi-line fire &
Company Worcester, MA 01605 casualty insurance
Hanover Texas Insurance 801 East Campbell Road Incorporated Branch
Management Company, Inc. Richardson, TX 75081 Office of The Hanover
Insurance Company
Attorney-in-fact for
Hanover Lloyd's
Insurance Company
Hanover Lloyd's Insurance 801 East Campbell Road Multiline fire &
Company Richardson, TX 75081 casualty insurance
Hollywood Center, Inc. 440 Lincoln Street General business
Worcester, MA 01653 corporation
Linder Skokie Real Estate 440 Lincoln Street General business
Corporation Worcester, MA 01653 corporation
Lloyds Credit Corporation 440 Lincoln Street Premium financing
Worcester, MA 01653 service franchises
Logan Wells Water Company 603 Heron Drive Water Company,
Inc. Bridgeport, NJ 08014 servicing land
development
investment
Massachusetts Bay 100 North Parkway Multi-Insurance
Company Worcester, MA 01653 line fire and
casualty
SMA Financial Corp. 440 Lincoln Street Holding Company
Worcester, MA 01653
Allmerica Financial Life 440 Lincoln Street Life insurance,
Insurance and Annuity Worcester, MA 01653 accident and
Company health insurance,
annuities,
variable annuities
and variable
life insurance
Somerset Square, Inc. 440 Lincoln Street General Business
Worcester, MA 01653 Corporation
Sterling Risk Management 100 North Parkway Risk management
Services, Inc. Worcester, MA 01605 services
Item 27. NUMBER OF CONTRACT OWNERS.
As of December 31, 1995, the following number of contract owners had
interests in the Separate Accounts:
Qualified Non-Qualified
Contracts Contracts
--------- ---------
Separate Account VA-A 10,568 1,845
Separate Account VA-B 563
Separate Account VA-C 2,751
Separate Account VA-G 142
Separate Account VA-H 790
Item 28. INDEMNIFICATION.
Article VIII of the Bylaws of Allmerica Financial Life Insurance and Annuity
Company (the Depositor) state: Each Director and each Officer of the
Corporation, whether or not in office, (and his executors or administrators),
shall be indemnified or reimbursed by the Corporation against all expenses
actually and necessarily incurred by him in the
<PAGE>
defense or reasonable settlement of any action, suit, or proceeding in which he
is made a party by reason of his being or having been a Director or Officer of
the Corporation, including any sums paid in settlement or to discharge
judgement, except in relation to matters as to which he shall be finally
adjudged in such action, suit or proceeding to be liable for negligence or
misconduct in the performance of his duties as such Director or Officer; and
the foregoing right of indemnification or reimbursement shall not affect any
other rights to which he may be entitled under the Articles of Incorporation,
any statute, bylaw, agreement, vote of stockholders, or otherwise.
Item 29. PRINCIPAL UNDERWRITERS.
(a) Allmerica Investments, Inc. also acts as principal underwriter for the
following:
- VEL Account, VEL II Account, Separate Accounts VA-K, VA-P,
Allmerica Select Separate Account and Inheiritage Account of Allmerica
Financial Life Insurance and Annuity Company
- Separate Account I, Separate Accounts VA-K, VA-P, Allmerica Select
Separate Account,
VEL II Account and Inheiritage Account of First Allmerica
- Allmerica Investment Trust
(b) The Principal Business Address of each of the following Directors and
Officers of Allmerica Investments, Inc. is:
440 Lincoln Street
Worcester, Massachusetts 01653
Name Position or Office with Underwriter
- ---- -----------------------------------
Abigail M. Armstrong Secretary and Counsel
Edward T. Berger Vice President and Chief Compliance Officer
Philip J. Coffey Vice President
John F. Kelly Director
John F. O'Brien Director
Stephen Parker President and Chief Executive Officer
Edward J. Parry, III Treasurer
Richard M. Reilly Director
Eric A. Simonsen Director
Mark Steinberg Senior Vice President
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
Each account, book or other document required to be maintained by Section 31(a)
of the Investment Company Act of 1940 and Rules 31a-1 to 31a-3 thereunder are
maintained by the Company at 440 Lincoln Street, Worcester, Massachusetts or on
behalf of the Company by First Data Investor Services, 4400 Computer Drive,
Westboro, MA 01581.
Item 31. MANAGEMENT SERVICES.
Effective March 31, 1995, the Company has engaged The Shareholder Services
Group, Inc., 53 State Street, Boston, Massachusetts to provide daily unit value
calculations and related services for the Company's separate accounts.
Item 32. UNDERTAKINGS.
(a) Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
(b) The registrant hereby undertakes to include in the prospectus a postcard
that the applicant can remove to send for a Statement of Additional Information.
<PAGE>
(c) The registrant hereby undertakes to deliver a Statement of Additional
Information promptly upon written or oral request, according to the requirements
of this Form.
(d) Insofar as indemnification for liability arising under the 1933 Act may be
permitted to Directors, Officers and Controlling Persons of Registrant under any
registration statement, underwriting agreement or otherwise, Registrant has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a Director, Officer or Controlling Person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Director, Officer or Controlling Person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
Item 33. REPRESENTATIONS CONCERNING WITHDRAWAL RESTRICTIONS ON SECTION 403(b)
PLANS AND UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM.
Registrant, a separate account of Allmerica Financial Life Insurance and Annuity
Company ("Company"), states that it is (a) relying on Rule 6c-7 under the 1940
Act with respect to withdrawal restrictions under the Texas Optional Retirement
Program ("Program") and (b) relying on the "no-action" letter (Ref. No. IP-6-88)
issued on November 28, 1988 to the American Council of Life Insurance, in
applying the withdrawal restrictions of Internal Revenue Code Section
403(b)(11). Registrant has taken the following steps in reliance on the letter:
1. Appropriate disclosures regarding the redemption restrictions imposed by
the Program and by Section 403(b)(11) have been included in the prospectus
of each registration statement used in connection with the offer of the
Company's variable contracts.
2. Appropriate disclosures regarding the redemption restrictions imposed by
the Program and by Section 403(b)(11) have been included in sales
literature used in connection with the offer of the Company's variable
contracts.
3. Sales Representatives who solicit participants to purchase the variable
contracts have been instructed to specifically bring the redemption
restrictions imposed by the Program and by Section 403(b)(11) to the
attention of potential participants.
4. A signed statement acknowledging the participant's understanding of (i) the
restrictions on redemption imposed by the Program and by Section 403(b)(11)
and (ii) the investment alternatives available under the employer's
arrangement will be obtained from each participant who purchases a variable
annuity contract prior to or at the time of purchase.
Registrant hereby represents that it will not act to deny or limit a transfer
request except to the extent that a Service-Ruling or written opinion of
counsel, specifically addressing the fact pattern involved and taking into
account the terms of the applicable employer plan, determines that denial or
limitation is necessary for the variable annuity contracts to meet the
requirements of the Program or of Section 403(b). Any transfer request not so
denied or limited will be effected as expeditiously as possible.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, Registrant certifies that it meets all of the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Worcester, and Commonwealth of Massachusetts on the 26th day of April, 1996.
Allmerica Financial Life Insurance and
Annuity Company
Separate Account VA-C
(Registrant)
By: /s/ Joseph W. MacDougall, Jr.
-----------------------------
Joseph W. MacDougall, Jr.
Vice President, Associate General
Counsel and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed by the following persons in the
capacities and on the date indicted.
Signature Title Date
- --------- ----- ----
/s/ Richard M. Reilly Director, President and April 26,1996
- --------------------- Chief Executive Officer -------------
Richard M. Reilly
/s/ John F. O'Brien Director and Chairman of April 26,1996
- ------------------- the Board -------------
John F. O'Brien
/s/ Eric A. Simonsen Director, Vice President and April 26,1996
- -------------------- Chief Financial Officer -------------
Eric A. Simonsen
/s/ Mark R. Colborn Vice President and Controller April 26,1996
- ------------------- -------------
Mark R. Colborn
/s/ Richard J. Baker Director and Vice President April 26,1996
- -------------------- -------------
Richard J. Baker
/s/ John F. Kelly Director April 26,1996
- ----------------- -------------
John F. Kelly
<PAGE>
EXHIBIT TABLE
Exhibit 9 - Consent and Opinion of Counsel
Exhibit 10- Consent of Independent Accountants
Exhibit 15- Service Agreement
Exhibit 16- Consent of newly elected Directors
Exhibit 27- Financial Data Schedules
<PAGE>
April 21, 1996
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester MA 01653
Gentlemen:
In my capacity as Counsel of Allmerica Financial Life Insurance and Annuity
Company (the "Company"), I have participated in the preparation of the Post-
Effective Amendments to the Registration Statements for Separate Accounts VA-A,
VA-B, VA-C, VA-G and VA-H (collectively, the "Separate Accounts"), on Form N-4
under the Securities Act of 1933 and the Investment Company Act of 1940, with
respect to the Company's individual qualified variable annuity contracts and
individual non-qualified variable annuity contracts.
I am of the following opinion:
1. The Separate Accounts are separate accounts of the Company validly existing
pursuant to the Delaware Insurance Code and the regulations issued
thereunder.
2. The assets held in the Separate Accounts are not chargeable with
liabilities arising out of any other business the Company may conduct.
3. The individual qualified and non-qualified variable annuity contracts, when
issued in accordance with the Prospectus contained in the Registration
Statements and upon compliance with applicable local law, will be legal and
binding obligations of the Company in accordance with their terms and when
sold will be legally issued, fully paid and non-assessable.
In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as in my judgment are necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to the Post-
Effective Amendments to the Registration Statements of the Separate Accounts
filed under the Securities Act of 1933.
Very truly yours,
/s Sheila B. St. Hilaire
Sheila B. St. Hilaire
Counsel
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 40 to the Registration
Statement on Form N-4 of our report dated February 5, 1996, relating to the
financial statements of Allmerica Financial Life Insurance and Annuity
Company and our report dated February 23, 1996, relating to the financial
statements of Separate Accounts VA-A, VA-B, VA-C, VA-G and VA-H of Allmerica
Financial Life Insurance and Annuity Company, both of which appear in such
Statement of Additional Information. We also consent to the reference to us
under the heading "Experts" in such Statement of Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
April 25, 1996
<PAGE>
SERVICE AGREEMENT
This Agreement is entered into and effective as of the 1st day of November,
1995, by and between FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY
("FIIOC") and ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
("Company").
WHEREAS, FIIOC provides transfer agency and other services to Fidelity's
Variable Insurance Products Fund and Variable Insurance Products Fund II
(collectively "Funds"); and
WHEREAS, the services provided by FIIOC on behalf of the Funds include
responding to inquiries about the Funds, including the provision of information
about the Funds' investment objectives, investment policies, portfolio holdings,
etc.; and
WHEREAS, Company holds shares of the Funds in order to fund certain
variable annuity contracts, group annuity contracts, and/or variable life
insurance policies, the beneficial interests in which are held by individuals,
plan trustees, or others who look to Company to provide information about the
Funds similar to the information provided by FIIOC; and
WHEREAS, the Company and one or both of the Funds have entered into one or
more Participation Agreements, under which the Company agrees not to provide
information about the Funds except for information provided by the Funds or
their designees; and
WHEREAS, FIIOC and Company desire that Company be able to respond to
inquiries about the Funds from individual variable annuity owners, participants
in group annuity contracts issued by the Company, and owners and participants
under variable life insurance policies issued by the Company, and prospective
customers for any of the above; and
WHEREAS, FIIOC and Company recognize that Company's efforts in responding
to customer inquiries will reduce the burden that such inquiries would place on
FIIOC should such inquiries be directed to FIIOC.
NOW, THEREFORE, the parties do agree as follows:
1. INFORMATION TO BE PROVIDED TO COMPANY. FIIOC agrees to provide to
Company, on a periodic basis, directly or through a designee, information about
the Funds' investment objectives, investment policies, portfolio holdings,
performance, etc. The content and format of such information shall be as FIIOC,
in its sole discretion, shall choose. FIIOC may change the format and/or
content of such informational reports, and the frequency with which such
information is provided. For purposes of Section 4.2 of each of the Company's
Participation Agreement(s) with the Funds, FIIOC represents that it is the
designee of the Funds, and Company may therefore use the information provided by
FIIOC without seeking additional permission from the Funds.
2. USE OF INFORMATION BY COMPANY. Company may use the information
provided by FIIOC in communications to individuals, plan trustees, or others who
have legal title or beneficial interest in the annuity or life insurance
products issued by Company, and to prospective purchasers of such products or
beneficial interests thereunder. If such information is contained as part of
larger pieces of sales literature, advertising, etc., such pieces shall be
furnished for review to the Funds in accordance with the terms of the Company's
Participation Agreements with the Funds. Nothing herein shall give the Company
the right to expand upon, reformat or otherwise alter the information provided
by FIIOC. Company acknowledges that the information provided it by FIIOC may
need to be supplemented with additional qualifying information, regulatory
disclaimers, or other information before it may be conveyed to persons outside
the Company.
1
<PAGE>
3. COMPENSATION TO COMPANY. In recognition of the fact that Company will
respond to inquiries that otherwise would be handled by FIIOC, FIIOC agrees to
pay Company a quarterly fee computed as follows:
At the close of each calendar quarter, FIIOC will determine the Average
Daily Assets held in the Funds by the Company. Average Daily Assets shall be
the sum of the daily assets for each calendar day in the quarter divided by the
number of calendar days in the quarter. The Average Daily Assets shall be
multiplied by 0.0002 (2 basis points) and that sum shall be divided by four.
The resulting number shall be the quarterly fee for that quarter, which shall be
paid to Company during the following month.
Should the Participation Agreement(s) between Company and the Fund(s) be
terminated effective before the last day of a quarter, Company shall be entitled
to a fee for that portion of the quarter during which the Participation
Agreement was still in effect, unless such termination is due to misconduct on
the part of the Company. For such a stub quarter, Average Daily Assets shall be
the sum of the daily assets for each calendar day in the quarter through and
including the date of termination of the Participation Agreement(s), divided by
the number of calendar days in that quarter for which the Participation
Agreement was in effect. Such Average Daily Assets shall be multiplied by
0.0002 (2 basis points) and that number shall be multiplied by the number of
days in such quarter that the Participation Agreement was in effect, then
divided by three hundred sixty-five. The resulting number shall be the
quarterly fee for the stub quarter, which shall be paid to the Company during
the following month.
4. TERMINATION. This Agreement may be terminated by Company at any time
upon written notice to FIIOC. FIIOC may terminate this Agreement at any time
upon ninety (90) days' written notice to Company. FIIOC may terminate this
Agreement immediately upon written notice to Company (1) if required by any
applicable law or regulation, (2) if so required by action of the Fund(s) Board
of Trustees, or (3) if Company engages in any material breach of this Agreement.
This Agreement shall terminate immediately and automatically upon the
termination of Company's Participation Agreement(s) with the Funds, and in such
event no notice need be given hereunder.
5. INDEMNIFICATION. Company agrees to indemnify and hold harmless FIIOC
for any misuse by Company, its affiliates, its agents, its brokers, and any
persons controlling Company, under common control with Company, or controlled by
Company, of the information provided by FIIOC under this Agreement.
6. APPLICABLE LAW. This Agreement shall be constructed and the
provisions hereof interpreted under and in accordance with the laws of the
Commonwealth of Massachusetts.
7. ASSIGNMENT. This Agreement may not be assigned, except that it shall
be assigned automatically to any successor to FIIOC as the Funds' transfer
agent, and any such successor shall be bound by the terms of this Agreement.
IN WITNESS WHEREOF, the parties have set their hands as of the date first
written above.
FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY
By: /s/ Virginia Meany
---------------------
Virginia Meany
Senior Vice President
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
By: /s/Richard M. Reilly
--------------------
Name: Richard M. Reilly
--------------------
Title: President
--------------------
2
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
Consent of Newly Elected Director
Having been duly elected as a Director of Allmerica Financial Life Insurance
and Annuity Company ("Company"), effective April 30, 1996, each of the
undersigned hereby consents to being named as a Director of the Company in
such post-effective amendments to Registration Statements for the Company's
variable annuity and variable life contracts as will be filed with the
Securities and Exchange Commission on or before April 30, 1996, with an
effective date on or after April 30, 1996, pursuant to the requirements of
the Securities Act of 1933 and the Investment Company Act of 1940.
Signed this _____ day of April, 1996
/s/ Bruce C. Anderson /s/ Theodore J. Rupley
- ----------------------------- ------------------------------
Bruce C. Anderson Theodore J. Rupley
/s/ Kruno Huitzingh /s/ Phillip E. Soule
- ----------------------------- ------------------------------
Kruno Huitzingh Phillip E. Soule
/s/ Larry C. Renfro /s/ Diane E. Wood
- ----------------------------- ------------------------------
Larry C. Renfro Diane E. Wood
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 50
<NAME> VAA
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 167197946
<INVESTMENTS-AT-VALUE> 212132498
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 212132498
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 511251
<TOTAL-LIABILITIES> 511251
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 29168119
<SHARES-COMMON-PRIOR> 32488548
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 44934552
<NET-ASSETS> 211621247
<DIVIDEND-INCOME> 20691251
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 2409559
<NET-INVESTMENT-INCOME> 18281692
<REALIZED-GAINS-CURRENT> 5514889
<APPREC-INCREASE-CURRENT> 29631205
<NET-CHANGE-FROM-OPS> 53427786
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