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File No. 33-47216
811-6632
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 7
----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 9
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Allmerica Select Separate Account of SMA Life Assurance Company
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(Exact Name of Trust)
SMA Life Assurance Company
440 Lincoln Street
Worcester MA 01653
(508) 855-1000
--------------
(Registrant's telephone number including area code)
Abigail M. Armstrong, Secretary and Counsel
SMA Life Assurance Company
440 Lincoln Street
Worcester MA 01653
(Name and complete address of agent for service)
It is proposed that this filing will become effective:
___on__________________pursuant to paragraph (a) of Rule 485
___60 days after filing pursuant to paragraph (a) of Rule 485
___immediately after filing pursuant to paragraph (b) of Rule 485
X on October 1, 1995 pursuant to paragraph (b) of Rule 485
--- ------------------
VARIABLE ANNUITY POLICIES
Pursuant to Reg. Section 270.24f-2 of the Investment Company Act of 1940,
Registrant hereby declares that an indefinite amount of its securities is being
registered under the Securities Act of 1933. The Rule 24f-2 Notice for the
issuer's fiscal year ended December 31, 1994 was filed on February 23, 1995.
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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 SMA Life, the Separate Account
and the Trust, VIPF and T. Rowe"
6. . . . . . . . . . . . . . "Charges and Deductions"
7. . . . . . . . . . . . . . "Description of the Contract"
8. . . . . . . . . . . . . . Omitted
9. . . . . . . . . . . . . . "Payment on Death"
10 . . . . . . . . . . . . . "Purchase Payments"; "Computation of Contract
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
- ----------------- ----------------------------------------------
5. . . . . . . . . . . . . . "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"
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PROSPECTUS SUPPLEMENT
ALLMERICA SELECT
(Supplement to prospectus dated May 1, 1995)
Effective October 1, 1995, the name of SMA Life Assurance Company has been
changed to ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY. The attached
prospectus is hereby amended to delete the name "SMA Life Assurance Company" and
to substitute ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY.
* * *
The following is added to the first page of the Prospectus:
THE ALLMERICA SELECT VARIABLE ANNUITY CONTRACTS ("CONTRACTS") ARE OBLIGATIONS OF
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY AND ARE DISTRIBUTED BY
ITS AFFILIATE, ALLMERICA INVESTMENTS, INC. THE CONTRACTS ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR CREDIT UNION. THE
CONTRACTS ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL INSURANCE DEPOSIT
CORPORATION (FDIC), OR ANY OTHER FEDERAL AGENCY. INVESTMENTS IN THE CONTRACTS
ARE SUBJECT TO VARIOUS RISKS, INCLUDING THE FLUCTUATION OF VALUE AND POSSIBLE
LOSS OF PRINCIPAL.
* * *
Effective October 10, 1995, the information under the caption"RIGHT TO REVOKE
OR SURRENDER IN SOME STATES" is amended to read in its entirety as follows:
In Georgia, Indiana, Michigan, Missouri, New York, North Carolina,
Oklahoma, South Carolina, Texas, Utah, Washington and West Virginia any Policy
Owner may revoke the Policy at any time between the date of application and the
date 10 days (20 days in North Dakota) after receipt of the Policy and receive a
refund, as described under "RIGHT TO REVOKE INDIVIDUAL RETIREMENT ANNUITY,"
above.
In all other states, a Policy Owner may surrender the Policy at any time
between the date of application and the date 10 days 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 purchase payments 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 Subaccount. This refund right applies
for 30 days to California residents age 60 years or older; provided, however,
that if the Policy is issued as an IRA, the refund right described under the
caption "RIGHT TO REVOKE INDIVIDUAL RETIREMENT ANNUITY" is applicable for the
first 10 days. The refund of any purchase payments paid by check may be delayed
until the check has cleared the Policy Owner's bank.
* * *
The folowing information is added at the end of the section entitled
"PERFORMANCE INFORMATION" beginning on page 30 of the Prospectus.
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<TABLE>
<CAPTION>
TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1994
(Assuming COMPLETE redemption of the investment)
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Total Return Average Annual
NAME OF FUND for year Total Return since
------------ ended inception of
12/31/94 Sub-Account
- --------------------------------------------------------------------------------
<S> <C> <C>
Money Market -3.94% -0.18%
Select Aggressive Growth -10.09% 11.95%
Select Growth -9.28% 0.85%
Select Growth and Income -7.10% 1.07%
Select Income -12.57% -0.90%
Select Int'l. Equity N/A -10.81%
Select Capital Appreciation N/A N/A
VIPF High Income N/A N/A
VIPF Equity-Income N/A N/A
VIPF Growth N/A N/A
T. Rowe Int'l Stock N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1994
(Assuming NO redemption of the investment)
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<TABLE>
<CAPTION>
Total Return
for year Average Annual Total
NAME OF FUND ended Return since inception of
12/31/94 Sub-Account*
- --------------------------------------------------------------------------------
<S> <C> <C>
Money Market 2.50% 1.90%
Select Aggressive Growth -2.85% 13.72%
Select Growth -2.28% 2.90%
Select Growth and Income -0.67% 3.11%
Select Income -6.13% 1.19%
Select Int'l. Equity N/A -4.37%
Select Capital Appreciation N/A N/A
VIPF High Income N/A N/A
VIPF Equity-Income N/A N/A
VIPFGrowth N/A N/A
T. Rowe Int'l Stock N/A N/A
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<FN>
* The inception dates for the Sub-Accounts investing in the Funds is as follows:
Money Market, Select Aggressive Growth, Select Growth, Select Growth and Income,
Select Income -- 8/21/92; Select Int'l. Equity -- 5/2/94; Select Capital
Appreciation, VIPF High Income, VIPF Equity-Income, VIPF Growth, T. Rowe Int'l
Stock -- 5/1/95.
</TABLE>
SUPPLEMENT DATED OCTOBER 1, 1995
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INDIVIDUAL AND GROUP VARIABLE ANNUITY CONTRACTS
FUNDED THROUGH
ALLMERICA SELECT SEPARATE ACCOUNT
This Prospectus describes individual variable annuity contracts and group
variable annuity contracts including certificates issued thereunder
("Contracts") offered by SMA Life Assurance Company ("SMA Life"), an indirect
wholly owned subsidiary of State Mutual Life Assurance Company of America
("State Mutual"). The Contracts are funded through SMA Life's Allmerica Select
Separate Account, which invests in shares of Allmerica Investment Trust,
Variable Insurance Products Fund and T. Rowe Price International Series, Inc.
The following investment portfolios are available under the Contracts:
SELECT INTERNATIONAL EQUITY FUND
T. ROWE PRICE'S INTERNATIONAL STOCK PORTFOLIO
SELECT AGGRESSIVE GROWTH FUND
SELECT CAPITAL APPRECIATION FUND
SELECT GROWTH FUND
FIDELITY'S GROWTH PORTFOLIO
SELECT GROWTH AND INCOME FUND
FIDELITY'S EQUITY-INCOME PORTFOLIO
FIDELITY'S HIGH INCOME PORTFOLIO
SELECT INCOME FUND
The "SUMMARY" that follows provides basic information about the Contracts. More
detailed information can be found under the captions in the Prospectus. This
Prospectus generally describes only variable accumulation and variable annuity
features of the Contracts, except where fixed values or fixed annuity payments
are specifically mentioned. ALLOCATIONS TO AND TRANSFERS TO AND FROM THE FIXED
ACCOUNT DESCRIBED IN APPENDIX A ARE NOT PERMITTED IN CERTAIN STATES.
Additional information is contained in a Statement of Additional Information
dated May 1, 1995 ("SAI"), filed with the Securities and Exchange Commission and
incorporated herein by reference. The Table of Contents of the SAI is on page
32 of this Prospectus. The SAI is available upon request and without charge
through Allmerica Investments, Inc., 440 Lincoln Street, Worcester,
Massachusetts 01653, 508-855-3590.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY CURRENT PROSPECTUSES OF
ALLMERICA INVESTMENT TRUST, VARIABLE INSURANCE PRODUCTS FUND AND T. ROWE PRICE
INTERNATIONAL SERIES, INC. FIDELITY'S HIGH INCOME PORTFOLIO INVESTS IN HIGHER
YIELDING, LOWER RATED DEBT SECURITIES (SEE "INVESTMENT OBJECTIVES AND POLICIES"
IN THIS PROSPECTUS). 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.
May 1, 1995
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SUMMARY
WHAT IS THE ALLMERICA SELECT VARIABLE ANNUITY?
The Allmerica Select variable annuity contract ("Contract") is designed to help
you accumulate assets for your retirement or other important financial goals on
a tax-deferred basis. The Contract combines the concept of professional money
management with the attributes of an annuity contract. Features available
through the Contract include:
- A customized investment portfolio
- Experienced professional investment advisers
- Tax deferral on earnings
- Guarantees that can protect your family during the accumulation phase
- Income that can be guaranteed for life
The Contract has two phases, an accumulation phase and an annuity phase. During
the accumulation phase, your initial purchase payment and any additional
purchase payments you choose to make are allocated to the combination of
portfolios of securities ("Funds") you have selected under your Contract. Your
Contract's accumulated value is based on the investment performance of the
Funds. No income taxes are paid on any earnings under the Contract unless and
until accumulated values are withdrawn.
During the annuity phase, the Annuitant can receive income based on several
annuity plans. These plans include payment over a period of years or for the
rest of the Annuitant's life.
THE ACCUMULATION PHASE
During the accumulation phase, you select the Funds most appropriate for your
investment needs. Each Fund is professionally advised by an investment adviser
with experience managing the types of investments in the Fund. All investment
gains or losses will be reflected in the accumulated value under your Contract.
The accumulation phase provides certain protection and guarantees for the
beneficiary if the Annuitant should die before the annuity phase begins. See
discussion below under "What happens upon death during the accumulation phase?"
THE ANNUITY PHASE
You choose the annuity plan and the date for the annuity phase to begin.
Annuity payments may be on a variable basis (dependent upon the performance of
the Funds) or on a fixed basis (with payment amounts guaranteed). Among the
income options available during the annuity phase are:
- Lump sum
- At regular intervals over a specified number of years; or
- At regular intervals for the rest of the Annuitant's life, regardless
of how long he or she lives.
WHO ARE THE KEY PERSONS UNDER THE CONTRACT?
The Contract is between you and us - SMA Life Assurance Company ("SMA Life").
Each Contract has a Contract Owner, an Annuitant and a beneficiary. As Contract
Owner, you make purchase payments, choose investment allocations and select the
Annuitant and beneficiary. The Annuitant is the individual to receive annuity
payments under the Contract. The beneficiary is the person who receives any
payment on death of the Contract Owner or Annuitant.
CAN I EXAMINE THE CONTRACT?
Yes. Your Contract will be delivered to you after your purchase. If you return
the Contract to SMA Life during the first 10 days from the date you received it,
the Contract will be cancelled. (There is a 20-day right-to-examine period in
North Dakota and a 30-day right-to-examine period applicable to California
senior citizens age 60 years or older.) If your Contract was issued as an
individual retirement annuity or provides for a full refund of the initial
purchase payment under its "Right to Examine"
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provision, you will incur no fees to cancel within the right-to-examine period
and will receive the greater of (1) your entire purchase payment, or (2) the
accumulated value of the Contract plus any amounts deducted under the Contract
or by the Funds for taxes, charges or fees. If your Contract does not provide
for a full refund of the initial purchase payment, you will receive upon
cancellation the sum of (1) the difference between the purchase payment paid,
including fees, and any amount allocated to the Separate Account and (2) the
Accumulated Value of the Policy (on the date the cancellation request is
received by the Company) attributable to any amount allocated to a Sub-Account.
See "RIGHT TO REVOKE CONTRACT."
WHAT ARE MY INVESTMENT CHOICES?
You have a choice of eleven Funds:
- Select International Equity Fund
Managed by Bank of Ireland Asset Management Limited
- T. Rowe Price's International Stock Portfolio
Managed by Rowe Price-Fleming International, Inc.
- Select Aggressive Growth Fund
Managed by Nicholas-Applegate Capital Management
- Select Capital Appreciation Fund
Managed by Janus Capital Corporation
- Select Growth Fund
Managed by United Asset Management Corporation
- Fidelity's Growth Portfolio
Managed by Fidelity Management & Research Company
- Select Growth and Income Fund
Managed by John A. Levin & Co., Inc.
- Fidelity's Equity-Income Portfolio
Managed by Fidelity Management & Research Company
- Fidelity's High Income Portfolio
Managed by Fidelity Management & Research Company
- Select Income Fund
Managed by Standish, Ayer & Wood, Inc.
- Money Market Fund
Managed by Allmerica Asset Management, Inc.
This range of investment choices enables you to allocate your money among the
Funds to meet your particular investment needs. If your Contract was issued as
an individual retirement annuity or provides for a full refund of the initial
purchase payment under its "Right to Examine" provision (see "RIGHT TO REVOKE
CONTRACT"), for the first 14 days following the date of issue, all Fund
investments will be allocated to the Money Market Fund. (For California senior
citizens age 60 and older, all Fund investments will be allocated to the Money
Market Fund for 34 days following the date of issue because of an extended
"Right to Examine" provision applicable to these individuals.) Thereafter, all
amounts will be allocated according to your investment choices. For a more
detailed description of the Funds, see "ALLMERICA INVESTMENT TRUST, VARIABLE
INSURANCE PRODUCTS FUND AND T. ROWE PRICE INTERNATIONAL SERIES, INC." and
"INVESTMENT OBJECTIVES AND POLICIES."
SMA Life also offers a guaranteed account ("Fixed Account"), where available.
The Fixed Account is part of the General Account of SMA Life and provides
guarantees of principal and a fixed interest rate. See APPENDIX A, "MORE
INFORMATION ABOUT THE FIXED ACCOUNT."
WHO ARE THE INVESTMENT ADVISERS AND HOW ARE THEY SELECTED?
Allmerica Investment Management Company, Inc. ("Manager") is the investment
manager of Allmerica Investment Trust and handles the day-to-day affairs of the
Trust. The Manager has entered into
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agreements with experienced investment advisers ("Sub-Advisers"), who will
manage the investments of the Funds. The Sub-Advisers for the Funds, except for
the Money Market Fund, are independent and have been selected by the Manager in
consultation with Rogers, Casey & Associates, a leading pension consulting firm.
Rogers, Casey & Associates provides consulting services to pension plans
representing over $175 billion in total assets and, in its consulting capacity,
monitors the investment performance of over 1,000 investment advisers. Each
independent Sub-Adviser was selected by the Manager on the basis of strict
objective and qualitative criteria, with special emphasis on the Sub-Adviser's
record in managing similar portfolios. For the Money Market Fund, the Sub-
Adviser is Allmerica Asset Management, Inc. See "INVESTMENT ADVISORY SERVICES
TO THE TRUST."
Fidelity Management & Research Company ("Fidelity Management") is the investment
manager of VIPF. Fidelity Management, a registered investment adviser under the
Investment Advisers Act of 1940, is one of America's largest investment
management organizations and has its principal business address at 82 Devonshire
Street, Boston MA. It is composed of a number of different companies, which
provide a variety of financial services and products. Fidelity Management is
the original Fidelity company, founded in 1946. It provides a number of mutual
funds and other clients with investment research and portfolio management
services.
Rowe Price-Fleming International, Inc. ("Price-Fleming") is the investment
manager of T. Rowe. Price-Fleming, founded in 1979 as a joint venture between
T. Rowe Price Associates, Inc. and Robert Fleming Holdings, Limited, is one of
America's largest international mutual fund asset managers with approximately $9
billion under management in its offices in Baltimore, London, Tokyo and Hong
Kong.
CAN I MAKE TRANSFERS AMONG THE FUNDS?
Yes. You may transfer among the Funds, subject to certain limits. You will
incur no current taxes on transfers while your money remains in the Contract.
See "TRANSFER PRIVILEGE."
HOW MUCH CAN I INVEST AND HOW OFTEN?
The number and frequency of your purchase payments are flexible, subject to the
minimum and maximum purchase payments stated in "PURCHASE PAYMENTS."
WHAT IF I NEED MY MONEY BEFORE MY ANNUITY PHASE BEGINS?
You may surrender your Contract or make partial withdrawals any time before your
annuity phase begins, subject to the restrictions discussed in "SURRENDER" and
"PARTIAL REDEMPTION." Certain charges may apply, see "CHARGES AND DEDUCTIONS,"
and there may be a tax-penalty assessed under the Internal Revenue Code. See
"FEDERAL TAX CONSEQUENCES."
WHAT HAPPENS UPON DEATH DURING MY ACCUMULATION PHASE?
If the Annuitant dies during the accumulation phase and the Contract is not
continued (see "THE SPOUSE OF THE CONTRACT OWNER AS BENEFICIARY"), the
beneficiary will receive the greatest of:
- Your total purchase payments under the Contract less any withdrawals
you may have made;
- The then current value of your Contract; or
- The amount that would have been payable on death of the Annuitant at
the most recent fifth Contract anniversary, adjusted to reflect new
purchase payments or withdrawals since that date.
If the Contract Owner dies before the Annuitant, the beneficiary will receive
the accumulated value of the Contract. See "PAYMENT ON DEATH."
WHAT ARE MY ANNUITY OPTIONS UNDER THE CONTRACT?
You may choose variable annuity payments based on the investment performance of
certain Funds, fixed-amount annuity payments, or a combination of fixed-amount
and variable annuity payments. Fixed-amount payments are guaranteed by SMA
Life. See "DESCRIPTION OF THE CONTRACT" for information about annuity payment
options, selecting the Annuity Date, and how annuity payments are calculated.
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WHAT CHARGES WILL I INCUR UNDER MY CONTRACT?
At each Contract anniversary and upon surrender, SMA Life will deduct a $30
Contract Fee from your Contract. SMA Life reserves the right to waive the
Contract Fee for Contracts issued to a Trustee of a 401(k) plan or qualifying
under Section 403(b) of the Internal Revenue Code.
Should you decide to surrender your Contract, make partial withdrawals, or
receive payments under certain annuity options, you may be subject to a
contingent deferred sales charge. This charge will be between 1% and 6.5% of
purchase payments withdrawn, based on when the purchase payments were made.
A deduction for state and local premium taxes, if any, may be made as described
under "PREMIUM TAXES."
Currently, the first twelve transfers you make in a Contract year among Fund or
Fixed Account allocations will be free. There will be a charge of $25 for
additional transfers. SMA Life may limit the number of free transfers and the
number of total transfers in a Contract year to six.
SMA Life will deduct a daily Mortality and Expense Risk Charge and
Administrative Expense Charge equal to 1.25% and 0.15%, respectively, of the
average daily net assets invested in each Fund.
The Funds will incur certain management fees and expenses which are more fully
described in "OTHER CHARGES" and in the prospectus of the Funds, which
accompanies this Prospectus.
For more information, see "CHARGES AND DEDUCTIONS."
CAN I MAKE FUTURE CHANGES UNDER MY CONTRACT?
There are several changes you can make after receiving your Contract:
- You may assign your ownership to someone else, except under certain
qualified plans.
- You may change the beneficiary, unless you have designated a
beneficiary irrevocably.
- You may change the allocation of purchase payments, with no tax
consequences under current law.
- You may make transfers of Contract value among your current
investments, subject to then current rules.
- You may cancel your Contract within 10 days of delivery, as discussed
above.
- You may select the form and timing of annuity payments.
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TABLE OF CONTENTS
SPECIAL TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ANNUAL AND TRANSACTION EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . 8
CONDENSED FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . .10
RIGHT TO REVOKE CONTRACT . . . . . . . . . . . . . . . . . . . . . . . . . . .11
DESCRIPTION OF SMA LIFE, THE SEPARATE ACCOUNT AND THE TRUST . . . . . . . . .11
SMA LIFE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
ALLMERICA SELECT SEPARATE ACCOUNT . . . . . . . . . . . . . . . . . . . . .11
ALLMERICA INVESTMENT TRUST. . . . . . . . . . . . . . . . . . . . . . . . .11
INVESTMENT OBJECTIVES AND POLICIES. . . . . . . . . . . . . . . . . . . . .12
INVESTMENT ADVISORY SERVICES TO THE TRUST . . . . . . . . . . . . . . . . .13
CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
CONTINGENT DEFERRED SALES CHARGE. . . . . . . . . . . . . . . . . . . . . .15
CONTRACT FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
ANNUAL CHARGES AGAINST SEPARATE ACCOUNT . . . . . . . . . . . . . . . . . 17
TRANSFER CHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
PREMIUM TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
OTHER CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
DESCRIPTION OF THE CONTRACT. . . . . . . . . . . . . . . . . . . . . . . . . .18
PURCHASE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
TRANSFER PRIVILEGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
SURRENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
PARTIAL REDEMPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
LIFE EXPECTANCY DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . .20
PAYMENT ON DEATH . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
THE SPOUSE OF THE CONTRACT OWNER AS BENEFICIARY . . . . . . . . . . . . . .21
ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
ELECTING THE FORM OF ANNUITY AND THE ANNUITY DATE . . . . . . . . . . . . .22
DESCRIPTION OF VARIABLE ANNUITY OPTIONS . . . . . . . . . . . . . . . . . .22
COMPUTATION OF CONTRACT VALUES AND ANNUITY PAYMENTS . . . . . . . . . . . .23
FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . .25
VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .30
CHANGES IN OPERATION OF THE SEPARATE ACCOUNT . . . . . . . . . . . . . . . . .31
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS. . . . . . . . . . . . . . .31
FURTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION . . . . . . . . .33
APPENDIX A - MORE INFORMATION ABOUT THE FIXED ACCOUNT. . . . . . . . . . . . .34
APPENDIX B - EXCHANGE OFFER. . . . . . . . . . . . . . . . . . . . . . . . . .35
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SPECIAL TERMS
CONTRACT OWNER: the person who may exercise all rights under the Contract,
subject to the consent of any irrevocable beneficiary. "You" in this Prospectus
refers to the Contract Owner. After the Annuity Date, the Annuitant will be the
Contract Owner.
ANNUITANT: the individual (1) to receive annuity payments under your Contract,
(2) on whose life the continuation of annuity payments may depend, and (3) on
whose death prior to the Annuity Date the beneficiary may receive payment.
FUNDS: the following investment portfolios of Allmerica Investment Trust: the
Select International Equity Fund, Select Aggressive Growth Fund, Select Growth
Fund, Select Capital Appreciation Fund, Select Growth and Income Fund, Select
Income Fund and Money Market Fund; the following investment portfolios of
Variable Insurance Products Fund: Growth Portfolio, Equity-Income Portfolio and
High Income Portfolio; and the International Stock Portfolio of T. Rowe Price
International Series, Inc. SMA Life may designate additional eligible mutual
fund investments as Funds.
SEPARATE ACCOUNT: Allmerica Select Separate Account, a separate investment
account of SMA Life.
SUB-ACCOUNT: a subdivision of the Separate Account investing exclusively in the
shares of a given Fund.
GENERAL ACCOUNT: all the assets of SMA Life other than those held in a separate
investment account.
ACCUMULATED VALUE: the total value of your Contract, including your interest in
the Separate Account and in the Fixed Account, before annuity payments begin.
SURRENDER VALUE: the Accumulated Value of the Contract minus the Contract Fee
and any applicable contingent deferred sales charge.
ACCUMULATION UNIT: a measure of your interest in a Sub-Account before annuity
payments begin.
ANNUITY UNIT: a measure of the value of variable annuity payments under the
Contract.
ANNUITY DATE: the date on which annuity payments are to start.
VARIABLE ANNUITY: an annuity providing for payments that vary in amount with
the investment experience of certain Funds.
FIXED ANNUITY: an annuity providing for annuity payments that remain fixed in
amount.
VALUATION DATE: any day on which the net asset value of the shares of any Funds
and Accumulation Unit and Annuity Unit values of any Sub-Accounts 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 purchase payment, partial withdrawal, or surrender of a Contract
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 Sub-Accounts may be
materially affected.
VALUATION PERIOD: the interval between two consecutive Valuation Dates.
-7-
<PAGE>
ANNUAL AND TRANSACTION EXPENSES
The following tables show charges under your Contract, expenses of the Sub-
Accounts, and expenses of the Funds. In addition to the charges and expenses
described below, premium taxes are applicable in some states and deducted as
described under "PREMIUM TAXES."
<TABLE>
<CAPTION>
YEARS FROM
CONTRACT CHARGES DATE OF PAYMENT CHARGE
--------------- ------
<S> <C> <C>
- -Contingent Deferred Sales Charge:
This charge may be assessed upon surrender, 0-1 6.5%
redemption or, in some cases, annuitization 2 6.0%
under a period certain option. The charge is a 3 5.0%
percentage of purchase payments applied to the 4 4.0%
amount surrendered (in excess of any amount that 5 3.0%
is free of charge) within the indicated time 6 2.0%
periods. 7 1.0%
- -Transfer Charge:
This charge is currently imposed for transfers $25
in excess of twelve transfers in a Contract year.
(SMA Life may limit the number of free transfers
in a Contract year to six.)
- -Contract Fee:
The Fee is deducted annually and upon surrender, $30
prior to the annuity date.
SUB-ACCOUNT EXPENSES
(on annual basis as percentage of average daily net assets)
- -Mortality and Expense Risk Charge: 1.25%
- -Administrative Expense Charge: 0.15%
-------
Total Asset Charge: 1.40%
</TABLE>
FUND EXPENSES
(on annual basis as percentage of average daily net assets)
<TABLE>
<CAPTION>
MANAGEMENT OTHER FUND TOTAL FUND
FUND FEE EXPENSES EXPENSES
- ---- ---------- ---------- ----------
<S> <C> <C> <C>
Select International Equity Fund.................... 0.72% 0.78% 1.50%
T. Rowe's International Stock Portfolio............. 1.05% 0.00% 1.05%
Select Aggressive Growth Fund....................... 1.00% 0.16% 1.16%
Select Capital Appreciation Fund.................... 1.00% 0.35% 0.35%
Select Growth Fund.................................. 0.85% 0.18% 1.03%
Fidelity's Growth Fund.............................. 0.62% 0.07% 0.69%
Select Growth and Income Fund....................... 0.75% 0.16% 0.91%
Fidelity's Equity-Income Portfolio.................. 0.52% 0.06% 0.58%
Fidelity's High Income Portfolio.................... 0.61% 0.10% 0.71%
Select Income Fund.................................. 0.58% 0.25% 0.83%
Money Market Fund................................... 0.31% 0.14% 0.45%
<FN>
* Under the Management Agreement with Allmerica Investment Trust, Allmerica
Investment Management Company, Inc. ("Manager") has declared a voluntary expense
limitation of 1.50% of average net assets for the Select International Equity
Fund, 1.35% for the Select Aggressive Growth Fund, 1.20% for the Select Growth
Fund, 1.10% for the Select Growth and Income Fund, 1.00% for the Select Income
Fund, and 0.60% for the Money Market Fund. Without the effect of the expense
limitation, in 1994 the total operation expenses of the Select International
Equity Fund and Select Income Fund would have been 1.78% and 0.85%,
respectively, of average net assets. The declaration of a voluntary expense
limitation in any year does not bind the Manager to declare future expense
limitations for any Fund.
-8-
<PAGE>
+A portion of the brokerage commissions the Portfolio paid was used to reduce
the expenses. Without this reduction, total operating expenses would have been
0.60% for the Equity-Income Portfolio and 0.70% for the Growth Portfolio.
#Price-Fleming has voluntarily agreed to limit the total operating expenses
(except interest, taxes, brokerage commissions, directors' fees and expenses and
extraordinary expenses) of the International Stock Portfolio to 1.05% of its
average daily net assets.
</TABLE>
The following examples demonstrate the cumulative expenses which would be paid
by the Contract Owner at 1-year, 3-year, 5-year and 10-year intervals under
certain contingencies. Each example assumes a $1,000 investment in a Sub-
Account and a 5% annual return on assets, as required by rules of the Securities
and Exchange Commission. Because the expenses of the Funds differ, separate
examples are used to illustrate the expenses incurred by a Contract Owner on an
investment in the various Sub-Accounts.
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.
(a) If, at the end of the applicable period, you surrender your Contract or
annuitize* under a variable period certain option of less than ten years or any
fixed period certain option, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Select International Equity Fund. . . . . . $89 $137 $183 $329
T. Rowe's International Stock Portfolio . . $84 $124 $161 $286
Select Aggressive Growth Fund . . . . . . . $85 $127 $167 $297
Select Capital Appreciation Fund . . . . . $87 $133 $176 $315
Select Growth Fund. . . . . . . . . . . . . $84 $123 $160 $284
Fidelity's Growth Fund. . . . . . . . . . . $81 $113 $144 $250
Select Growth and Income Fund . . . . . . . $83 $120 $154 $272
Fidelity's Equity-Income Portfolio. . . . . $80 $110 $138 $239
Fidelity's High Income Portfolio. . . . . . $81 $114 $145 $252
Select Income Fund. . . . . . . . . . . . . $82 $117 $151 $265
Money Market Fund . . . . . . . . . . . . . $78 $106 $131 $226
</TABLE>
(b) If, at the end of the applicable time period, you annuitize* under a life
option or a variable period certain option of ten years or longer, or if you do
not surrender or annuitize your Contract, you would pay the following expenses
on a $1,000 investment, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Select International Equity Fund . . . . . . $30 $92 $157 $329
T. Rowe's International Stock Portfolio. . . $26 $79 $135 $286
Select Aggressive Growth Fund. . . . . . . . $27 $82 $140 $297
Select Capital Appreciation Fund . . . . . . $29 $88 $149 $315
Select Growth Fund . . . . . . . . . . . . . $26 $78 $134 $284
Fidelity's Growth Fund . . . . . . . . . . . $22 $68 $117 $250
Select Growth and Income Fund. . . . . . . . $24 $75 $128 $272
Fidelity's Equity-Income Portfolio . . . . . $21 $65 $111 $239
Fidelity's High Income Portfolio . . . . . . $22 $69 $118 $252
Select Income Fund . . . . . . . . . . . . . $24 $72 $124 $265
Money Market Fund. . . . . . . . . . . . . . $20 $61 $105 $226
- ---------------------------
<FN>
As required in rules promulgated under the 1940 Act, the Contract Fee is
reflected in the examples by a method to show the "average" impact on an
investment in the Separate Account. The total Contract Fees collected are
divided by the total average net assets attributable to the Contracts. The
resulting percentage is 0.075%, and the amount of the Contract Fee is assumed to
be $.75 in the examples.
* The Contract Fee is not deducted after annuitization. No contingent deferred
sales charge is assessed at the time of annuitization under an option
including a life contingency or under a variable period certain option of ten
years or longer.
</TABLE>
-9-
<PAGE>
CONDENSED FINANCIAL INFORMATION
SMA Life Assurance Company
Allmerica Select Separate Account
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Select Aggressive Growth
Net Asset Value:
Beginning of Period 1.405 1.192 1.000
End of Period 1.354 1.405 1.192
Number of Units Outstanding at End of 36,330 17,538 5,123
Period (in thousands)
Select Growth
Net Asset Value:
Beginning of Period 1.101 1.104 1.000
End of Period 1.069 1.101 1.104
Number of Units Outstanding at End of 38,752 20,366 5,246
Period (in thousands)
Select Growth & Income
Net Asset Value:
Beginning of Period 1.082 0.994 1.000
End of Period 1.074 1.082 0.994
Number of Units Outstanding at End of 43,292 20,983 2,339
Period (in thousands)
Select Income
Net Asset Value:
Beginning of Period 1.095 1.001 1.000
End of Period 1.028 1.095 1.001
Number of Units Outstanding at End of 32,823 18,320 5,372
Period (in thousands)
Money Market
Net Asset Value:
Beginning of Period 1.019 1.003 1.000
End of Period 1.045 1.019 1.003
Number of Units Outstanding at End of 31,836 19,802 1,447
Period (in thousands)
Select International Equity
Net Asset Value:
Beginning of Period 1.000 --- ---
End of Period 0.956 --- ---
Number of Units Outstanding at End of 22,183 --- ---
Period (in thousands)
</TABLE>
-10-
<PAGE>
RIGHT TO REVOKE CONTRACT
The Contract may be revoked at any time between the date of the application and
the date 10 days after receipt of the Contract. In order to revoke the
Contract, the Contract Owner must mail or deliver the Contract (if it has
already been received), to the principal office of SMA Life at 440 Lincoln
Street, Worcester, Massachusetts 01653, or to an SMA Life agent. Mailing or
delivery must occur on or before 10 days after receipt of the Contract for
revocation to be effective. (There is a 20-day right-to-revoke period in North
Dakota and a 30-day right-to-revoke period applicable to California senior
citizens age 60 years or older.)
If your Contract was issued as an individual retirement annuity or provides for
a full refund of the initial purchase payment under its "Right to Examine"
provision, you will incur no fees to cancel within the right-to-examine period
and will receive the greater of (1) your entire purchase payment, or (2) the
accumulated value of the Contract plus any amounts deducted under the Contract
or by the Funds for taxes, charges or fees. The liability of the Separate
Account under this provision is limited to the Contract Owner's Accumulated
Value in the Separate Account on the date of cancellation. Any additional
amounts refunded to the Contract Owner will be paid by SMA Life.
If your Contract does not provide for a full refund of the initial purchase
payment, you will receive upon cancellation the sum of (1) the difference
between the purchase payment paid, including fees, and any amount allocated to
the Separate Account and (2) the Accumulated Value of the Policy (on the date
the cancellation request is received by the Company) attributable to any amount
allocated to a Sub-Account.
The refund of any purchase payment made by check may be delayed until the check
has cleared the Contract Owner's bank.
DESCRIPTION OF SMA LIFE, THE SEPARATE ACCOUNT,
THE TRUST, VIPF AND T. ROWE
SMA LIFE. SMA Life, a life insurance company organized under the laws of
Delaware in July 1974, is an indirect wholly owned subsidiary of State Mutual
Life Assurance Company of America ("State Mutual"). State Mutual, organized
under the laws of Massachusetts in 1844, is the fifth oldest life insurance
company in America. As of December 31, 1994, State Mutual and its subsidiaries
had over $10 billion in combined assets and over $42 billion of life insurance
in force, of which SMA Life accounted for over $4 billion in assets and over $25
billion of life insurance in force.
SMA Life's principal office is located at 440 Lincoln Street, Worcester,
Massachusetts 01653, Telephone 508-855-1000 ("Principal Office"). SMA Life is
subject to the laws of the state of Delaware governing insurance companies, to
regulation by the Commissioner of Insurance of Delaware, and to the insurance
laws and regulations of other states and jurisdictions in which it is licensed
to operate.
ALLMERICA SELECT SEPARATE ACCOUNT. Allmerica Select Separate Account ("Separate
Account") is a separate investment account of SMA Life with eleven Sub-Accounts.
The assets used to fund the variable portions of the Contracts are set aside in
Sub-Accounts kept separate from the general assets of SMA Life. Each Sub-
Account is administered and accounted for as part of the general business of SMA
Life. However, the income, capital gains, or capital losses of each Sub-Account
are allocated to each Sub-Account, without regard to any other income, capital
gains, or capital losses of SMA Life. Under Delaware law, the assets of the
Separate Account may not be charged with any liabilities arising out of any
other business of SMA Life.
The Separate Account was authorized by vote of the Board of Directors of SMA
Life on March 5, 1992. The Separate Account meets the definition of "separate
account" under federal securities laws and is registered with the Securities and
Exchange Commission ("SEC") as a unit investment trust under the Investment
Company Act of 1940 ("1940 Act"). This registration does not involve the
supervision of management or investment practices or policies of the Separate
Account or SMA Life by the SEC.
SMA Life reserves the right, subject to compliance with applicable law, to
change the names of the Separate Account and the Sub-Accounts.
THE TRUST. The Trust is an open-end, diversified management investment company
registered with the SEC under the 1940 Act. This registration does not involve
supervision by the SEC of the investments or investment policy of the Trust or
its separate investment Funds.
The Trust under its former name, SMA Investment Trust, was established by State
Mutual as a Massachusetts business trust on October 11, 1984, for the purpose of
providing a vehicle for the investment of assets of various separate accounts
established by SMA Life or other affiliated insurance companies.
-11-
<PAGE>
Shares of the Trust are not offered to the general public but solely to such
separate accounts. Seven different investment portfolios of the Trust are
available under the Contracts, each issuing a series of shares: the Select
International Equity Fund, Select Aggressive Growth Fund, Select Capital
Appreciation Fund, Select Growth Fund, Select Growth and Income Fund, Select
Income Fund and Money Market Fund ("Funds"). The assets of each Fund are held
separate from the assets of the other Funds. Each Fund operates as a separate
investment vehicle and the income or losses of one Fund have no effect on the
investment performance of another Fund. Dividends or capital gains
distributions received from a Fund are reinvested in additional shares of that
Fund, which are retained as assets of the corresponding Sub-Account.
Allmerica Investment Management Company, Inc. ("Manager") serves as investment
manager of the Trust. The Manager has entered into sub-advisory agreements with
other investment managers ("Sub-Advisers"), who manage the investments of the
Funds. See "INVESTMENT ADVISORY SERVICES TO THE TRUST."
VIPF. VIPF, managed by Fidelity Management & Research Company ("Fidelity
Management"), is an open-end, diversified, management investment company
organized as a Massachusetts business trust on November 13, 1981 and registered
with the Commission under the 1940 Act. Three of its investment portfolios are
available under the Contracts: Growth Portfolio, Equity-Income Portfolio and
High Income Portfolio.
T. ROWE. T. Rowe, managed by Rowe Price-Fleming International, Inc. ("Price-
Fleming"), is an open-end, diversified, management investment company organized
as a Maryland corporation in 1994 and registered with the Commission under the
1940 Act. One of its investment portfolios is available under the Contracts:
the International Stock Portfolio.
INVESTMENT OBJECTIVES AND POLICIES. A summary of investment objectives of each
of the Funds is set forth below. MORE DETAILED INFORMATION REGARDING THE
INVESTMENT OBJECTIVES, RESTRICTIONS AND RISKS, EXPENSES PAID BY THE FUNDS, AND
OTHER RELEVANT INFORMATION REGARDING THE FUNDS MAY BE FOUND IN THE PROSPECTUSES
OF THE TRUST, VIPF AND T. ROWE WHICH ACCOMPANY THIS PROSPECTUS AND SHOULD BE
READ CAREFULLY BEFORE INVESTING. Also, the Statements of Additional Information
of the Funds are available upon request. There can be no assurance that the
investment objectives of the Funds can be achieved or that the value of a
Contract will equal or exceed the aggregate amount of the purchase payments made
under the Contract.
SELECT INTERNATIONAL EQUITY FUND seeks maximum long-term total return (capital
appreciation and income). The Fund will invest primarily in common stocks of
established non-U.S. companies. The Sub-Adviser for the Select International
Equity Fund is Bank of Ireland Asset Management Limited.
T. ROWE PRICE'S INTERNATIONAL STOCK PORTFOLIO seeks long-term growth of capital
through investments primarily in common stocks of established, non-U.S.
companies.
SELECT AGGRESSIVE GROWTH FUND seeks above-average capital appreciation by
investing primarily in common stocks of companies which are believed to have
significant potential for capital appreciation. The Sub-Adviser for the Select
Aggressive Growth Fund is Nicholas-Applegate Capital Management.
SELECT CAPITAL APPRECIATION FUND seeks long-term growth of capital in a manner
consistent with the preservation of capital. Realization of income is not a
significant investment consideration and any income realized on the Fund's
investments will be incidental to its primary objective. The Fund will invest
primarily in common stock of industries and companies which are experiencing
favorable demand for their products and services, and which operate in a
favorable competitive environment and regulatory climate. The Sub-Adviser for
the Select Capital Appreciation Fund is Janus Capital Corporation.
SELECT GROWTH FUND seeks to achieve growth of capital by investing in a
diversified portfolio consisting primarily of common stocks selected on the
basis of their long-term growth potential. The Sub-Adviser for the Select
Growth Fund is United Asset Management Corporation.
FIDELITY'S GROWTH PORTFOLIO seeks to achieve capital appreciation. The
Portfolio normally purchases common stocks, although its investments are not
restricted to any one type of security. Capital appreciation may also be found
in other types of securities, including bonds and preferred stocks.
SELECT GROWTH AND INCOME FUND seeks a combination of long-term growth of capital
and current income. The Fund will invest primarily in dividend-paying common
stocks and securities convertible into common stocks. The Sub-Adviser for the
Select Growth and Income Fund is John A. Levin & Co., Inc.
FIDELITY'S EQUITY-INCOME PORTFOLIO seeks reasonable income by investing
primarily in income-producing equity securities. In choosing these securities,
the Portfolio will also consider the potential for capital
-12-
<PAGE>
appreciation. The Portfolio's goal is to achieve a yield which exceeds the
composite yield on the securities comprising the Standard & Poor's 500 Composite
Stock Price Index. The Portfolio may invest in high yielding, lower-rated
securities (commonly referred to as "junk bonds") which are subject to greater
risk than investments in higher-rated securities. For a further discussion of
lower-rated securities, please see "Risks of Lower-Rated Debt Securities" in the
VIPF prospectus.
FIDELITY'S HIGH INCOME PORTFOLIO seeks to obtain a high level of current income
by investing primarily in high-yielding, lower-rated fixed-income securities
(commonly referred to as "junk bonds"), while also considering growth of
capital. These securities are often considered to be speculative and involve
greater risk of default or price changes than securities assigned a high quality
rating. For more information about these lower-rated securities, see "Risks of
Lower-Rated Debt Securities" in the VIPF prospectus.
SELECT INCOME FUND seeks a high level of current income. The Fund will invest
primarily in investment grade, fixed-income securities. The Sub-Adviser for the
Select Income Fund is Standish, Ayer & Wood, Inc.
MONEY MARKET FUND seeks to obtain maximum current income consistent with the
preservation of capital and liquidity. Allmerica Asset Management, Inc. is the
Sub-Adviser of the Money Market Fund.
If there is a material change in the investment policy of a Fund, the Contract
Owner will be notified of the change. If the Contract Owner has Accumulated
Value allocated to that Fund, he or she may have the Accumulated Value
reallocated without charge to another Fund or to the Fixed Account, where
available, on written request received by SMA Life within sixty (60) days of the
later of (1) the effective date of such change in the investment policy or (2)
the receipt of the notice of the Contract Owner's right to transfer.
INVESTMENT ADVISORY SERVICES TO THE TRUST. The overall responsibility for the
supervision of the affairs of the Trust vests in the Trustees. The Trustees
have entered into a Management Agreement with Allmerica Investment Management
Company, Inc. ("Manager"), an indirectly wholly-owned subsidiary of State
Mutual, to handle the day-to-day affairs of the Trust. The Manager, subject to
review by the Trustees, is responsible for the general management of the Funds.
The Manager is also obligated to perform certain administrative and management
services for the Trust, furnishes to the Trust all necessary office space,
facilities and equipment, and pays the compensation, if any, of officers and
Trustees who are affiliated with the Manager.
Other than the expenses specifically assumed by the Manager under the Management
Agreement, all expenses incurred in the operation of the Trust are borne by it,
including fees and expenses associated with the registration and qualification
of the Trust's shares under the Securities Act of 1933, other fees payable to
the SEC, independent public accountant, legal and custodian fees, association
membership dues, taxes, interest, insurance premiums, brokerage commission, fees
and expenses of the Trustees who are not affiliated with the Manager, expenses
for proxies, prospectuses, reports to shareholders and other expenses.
Pursuant to the Management Agreement with the Trust, the Manager 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. Under the Sub-Adviser Agreement, the Sub-Adviser is authorized to
engage in portfolio transactions on behalf of the applicable Fund, subject to
such general or specific instructions as may be given by the Trustees. The
terms of a Sub-Adviser Agreement cannot be materially changed without the
approval of a majority in interest of the shareholders of the affected Fund.
Allmerica Asset Management, Inc., an indirect wholly-owned subsidiary of State
Mutual, is the Sub-Adviser for the Money Market Fund. For the Select
International Equity Fund, Select Aggressive Growth Fund, Select Capital
Appreciation Fund, Select Growth Fund, Select Growth and Income Fund, and Select
Income Fund, the Sub-Advisers are independent and have been selected by the
Manager in consultation with Rogers, Casey & Associates, a leading pension
consulting firm. The cost of such consultation is borne by the Manager.
Rogers, Casey & Associates provides consulting services to pension plans
representing over $175 billion in total assets and, in its consulting capacity,
monitors the investment performance of over 1,000 investment advisers. Each
independent Sub-Adviser was selected by the Manager on the basis of strict
objective and qualitative criteria, with special emphasis on the Sub-Adviser's
record in managing similar portfolios. On-going performance of the independent
Sub-Advisers is monitored and evaluated by a committee which includes members
who may be affiliated or unaffiliated with SMA Life.
For providing its services under the Management Agreement, the Manager will
receive a fee, computed daily at an annual rate based on the average daily net
asset value of each Fund as follows: 1.00% for the Select International Equity
Fund and Select Aggressive Growth Fund, 0.85% for the Select Growth Fund, 0.75%
for the Select Growth and Income Fund, and 0.60% for the Select Income Fund.
For the Money
-13-
<PAGE>
Market Fund, the fee will be 0.35% on net asset value up to $50,000,000; 0.25%
on the next $200,000,000; and 0.20% on the remainder. The fee computed for each
Fund will be paid from the assets of such Fund.
The Manager is solely responsible for the payment of all fees for investment
management services to the Sub-Advisers, who will receive from the Manager a
fee, computed daily at an annual rate based on the average daily net asset value
of each Fund as follows:
<TABLE>
<CAPTION>
Sub-Adviser Fund Net Asset Value Rate
----------- ---- --------------- ----
<S> <C> <C> <C>
Bank of Ireland Asset Management Select Int'l Equity First $50 million 0.45%
Limited Next $50 million 0.40%
Over $100 million 0.30%
Janus Capital Corporation Select Capital Appreciation First $100 million 0.60%
Over $100 million 0.55%
Nicholas-Applegate Capital Management Select Aggressive Growth - 0.60%
United Asset Management Corporation Select Growth First $50 million 0.50%
$50-150 million 0.45%
$150-250 million 0.35%
$250-350 million 0.30%
Over $350 million 0.25%
John A. Levin & Co., Inc. Select Growth and Income First $100 million 0.40%
Next $200 million 0.25%
Over $300 million 0.30%
Standish, Ayer & Wood, Inc. Select Income - 0.20%
Allmerica Asset Management, Inc. Money Market - 0.10%
<FN>
* For the Select Aggressive Growth Fund, Select Income Fund and Money Market
Fund, each rate does not vary according to the level of assets in the Fund.
</TABLE>
INVESTMENT ADVISORY SERVICES TO VIPF. For managing investments and business
affairs, each Portfolio pays a monthly fee to Fidelity Management. The
Prospectus of VIPF contains additional information concerning the Portfolios,
including information concerning additional expenses paid by the Portfolios, and
should be read in conjunction with this Prospectus.
The High Income Portfolio pays a monthly fee to Fidelity Management at an annual
fee rate made up of the sum of two components:
1. A group fee rate based on the monthly average net assets of all the mutual
funds advised by Fidelity Management. On an annual basis this rate cannot
rise above 0.37%, and drops as total assets in all these funds rise.
2. An individual fund fee rate of 0.45% of the High Income Portfolio's average
net assets throughout the month. One-twelfth of the annual management fee
rate is applied to net assets averaged over the most recent month, resulting
in a dollar amount which is the management fee for that month.
The Growth and Equity-Income Portfolios' fee rates are each made of two
components:
1. A group fee rate based on the monthly average net assets of all of the
mutual funds advised by Fidelity Management. On an annual basis, this rate
cannot rise above 0.52%, and drops as total assets in all these mutual funds
rise.
2. An individual Portfolio fee rate of 0.30% for the Growth Portfolio and 0.20%
for the Equity-Income Portfolio.
One-twelfth of the sum of these two rates is applied to the respective
Portfolio's net assets averaged over the most recent month, giving a dollar
amount which is the fee for that month.
Thus, the High Income Portfolio may have a fee as high as 0.82%. The Growth
Portfolio may have a fee of as high as 0.82% of its average net assets. The
Equity-Income Portfolio may have a fee as high as 0.72% of its average net
assets.
-14-
<PAGE>
INVESTMENT ADVISORY SERVICES TO T. ROWE. To cover investment management and
operating expenses, the International Stock Portfolio pays Price-Fleming a
single, all-inclusive fee of 1.05% of its average daily net assets.
CHARGES AND DEDUCTIONS
Deductions under the Contracts and charges against the assets of the Sub-
Accounts are described below. Other deductions and expenses paid out of the
assets of the Funds are described in the Prospectuses and Statements of
Additional Information of the Trust, VIPF and T. Rowe.
CONTINGENT DEFERRED SALES CHARGE. No charge for sales expenses is deducted from
purchase payments at the time the purchase payments are made. For surrenders,
partial redemptions, variable annuity payments under Option V for periods of
less than ten years or any fixed period certain option, a contingent deferred
sales charge may be deducted from the Accumulated Value of the Contract.
However, the charge does not apply to (1) purchase payments redeemed more than
seven years from the date of receipt, (2) annuitization under an option
involving a life contingency (Options I, II, III, IV-A, IV-B or the comparable
fixed annuity options) or under Option V for periods of ten years or more, or
(3) amounts discussed under "Free Withdrawal Amounts," below.
For purposes of determining the contingent deferred sales charge, the Contract
value is divided into three categories: (1) New Purchase Payments - purchase
payments received by SMA Life during the seven years preceding the date of the
surrender; (2) Old Purchase Payments - purchase payments not defined as New
Purchase Payments; and (3) Earnings - the amount of Contract value in excess of
all purchase payments that have not been previously surrendered. For purposes
of determining the amount of any contingent deferred sales charge, surrenders
will be deemed to be taken first from Old Purchase Payments, then from New
Purchase Payments, and then from Earnings. Old Purchase Payments may be
withdrawn from the Contract at any time without the imposition of a contingent
deferred sales charge. If a withdrawal is attributable all or in part to New
Purchase Payments, a contingent deferred sales charge may apply.
Pursuant to Section 11 of the 1940 Act and Rule 11a-2 thereunder, the contingent
deferred sales charge is modified to effect an exchange of one Contract for
another Contract as provided in APPENDIX B, "EXCHANGE OFFER."
CHARGES FOR SURRENDER AND PARTIAL REDEMPTION. If a Contract is surrendered, or
if New Purchase Payments are redeemed, while the Contract is in force and before
the Annuity Date, a contingent deferred sales charge may be imposed. (For a
discussion of charges applicable on the Annuity Date, see "Charge at the Time
Annuity Payments Begin," below.) The charge does not apply to Old Purchase
Payments, nor to certain amounts discussed under "Free Withdrawal Amounts,"
below. The amount of the charge will depend upon the number of years that the
New Purchase Payments, if any, to which the withdrawal is attributed have
remained credited under the Contract. Amounts withdrawn are deducted first from
Old Purchase Payments. Then, for the purpose of calculating surrender charges
for New Purchase Payments, all amounts withdrawn are assumed to be deducted
first from the earliest New Purchase Payment and then from the next earliest New
Purchase Payment and so on, until all New Purchase Payments have been exhausted
pursuant to the FIFO (first in, first out) method of accounting. (In New Jersey,
the 10% Free Withdrawal Amount described below is deducted first from New
Purchase Payments on a LIFO basis.) Subsequent withdrawals will be deducted from
Earnings. (But see "TAXATION OF THE CONTRACTS IN GENERAL" for a discussion of
how withdrawals are treated for income tax purposes. For tax purposes, certain
partial redemptions will be deemed to come first from earnings.)
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The contingent deferred sales charge is applied as follows:
Years from date of Charge as Percentage
Purchase Payment to date of of New Purchase
Withdrawal Payments Withdrawn
----------------------------- --------------------
0-1 6.5%
2 6.0%
3 5.0%
4 4.0%
5 3.0%
6 2.0%
7 1.0%
More than 7 0.0%
The amount redeemed equals the amount requested by the Contract Owner plus the
charge, if any, which is applied against the amount requested. For example, if
the applicable charge is 6.5% and the Contract Owner has requested $200, the
Contract Owner will receive $200 and the charge will be $13 (assuming no Free
Withdrawal Amount, discussed below) for a total withdrawal of $213. The charge
is applied as a percentage of the New Purchase Payments redeemed, but in no
event will the total contingent deferred sales charge exceed a maximum limit of
6.5% of total gross New Purchase Payments. Such total charge equals the
aggregate of all applicable contingent deferred sales charges for surrender,
partial redemptions, and annuitization.
FREE WITHDRAWAL AMOUNTS. In each calendar year, SMA Life will waive the
contingent deferred sales charge, if any, on an amount equal to a percentage of
the Accumulated Value ("Free Withdrawal Amount"). If the Contract Owner and
Annuitant are different individuals, the Free Withdrawal Amount is equal to 10%
of the Accumulated Value as of December 31 of the previous calendar year ("Year-
End Accumulated Value") or, if the Contract is in its first calendar year, 10%
of the total gross payments. If the Contract Owner and Annuitant are the same
individual, the Free Withdrawal Amount will be greater of (1) the amount
calculated above, or (2) the amount calculated under SMA Life's life expectancy
distribution (see "LIFE EXPECTANCY DISTRIBUTION"), whether or not the withdrawal
was part of such distribution.
For example, an 81-year-old Contract Owner who is also the Annuitant would
receive 10.2% of the Year-End Accumulated Value under the life expectancy
distribution. The Free Withdrawal Amount in that year would be 10.2%, rather
than 10%, of the Year-End Accumulated Value.
Old Purchase Payments will be included in calculating the Free Withdrawal
Amount. If more than one partial withdrawal is made during the year, on each
subsequent withdrawal SMA Life will waive the contingent deferred sales charge,
if any, until the entire Free Withdrawal Amount has been redeemed. In the event
that a redemption of New Purchase Payments is made in excess of the amount which
may be redeemed free of charge, only the excess will be subject to a contingent
deferred sales charge.
SURRENDERS. In the case of a complete surrender, the amount received by the
Contract Owner is equal to the entire Accumulated Value under the Contract, net
of the applicable contingent deferred sales charge on New Purchase Payments, the
Contract Fee, any tax withholding, and any premium tax deducted as described
under "PREMIUM TAXES." Subject to the same rules that are applicable to partial
redemptions, SMA Life will not assess a contingent deferred sales charge on a
Free Withdrawal Amount.
Where a Contract Owner who is trustee under a pension plan surrenders, in whole
or in part, a Contract on a terminating employee, the trustee will be permitted
to reallocate all or a part of the total Accumulated Value under the Contract to
other contracts issued by SMA Life 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 Sub-Accounts as of the Valuation
Date on which a written, signed request is received at the Principal Office.
For further information on surrender and partial redemption, including minimum
limits on amount redeemed and amount remaining under the Contract in the case of
partial redemption, and important tax considerations, see "SURRENDER," "PARTIAL
REDEMPTION," and FEDERAL TAX CONSIDERATIONS."
CHARGE AT THE TIME ANNUITY PAYMENTS BEGIN. No contingent deferred sales charge
is imposed at the time of annuitization under any option involving a life
contingency (Options I, II, III, IV-A, IV-B or the comparable fixed annuity
options) or under a variable period certain option (Option V) involving a period
of ten years or longer. If the annuity option chosen is Option V for a period
of less than ten years or any fixed period option, a contingent deferred sales
charge will be deducted from the Accumulated Value of the
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Contract if the Annuity Date occurs at any time during the surrender charge
period. Such charge is the same as that which would apply had the Contract been
surrendered on the Annuity Date.
CHARGE FOR COMMUTATION UNDER VARIABLE ANNUITY OPTION V. If the Annuitant elects
to receive the commuted value of a period certain variable annuity (Option V),
see "DESCRIPTION OF VARIABLE ANNUITY OPTIONS," the basis for calculating the
commuted value will assume that the Surrender Value, rather than the Accumulated
Value, had applied at the Annuity Date. The method of computation of the
commuted value is shown under "Annuity Payments" in the Statement of Additional
Information.
CONTRACT FEE. A Contract Fee will be deducted annually on the Contract
anniversary date and upon full surrender of the Contract. The Contract Fee is
$30. SMA Life reserves the right to waive the Contract Fee for Contracts issued
to a trustee of a 401(k) plan or qualifying under Section 403(b) of the Internal
Revenue Code.
Where Contract value has been allocated to more than one Sub-Account or to the
Fixed Account and one or more Sub-Accounts, a percentage of the total Contract
Fee will be deducted from the Contract value in each account. The portion of
the charge deducted from each account will be equal to the percentage which the
Contract value in that account represents of the total Accumulated Value under
the Contract. The deduction of the Contract Fee will result in cancellation of
a number of Accumulation Units equal in value to the percentage of the charge
deducted from that account.
ANNUAL CHARGES AGAINST SEPARATE ACCOUNT ASSETS. The following annual charges
are deducted against the assets of the Separate Account:
MORTALITY AND EXPENSE RISK CHARGE. SMA Life assesses each Sub-Account a daily
charge, based on the average daily net assets of the Sub-Account, of 1.25% on an
annual basis. This charge covers the mortality and expense risk which SMA Life
assumes for the variable interests in the Contracts. The mortality risk arises
from the Contract's guarantees respecting payment on death and SMA Life's
guarantee that it will make annuity payments according to annuity rate
provisions established at the time the Contract is issued for the life of the
Annuitant (or in accordance with the annuity option selected), no matter how
long the Annuitant lives and no matter how long all annuitants as a class
live. The expense risk arises from SMA Life's guarantee that charges will not
be increased beyond the limits specified in the contract, regardless of actual
costs of operations.
The charge is imposed during both the accumulation phase and the annuity phase
(if a variable annuity option has been selected). The mortality charge is
deducted for variable annuity options that do not involve a life contingency,
even though SMA Life does not bear direct mortality risk for such annuity
options.
If the charge for mortality and expense risks is not sufficient to cover actual
mortality experience and expenses, SMA Life will absorb the losses. If expenses
are less than the amounts provided to SMA Life by the charge, the difference
will be a profit to SMA Life. To the extent this charge results in a profit to
SMA Life, such profit will be available for use by SMA Life for, among other
things, the payment of distribution, sales and other expenses.
ADMINISTRATIVE EXPENSE CHARGE. SMA Life assesses each Sub-Account a daily
charge, based on the average daily net assets of the Sub-Account, of 0.15% on an
annual basis. The charge is imposed during both the accumulation period and the
annuity period (if a variable annuity option is selected). The Administrative
Expense Charge reimburses SMA Life for expenses incurred in the administration
of the Sub-Accounts. Both the Contract Fee and the Administrative Expense
Charge are designed to recover actual administrative costs.
The administrative functions and expense assumed by SMA Life in connection with
the Separate Account and the Contracts 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.
TRANSFER CHARGE. Currently, the first twelve transfers in a Contract year will
be free of charge. For the thirteenth and each subsequent transfer in a
Contract year, SMA Life will impose a charge of $25 to reimburse SMA Life for
the costs of processing the transfer. SMA Life reserves the right to limit the
number of free transfers and the number of total transfers in a Contract year to
six.
PREMIUM TAXES. Some states and municipalities impose a premium tax on variable
annuity policies. State premium taxes currently range up to 3.5%. SMA Life pays
state and municipal premium taxes,
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when applicable, and deducts the amount paid as a premium tax charge. The
current practice of SMA Life is to deduct the premium tax charge in one of two
ways:
(1) if the premium tax was paid by SMA Life when purchase payments were
received, to the extent permitted in your Contract the premium tax charge
is deducted on a pro rata basis when partial withdrawals are made, upon
surrender of the Contract, or when annuity payments begin (SMA Life
reserves the right instead to deduct the premium tax charge for these
Contracts at the time the purchase payments are received); or
(2) the premium tax charge is deducted when annuity payments begin.
OTHER CHARGES. Because the Sub-Accounts purchase shares of the Funds, the value
of the net assets of the Sub-Accounts will reflect the investment advisory fee
and other operating expenses incurred by the Funds. The Prospectuses and
Statements of Additional Information of the Trust, VIPF and T. Rowe contain
additional information concerning expenses of the Funds.
DESCRIPTION OF THE CONTRACT
The Contracts are designed for sale to individuals and for use with several
types of retirement plans. The right to benefits in Contracts issued under
retirement plans may be subject to the terms and conditions of the plans,
regardless of the terms and conditions of the Contracts.
PURCHASE PAYMENTS. Your initial purchase payment will be credited to the
Contract as of the date that the properly completed application which
accompanies the purchase payment is received by SMA Life at its Principal
Office. If an application is incomplete, the initial purchase payment will be
returned within five business days, unless the Contract Owner consents to SMA
Life's retention of the purchase payment until the application is made complete.
After a Contract is issued, Accumulation Units will be credited to the Contract
at the unit value computed as of the Valuation Date that a purchase payment is
received at the Principal Office.
Purchase payments are not limited as to frequency and number. The initial
purchase payment must be at least $10,000 or such smaller amount as meets SMA
Life's then current minimum requirements. Subsequent purchase payments must be
at least $50.
Under a monthly automatic payment plan or a payroll deduction plan, the initial
purchase payment must be at least $500 and subsequent purchase payments must be
at least $50.
Under employer-sponsored retirement plans, SMA Life may issue a Contract on an
employee-participant with a minimum annual contribution of $300, if the plan's
average annual contribution per eligible plan participant is at least $1,000.
SMA Life reserves the right to set maximum limits on the aggregate purchase
payments made under the Contract. Total purchase payments may not exceed the
maximum limit specified in the Contract. In addition, the Internal Revenue Code
("Code") imposes maximum limits on contributions under qualified annuity plans.
Purchase payments will be allocated among the Sub-Accounts and the Fixed
Account, where available, according to the Contract Owner's instructions.
However, if your Contract was issued as an individual retirement annuity or
provides for a full refund of the initial purchase payment under its "Right to
Examine" provision (see "RIGHT TO REVOKE CONTRACT"), for the first 14 days
following the date of issue, all Fund investments will be allocated to the Money
Market Fund. (For California senior citizens age 60 and older, all Fund
investments will be held in the Money Market Fund for 34 days following the date
of issue because of an extended "Right to Examine" provision applicable to these
individuals.) Thereafter, all amounts will be allocated according to your
investment choices.
The amount of any purchase payment allocated to the Fixed Account must be at
least $500. Amounts less than $500 will be applied instead to the Money Market
Sub-Account. Purchase payments less than $50 that are allocable to any Sub-
Account may be applied instead to another Sub-Account according to SMA Life's
rules and procedures.
The Contract Owner may change allocation instructions for purchase payments or
transfers, as discussed below, by telephone or written notice to SMA Life at its
Principal Office. The privilege to initiate transactions by telephone is made
available to Contract Owners automatically unless they elect not to have the
privilege by checking a box on the application. The policy of SMA Life 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. SMA Life
will employ reasonable procedures to confirm that instructions
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communicated by telephone are genuine; otherwise, SMA Life may be liable for any
losses due to unauthorized or fraudulent instructions. The procedures SMA Life
follows for transactions initiated by telephone include requirements that
callers on behalf of a Contract 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.
TRANSFER PRIVILEGE. Subject to SMA Life's then current rules, a Contract Owner
may have amounts transferred among the Sub-Accounts or between a Sub-Account and
the Fixed Account, where available. Currently, the first twelve transfers in a
Contract year are free of any charge. For the thirteenth and each subsequent
transfer in a Contract year, SMA Life will impose a charge of $25 to reimburse
it for the expense of processing transfers. SMA Life reserves the right to
limit to six the number of permitted transfers or free transfers in any Contract
year and to establish other reasonable transfer limitation rules. In determining
the number of permitted or free transfers, SMA Life will count the transfer of
amounts from any number of Sub-Accounts or the Fixed Account to any number of
other Sub-Accounts or the Fixed Account in the same day as only one transfer.
Any transfer from the Money Market Sub-Account to any other Sub-Account will not
be deemed a transfer.
The transfer privilege is subject to the following current limitations:
(1) Transfers from a Sub-Account
(a) must involve a minimum of $500 (except for systematic transfers,
discussed below), or the entire amount in the Sub-Account, if less,
(b) must not reduce the value of the Sub-Account from which the transfer
is to be made to less than $500 (in any request where the remaining
value would be less than $500, SMA Life reserves the right to include
such remaining value in the amount transferred), and
(c) after the Annuity Date, may be made only among the Select Growth and
Income Sub-Account, Select Income Sub-Account, and Money Market Sub-
Account.
(2) Transfers from the Fixed Account
(a) may not be made prior to the maturity date applicable to such amount
(the "maturity date" is the end of a guaranteed period as described in
APPENDIX A, "MORE INFORMATION ABOUT THE FIXED ACCOUNT"),
(b) may not be made after the Annuity Date,
(c) must leave a balance with respect to the amount subject to maturity of
at least $500, unless the entire amount is transferred.
A transfer to the Fixed Account must involve an amount of at least $500. Any
amount less than $500 will be transferred instead to the Money Market Sub-
Account.
Transfers from a Sub-Account are effected at the value next computed after
receipt of the transfer order. Transfers from the Fixed Account to a Sub-
Account are effected at the value next computed after the maturity date. For
any period between the maturity date and the next Valuation Date for the Sub-
Account, the amount to be transferred will remain in the Fixed Account at the
then current rate.
Subject to SMA Life's then-current rules, the Contract Owner may apply for
systematic transfers (1) from the Money Market Sub-Account to one or more of the
other Sub-Accounts on a monthly, quarterly or semiannual schedule, or (2) to
reallocate Contract value among the Sub-Accounts on a quarterly, semiannual or
annual schedule. Each systematic transfer must be at least $100.
SURRENDER. At any time prior to the Annuity Date, a Contract Owner may
surrender the Contract and receive its Surrender Value, less any applicable tax
withholding or premium tax deduction described under "PREMIUM TAXES." The
Contract Owner must return the Contract and a signed, written request for
surrender, satisfactory to SMA Life, to the Principal Office. The Surrender
Value will be based on the Accumulated Value of the Contract as of the Valuation
Date on which the request and the Contract are received at the Principal Office.
A contingent deferred sales charge may be deducted when a Contract is
surrendered if purchase payments have been credited to the Contract during the
last seven full Contract years. See "CHARGES AND DEDUCTIONS." The Contract Fee
will be deducted upon surrender of the Contract.
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Any amount surrendered is normally payable within seven days following SMA
Life's receipt of the surrender request. SMA Life reserves the right to defer
surrenders and partial redemptions of amounts in each Sub-Account in any period
during 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 or in accordance with rules of the SEC, exists such
that disposal of portfolio securities or valuation of the assets of the Separate
Account is not reasonably practicable.
The right is reserved by SMA Life to defer surrenders and partial redemptions of
amounts allocated to the Fixed Account for a period not to exceed six months.
The surrender rights of Contract Owners who are participants under Section
403(b) plans or the Texas Optional Retirement Program ("Texas ORP") are
restricted. See "PUBLIC SCHOOL SYSTEMS AND CERTAIN TAX-EXEMPT ORGANIZATIONS"
and "TEXAS OPTIONAL RETIREMENT PROGRAM."
For important tax consequences which may result from surrender, see "FEDERAL TAX
CONSIDERATIONS."
PARTIAL REDEMPTION. At any time prior to the Annuity Date, a Contract Owner may
redeem a portion of the Accumulated Value of his or her Contract, subject to the
limits stated below. The Contract Owner must file a signed, written request for
redemption, satisfactory to SMA Life, at the Principal Office. The written
request must indicate the dollar amount the Contract Owner wishes to receive and
the Sub-Account from which such amount is to be redeemed. Where allocations
have been made to more than one Sub-Account, a percentage of the partial
redemption may be allocated to each such account. Amounts must first be
withdrawn from all allocations to Sub-Accounts before amounts allocated to the
Fixed Account may be withdrawn.
In a partial redemption, the amount redeemed equals the amount requested by the
Contract Owner plus any applicable contingent deferred sales charge, as
described under "CHARGES AND DEDUCTIONS." A partial redemption from a Sub-
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 Principal Office.
Each partial redemption must be in a minimum amount of $200. No partial
redemption will be permitted if the Accumulated Value remaining under the
Contract would be reduced to less than $1,000. Partial redemptions will be paid
in accordance with the time limitations described under "SURRENDER."
For important restrictions on withdrawals which are applicable to participants
under Section 403(b) plans or the Texas ORP, see "PUBLIC SCHOOL SYSTEMS AND
CERTAIN TAX-EXEMPT ORGANIZATIONS" and "TEXAS OPTIONAL RETIREMENT PROGRAM."
For important tax consequences which may result from partial redemptions, see
"FEDERAL TAX CONSIDERATIONS."
LIFE EXPECTANCY DISTRIBUTION. A Contract Owner who is also the Annuitant may
make a revocable election to take a series of systematic withdrawals from the
Contract according to a life expectancy distribution ("LED") by returning a
signed LED request form to the Principal Office. (For information on how the
Free Withdrawal Amount is calculated under the LED, see "Free Withdrawal
Amounts" under "CONTINGENT DEFERRED SALES CHARGE") The LED permits the Contract
Owner to make systematic withdrawals from the Contract over his or her lifetime.
The amount withdrawn from the Contract changes each year because life expectancy
changes each year that a person lives. For example, actuarial tables indicate
that a person age 70 has a life expectancy of 16 years, but a person who attains
age 86 has a life expectancy of another 6.5 years.
If a Contract Owner elects the LED, a fraction of the Year-End Accumulated Value
is withdrawn from the Contract in each Contract year based on the Contract
Owner's then life expectancy. The numerator of the fraction is 1 (one) and the
denominator of the fraction is the remaining life expectancy of the Contract
Owner, as determined annually by SMA Life. The resulting fraction, expressed as
a percentage, is applied to the Year-End Accumulated Value to determine the
amount to be distributed during the year. The Contract Owner may elect monthly,
bimonthly, quarterly, semiannual or annual distributions, and may terminate the
LED at any time. The Contract Owner may also elect to receive distributions
under an LED which is determined on the joint life expectancy of the Contract
Owner and a beneficiary. SMA Life may also offer other systematic withdrawal
options.
If a Contract Owner makes withdrawals under the LED prior to age 59 1/2, the
withdrawals may be treated by the IRS as premature distributions from the
Contract. The payments would then be taxed on an
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"income first" basis, and be subject to a 10% federal tax penalty. See
"TAXATION OF THE CONTRACTS IN GENERAL."
PAYMENT ON DEATH. If the Annuitant dies (or the Contract Owner predeceases the
Annuitant) prior to the Annuity Date while the Contract is in force, SMA Life
will pay the beneficiary, except where the Contract continues as provided in
"THE SPOUSE OF THE CONTRACT OWNER AS BENEFICIARY," as follows:
Upon death of the Annuitant (including a Contract Owner who is also the
Annuitant), SMA Life will pay the beneficiary the greatest of (a) the
Accumulated Value under the Contract next determined following receipt of due
proof of death at the Principal Office, (b) the total amount of gross purchase
payments made under the Contract minus the amounts of all prior partial
withdrawals, or (c) the amount that would have been paid on death of the
Annuitant at the most recent fifth year contract anniversary, adjusted for
subsequent purchase payments and withdrawals after that date. Upon death of a
Contract Owner who is not the Annuitant, SMA Life will pay the beneficiary the
Accumulated Value of the Contract next determined following receipt of due proof
of death at the Principal Office.
Payment will be made to the beneficiary in one sum, except that 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 death.
2. The payment may be made in installments. The first installment must
begin within one year from the date of death. Installments are payable
over a period certain not extended beyond the life expectancy of the
beneficiary.
3. All or a portion of the payment may be used to provide a life annuity
for the beneficiary. Annuity payments must begin within one year from
the date of death and are payable over a period not extended beyond the
life expectancy of the beneficiary. Any annuity payments will be
provided in accordance with the annuity options of the Contract.
If there is more than one beneficiary, the payment on death will be paid to such
beneficiaries in one sum unless SMA Life consents to pay an annuity option
chosen by the beneficiaries.
With respect to any payment on death, the Accumulated Value under the Contract
shall be based on the unit values next computed after due proof of death has
been received at the Principal Office. If the beneficiary elects to receive the
payment in one sum, the payment will be paid within seven business days. If the
beneficiary has not elected an annuity option within one year from the date
notice of death is received by SMA Life, the payment will be made in one sum.
The payment will reflect any earnings or losses experienced during the period
and any withdrawals.
If the Annuitant's death occurs on or after the Annuity Date but before the
completion of all guaranteed annuity payments, any unpaid amounts or
installments will be paid to the beneficiary. SMA Life 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 the payments, 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.
THE SPOUSE OF THE CONTRACT OWNER AS BENEFICIARY. The Contract Owner's spouse,
if named as the beneficiary, may by written request continue the Contract in
lieu of receiving the amount payable upon death of the Contract Owner. Upon
such election, the spouse will become the new Contract Owner (and, if the
deceased Owner was also the Annuitant, the new Annuitant). All other rights and
benefits provided in the Contract will continue, except that any subsequent
spouse of such new Contract Owner will not be entitled to continue the Contract
upon such new Contract Owner's death.
ASSIGNMENT. The Contracts, other than those sold in connection with certain
qualified plans (see "FEDERAL TAX CONSIDERATIONS"), may be assigned by the
Contract Owner at any time prior to the Annuity Date and while the Annuitant is
alive. SMA Life will not be deemed to have knowledge of an assignment unless it
is made in writing and filed at the Principal Office. SMA Life will not assume
responsibility for determining the validity of any assignment. If an assignment
of the Contract is in effect on the Annuity Date, SMA Life reserves the right to
pay to the assignee, in one sum, that portion of the Surrender Value of the
Contract to which the assignee appears to be entitled. SMA Life will pay the
balance, if any, in one sum to the Contract Owner in full settlement of all
liability under the Contract. The interest of the Contract Owner and of any
beneficiary will be subject to any assignment.
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ELECTING THE FORM OF ANNUITY AND THE ANNUITY DATE. Subject to certain
restrictions described below, the Contract Owner has the right to (1) select the
annuity option under which annuity payments are to be made, and (2) determine
whether payments are to be made on a fixed basis, a variable basis, or a
combination fixed and variable basis, and (3) reallocate variable annuity option
investments among the available Funds, subject to certain restrictions.
Annuity payments are determined according to the annuity tables in the Contract,
by the annuity option selected, and by the investment performance of the
applicable Sub-Accounts, if variable annuity payments are selected.
Under a variable annuity, a payment equal to the value of the fixed number of
Annuity Units in the Sub-Account(s) is made each month. Since the value of an
Annuity Unit in a Sub-Account will reflect the investment performance of the
Sub-Account, the amount of each payment will vary.
If a fixed annuity is selected, Accumulated Value will be transferred to the
General Account of SMA Life, and annuity payments will be fixed in amount. For
information about the General Account, see APPENDIX A, "MORE INFORMATION ABOUT
THE FIXED ACCOUNT."
The annuity option selected must produce an initial payment at least equivalent
to $50 a month. If a combination of fixed and variable payments is selected,
the initial payment on each basis must be at least equivalent to $50 a month.
SMA Life reserves the right to increase these initial minimum amounts to an
amount no higher than the equivalent of $500 a month. If the annuity option
selected does not produce initial payments which meet this minimum, SMA Life
will pay the Surrender Value or guaranteed payment on death, as the case may be,
in one sum. Once SMA Life begins making annuity payments, the Contract Owner
cannot make partial redemptions or surrender the annuity benefit. 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 Contract Owner. To the extent permitted in
your state, the Annuity Date may be the first day of any month (a) before the
Annuitant's 85th birthday, if the Annuitant's age at the date of issue of the
Contract is 75 or under, or (b) within 10 years from the date of issue of the
Contract and before the Annuitant's 90th birthday, if the Annuitant's age at the
date of issue is between 76 and 90. The Contract Owner may elect to change the
Annuity Date by sending a written request to the Principal Office at least one
month before the new Annuity Date. The new Annuity Date must be the first day
of any month occurring before the Annuitant's 90th birthday. The new Annuity
Date must be within the life expectancy of the Annuitant. SMA Life will
determine life expectancy at the time the Annuity Date is requested. The
Internal Revenue Code imposes limitations on the age at which distributions may
commence. See "FEDERAL TAX CONSIDERATIONS."
If the Contract Owner does not elect otherwise, annuity payments will be made in
accordance with Option I, a variable life annuity with ten years guaranteed.
Changes in either the Annuity Date or annuity option can be made up to one month
prior to the Annuity Date.
DESCRIPTION OF VARIABLE ANNUITY OPTIONS. SMA Life offers the variable annuity
options described below and provides fixed-amount annuity options which are
comparable to the variable annuity options. Other annuity options may be
offered by SMA Life.
Variable annuity options provide payments that vary according to investment
experience. The variable annuity options offered under the Contracts may be
funded through the Select Growth and Income Sub-Account, Select Income Sub-
Account, and Money Market Sub-Account.
Regardless of how purchase payments were allocated during the accumulation
period, the Contract Owner may choose any one of the variable annuity options
offered, a comparable fixed-amount option, or a variable annuity option in
combination with a comparable fixed-amount annuity option. Each annuity option
may be paid on a monthly, quarterly, semiannual or annual basis.
Under a variable life annuity option, payments are based on how long the payee
is expected to live and how the net investment results of the chosen Fund(s)
compare to an assumed rate of return (See "Determination of First and Subsequent
Annuity Payments"). If the payee outlives his or her life expectancy, payments
will continue for the life of the payee. If the payee dies, regardless of when
the death occurs in relation to the payee's life expectancy, payments will cease
with the last payment due prior to the payee's death. Therefore, under a life
annuity, it is possible for the payee to receive only one annuity payment if the
payee dies prior to the due date of the second annuity payment, two annuity
payments if the payee dies before the due date of the third annuity payment, and
so on. However, payments will continue during the lifetime of the payee, no
matter how long the payee lives.
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OPTION I - VARIABLE LIFE ANNUITY WITH TEN YEARS GUARANTEED
Variable payments will be made during the lifetime of the payee. If the payee
dies before a guaranteed payment period of ten years, the annuity payments are
guaranteed to continue to the beneficiary until the end of the ten-year
guarantee period.
OPTION II - VARIABLE LIFE ANNUITY
Variable payments will be made for the life of the payee. Payments will cease
with the last payment due prior to the payee's death.
OPTION III - UNIT REFUND VARIABLE LIFE ANNUITY
Variable payments will be made during the lifetime of the payee. Upon death of
the payee, payments will continue to the beneficiary until the total number of
payments equals the dollar amount of the annuity value applied, divided by the
first annuity payment.
OPTION IV-A - JOINT AND SURVIVOR VARIABLE LIFE ANNUITY
A variable annuity payable jointly to two payees during their joint lifetime,
and then continuing during the lifetime of the survivor. The amount of each
payment to the survivor 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
either the Annuitant or the beneficiary. There is no minimum number of payments
under this option.
OPTION IV-B - JOINT AND TWO-THIRDS SURVIVOR VARIABLE LIFE ANNUITY
A variable annuity payable jointly to two payees during their joint lifetime,
and then continuing thereafter during the lifetime of the survivor. However,
the amount of each payment to the survivor 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 Annuitant or the beneficiary. There is
no minimum number of payments under this option.
OPTION V - PERIOD CERTAIN VARIABLE ANNUITY
A variable annuity payable for a stipulated number of from one to thirty years.
It should be noted that Option V does not involve a life contingency. Although
not contractually required to do so, SMA Life currently follows a practice of
permitting persons receiving payments under Option V to elect to convert to a
variable annuity involving a life contingency. SMA Life may discontinue or
change this practice at any time, but not with respect to Contract Owners who
have elected Option V prior to the date of any change in this practice.
If the Annuitant dies before the completion of the period stipulated under
Option V, payments will continue to be paid to the beneficiary. The Annuitant
or the beneficiary may choose at any time to redeem the Contract and receive its
commuted value. The method of computation of the commuted value is shown under
"Annuity Payments" in the Statement of Additional Information. If the Annuitant
makes this election, the commuted value will be based on the remaining payments
that would have been payable had the Surrender Value, rather than the
Accumulated Value, been applied at the Annuity Date. See "Charge for
Commutation under Variable Annuity Option V" under "CONTINGENT DEFERRED SALES
CHARGE."
In the computation of the payments under this option (see "Determination of
First and Subsequent Annuity Payments"), the charge for annuity rate guarantees,
which includes a factor for mortality risks, is made.
See "FEDERAL TAX CONSIDERATIONS" for a discussion of the possible adverse tax
consequences of selecting Option V.
COMPUTATION OF CONTRACT VALUES AND ANNUITY PAYMENTS. Contract values and annuity
payments are computed as follows:
THE ACCUMULATION UNIT. Each purchase payment is allocated to the Sub-Accounts
or Fixed Account, as selected by the Contract Owner. Allocations to the Sub-
Accounts are credited to the Contract in the form of Accumulation Units.
Accumulation Units are credited separately for each Sub-Account. The number of
Accumulation Units of each Sub-Account credited to the Contract is equal to the
portion of the purchase payment allocated to the Sub-Account, divided by the
dollar value of the applicable Accumulation Unit as of the Valuation Date the
purchase payment is received at the Principal Office. A subsequent transfer,
partial redemption, surrender or split of Accumulation Unit value will change
the number of Accumulation
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Units. The number of Accumulation Units will not change as a result of
investment experience. The dollar value of an Accumulation Unit of each Sub-
Account varies from Valuation Date to Valuation Date based on the investment
experience of that Sub-Account and will reflect the investment performance,
expenses and charges of its Funds. On the first Valuation Date, the value of an
Accumulation Unit was set at $1.00 for each Sub-Account. Allocations to the
Fixed Account are not converted into Accumulation Units, but are credited
interest at a rate periodically set by SMA Life. See APPENDIX A, "MORE
INFORMATION ABOUT THE FIXED ACCOUNT."
The Accumulated Value under the Contract is determined by (1) multiplying the
number of Accumulation Units in each Sub-Account by the dollar value of an
Accumulation Unit of that Sub-Account on the Valuation Date, (2) adding the
products, and (3) adding the amount of the accumulations in the Fixed Account,
if any.
ADJUSTED GROSS INVESTMENT RATE. At each Valuation Date an adjusted gross
investment rate for each Sub-Account for the Valuation Period then ended is
determined from the investment performance of that Sub-Account. Such rate is
(1) the investment income of that Sub-Account for the Valuation Period, plus
capital gains and minus capital losses of that Sub-Account for the Valuation
Period, whether realized or unrealized, adjusted for provisions made for taxes,
if any, divided by (2) the amount of that Sub-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
Sub-Account's variable accumulations for any Valuation Period is equal to the
adjusted gross investment rate of the Sub-Account for such Valuation Period
decreased by the equivalent for such period of a charge equal to 1.40% per
annum. This charge cannot be increased.
The net investment factor is l.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. On and after the Annuity Date the Annuity Unit is a measure
of the value of the Annuitant's annuity payments under a variable annuity
option. The value of an Annuity Unit in each Sub-Account initially was set at
$1.00. The value of an Annuity Unit under a Sub-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 Sub-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 variable annuity options offered in the
Contract.
DETERMINATION OF THE FIRST AND SUBSEQUENT ANNUITY PAYMENTS. The amount of the
first annuity payment is based on the annuity value applied and the annuity
option selected. The annuity value applied under an annuity option is the
amount described below, minus any applicable premium tax charge: (1) if
Option V is chosen with a period of 10 or more years - the Accumulated Value;
(2) if Option V is chosen with a period of less than 10 years - the Surrender
Value; (3) if any annuity option offered by SMA Life involving a life
contingency is chosen - the Accumulated Value; and (4) if a death benefit
annuity is payable at any time - the amount of the death benefit.
Annuity values will be based on a Valuation Date applied uniformly not more than
four weeks preceding the Annuity Date. Currently, the Valuation Date for
annuity values is the 15th date of the month preceding the Annuity Date, and
variable annuity payments are made on the first of the month based on unit
values as of the 15th day of the preceding month.
The Contract provides annuity rates which determine the dollar amount of the
first payment under each form of annuity for each $1,000 of applied annuity
value. Guaranteed variable life annuity rates in the Contract are based on a
modification of the 1983 Table "a" rates and are unisex except where not allowed
by state law, in which case sex-distinct rates will apply. Rates for Contracts
subject to the United States Supreme Court decision in Arizona Governing
Committee v. Norris are unisex in all jurisdictions. The Norris decision
generally applies to employer-sponsored plans.
The amount of the first payment depends upon the form of annuity selected, the
sex (only if sex-distinct rates apply) and age of the Annuitant and the value of
the amount applied under the annuity option. The variable annuity options
offered by SMA Life are based on a 3 1/2% assumed interest rate. Variable
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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 Sub-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 Sub-Account is less than the equivalent of the assumed
interest rate for the period.
The dollar amount of the first 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
charge, if any) divided by $1,000, by (2) the applicable amount of the first
payment per $1,000 of value. The dollar amount of the first variable annuity
payment is then divided by the value of an Annuity Unit of the selected Sub-
Account(s) to determine the number of Annuity Units represented by the first
payment. In each subsequent annuity payment, the dollar amount of the variable
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 payment, the dollar amount of each variable annuity payment will
vary with subsequent variations in the value of the Annuity Unit of the selected
Sub-Account(s). The dollar amount of each fixed amount annuity payment is fixed
and will not change, except under the joint and two-thirds survivor annuity
option.
SMA Life may from time to time offer its Contract Owners both fixed and variable
annuity rates more favorable than those contained in the Contract. Any such
rates will be applied uniformly to all Contract 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 Contract, on redemptions or
surrenders, on annuity payments, and on the economic benefit to the Annuitant or
beneficiary depends upon a variety of factors. The following discussion is
based upon SMA Life'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.
It should be recognized that the following discussion of federal income tax
aspects of amounts received under variable annuity contracts 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.
SMA Life intends to make a charge for any effect which the income, assets, or
existence of the Contracts, the Separate Account or Sub-Accounts may have upon
SMA Life's tax. The Separate Account presently is not subject to tax, but
SMA Life reserves the right to assess a charge for taxes should the Separate
Account 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 Contract Owners and with respect to each Separate Account as though that
Separate Account were a separate taxable entity.
The Separate Account is considered to be a part of and taxed with the operations
of SMA Life. SMA Life is taxed as a life insurance company under subchapter L
of the Code. SMA Life files a consolidated tax return with its parent, State
Mutual, and other affiliates.
The Internal Revenue Service has issued regulations relating to the
diversification requirements for variable annuity and variable life insurance
policies 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 contract owner, would be treated as
ordinary income received or accrued by the contract owner. It is anticipated
that the Funds of the Trust, VIPF and T. Rowe will comply with the
diversification requirements.
QUALIFIED AND NON-QUALIFIED CONTRACTS. From a federal tax viewpoint there are
two types of variable annuity contracts, "qualified" contracts and "non-
qualified" contracts. A qualified contract is
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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 contract 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
contract or a non-qualified contract. For more information on the tax
provisions applicable to specific types of qualified contracts, see the
discussions under the applicable headings, below.
TAXATION OF THE CONTRACTS IN GENERAL. SMA Life believes that the Contracts
described in this Prospectus will, with certain exceptions discussed in "SECTION
457 PLANS FOR STATE GOVERNMENTS AND TAX-EXEMPT ENTITIES," be considered
annuities under Section 72 of Code. This section provides for the taxation of
annuities. The following discussion concerns annuities subject to Section 72.
All non-qualified deferred annuity contracts issued by the same insurance
company to the same contract owner during the same calendar year will be treated
as a single contract in determining taxable distributions under Section 72(e).
Any increase in the Accumulated Value of the Contract is not taxable to the
Contract Owner until it is withdrawn, except in cases of assignment or certain
non-individual Contract Owners, as discussed below. If the Contract 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
Contract would be taxed as ordinary income. Under the current provisions of the
Code, amounts received under a non-qualified Contract prior to the Annuity Date
(including payments made upon the death of the Annuitant or Contract Owner), or
as non-periodic payments after the Annuity Date, are generally first
attributable to any investment gains credited to the Contract over the
taxpayer's basis (if any) in the Contract. Such amounts will be treated as
income subject to federal income taxation.
The tax treatment of partial redemptions or surrenders of non-qualified
Contracts offered by this Prospectus may vary according to whether the amount
redeemed or surrendered is allocable to an investment in the Contract made
before or after certain dates.
A 10% penalty tax may be imposed on the withdrawal of 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 Contract Owner
(or, if the Contract 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 Contract Owner. 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 Contract Owner elects to have distributions made
over his or her life expectancy, or over the joint life expectancy of the
Contract Owner and beneficiary. The requirement that the amount 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.
In a private letter ruling, the Internal Revenue Service took the position that
where distributions from a variable annuity contract were determined by
amortizing the accumulated value of the contract over the taxpayer's remaining
life expectancy (such as under the Contract's LED (see "LIFE EXPECTANCY
DISTRIBUTION"), and could be changed or terminated at any time, the
distributions failed to qualify as part of a "series of substantially equal
payments" within the meaning of Section 72 of the Code. The distributions were
therefore subject to the 10% federal tax penalty. This private letter ruling
may be applicable to a Contract Owner who receives life expectancy distributions
prior to age 59 1/2. Subsequent private letter rulings, however, have treated
LED-type withdrawal programs as effectively avoiding the 10% penalty tax. The
position of the IRS on this issue is unclear.
If the Contract Owner transfers (assigns) the Contract to another individual as
a gift prior to the Annuity Date, the Code provides that the Contract Owner will
incur taxable income at the time of the transfer. An exception is provided for
certain transfers between spouses. The amount of taxable income upon such
taxable transfer is equal to the excess, if any, of the Surrender Value of the
Contract over the Contract Owner's cost basis at the time of the transfer. The
transfer is also subject to federal gift tax provisions. Where the Contract
Owner and Annuitant are different persons, the change of ownership of the
Contract to the Annuitant on the Annuity Date, as required under the Contract,
is a gift and will be taxable to the Owner as such. However, the Owner will not
incur taxable income. Rather the Annuitant will incur taxable income upon
receipt of annuity payments as discussed below.
When annuity payments are commenced under the Contract, 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 Contract bears to the expected return under the Contract. The portion of
the payment in excess of this excludable amount is taxable as ordinary income.
Once all cost basis in
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the Contract is recovered, the entire payment is taxable. If the last payee
dies before cost basis is recovered, a deduction for the difference is allowed
on the payee's final tax return.
TAX WITHHOLDING. The Code requires withholding with respect to payments or
distributions from annuities, unless a taxpayer elects not to have withholding.
In addition, the Code requires reporting to the Internal Revenue Service of the
amount of income received with respect to payment or distributions from
annuities.
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 Contracts 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 Contract.
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 amount, as
required under Section 72(p).
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 the lump-sum
distribution as long-term capital gain and may also elect 10-year averaging
instead of five-year averaging.
SMA Life can provide prototype plans for certain of the pension or profit
sharing plans for review by your legal counsel. For information, ask your
agent.
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.
INDIVIDUAL RETIREMENT ACCOUNT PLANS. Any individual who earns "compensation"
(as defined in the Code and including alimony) 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 contracts, including the Contracts
offered by this Prospectus.
Contributions to an 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 (one with income of $250 or less) 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.
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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 the earnings are
distributed. The maximum permissible non-deductible contribution is $2,000 for
an individual taxpayer and $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, SMA Life will regard contributions
as being applicable to the year made unless it receives notice to the contrary.
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 must be made
in accordance with Section 401(a)(9) of the Code. Failure to make distributions
as so required 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 Internal Revenue Service 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 Internal Revenue Service, distributions from an IRA to which
both deductible and non-deductible contributions have been made are presumed to
be fully taxable.
SIMPLIFIED EMPLOYEE PENSIONS. Simplified employee pensions ("SEPs") may be
established 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 (as indexed for inflation) 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 "INDIVIDUAL RETIREMENT ACCOUNT PLANS."
These plans are subject to the general employer's deduction limitations
applicable to all corporate qualified plans.
PUBLIC SCHOOL SYSTEMS AND CERTAIN TAX-EXEMPT ORGANIZATIONS. Under the
provisions of Section 403(b) of the Code, purchase payments made for annuity
contracts 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 contracts in any year do
not exceed the maximum contribution permitted under the Code.
A Contract 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 Contract 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. Also, there is a mandatory 20% income
tax withholding on any eligible rollover distribution, unless it is a direct
rollover to another qualified plan in accordance with IRS rules.
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The distribution restrictions are effective for years beginning after December
31, 1988, but only with respect to amounts that were not held under the Contract
as of that date.
TEXAS OPTIONAL RETIREMENT PROGRAM. Under a Code Section 403(b) annuity contract
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.
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 Contract.
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.
NON-INDIVIDUAL OWNERS. Non-individual Owners (e.g., a corporation) of deferred
annuity contracts 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.
VOTING RIGHTS
To the extent required by law, SMA Life will vote Fund shares held by each Sub-
Account in accordance with instructions received from Contract Owners and, after
the Annuity Date, from the Annuitants. Each person having a voting interest in
a Sub-Account will be provided with proxy materials of the Fund together with a
form with which to give voting instructions to SMA Life. Shares for which no
timely instructions are received will be voted in proportion to the instructions
which are received. SMA Life will vote in its discretion shares attributable to
its investment in a Sub-Account. If the 1940 Act or any rules thereunder should
be amended or if the present interpretation of the 1940 Act or such rules should
change, and as a result SMA Life determines that it is permitted to vote shares
in its own right, whether or not such shares are attributable to the Contracts,
SMA Life reserves the right to do so.
The number of votes which a Contract Owner or Annuitant may cast will be
determined by SMA Life as of the record date established by the Fund.
During the accumulation period, the number of Fund shares attributable to each
Contract Owner will be determined by dividing the dollar value of the
Accumulation Units of the Sub-Account credited to the Contract 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 Sub-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.
DISTRIBUTION
The Contracts offered by the Prospectus may be purchased from certain
independent broker-dealers which are registered under the Securities Exchange
Act of 1934 and members of the National Association of
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Securities Dealers, Inc. ("NASD"). The Contracts are also offered through
Allmerica Investments, Inc., which is the principal underwriter and distributor
of the Contracts. Allmerica Investments, Inc., 440 Lincoln Street, Worcester,
Massachusetts 01653, is a registered broker-dealer, member of the NASD and an
indirect wholly-owned subsidiary of State Mutual.
SMA Life pays commissions not to exceed 5.5% of purchase payments to broker-
dealers which sell the Contracts. Alternative commission schedules are
available with lower initial commission amounts based on purchase payments, plus
ongoing annual compensation of up to 1% of contract value. To the extent
permitted by NASD rules, promotional incentives or payments may also be provided
to such broker-dealers based on sales volumes, the assumption of wholesaling
functions, or other sales-related criteria. Additional payments may be made for
other services not directly related to the sale of the Contracts, including the
recruitment and training of personnel, production of promotional literature, and
similar services.
SMA Life intends to recoup commissions and other sales expenses through a
combination of anticipated contingent deferred sales charges and profits from
SMA Life's General Account. Commissions paid on the Contracts, including
additional incentives or payments, do not result in any additional charge to
Contract Owners or to the Separate Account. Any contingent deferred sales
charges assessed on a Contract will be retained by SMA Life.
Contract Owners may direct any inquiries to their financial adviser or to
Allmerica Investments, Inc., 440 Lincoln Street, Worcester, Massachusetts 01653,
508-855-3590.
REPORTS
A Contract Owner is sent a report semi-annually which states certain financial
information about the Funds. SMA Life will also furnish an annual report to the
Contract Owner containing a statement of his or her account, including unit
values and other information required by applicable law, rules and regulations.
PERFORMANCE INFORMATION
SMA Life from time to time may advertise the "total return" of the Sub-Accounts
and the "yield" and "effective yield" of the Money Market Sub-Account. 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 Sub-Account refers to the total of the income generated
by an investment in the Sub-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 Separate Account charges, and expressed as a
percentage of the investment.
The "yield" of the Money Market Sub-Account refers to the income generated by an
investment in the Sub-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 Sub-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
Sub-Account's asset charges. The total return figures also reflect the $30
annual Contract Fee and the contingent deferred sales charge which would be
assessed if the investment were completely redeemed at the end of the specific
period.
SMA Life may also advertise supplemental total return performance information.
Supplemental total return refers to the total of the income generated by an
investment in the Sub-Account and of the changes of value of the principal
invested (due to realized and unrealized capital gains or losses), adjusted by
the Sub-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 withdrawal charge is NOT included in the
calculation of supplemental total return.
Performance information for a Sub-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 the Sub-Account
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
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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 (a measure for inflation)
to assess the real rate of return from an investment in the Sub-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 Sub-Account reflects only the performance of a
hypothetical investment in the Sub-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 in which the Sub-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.
CHANGES IN OPERATION OF THE SEPARATE ACCOUNT
SMA Life reserves the right, subject to compliance with applicable law, to (1)
transfer assets from the Separate Account or any Sub-Account to another of SMA
Life's separate accounts or sub-accounts having assets of the same class, (2) to
operate the Separate Account or Sub-Accounts as a management investment company
under the 1940 Act or in any other form permitted by law, (3) to deregister the
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 Sub-Account, in the event that Fund shares
are unavailable for investment, or if SMA Life determines that further
investment in such Fund shares is inappropriate in view of the purpose of the
Sub-Account. In no event will the changes described above be made without
notice to Contract Owners in accordance with the 1940 Act.
SMA Life reserves the right, subject to compliance with applicable law, to
change the names of the Separate Account or any Sub-Accounts.
LEGAL MATTERS
There are no legal proceedings pending to which the Separate Account is a party.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
SMA Life reserves the right, subject to applicable law, to make additions to,
deletions from, or substitutions for the shares that are held in the Sub-
Accounts or that the Sub-Accounts may purchase. If the shares of any Fund are
no longer available for investment or if in SMA Life's judgment further
investment in any Fund should become inappropriate in view of the purposes of
the Separate Account or the affected Sub-Account, SMA Life may redeem the shares
of that Fund and substitute shares of another registered open-end management
company. SMA Life will not substitute any shares attributable to a Contract
interest in a Sub-Account without notice to the Contract Owner and prior
approval of the SEC and state insurance authorities, to the extent required by
the 1940 Act or other applicable laws. The Separate Account may, to the extent
permitted by law, purchase other securities for other contracts or permit a
conversion between contracts upon request by a Contract Owner.
SMA Life also reserves the right to establish additional Sub-Accounts, each of
which would invest in shares corresponding to a new Fund or in shares of another
investment company having a specified investment objective. Subject to
applicable law and any required SEC approval, SMA Life may, in its sole
discretion, establish new Sub-Accounts or eliminate one or more Sub-Accounts if
marketing needs, tax considerations or investment conditions warrant. Any new
Sub-Accounts may be made available to existing Contract Owners on a basis to be
determined by SMA Life.
Shares of the Funds are also issued to separate accounts of SMA Life and its
affiliates which issue variable life policies ("mixed funding") and other
variable annuities. It is conceivable that in the future such mixed funding may
be disadvantageous for variable life or variable annuity Contract Owners.
Although SMA Life, the Trust, VIPF and T. Rowe do not currently foresee any such
disadvantage to either variable life insurance or variable annuity Contract
Owners, SMA Life and the Trustees of the Trust, VIPF and T. Rowe intend to
monitor events in order to identify any material conflicts and to determine what
action, if any should be taken in response thereto. If the Trustees of the
Trust were to conclude that separate funds should be established for variable
life and variable annuity separate accounts, SMA Life will bear the attendant
expenses.
If any of these substitutions or changes are made, SMA Life may by appropriate
endorsement change the Contract to reflect the substitution or change and will
notify Contract Owners of all such changes. If SMA Life deems it to be in the
best interest of Contract Owners, and subject to any approvals that may be
required under applicable law, the Separate Account or any Sub-Account(s) may be
operated as a
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management company under the 1940 Act, may be deregistered under the 1940 Act if
registration is no longer required, or may be combined with other Sub-Accounts
or other separate accounts of SMA Life.
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 SEC. The omitted
information may be obtained from the SEC's principal office in Washington, D.C.,
upon payment of the SEC's prescribed fees.
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APPENDIX A
MORE INFORMATION ABOUT THE FIXED ACCOUNT
Because of exemption and exclusionary provisions in the securities laws,
interests in the General Account, including the Fixed Account, are not 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
Contract and the Fixed 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. ALLOCATIONS TO AND TRANSFERS
TO AND FROM THE FIXED ACCOUNT ARE NOT PERMITTED IN CERTAIN STATES.
The General Account of SMA Life is made up of all of the general assets of SMA
Life other than those allocated to any separate account. Allocations to the
Fixed Account become part of the assets of SMA Life and are used to support
insurance and annuity obligations.
A portion or all of purchase payments may be allocated to accumulate at a fixed
rate of interest in the Fixed Account, where available. The amount of any
purchase payment allocated to the Fixed Account must be at least $500. Amounts
less than $500 will be applied instead to the Money Market Sub-Account. Amounts
allocated to the Fixed Account are guaranteed by SMA Life as to principal and a
minimum rate of interest. Under the Contracts, the minimum interest which may
be credited on amounts allocated to the Fixed Account is 3.5% compounded
annually. Additional "excess interest" may or may not be credited at the sole
discretion of SMA Life. Initial and subsequent interest rates on amounts
allocated to the Fixed Account, either as purchase payments, transfers or
amounts remaining in the Fixed Account after the end of a guaranteed period
("maturity date"), will be guaranteed for periods of one year.
An amount may not be transferred from the Fixed Account to a Sub-Account prior
to its maturity date or after the Annuity Date. The transfer must leave a
balance with respect to the amount subject to maturity of at least $500, unless
the entire amount is transferred. A transfer to the Fixed Account must involve
an amount of at least $500. Any amount less than $500 will be transferred
instead to the Money Market Sub-Account.
Prior to the maturity date, SMA Life will notify the Contract Owner of the new
interest rate applicable for the next one-year period applicable both to new
purchase payments and maturing amounts. Unless SMA Life receives in writing, at
least five business days prior to the maturity date, a request from the Contract
Owner to apply the maturing amount to a new guaranteed interest rate period of
one year or to a Sub-Account, the amount will be transferred after the maturity
date to the Money Market Sub-Account.
Transfers from the Fixed Account to a Sub-Account will be effected at the value
next computed after the maturity date. For any period between the maturity date
and the next Valuation Date for the Sub-Account, the amount to be transferred
will remain in the Fixed Account at the then current rate.
If the Contract Owner makes partial withdrawals from his or her Contract,
amounts must first be withdrawn from all allocations to Sub-Accounts before
amounts allocated to the Fixed Account may be withdrawn. If a Contract is
surrendered, partially redeemed, or annuitized under any fixed period certain, a
contingent deferred sales charge is imposed if such event occurs before the
purchase payments attributable to the surrender, withdrawal or annuitization
have been credited to the Contract less than seven full Contract years. For the
purpose of calculating surrender charges, surrenders and redemptions are deemed
made pursuant to the FIFO ("first in, first out") method of accounting.
However, withdrawals from the Fixed Account will be made on a LIFO (last in,
first out) basis; i.e., withdrawals will be made first from amounts attributable
to the most recent purchase payment.
LOANS FROM THE FIXED ACCOUNT (QUALIFIED CONTRACTS ONLY). Loans will be
permitted only for Contracts issued to a plan qualified under Section 401(a),
401(k) or 403(b) of the Code. Loans are permitted only from a Contract's
accumulation in the Fixed Account, where available. The maximum loan amount is
the amount determined under SMA Life's maximum loan formula for qualified plans.
The minimum loan amount is $1,000. Loans will be secured by a security interest
in the Contract. 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 SMA Life'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 payment on death, 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.
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APPENDIX B
EXCHANGE OFFER
A. VARIABLE CONTRACT EXCHANGE OFFER.
The Company reserves the right to suspend this exchange offer at any time. This
exchange offer applies to all variable annuity contracts issued by SMA Life,
except for variable annuity contract A3018-91 (and state variation forms
thereof). A variable annuity contract to which this exchange offer applies may
be exchanged at net asset value for the Contract described in this Prospectus.
To effect an exchange, SMA Life should receive (1) a completed application for
the Contract, (2) written request for the exchange, (3) the contract to be
exchanged for the Contract, and (4) a signed Letter of Awareness.
CONTINGENT DEFERRED SALES CHARGE COMPUTATION. No surrender charge applicable to
the contracts to be exchanged will apply to the surrender effecting the
exchange. Where a contract, other than a Contract or variable annuity contract
A3019-92 and state variations thereof ("contract A3019-92"), is exchanged for a
Contract, the contingent deferred sales charge under the acquired Contract will
be computed as if prior purchase payments for the exchanged contract had been
made for the acquired Contract on the date of issue of the exchanged contract.
Where another Contract or contract A3019-92 is exchanged for a new Contract, the
contingent deferred sales charge under the acquired Contract will be computed as
if prior purchase payments for the exchanged Contract or contract A3019-92 had
been made for the acquired Contract at least as early as the date on which they
were made for the exchanged Contract or contract A3019-92.
For those exchanged contracts for which a front-end sales charge was deducted
from each purchase payment, the transferred accumulated values will be treated
as "Old Payments" under the Contract, so that no deferred sales charge will be
assessed on aggregate subsequent withdrawals from the Contract of up to the
amount of the transferred accumulated values. For additional purchase payments
made under the Contract after the transfer of accumulated value from the
exchanged contract, the contingent deferred sales charge will be computed based
on the number of years that the additional purchase payments to which the
withdrawal is attributed have been credited under the Contract, as provided in
this Prospectus.
SUMMARY OF DIFFERENCES BETWEEN THE ACQUIRED CONTRACT AND EXCHANGED CONTRACTS.
The Contract and the variable contracts to which this exchange offer applies, if
other than another Contract or contract A3019-92, differ substantially as
summarized below. There may be additional differences important to a person
considering an exchange, and the prospectuses of the Contract and the variable
contract to be exchanged should be reviewed carefully before the exchange is
made.
CONTINGENT DEFERRED SALES CHARGE. The contingent deferred sales charge under
the Contract, as described in this Prospectus, imposes higher charge percentages
against the excess amount redeemed and generally applies such percentages for a
greater number of years than the exchanged contracts. For certain classes of
exchanged contracts, new purchase payments, subject to the contingent deferred
sales charge under the Contract, would not have been subject to the charge under
the exchanged contract.
CONTRACT FEE AND ADMINISTRATIVE EXPENSE CHARGE. Under the Contract, SMA Life
deducts a Contract Fee, at a maximum of $30, on each policy anniversary date and
upon full surrender, when the Accumulated Value is $50,000 or less, and assesses
each Subaccount with a daily administrative expense charge at an annual rate of
0.15% of the average daily net assets of the Subaccount. Depending on the class
of contracts to which this exchange offer is made, either no policy fee is
deducted or a policy fee of $9 is deducted twice a year. For certain classes of
contracts, a combined sales and administrative expense is deducted from purchase
payments. No administrative expense charge based on a percentage of Subaccount
assets is imposed under the contracts to which this exchange offer is made.
TRANSFER CHARGE. No charges for transfers among the Subaccounts and the General
Account are imposed for contracts to which this exchange offer is made.
Currently, no such charge is imposed under the Contract and the first six
transfers in a Contract year are guaranteed to be free of any charge. However,
SMA Life reserves the right to assess a charge, guaranteed never to exceed $25,
for the seventh and each subsequent transfer in a Contract year.
DEATH BENEFIT. The Contract offers a "stepped-up death benefit" which is not
offered under the exchanged contract; namely, the minimum death benefit that
would have been payable on the most recent fifth year Contract Anniversary,
adjusted for subsequent purchase payments and withdrawals after that date. Upon
exchange for the Contract, the accumulated value of the exchanged contract
becomes the "purchase payment" for the Contract. Therefore, the prior purchase
payments made for the exchanged contract would not become a basis for
determining the gross payment (less redemptions) guarantee under the Contract.
Consequently, whether the initial minimum death benefit under the Contract
acquired in an exchange is
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greater than, equal to, or less than the death benefit of the exchanged contract
depends upon whether the accumulated value transferred to the Contract is
greater than, equal to, or less than the gross payments (less redemptions) under
the exchanged contract.
ANNUITY TABLES. The contracts to which this exchange offer is made contain more
favorable annuity tables than the Contract for use in determining the amount of
the first variable annuity payment under the annuity options offered. The
contracts and the Contract each provide minimum guarantees.
INVESTMENTS. Accumulated Value and purchase payments under the Contract may be
allocated to several underlying funds in addition to those permitted under the
exchanged contracts.
SUMMARY OF DIFFERENCES BETWEEN THE ACQUIRED CONTRACT AND CONTRACT A3019-92. The
Contract and contract A3019-92 differ in the following material ways (the
prospectuses of the Contract and contract A3019-92 should be reviewed carefully
before any exchange):
CONTINGENT DEFERRED SALES CHARGE. The contingent deferred sales charge under
the Contract, as described in this Prospectus, imposes lower charge percentages
against the excess amount redeemed.
DEATH BENEFIT. The Contract offers a "stepped-up death benefit," which is the
minimum death benefit that would have been payable on the most recent fifth year
Contract Anniversary, adjusted for subsequent purchase payments and withdrawals
after that date. Under contract A3019-92, the stepped-up death benefit applies
to the most recent seventh year, rather than fifth year, contract anniversary.
Upon exchange for the Contract, the accumulated value of exchanged contract
A3019-92 becomes the "purchase payment" for the Contract. Therefore, the prior
purchase payments made for exchanged contract A3019-92 would not become a basis
for determining the gross payment (less redemptions) guarantee under the
Contract. Consequently, whether the initial minimum death benefit under the
Contract acquired in an exchange is greater than, equal to, or less than the
death benefit of exchanged contract A3019-92 depends upon whether the
accumulated value transferred to the Contract is greater than, equal to, or less
than the gross payments (less redemptions) under exchanged contract A3019-92.
INVESTMENTS. Accumulated Value and purchase payments under the Contract and
contract A3019-92 are allocable to different underlying funds underlying
investment companies.
FIXED ACCOUNT. The Contract has a Fixed Account minimum guaranteed interest
rate of 3.5% compounded annually. Contract A3019-92 has a fixed account minimum
guaranteed interest rate of 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 the Contract, amounts may not be
transferred from the Fixed Account to a Sub-Account prior to the end of the
applicable one-year guaranteed period.
B. FIXED ANNUITY EXCHANGE OFFER.
This exchange offer also applies to all fixed annuity contracts issued by SMA
Life. A fixed annuity contract to which this exchange offer applies may be
exchanged at net asset value for the Contract described in this Prospectus,
subject to the same provisions for effecting the exchange and for applying the
Contract's contingent deferred sales charge as described above for variable
annuity contracts. This Prospectus should be read carefully before making such
exchange. Unlike a fixed annuity, the Contract's value is not guaranteed and
will vary depending on the investment performance of the underlying funds to
which it is allocated. The Contract has a different charge structure than a
fixed annuity contract, which includes not only a contingent deferred sales
charge that may vary from that of the class of contracts to which the exchanged
fixed contract belongs, but also Contract fees, mortality and expense risk
charges (for SMA Life's assumption of certain mortality and expense risks),
administrative expense charges, transfer charges (for transfers permitted among
Subaccounts and the General Account), and expenses incurred by the underlying
funds. Additionally, the interest rates offered under the General Account of
the Contract and the Annuity Tables for determining minimum annuity payments may
be different from those offered under the exchanged fixed contract.
C. EXERCISE OF "FREE-LOOK PROVISION" AFTER ANY EXCHANGE.
Persons who, under the terms of this exchange offer, exchange their contract for
the Contract and subsequently revoke the Contract within the time permitted, as
described in the sections of this Prospectus captioned "RIGHT TO REVOKE
CONTRACT," will have their exchanged contract automatically reinstated as of the
date of revocation. The refunded amount will be applied as the new current
accumulated value under the reinstated contract, which may be more or less than
it would have been had no exchange and reinstatement occurred. The refunded
amount will be allocated initially among the general account and subaccounts of
the reinstated contract in the same proportion that the value in the general
account and
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the value in each subaccount bore to the transferred accumulated value on the
date of the exchange of the contract for the Contract. For purposes of
calculating any contingent deferred sales charge under the reinstated contract,
the reinstated contract will be deemed to have been issued and to have received
past purchase payments as if there had been no exchange.
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ALLMERICA SELECT
SEPARATE ACCOUNT
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
STATEMENT OF ADDITIONAL INFORMATION
FOR
INDIVIDUAL AND GROUP VARIABLE ANNUITY CONTRACTS FUNDED THROUGH
ALLMERICA SELECT SEPARATE ACCOUNT
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS FOR THE SEPARATE ACCOUNT DATED MAY 1, 1995
("THE PROSPECTUS"). THE PROSPECTUS MAY BE OBTAINED FROM ALLMERICA INVESTMENTS,
INC., 440 LINCOLN STREET, WORCESTER, MASSACHUSETTS 01653, (508) 855-3590.
DATED OCTOBER 1, 1995
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY. . . . . . . . . . . . . . . . . . . . . . . . 2
TAXATION OF THE CONTRACT, THE SEPARATE ACCOUNT AND THE
COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
UNDERWRITERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ANNUITY PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
GENERAL INFORMATION AND HISTORY
Allmerica Select Separate Account ("Separate Account") is a separate investment
account of Allmerica Financial Life Insurance and AnnuityCompany ("Company")
authorized by vote of the Board of Directors on March 5, 1992. 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 wholly-owned by SMA Financial
Corp., a Massachusetts holding company which is in turn wholly-owned by State
Mutual Life Assurance Company of America ("State Mutual"). State Mutual is a
mutual life insurance company organized under the laws of Massachusetts in 1844.
State Mutual is in the process of converting from a mutual life insurance
company to a stock life insurance company ("demutualization"). Following
demutualization, State Mutual will be known as First Allmerica Financial Life
Insurance Company and will be a wholly owned subsidiary of Allmerica Financial
Corporation, 440 Lincoln Street, Worcester, Massachusetts.
Currently, 11 Subaccounts of the Separate Account are available under the
Contracts. Each Subaccount invests in a corresponding investment portfolio of
Allmerica Investment Trust ("Trust"), Variable Insurance Products Fund ("VIPF")
or T. Rowe Price International Series, Inc. ("T. Rowe").
The Trust, VIPF and T. Rowe are open-end, diversified series investment
companies. Seven different funds of the Trust are available under the Policies:
Select International Equity Fund, Select Aggressive Growth Fund, Select Capital
Appreciation Fund, Select Growth Fund, Select Growth and Income Fund, Select
Income Fund and Money Market Fund. Three of the portfolios of VIPF are
available under the Policies: the High Income Portfolio, Equity-Income Portfolio
and Growth Portfolio. One portfolio of T. Rowe is available under the Policies:
the International Stock Portfolio. Each Fund, Portfolio and Series available
under the Contracts has its own investment objectives and certain attendant
risks.
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TAXATION OF THE CONTRACT, SEPARATE
ACCOUNT AND THE COMPANY
The Company currently imposes no charge for taxes payable in connection with the
Contract, other than for state and local premium taxes and similar assessments
when applicable. The Company reserves the right to impose a charge for any
other taxes that may become payable in the future in connection with the
Contracts or the Separate Account.
The Separate Account is 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 reserves the right to make a charge for any effect which the income,
assets, or existence of Contracts or the Separate Account may have upon its tax.
Such charge for taxes, if any, will be assessed on a fair and equitable basis in
order to preserve equity among classes of Contract Owners. The Separate Account
presently is not subject to tax.
SERVICES
CUSTODIAN OF SECURITIES. The Company serves as custodian of the assets of the
Separate Account. Trust shares owned by the Sub-Accounts are held on an open
account basis. A Sub-Account's ownership of Trust shares is reflected on the
records of the Trust and not represented by any transferable stock certificates.
EXPERTS. The financial statements of the Company as of December 31, 1994 and
1993 and for each of the three years in the period ended December 31, 1994, and
of Allmerica Select Separate Account as of December 31, 1994 and the periods in
1994 and 1993 indicated, 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
Contracts.
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 for the Contracts pursuant
to a contract with the Company and the Separate Account. Allmerica distributes
the Contracts on a best efforts basis. Allmerica Investments, Inc., 440 Lincoln
Street, Worcester, Massachusetts 01653 was organized in 1969 as a wholly-owned
subsidiary of State Mutual and is an indirect wholly-owned subsidiary of State
Mutual.
The Contracts offered by this Prospectus are offered continuously and may be
purchased from certain independent broker-dealers which are NASD members and
whose representatives are authorized by applicable law to sell variable annuity
contracts.
All persons selling contracts are required to be licensed by their respective
state insurance authorities for the sale of variable annuity contracts. The
Company pays commissions not to exceed 5.5% of purchase payments to entities
which sell the Contracts. To the extent permitted by NASD rules, promotional
incentives or payments may also be provided to such entities based on sales
volumes, the assumption of wholesaling functions, or other sales-related
criteria. Additional payments may be made for other services not directly
related to the sale of the Contracts, including the recruitment
-3-
<PAGE>
and training of personnel, production of promotional literature, and similar
services. Commissions paid on the Contracts, including additional incentives or
payments, do not result in any additional charge to Contract Owners or to the
Separate Account.
The aggregate amount of commissions retained by Allmerica Investments, Inc. was
$0.00 in 1994, $833,623.78 in 1993 and $20,876.08 in 1992. The aggregate amount
of commissions paid to independent broker/dealers was $7,477,332 in 1994,
$5,124,559.37 in 1993 and $125,256.51 in 1992.
Commissions are paid by The Company and do not result in any charge to Contract
Owners or to the Separate Account in addition to the charges described under
"CHARGES AND DEDUCTIONS" in the Prospectus. The Company intends to recoup the
commission and other sales expense through a combination of anticipated
surrender, partial redemption, and/or annuitization charges, profits from The
Company's general account, including 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.
ANNUITY PAYMENTS
The method by which the Accumulated Value under the Contract is determined is
described in detail under "COMPUTATION OF CONTRACT 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 Sub-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:
<TABLE>
<S> <C>
(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 1.40% per annum). . . . . . . 0.000038
(6) Net Investment Rate (4)-(5). . . . . . . . . . . . . . . . . . . . 0.000297
(7) Net Investment Factor 1.000000 + (6) . . . . . . . . . . . . . . . 1.000297
(8) Accumulation Unit Value - Current Period (1)x(7) . . . . . . . . $ 1.135337
</TABLE>
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
$1.134577.
The method for determining the amount of annuity payments is described in detail
under "COMPUTATION OF CONTRACT VALUES AND ANNUITY PAYMENTS" in the Prospectus.
-4-
<PAGE>
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. Therefore, the Accumulation Value
of the Contract is $44,800 (40,000 x $1.120000). Assume also that the Contract
Owner elects an option for which the first monthly 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.
Next, 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. When the Annuity Unit value of $1.100000 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 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.
Method for Determining Variable Annuity Option V Redemption and Illustration
Using Hypothetical Example. As discussed in the Prospectus under "DESCRIPTION
OF VARIABLE ANNUITY OPTIONS," the Annuitant, or the beneficiary if the Annuitant
has died, may choose at any time to redeem the Contract and receive its commuted
value. Commuted value is the present value of remaining payments commuted at 3
1/2% interest. However, if the annuitant elects the redemption, the remaining
payments are deemed to be the remaining payments that would have been payable
had the Surrender Value, rather than the Accumulation Value, been applied at the
Annuity Date. The determination of the commuted value upon redemption by an
Annuitant may be illustrated by the following hypothetical example.
Assume an annuity period of 10 years or longer is elected. The number of
Annuity Units each payment is based on would be calculated using the Accumulated
Value. Assume this results in 267.5818 Annuity Units. Assume the commuted
value is requested with 60 monthly payments remaining and a current Annuity Unit
Value of $1.200000. Based on these assumptions, the dollar amount of remaining
payments would be $321.10 a month for 60 months. If the commuted value was
requested by a beneficiary, the value would be based on the present value at 3
1/2% interest of this stream of annuity payments. The commuted value would be
$17,725.39. However, if the commuted value is requested by an Annuitant, the
value is calculated as if the Surrender Value, not the Accumulated Value, had
been used to calculate the number of Annuity units. Assume this results in 250
Annuity units. Based on these assumptions, the dollar amount of remaining
payments would be $300 a month for 60 months. The present value at 3 1/2% of
all remaining payments would be $16,560.72.
PERFORMANCE INFORMATION
Performance information for a Sub-Account may be compared, in reports and
promotional literature, to certain indices described in the prospectus under
"PERFORMANCE INFORMATION." In addition, The Company may provide advertising,
sales literature, periodic publications or other materials
-5-
<PAGE>
information on various topics of interest to Contract owners and prospective
Contract owners. These topics may include the relationship between sectors of
the economy and the economy as a whole and its effect on various securities
markets, investment strategies and techniques (such as value investing, market
timing, dollar cost averaging, asset allocation, constant ratio transfer and
account rebalancing), the advantages and disadvantages of investing in tax-
deferred and taxable investments, customer profiles and hypothetical purchase
and investment scenarios, financial management and tax and retirement planning,
and investment alternatives to certificates of deposit and other financial
instruments, including comparisons between the Contracts and the characteristics
of and market for such financial instruments.
TOTAL RETURN
"Total Return" refers to the total of the income generated by an investment in a
Sub-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 Sub-Accounts asset charge and any applicable contingent deferred sales
charge which would be assessed upon complete redemption of the investment.
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 asset of
the Sub-Account. This charge is 1.40% on an annual basis. The calculation of
ending redeemable value assumes (1) the policy was issued at the beginning of
the period and (2) 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:
<TABLE>
<CAPTION>
Years from date of purchase Charge as percentage
payment to date of withdrawal of New Purchase Payments
----------------------------- redeemed*
------------------------
<S> <C>
0-1 6.5%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
<FN>
*Subject to the maximum limit described in the prospectus.
</TABLE>
No contingent deferred sales charge is deducted upon expiration of the periods
specified above. In
-6-
<PAGE>
all calendar years, an amount equal to 10% of the Accumulated Value under the
Contract is not subject to the contingent sales load.
The calculations of Total Return include the deduction of the $30 Annual
Contract fee.
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 Sub-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 Sub-Account's asset charges.
However, it is assumed that the investment is NOT redeemed at the end of each
period.
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:
(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 1.40% annual charge
against the assets of the Sub-Accounts. 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 includes the deduction of the $30
Annual Policy fee.
YIELD AND EFFECTIVE YIELD - MONEY MARKET SUB-ACCOUNT
Set forth below is yield and effective yield information for the Money Market
Sub-Account for the seven-day period ended December 31, 1994:
Yield 2.35%
Effective Yield 2.37%
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 Sub-Account at the
beginning of the period, subtracting a charge reflecting the annual 1.40%
deduction for mortality and expense risk and the administrative charge, 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.
-7-
<PAGE>
The Money Market Sub-Account computes 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 $30 Annual
Policy fee.
FINANCIAL STATEMENTS
Financial Statements are included for the Company and for its Allmerica Select
Separate Account.
-8-
<PAGE>
SMA LIFE ASSURANCE COMPANY
FINANCIAL STATEMENTS
DECEMBER 31, 1994 and 1993
<PAGE>
SMA LIFE ASSURANCE COMPANY
December 31, 1994
Financial Statements
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . . . 1
Statement of Financial Position. . . . . . . . . . . . . . . . . . . . . . . . 2
Statement of Operations and Changes in Stockholder's Equity. . . . . . . . . . 3
Statement of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . 5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
February 13, 1995
To the Board of Directors and Stockholder of
SMA Life Assurance Company
In our opinion, the accompanying statement of financial position and the related
statements of operations and changes in stockholder's equity and of cash flows
present fairly, in all material respects, the financial position of SMA Life
Assurance Company at December 31, 1994 and 1993, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
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 of these 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 provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1 to the financial statements, the Company may adopt
Statement of Financial Accounting Standards No. 120, "Accounting and Reporting
by Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain
Long-Duration Participating Contracts", and Financial Accounting Standards Board
Interpretation No. 40, "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises", in 1996. If these
pronouncements are adopted, the financial statements for the year ended December
31, 1994 will be retroactively restated for the effects of these changes in
accounting principles.
Price Waterhouse LLP
Boston, Massachusetts
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A Wholly Owned Subsidiary of State Mutual Life Assurance Company of America)
STATEMENT OF FINANCIAL POSITION
as of December 31
(in thousands)
<TABLE>
<CAPTION>
ASSETS 1994 1993
---- ----
<S> <C> <C>
Cash $ 7,248 $ 10,172
Investments:
Bonds 1,595,275 1,567,658
Stocks 12,283 23,478
Mortgage loans 295,532 383,059
Policy loans 116,600 109,014
Real estate 51,288 40,904
Short term investments 45,239 4,999
Other investment assets 27,443 314
----------- -----------
Total cash and investments 2,150,908 2,148,598
Premiums deferred and uncollected 5,452 6,953
Investment income due and accrued 39,442 39,993
Other assets 6,548 12,560
Assets held in separate accounts 1,869,695 1,296,620
----------- -----------
$ 4,072,045 $ 3,504,724
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policy liabilities:
Life reserves $ 890,880 $ 905,813
Annuity and other fund reserves 928,325 925,098
Accident and health reserves 121,580 115,081
Claims payable 11,720 10,476
----------- -----------
Total policy liabilities 1,952,505 1,956,468
Expenses and taxes payable 17,484 43,123
Other liabilities 32,445 26,069
Asset valuation reserve 20,786 10,964
Obligations related to separate account business 1,859,502 1,285,884
----------- -----------
Total liabilities 3,882,722 3,322,508
----------- -----------
Stockholder's equity:
Common stock, $1,000 par value
Authorized - 10,000 shares
Issued and outstanding - 2,517 shares 2,517 2,517
Additional paid-in capital 199,307 199,307
Unassigned deficit (13,621) (20,744)
Special contingency reserves 1,120 1,136
----------- -----------
Total stockholder's equity 189,323 182,216
----------- -----------
$ 4,072,045 $ 3,504,724
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA)
STATEMENT OF OPERATIONS AND
CHANGES IN STOCKHOLDER'S EQUITY
for the year ended December 31
(In thousands)
<TABLE>
<CAPTION>
REVENUE 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Premiums and other considerations:
Life $ 195,633 $ 189,285 $ 181,992
Annuities 707,172 660,143 365,443
Accident and health 31,927 35,718 35,612
Reinsurance commissions and reserve adjustments 4,195 2,309 2,372
---------- ---------- ----------
Total premiums and other considerations 938,927 887,455 585,419
Net investment income 170,430 177,612 183,159
Realized capital gains (losses), net of tax (17,172) (7,225) 576
Other revenue 26,065 19,055 13,224
---------- ---------- ----------
Total revenue 1,118,250 1,076,897 782,378
---------- ---------- ----------
POLICY BENEFITS AND OPERATING EXPENSES
Policy benefits:
Claims, surrenders and other benefits 331,418 275,290 250,317
Increase in policy reserves 40,113 15,292 159,127
---------- ---------- ----------
Total policy benefits 371,531 290,582 409,444
Operating and selling expenses 164,175 160,928 134,482
Taxes, except capital gains tax 22,846 19,066 29,540
Net transfers to separate accounts 553,295 586,539 199,164
---------- ---------- ----------
Total policy benefits and operating expenses 1,111,847 1,057,115 772,630
---------- ---------- ----------
NET INCOME 6,403 19,782 9,748
STOCKHOLDER'S EQUITY AT BEGINNING OF YEAR 182,216 171,941 177,809
Unrealized capital gains (losses) on investments 12,170 (9,052) (20,770)
Transfer from (to) asset valuation reserve (9,822) 1,974 2,883
Other adjustments (1,644) (2,429) 2,271
---------- ---------- ----------
STOCKHOLDER'S EQUITY AT END OF YEAR $ 189,323 $ 182,216 $ 171,941
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA)
STATEMENT OF CASH FLOWS
for the year ended December 31
(In thousands)
<TABLE>
<CAPTION>
CASH FLOW FROM OPERATING ACTIVITIES 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Premiums, deposits and other income $ 962,147 $ 902,725 $ 602,253
Allowances and reserve adjustments on
reinsurance ceded 3,279 22,185 18,918
Net investment income 173,294 182,843 182,531
Net increase in policy loans (7,585) (7,812) (8,777)
Benefits to policyholders and beneficiaries (330,900) (298,612) (257,274)
Operating and selling expenses and taxes (213,399) (176,361) (126,421)
Net transfers to separate accounts (600,760) (634,021) (221,492)
Other sources (applications) 19,868 7,757 (43,869)
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 5,944 (1,296) 145,869
---------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Sales and maturities of long term investments:
Bonds 478,512 386,414 400,636
Stocks 63 64 80
Real estate and other invested assets 3,008 11,094 4,350
Repayment of mortgage principal 65,334 79,844 95,972
Capital gains tax (968) (3,296) --
Acquisition of long term investments:
Bonds (508,603) (466,086) (710,371)
Stocks -- -- (2,617)
Real estate and other invested assets (24,544) (2,392) (1,910)
Mortgage loans (364) (2,266) (852)
Other investing activities 18,934 (27,254) (3,001)
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 31,372 (23,878) (217,713)
---------- ---------- ----------
Net change in cash and short term investments 37,316 (25,174) (71,844)
CASH AND SHORT TERM INVESTMENTS
Beginning of the year 15,171 40,345 112,189
---------- ---------- ----------
End of the year $ 52,487 $ 15,171 $ 40,345
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION - SMA Life Assurance Company (SMA Life or
the "Company") is a wholly owned subsidiary of SMA Financial Corp., which is
wholly owned by State Mutual Life Assurance Company of America (State Mutual), a
mutual life insurance company. The stockholder's equity of the Company is being
maintained at a minimum level of 5% of general account assets by State Mutual in
accordance with a policy established by vote of State Mutual'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 are generally accepted accounting
principles for mutual life insurance companies and their stock life insurance
subsidiaries.
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.
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 and stocks 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 contractholders. Assets consist principally
of bonds, common stocks, and short term obligations at market value. The
investment income, gains, and losses of these accounts generally accrue to the
contractholders 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
stockholder's equity.
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. Interest rates range from 3% to 6% for life insurance and 3 1/2% to
9 1/2% for annuities, and mortality and morbidity assumptions reflect the
Company's 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.
5
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA)
At December 31, 1994 and 1993, approximately 77% and 70%, 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.
FEDERAL INCOME TAXES - State Mutual, its non-insurance domestic subsidiaries and
SMA Life file a 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 for the non-life insurance subsidiaries is calculated on
a separate return basis. Any current tax liability (benefit) is paid to
(reimbursed by) State Mutual. Tax benefits resulting from taxable operating
losses of the non-life subsidiaries are not reimbursed currently by State
Mutual. However, to the extent such losses are utilized by the consolidated
group, they are reflected as a liability of State Mutual.
The Federal income tax for the life companies is calculated on a line of
business basis, excluding the operating results of the non-insurance
subsidiaries and Allmerica P&C. The tax is allocated to each life company based
on its contribution to the taxable income or loss of each line of business.
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 stockholder's equity. 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.
PENDING ACCOUNTING PRONOUNCEMENT - In April 1993, the Financial Accounting
Standards Board (FASB) issued Interpretation No. 40, "Applicability of Generally
Accepted Accounting Principles to Mutual Life Insurance and Other Enterprises"
(FIN 40), which establishes a different definition of generally accepted
accounting principles for mutual life insurance companies (and their stock life
insurance subsidiaries). Under the Interpretation, financial statements of
mutual life insurance companies (and their stock life insurance subsidiaries)
which are prepared on the basis of statutory accounting, will no longer be
characterized as in conformity with generally accepted accounting principles.
In January 1995, the FASB issued Statement of Financial Accounting Standards No.
120, "Accounting and Reporting by Mutual Life Insurance Enterprises and by
Insurance Enterprises for Certain Long-Duration Participating Contracts" (SFAS
No. 120), and the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position No. 95-1, "Accounting for Certain Insurance
Activities of Mutual Life Insurance Enterprises" (SOP 95-1). SFAS No. 120
extends the requirements of SFAS No. 60, "Accounting and Reporting by Insurance
Enterprises," No. 97, "Accounting and Reporting by Insurance Enterprises for
Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale
of Investments," and No. 113, "Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts," to mutual life insurance
enterprises. SOP 95-1 establishes accounting for certain participating life
insurance contracts for mutual life insurance enterprises. SFAS No. 120
requires mutual life insurance enterprises (and permits stock life insurance
enterprises) to apply the provisions of SOP 95-1 to those contracts which meet
the conditions in SFAS No. 120.
FIN 40, SFAS No. 120 and SOP 95-1 are all effective for financial statements
issued for fiscal years beginning after December 15, 1995.
Management of the Company has not yet determined the effect on its financial
statements of applying the new pronouncements nor whether it will continue to
present its general purpose financial statements in conformity with the
statutory basis of accounting or adopt the accounting changes required in order
to continue to present its financial statements in conformity with generally
accepted accounting principles. If the Company chooses to adopt the accounting
changes required, the effect of the changes would be reported retroactively
through restatement of all previously issued financial statements beginning with
the earliest year presented. The cumulative effect of adopting these changes
would be included in the earliest year presented.
6
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA)
NOTE 2 - INVESTMENTS
BONDS - The carrying value and fair value of investments in bonds,are as
follows:
<TABLE>
<CAPTION>
December 31, 1994
-----------------
Gross Gross
Carrying Unrealized Unrealized Fair
(In thousands) Value Appreciation Depreciation Value
----- ------------ ------------ -----
<S> <C> <C> <C> <C>
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
----------- ----------- ----------- -----------
$ 1,595,275 $ 8,558 $ 62,245 $ 1,541,588
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
-----------------
Gross Gross
Carrying Unrealized Unrealized Fair
(In thousands) Value Appreciation Depreciation Value
----- ------------ ------------ -----
<S> <C> <C> <C> <C>
Federal government bonds $ 7,969 $ 356 $ -- $ 8,325
State, local and government agency bonds 15,212 678 -- 15,890
Foreign government bonds 24,152 720 9 24,863
Corporate securities 1,519,050 74,777 4,430 1,589,397
Mortgage-backed securities 1,275 92 -- 1,367
----------- ----------- ----------- -----------
Total $ 1,567,658 $ 76,623 $ 4,439 $ 1,639,842
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The carrying value and fair value by contractual maturity at December 31, 1994,
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 $ 225,814 $ 224,695
Due after one year through five years 774,918 751,778
Due after five years through ten years 428,080 404,377
Due after ten years 166,463 160,738
----------- -----------
Total $ 1,595,275 $ 1,541,588
----------- -----------
----------- -----------
</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, 1994 and 1993, mortgage
loan and real estate investments were distributed by the following types and
geographic regions:
7
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA)
<TABLE>
<CAPTION>
(In thousands)
Property Type 1994 1993
- ------------- ---- ----
<S> <C> <C>
Office buildings $ 140,292 $ 172,694
Residential 57,061 74,514
Retail 72,787 72,756
Industrial/Warehouse 39,424 62,572
Other 37,256 41,427
--------- ---------
Total $ 346,820 $ 423,963
--------- ---------
--------- ---------
<CAPTION>
Geographic Region 1994 1993
- ----------------- ---- ----
<S> <C> <C>
South Atlantic $ 92,934 $ 118,434
East North Central 72,704 78,343
Middle Atlantic 48,688 58,291
Pacific 39,892 45,666
West North Central 27,377 33,325
Mountain 12,211 31,116
New England 26,613 28,759
East South Central 6,224 8,250
West South Central 20,177 21,779
--------- ---------
Total $ 346,820 $ 423,963
--------- ---------
--------- ---------
</TABLE>
NET INVESTMENT INCOME - The components of net investment income for the year
ended December 31 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Bonds $ 123,495 $ 126,729 $ 119,777
Stocks 1,799 953 692
Mortgage loans 31,945 40,823 52,406
Real estate 8,425 9,493 8,412
Policy loans 8,797 8,215 7,701
Other investments 1,651 674 344
Short term investments 1,378 840 1,848
--------- --------- ---------
177,490 187,727 191,180
Less investment expenses 9,138 11,026 8,035
--------- --------- ---------
Net investment income, before IMR amortization 168,352 176,701 183,145
IMR amortization 2,078 911 14
--------- --------- ---------
Net investment income $ 170,430 $ 177,612 $ 183,159
--------- --------- ---------
--------- --------- ---------
</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) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Bonds $ 645 $ 10,133 $ 3,302
Stocks (62) 16 33
Mortgage loans (17,142) (83) 162
Real Estate 605 (2,044) 1,985
--------- --------- ---------
(15,954) 8,022 5,482
Less income tax 968 3,296 4,623
--------- --------- ---------
Net realized capital gains (losses) before transfer to IMR (16,922) 4,726 859
Net realized capital gains transferred to IMR (250) (11,951) (283)
--------- --------- ---------
Net realized capital gains (losses) $ (17,172) $ (7,225) $ 576
--------- --------- ---------
--------- --------- ---------
</TABLE>
8
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA)
Proceeds from voluntary sales of investments in bonds during 1994, 1993 and 1992
were $178,640 thousand, $131,783 thousand and $153,218 thousand, respectively.
Gross gains of $3,010 thousand, $4,523 thousand and $3,043 thousand and gross
losses of $4,553 thousand, $450 thousand and $139 thousand, 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.
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 financial position 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 financial
position 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.
9
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA)
The estimated fair values of the financial instruments as of December 31 were as
follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
Carrying Fair Carrying Fair
(In thousands) Value Value Value Value
----- ----- ----- -----
<S> <C> <C> <C> <C>
Financial Assets:
Cash $ 7,248 $ 7,248 $ 10,172 $ 10,172
Short term investments 45,239 45,239 4,999 4,999
Bonds 1,595,275 1,541,588 1,567,658 1,639,842
Stocks 12,283 12,283 32,478 32,478
Mortgage loans 295,532 291,704 383,059 395,327
Policy loans 116,600 116,600 109,014 109,014
Financial Liabilities:
Individual annuity contracts 869,230 862,662 870,112 865,668
Supplemental contracts without life
contingencies 16,673 16,673 14,842 14,842
Other contract deposit funds 1,105 1,105 1,317 1,317
</TABLE>
NOTE 4 - FEDERAL INCOME TAXES
The federal income tax provisions for 1994, 1993 and 1992 were $13,109 thousand,
$8,551 thousand and $18,108 thousand, respectively, which include taxes
applicable to realized capital gains of $968 thousand, $3,296 thousand and
$4,623 thousand.
The effective federal income tax rates were 67%, 30% and 65% in 1994, 1993 and
1992, 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 Company paid to State Mutual $14,353 thousand,
$8,100 thousand and $30,000 thousand in 1994, 1993 and 1992, respectively, for
its federal income taxes.
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
Internal Revenue Service (IRS) has completed its examination of all of the
consolidated federal income tax returns through 1988. Deficiencies asserted
with respect to tax years 1977 through 1981 have been paid and recorded and the
consolidated group has filed a recomputation of such years with appeals claiming
a refund with respect to certain agreed upon issues, but has not recognized any
benefit in its financial statements. The consolidated group is currently
considering its response to certain adjustments proposed by the IRS with respect
to the consolidated federal income tax returns for 1982 and 1983. If upheld,
these proposed adjustments would result in additional payments; however, the
consolidated group will vigorously defend its position with respect to these
adjustments. In management's opinion, adequate tax liabilities have been
established for all years.
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) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Reinsurance premiums assumed $ 3,788 $ 4,190 $ 4,614
Reinsurance premiums ceded 17,430 14,798 15,570
Deduction from insurance liability including
reinsurance recoverable on unpaid claims 46,734 42,805 48,191
</TABLE>
10
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A Wholly Owned Subsidiary of State Mutual Life Assurance Company of America)
The Company cedes to State Mutual approximately 10% of its individual life
business. Premiums ceded to State Mutual aggregated $7,771 thousand, $9,000
thousand and $9,586 thousand in 1994, 1993 and 1992, respectively. The Company
has also entered into various reinsurance agreements with State Mutual under
which certain insurance risks related to individual accident and health
business, premium income and related expenses are assumed by the Company from
State Mutual. Premiums assumed pursuant to these agreements aggregated $3,788
thousand, $4,190 thousand and $4,614 thousand in 1994, 1993 and 1992,
respectively .
NOTE 6 - DIVIDEND RESTRICTIONS
Delaware has enacted laws governing the payment of dividends 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 earned surplus would also
require the prior approval of the Delaware Commissioner of Insurance. While the
Company is currently operating on a profitable basis, it has a negative earned
surplus position and accordingly is precluded from paying dividends to State
Mutual without the approval of the Commissioner of Insurance.
NOTE 7 - RELATED PARTY TRANSACTIONS
State Mutual provides management, operating personnel and facilities on a cost
reimbursement basis to the Company. Expenses for services received from State
Mutual were $102,461 thousand, $98,676 thousand and $88,273 thousand in 1994,
1993 and 1992, respectively. The net amounts payable to State Mutual and
affiliates for accrued expenses and various other liabilities and receivables
were $8,344 thousand and $12,182 thousand at December 31, 1994 and 1993,
respectively.
During 1992, the Company sold a building to an affiliated company at its
estimated fair value of $4,350 thousand. The Company recognized a capital gain
on the sale, net of tax, in the amount of $1,310 thousand.
NOTE 8 - FUNDS ON DEPOSIT
In March 1994, the Company voluntarily withdrew from being licensed in New York.
In connection with the withdrawal State Mutual, which is licensed in New York,
became qualified to sell the products previously sold by SMA Life 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, 1994, the carrying value and fair value of the assets on
deposit was $327,899 thousand and $323,474 thousand, respectively, which is in
excess of the required amount.
Additional securities with a carrying value of $3,855 thousand and $3,353
thousand were on deposit with various other state and governmental authorities
as of December 31, 1994 and 1993, respectively.
NOTE 9 - 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.
11
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES - DECEMBER 31, 1994
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SELECT AGGRESSIVE SELECT GROWTH SELECT GROWTH & INCOME
GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
301 302 303
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of Allmerica Investment Trust.......... $ 49,181,325 $ 41,310,731 $ 46,388,976
Receivable from SMA Life Assurance Company (Sponsor)........ 31,970 142,966 144,708
------------- ----------- --------------
Total assets.......................................... 49,213,295 41,453,697 46,533,684
LIABILITIES:
Payable to SMA Life Assurance Company (Sponsor)............. -- -- --
------------- ------------ --------------
Net assets............................................ $ 49,213,295 $ 41,453,697 $ 46,533,684
------------- ------------- --------------
------------- ------------- --------------
Net asset distribution by category:
Qualified variable annuity policies....................... $ 15,055,176 $ 12,922,782 $ 14,850,105
Non-qualified variable annuity policies................... 34,158,119 28,530,915 31,683,579
Value of investment by
SMA Life Assurance Company (Sponsor)..................... -- -- --
-------------- ------------ -------------
$ 49,213,295 $ 41,453,697 $ 46,533,684
-------------- ------------ -------------
-------------- ------------ -------------
Qualified units outstanding, December 31, 1994.............. 11,114,005 12,080,516 13,815,748
Net asset value per qualified unit, December 31, 1994....... $ 1.354613 $ 1.069721 $ 1.074868
Non-qualified units outstanding, December 31,1994........... 25,216,146 26,671,361 29,476,716
Net asset value per non-qualified unit, December 31, 1994... $ 1.354613 $ 1.069721 $ 1.074868
</TABLE>
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SELECT INCOME MONEY MARKET SELECT INTERNATIONAL
SUB-ACCOUNT SUB-ACCOUNT EQUITY SUB-ACCOUNT
304 305 306
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of Allmerica Investment Trust.......... $ 33,649,572 $ 33,771,438 $ 21,078,300
Receivable from SMA Life Assurance Company (Sponsor)........ 105,286 -- 135,019
------------- ------------- -------------
Total assets................................................
33,754,858 33,771,438 21,213,319
------------- ------------- -------------
LIABILITIES:
Payable to SMA Life Assurance Company (Sponsor)............. -- 492,876 --
------------- ------------- -------------
Net assets............................................. $ 33,754,858 $ 33,278,562 $ 21,213,319
------------- ------------- -------------
------------- ------------- -------------
Net asset distribution by category:
Qualified variable annuity policies....................... $ 12,257,989 $ 13,490,960 $ 7,120,328
Non-qualified variable annuity policies................... 21,496,869 19,787,602 14,092,895
Value of investment by
SMA Life Assurance Company (Sponsor)..................... -- -- 96
------------- -------------- ------------
$ 33,754,858 $ 33,278,562 $ 21,213,319
------------- -------------- ------------
------------- -------------- ------------
Qualified units outstanding, December 31, 1994.............. 11,920,716 12,906,255 7,446,055
Net asset value per qualified unit, December 31, 1994....... $ 1.028293 $ 1.045304 $ .956255
Non-qualified units outstanding, December 31,1994........... 20,905,393 18,929,997 14,737,691
Net asset value per non-qualified unit, December 31, 1994... $ 1.028293 $ 1.045304 $ .956255
</TABLE>
53
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SELECT AGGRESSIVE SELECT GROWTH SELECT GROWTH & INCOME
GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
301 302 303
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................................. -- $ 124,749 $ 1,962,154
EXPENSES:
Mortality and expense risk fees....................... $ 474,221 396,591 443,314
Administrative expense charges........................ 56,907 47,591 53,198
--------------- ----------- -------------
Total expenses.................................. 531,128 444,182 496,512
--------------- ----------- -------------
Net investment income (loss).......................... (531,128) (319,433) 1,465,642
--------------- ----------- -------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss).............................. 207,996 19,589 1,454
Net unrealized (loss)................................. (1,312,608) (667,555) (1,845,613)
--------------- ----------- -------------
Net realized and unrealized gain (loss) on investments... (1,104,612) (647,966) (1,844,159)
--------------- ----------- -------------
Net increase (decrease) in net assets from operations.... $ (1,635,740) $ (967,399) $ (378,517)
--------------- ----------- -------------
--------------- ----------- -------------
<FN>
(a) For the period May 2, 1994 (date of initial investment) to December 31, 1994.
</TABLE>
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SELECT INCOME MONEY MARKET SELECT INTERNATIONAL
SUB-ACCOUNT SUB-ACCOUNT EQUITY SUB-ACCOUNT
304 305 306(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................................. $1,688,807 $ 979,483 $ 45,754
EXPENSES:
Mortality and expense risk fees....................... 347,627 302,259 127,856
Administrative expense charges........................ 41,715 36,271 15,343
---------- --------- ---------
Total expenses.................................. 389,342 338,530 143,199
---------- --------- ---------
Net investment income (loss).......................... 1,299,465 640,953 (97,445)
---------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss).............................. (147,474) -- (6,755)
Net unrealized (loss)................................. (2,781,132) -- (687,448)
---------- --------- ---------
Net realized and unrealized gain (loss) on investments... (2,928,606) -- (694,203)
---------- --------- ---------
Net increase (decrease) in net assets from operations.... $(1,629,141) $ 640,953 $(791,648)
----------- ---------- ---------
----------- ---------- ---------
</TABLE>
55
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SELECT AGGRESSIVE GROWTH SELECT GROWTH
SUB-ACCOUNT 301 SUB-ACCOUNT 302
FOR THE YEAR ENDED FOR THE YEAR ENDED
12/31/94 12/31/93 12/31/94 12/31/93
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss)........................... $ (531,128) $ (178,187) $ (319,433) $ (142,339)
Net realized gain (loss) from security transactions.... 207,996 1,167,433 19,589 481,477
Net unrealized gain (loss) on investments............... (1,312,608) 1,598,311 (667,555) 370,406
------------ ------------ -------------- ------------
Net increase (decrease) in net assets from operations... (1,635,740) 2,587,557 (967,399) 709,544
FROM CAPITAL TRANSACTIONS:
Net purchase payments................................... 11,026,474 2,737,111 9,817,670 2,874,042
Terminations............................................ (1,258,707) (79,578) (1,075,950) (97,571)
Annuity benefits........................................ (201,782) (9,229) (66,496) (11,617)
Other transfers from (to) the General Account of
SMA Life Assurance Company (Sponsor)................. 16,623,836 20,415,338 11,321,922 18,861,255
Net increase(decrease) in investment by
SMA Life Assurance Company (Sponsor)................. -- (7,102,102) -- (5,703,393)
----------- ------------ -------------- ------------
Net increase in net assets from capital transactions..... 26,189,821 15,961,540 19,997,146 15,922,716
----------- ------------ -------------- ------------
Net increase in net assets............................... 24,554,081 18,549,097 19,029,747 16,632,260
NET ASSETS:
Beginning of year........................................ 24,659,214 6,110,117 22,423,950 5,791,690
----------- ----------- -------------- ------------
End of year.............................................. $49,213,295 $ 24,659,214 $ 41,453,697 $ 22,423,950
----------- ------------- -------------- ------------
----------- ------------- -------------- ------------
* Date of initial investment.
</TABLE>
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
ALL AMERICA SELECT SEPARATE ACCOUNT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
SELECT GROWTH & INCOME SELECT INCOME
SUB-ACCOUNT 303 SUB-ACCOUNT 304
FOR THE YEAR ENDED FOR THE YEAR ENDED
12/31/94 12/31/93 12/31/94 12/31/93
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss)........................... $ 1,465,642 $ 160,111 $ 1,299,465 $ 673,256
Net realized gain (loss) from security transactions.... 1,454 56,963 (147,474) 118,744
Net unrealized gain (loss) on investments.............. (1,845,613) 502,550 (2,781,132) (34,491)
-------------- ------------- -------------- -------------
Net increase (decrease) in net assets from operations... (378,517) 719,624 (1,629,141) 757,509
FROM CAPITAL TRANSACTIONS:
Net purchase payments................................... 10,185,183 2,717,741 7,881,724 2,743,782
Terminations............................................ (1,229,097) (124,495) (1,318,815) (177,819)
Annuity benefits........................................ (298,294) (13,647) (303,752) (13,617)
Other transfers from (to) the General Account of
SMA Life Assurance Company (Sponsor)................. 15,548,998 19,233,731 9,055,027 16,887,284
Net increase(decrease) in investment by
SMA Life Assurance Company (Sponsor)................. -- (2,153,694) -- (5,506,915)
-------------- ------------- ------------- -------------
Net increase in net assets from capital transactions.... 24,206,790 19,659,636 15,314,184 13,932,715
-------------- ------------- ------------- -------------
Net increase in net assets............................... 23,828,273 20,379,260 13,685,043 14,690,224
NET ASSETS:
Beginning of year...................................... 22,705,411 2,326,151 20,069,815 5,379,591
-------------- ------------- ------------- -------------
End of year........................................... $ 46,533,684 $ 22,705,411 $ 33,754,858 $20,069,815
-------------- ------------- -------------- -------------
-------------- ------------- -------------- -------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
MONEY MARKET SELECT INTERNATIONAL EQUITY
SUB-ACCOUNT 305 SUB-ACCOUNT 306
FOR THE YEAR ENDED FOR THE PERIOD
12/31/94 12/31/93 5/02/94* to 12/31/94
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss)........................... $ 640,953 $ 124,159 $ (97,445)
Net realized gain (loss) from security transactions.... -- -- (6,755)
Net unrealized gain (loss) on investments.............. -- -- (687,448)
-------------- -------------- -------------
Net increase (decrease) in net assets from operations... 640,953 124,159 (791,648)
FROM CAPITAL TRANSACTIONS:
Net purchase payments................................... 83,357,219 93,649,052 6,893,849
Terminations............................................ (1,724,705) (93,725) (422,797)
Annuity benefits........................................ (536,208) (7,513) (39,074)
Other transfers from (to) the General Account of
SMA Life Assurance Company (Sponsor)................. (68,653,676) (74,929,761) 15,572,889
Net increase(decrease) in investment by
SMA Life Assurance Company (Sponsor)................. -- -- 100
------------- ------------- -------------
Net increase in net assets from capital transactions..... 12,442,630 18,618,053 22,004,967
------------- ------------- -------------
Net increase in net assets............................... 13,083,583 18,742,212 21,213,319
------------- ------------- -------------
NET ASSETS:
Beginning of year........................................ 20,194,979 1,452,767 --
End of year.............................................. $ 33,278,562 $ 20,194,979 $ 21,213,319
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
57
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS - December 31, 1994
NOTE 1 - ORGANIZATION
Allmerica Select Separate Account (Allmerica Select) is a separate investment
account of SMA Life Assurance Company (the Company). Allmerica Select was
established on March 5, 1992 for the purpose of separating from the general
assets of the Company those assets used to fund certain variable annuity
policies issued by the Company. The Company is a wholly-owned subsidiary of
State Mutual Life Assurance Company of America (State Mutual). Under applicable
insurance law, the assets and liabilities of Allmerica Select are clearly
identified and distinguished from the other assets and liabilities of the
Company. Allmerica Select cannot be charged with liabilities arising out of any
other business of the Company.
Allmerica Select is registered as a unit investment trust under the
Investment Company Act of 1940, as amended (the 1940 Act). Allmerica Select
currently offers six Sub-Accounts. Each Sub-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 State Mutual. The Trust is an open-end, diversified series
management investment company registered under the 1940 Act.
Allmerica Select has 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 State Mutual. The Company anticipates no tax liability
resulting from the operations of Allmerica Select. Therefore,no provision for
income taxes has been charged against Allmerica Select.
Capital Transactions - The components of the prior year's net increase
(decrease) in net assets from capital transactions have been disclosed in the
current year Statements of Changes in Net Assets to conform to the current
presentation.
58
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS - December 31, 1994, Continued
NOTE 3 - INVESTMENTS
The number of shares owned, aggregate cost, and net asset value per share of
each Sub-Account's investment in the Trust at December 31, 1994 were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO INFORMATION
SUB/ INVESTMENT NUMBER OF AGGREGATE NET ASSET
ACCOUNT PORTFOLIO SHARES COST VALUE PER SHARE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
301 Select Aggressive Growth 35,204,957 $ 47,907,846 $ 1.397
302 Select Growth 37,589,382 41,052,456 1.099
303 Select Growth & Income 45,169,402 47,750,493 1.027
304 Select Income 36,182,335 36,525,752 0.930
305 Money Market 33,771,438 33,771,438 1.000
306 Select International Equity 21,888,162 21,765,747 0.963
</TABLE>
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company makes a charge of 1.25% per annum based on the average daily net
assets of each Sub-Account at each valuation date for mortality and expense
risks. The Company also charges each Sub-Account .15% per annum based on the
average daily net assets of each Sub-Account for administrative expenses. These
charges are deducted from the daily value of each Sub-Account but are paid to
the Company on a monthly basis. Net purchase payments represent gross purchase
payments less applicable premium taxes.
A contract fee is currently deducted on the policy anniversary date and upon
full surrender of the policy. The contract fee is $30. For the year ended
December 31, 1994, contract fees deducted from accumulated value in the
Sub-Accounts amounted to $79,967.
Allmerica Investments, Inc., (Allmerica Investments), a wholly-owned
subsidiary of State Mutual, is principal underwriter and general distributor of
Allmerica Select, and does not receive any compensation for sales of the
Allmerica Select policies. Commissions are paid by the Company to registered
representatives of broker-dealers who are registered under the Securities
Exchange Act of 1934 and are members of the National Association of Securities
Dealers. 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, 1994, the Company received $168,183 for
contingent deferred sales charges applicable to Allmerica Select.
59
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS - December 31, 1994, Continued
Note 5 - POLICYOWNERS AND SPONSOR TRANSACTIONS
Transactions from policyowners and sponsor were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31,
1994 1993
---- ----
UNITS AMOUNT UNITS AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sub-Account 301
Issuance of units.............. 27,423,000 $ 37,965,912 18,235,079 $ 24,155,579
Redemption of units............ (8,631,521) (11,776,091) (5,819,624) (8,194,039)
----------- ------------ ----------- ------------
Net increase................... 18,791,479 $ 26,189,821 12,415,455 $ 15,961,540
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
Sub-Account 302
Issuance of units.............. 24,898,964 $ 27,008,384 21,303,709 $ 22,888,759
Redemption of units............ (6,512,593) (7,011,238) (6,183,908) (6,966,043)
----------- ------------ ----------- ------------
Net increase................... 18,386,371 $ 19,997,146 15,119,801 $ 15,922,716
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
Sub-Account 303
Issuance of units.............. 27,804,581 $ 30,134,264 21,269,739 $ 22,478,875
Redemption of units............ (5,495,408) (5,927,474) (2,626,432) (2,819,239)
----------- ------------ ----------- ------------
Net increase................... 22,309,173 $ 24,206,790 18,643,307 $ 19,659,636
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
Sub-Account 304
Issuance of units.............. 23,000,672 $ 23,944,394 18,994,334 $ 20,615,574
Redemption of units............ (8,494,763) (8,630,210) (6,046,719) (6,682,859)
----------- ------------ ----------- ------------
Net increase................... 14,505,909 $ 15,314,184 12,947,615 $ 13,932,715
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
Sub-Account 305
Issuance of units.............. 94,156,251 $ 96,953,841 94,347,724 $ 95,561,385
Redemption of units............ (82,122,357) (84,511,211) (75,992,385) (76,943,332)
----------- ------------ ----------- ------------
Net increase................... 12,033,894 $ 12,442,630 18,355,339 $ 18,618,053
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
Sub-Account 306
Issuance of units............... 23,987,394 $ 23,788,465 -- $ --
Redemption of units............. (1,803,648) (1,783,498) -- --
----------- ------------ ----------- ------------
Net increase.................... 22,183,746 $ 22,004,967 -- $ --
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
60
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS - December 31, 1994, Continued
NOTE 6 - 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 Allmerica Select satisfies the
current requirements of the regulations, and it intends that Allmerica Select
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 Allmerica
Select during the year ended December 31, 1994 were as follows:
<TABLE>
SUB-
ACCOUNT INVESTMENT PORTFOLIO PURCHASES SALES
- ------- -------------------- --------------- -------------
<S> <C> <C> <C>
301 Select Aggressive Growth..... $ 30,448,558 $ 4,682,969
302 Select Growth................ 21,463,923 1,817,851
303 Select Growth & Income....... 26,608,141 985,266
304 Select Income................ 18,941,056 2,273,431
305 Money Market................. 42,069,498 27,090,344
306 Select International Equity.. 22,225,784 453,281
-------------- --------------
Totals....................... $ 161,756,960 $ 37,303,142
-------------- -------------
-------------- -------------
</TABLE>
61
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of SMA Life
Assurance Company and Policyowners
of Allmerica Select Separate Account
of SMA Life Assurance 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 the Select
Aggressive Growth, Select Growth, Select Growth & Income, Select Income, Money
Market and Select International Equity Sub-Accounts (constituting the Allmerica
Select Separate Account of SMA Life Assurance Company) at December 31, 1994, the
results of each of their operations and the changes in each of their net assets
for the periods indicated, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of SMA Life
Assurance Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
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 securities at December 31, 1994 by correspondence with the
Trust, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 13, 1995
62
<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 SMA Life Assurance Company
Financial Statements for Allmerica Select Separate Account
FINANCIAL STATEMENTS INCLUDED IN PART C
None
(B) EXHIBITS
Exhibit 1 - Vote of Board of Directors Authorizing Establishment of
Registrant dated March 5, 1992 was previously filed on April 15,
1992, 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 - Form of Underwriting and Administrative Services Agreement and
Broker's Agreement were previously filed on August 14, 1992 and
are incorporated herein by reference.
Exhibit 4 - NY Group Specimen Policy Form and Certificate and Generic Policy
Form were previously filed on April 15, 1992, and are
incorporated herein be reference.
Exhibit 5 - Specimen Generic Application Forms were previously filed on
August 14, 1992, and are incorporated herein by reference.
Exhibit 6 - The Depositor's Articles of Incorporation and Bylaws, as amended
to reflect its name change.
Exhibit 7 - Not Applicable.
Exhibit 8 - AUV Calculation Services Agreement with The Shareholder Services
Group dated March 31, 1995 was previously filed on May 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.
<PAGE>
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR.
The principal business address of all the following Directors and Officers
is:
440 Lincoln Street
Worcester, Massachusetts 01653
NAME AND POSITION PRINCIPAL OCCUPATION
----------------- --------------------
Barry Z. Aframe Vice President and Counsel, State Mutual
Vice President and Counsel
Abigail M. Armstrong Counsel, State Mutual
Secretary and Counsel
Richard J. Baker Vice President and Secretary, State Mutual
Director and Vice President
Whitworth F. Bird, Jr., M.D. Vice President and Medical Director, State Mutual
Vice President and Medical
Director
Alan R. Boyer Vice President, State Mutual
Vice President
Mark R. Colborn Vice President, and Controller, State Mutual
Vice President and Controller
Lisa M. Coleman Vice President, State Mutual
Vice President
Dix F. Davis Vice President, State Mutual
Vice President
Bruce A. Emond Vice President, State Mutual
Vice President
Edward W. Ford Vice President, State Mutual
Vice President
Bruce H. Freedman Vice President, State Mutual
Vice President
Brian L. Hirst Vice President and Actuary, State Mutual
Vice President and Actuary
Kruno Huitzingh Vice President and Chief Information Officer,
Vice President and Chief State Mutual
Information Officer
John P. Kavanaugh Vice President, State Mutual
Vice President
John F. Kelly Senior Vice President, General Counsel, and
Director Assistant Secretary, State Mutual
Richard H. Kremer Vice President, State Mutual
Vice President
Jeffrey P. Lagarce Vice President, State Mutual
Vice President
Joseph W. MacDougall, Jr. Vice President, Associate General Counsel, and
Vice President, Associate Assistant Secretary, State Mutual
General Counsel and
Assistant Secretary
William H. Mawdsley Vice President and Actuary, State Mutual
Vice President and Actuary
<PAGE>
Roderick A. McGarry, II Vice President, State Mutual
Vice President
John W. Nunley Vice President, State Mutual
Vice President
John F. O'Brien Director, President and Chief Executive Officer,
Director and Chairman of State Mutual
the Board
Edward J. Parry, III Vice President and Treasurer, State Mutual
Vice President and Treasurer
Richard M. Reilly Vice President, State Mutual
Director, President and CEO
Henry P. St. Cyr Vice President and Asst. Treasurer, State Mutual
Vice President and Asst.
Treasurer
Eric Simonsen Vice President and Chief Financial Officer, State
Director, Vice President Mutual
and Chief Financial Officer
Ann K. Tripp Vice President, State Mutual
Vice President
Jerome F. Weihs Vice President, State Mutual
Vice President
Diane E. Wood Vice President, State Mutual
Vice President
Item 26. PERSONS UNDER COMMON CONTROL WITH REGISTRANT. See attached
organization chart.
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
NAME ADDRESS TYPE OF BUSINESS
---- ------- ----------------
AAM Equity Fund 440 Lincoln Street Massachusetts Grantor
Worcester MA 01653 Trust
Allmerica Asset 440 Lincoln Street Investment Advisory
Management, Inc. Worcester MA 01653 Services
Allmerica Employees 440 Lincoln Street Insurance Agency
Insurance Agency, Inc. Worcester MA 01653
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. Worcester MA 01653 and shareholder services for
investment companies
Allmerica Investment 440 Lincoln Street Holding Company
Services, Inc. Worcester, MA 01653
(formerly Allmerica
Financial Services, Inc.)
Allmerica Investment 440 Lincoln Street Investment Advisory
<PAGE>
Management Company, Inc. Worcester MA 01653 Services
Allmerica Investments, 440 Lincoln Street Securities, Retail Broker-
Inc. Worcester MA 01653 Dealer
Allmerica Investment Trust 440 Lincoln Street Investment Company
(formerly SMA Worcester MA 01653
Investment Trust)
Allmerica Property and 440 Lincoln Street Holding Company
Casualty Companies, Inc. Worcester MA 01653
Allmerica Realty Advisors, 440 Lincoln Street Investment Advisory
Inc. Worcester MA 01653 Services
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 national
N.A. Worcester MA 01653 trust company
AMGRO, Inc. 472 Lincoln Street Premium Financing
Worcester MA 01653
APC Funding Corp. 440 Lincoln Street Special purpose funding
Worcester MA 01653 vehicle for commercial
paper
Beltsville Drive Limited 440 Lincoln Street Real estate partnership
Partnership Worcester MA 01653
Citizens Corporation 440 Lincoln Street Holding Company
Worcester MA 01653
Citizens Insurance 645 West Grand River Multi-line fire &
Company of America Howell MI 48843 casualty insurance
Citizens Insurance 645 West Grand River Multi-line fire &
Company of Ohio Howell MI 48843 casualty insurance
Citizens Management, Inc. 645 West Grand River Services management
Howell MI 48843 company
Greendale Special 440 Lincoln Street Massachusetts Grantor
Placements Fund Worcester MA 01653 Trust
The Hanover American 100 North Parkway Multi-line fire &
Insurance Company Worcester MA 01653 casualty insurance
The Hanover Insurance 100 North Parkway Multi-line fire &
Company Worcester MA 01605 casualty insurance
Hanover Texas Insurance 801 East Campbell Incorporated Branch
Management Company, Inc. Road Richardson TX Office of The Hanover
75081 Insurance Company
Hanover Lloyd's Insurance 801 East Campbell Multi-line fire &
Company Road Richardson TX casualty insurance
75081
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
<PAGE>
Lloyds Credit Corporation 440 Lincoln Street Premium financing
Worcester MA 01653 service franchises
Logan Wells Water Company, 603 Heron Drive Water Company, serving
Inc. Bridgeport NJ 08014 land development
investment
Massachusetts Bay 100 North Parkway Multi-line fire &
Insurance Company Worcester MA 01653 casualty
SMA Financial Corp. 440 Lincoln Street Holding Company
Worcester MA 01653
Allmerica Fiancial Life 440 Lincoln Street Life insurance, accident
Insurance and Annuity Worcester MA 01653 & health insurance,
Company 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, 1994, there were 2,422 Contact holders of qualified
Contracts and 3,439 Contract holders of non-qualified Contracts.
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 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-A, VA-B, VA-C, VA-G,
VA-H, VA-K and VA-P of Allmerica Financial Life Insurance and Annuity
Company
- Separate Account I, Separate Accounts VA-K and VA-P, Inheiritage
Account, Allmerica Select Separate
and VEL II Account of State Mutual
- 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
Philip J. Coffey Vice President
<PAGE>
Bob A. Freelove Vice President
John F. Kelly Director
John F. O'Brien Director
Stephen Parker President and CEO
Edward J. Parry, III Treasurer
Richard M. Reilly Director
Eric A. Simonsen Director
Ronald K. Smith Vice President
Mark Steinberg Senior Vice President
Robert T. Stemple Vice President and Controller
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 the Shareholder Services Group, Inc. at 290 Donald
Lynch Boulevard, Marlborough, Massachusetts.
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 as part of the application to
purchase a Contract a space that the applicant can check to request a Statement
of Additional Information.
(c) The registrant hereby undertakes to deliver a Statement of Additional
Information promptly upon written or oral request, according to the requirements
of Form N-4.
(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
<PAGE>
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>
EXHIBIT TABLE
Exhibit 6 - Company's Articles of Incorporation and Bylaws, as amended
Exhibit 9 - Consent and Opinion of Counsel
Exhibit 10- Consent of Independent Accountants
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this post-effective
amendment to the Registration Statement to be signed on its behalf by the
undersigned there unto duly authorized, all in the City of Worcester, and
Commonwealth of Massachusetts on the 25th day of September, 1995. Registrant
certifies that it meets the requirements of Securities Act Rule 485(b) for
effectiveness of this post-effective amendment to its Registration Statement.
SMA LIFE ASSURANCE COMPANY
ALLMERICA SELECT SEPARATE
ACCOUNT
Attest: /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 indicated.
Signature Title Date
- --------- ----- ----
/s/ Richard M. Reilly Director, President and September 25, 1995
- ---------------------- Chief Executive Officer
Richard M. Reilly
/s/ John F. O'Brien Director and Chairman of the
- ----------------------- Board
John F. O'Brien
/s/ Eric A. Simonsen Director, Vice President and
- ----------------------- Chief Financial Officer
Eric A. Simonsen
/s/ Mark R. Colborn Vice President and
- ----------------------- Controller
Mark R. Colborn
/s/ Richard J. Baker Director and Vice President
- -----------------------
Richard J. Baker
/s/ John F. Kelly Director
- -----------------------
John F. Kelly
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
SMA LIFE ASSURANCE COMPANY, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That at a meeting of the Board of Directors of SMA Life Assurance
Company resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is
as follows:
RESOLVED: That the Certificate of Incorporation of this corporation be amended
by changing the Article thereof numbered "First" so that as amended said Article
shall be and read as follows: "THE NAME OF THE CORPORATION IS ALLMERICA
FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY."
SECOND: That at a meeting of the Board of Directors of SMA Life Assurance
Company resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is
as follows:
RESOLVED: That effective October 1, 1995, and subject to the approval of the
Stockholder of the Company, the Certificate of Incorporation of SMA Life
Assurance Company, a Delaware corporation, shall be amended to add the following
as Article Tenth:
"A director or officer of this corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director or officer, except to the extent that exculpation from
liability is not permitted under the General Corporation Law of the State of
Delaware as in effect at the time such liability is determined. No amendment or
repeal of this paragraph shall apply to or have any effect on the liability of
alleged liability of any director or officer of the corporation for or with
respect to any acts or omissions of such director or officer occurring prior to
such amendment or repeal.
THIRD: That thereafter, pursuant to resolution of its Board of Directors, a
special meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware, at which meeting the necessary number of shares as
required by statue were voted in favor of the amendments.
<PAGE>
FOURTH: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FIFTH: That the capital of said corporation shall not be reduced or increased
by reason of said amendment.
SIXTH: That the effective date of said amendments shall be October 1, 1995.
In Witness Whereof, said SMA Life Assurance Company has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Bradford K.
Gallagher, its President, and Abigail M. Armstrong, its Secretary, this 29th day
of June 1995.
By: /s/ Bradford K. Gallagher
------------------------------------
President
(Corporate Seal)
By: /s/ Abigail M. Armstrong
------------------------------------
Secretary
Attest:
/s/ Randi B. Setterlund
- -------------------------------
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
***
American Variable Annuity Life Assurance Company, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of American Variable
Annuity Life Assurance Company resolutions were duly adopted setting forth a
proposed amendment of the Certificate of Incorporation of said corporation,
declaring said amendment to be advisable and calling a meeting of the
stockholders of said corporation for consideration thereof. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "FIRST" so that, as amended
said Article shall be and read as follows:
"The name of the corporation is SMA Life Assurance Company"
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or
by reason of said amendment.
FIFTH: That the effective date of said amendment shall be January 1,
1982.
IN WITNESS WHEREOF, said American Variable Annuity Life Assurance Company
has caused its corporate seal to be hereunto affixed and this certificate to be
signed by John M. Quinlan, its President, and Sheila B. St. Hilaire, its
Secretary, this 28th day of September, 1981.
/s/ John M. Quinlen
----------------------------------
By: John M. Quinlan
President
/s/ Sheila B. St. Hilaire
---------------------------------
(CORPORATE SEAL) By: Sheila B. St. Hilaire
Secretary
ATTEST: Ralph L. Diller, Asst. Secretary
<PAGE>
CERTIFICATE OF INCORPORATION
OF
AMERICAN VARIABLE ANNUITY LIFE ASSURANCE COMPANY, INC.
KNOW ALL MEN BY THESE PRESENTS: EXHIBIT A
That the following Certificate of Incorporation of AMERICAN VARIABLE ANNUITY
LIFE ASSURANCE COMPANY, INC. shall henceforth be, and constitute the Certificate
of Incorporation of said Corporation as follows:
First: The name of the Corporation is American Variable Annuity Life
Assurance Company, Inc.
Second: Its registered office in the State of Delaware is located at No. 229
South State Street, Dover, County of Kent. The registered agent in
charge thereof at such address is The Prentice-Hall Corporation
System, Inc.
Third: The nature of the business or objects or purposes to be transacted,
promoted, or carried on by the Corporation are as follows:
(a) The insuring of lives of persons and every insurance pertaining
thereto or connected therewith, including accident and health
insurance and the granting or disposing of annuities and the
transacting of disability insurance, whether on a group,
individual, franchise or reinsurance basis, and any other type of
insurance or other business which may be or hereafter be lawfully
conducted by legal reserve life insurance companies organized
under the laws of the State of Delaware. Any such business may be
transacted on a variable basis stated in terms of units or
otherwise but payable in lawful currency, or on a fixed basis
stated in terms of predetermined amounts of lawful currency; the
Corporation may transact any such business in Delaware or
elsewhere.
(b) The Directors of the Corporation shall have the power to segregate
and hold separate from the other funds and assets of the
Corporation premiums or other funds received from the sale of
various types and classes of policies and annuity contracts; the
amount held may be invested in such proportions and in such manner
as determined by the Board of Directors of the Corporation or by a
committee thereof; except as may otherwise by required under
Subsection (c) hereof. The assets held in such separate account
or accounts shall not be chargeable with liabilities arising out
of any other business the Corporation may conduct, but shall be
held and applied exclusively for the benefit of the holders or
beneficiaries of those variable annuity contracts or life
insurance policies with respect to which the account or accounts
have been established;
(c) If a separate account is registered with an Agency of the Federal
Government having jurisdiction over such separate account or
contracts issued in connection therewith, provisions may be made
in the rules and regulations for such separate account for voting
by
<PAGE>
owners of a separate account contracts with respect to the
election of a board of managers for such account, ratification of
the selection of auditors for such account by such board, approval
of investment advisory service contracts for such account, and
such other matters as may be required by applicable law.
Fourth: The authorized capital stock of the Corporation shall be 10,000 shares
of $1,000 par value per share. Stock authorized but not issued may be
issued for such consideration as shall be fixed from time to time by
the Board of Directors, but the consideration shall at all times be
not less than the par value of said shares. When shares of stock
shall be issued, and paid for in cash at the rate determined by the
Board of Directors, such shares shall thereafter be nonassessable.
Fifth: The names and places of residence of the incorporators are as follows:
Ralph L. Diller, 11 Notre Dame Street, Leominster, Massachusetts
01543;
Gaynelle G. Jones, 8 Wabon Street, Dorchester, Massachusetts 02121;
Marilyn G. Quattrocchi, Harris Avenue, Lincoln, Rhode Island 02865
Sixth: The powers of the incorporators shall terminate upon the filing of
this Certificate of Incorporation, and the initial Board of Directors
of the Corporation shall be composed of:
Harold E. Ahlquist 75 Birchwood Drive
Holden, Massachusetts 01520
W. Douglas Bell 50 Wyndhurst Drive
Holden, Massachusetts 01520
Norman C. Cross 35 Leominster Road
Lunenburg, Massachusetts 01420
Roland A. Erickson 20 Church Street
Greenwich, Connecticut 06830
Frederick Fedeli 22 High Street
Southboro, Massachusetts 01772
John H. Freese 85 Wyndhurst Drive
Holden, Massachusetts 01520
Ralph F. Gow 14 Monmouth Road
Worcester, Massachusetts 01609
Paul R. O'Connell 34 Drury Lane
Worcester, Massachusetts 01609
and they shall serve until the Annual Meeting of the Corporation to be
held on the second Wednesday of April, 1975 and until their successors
shall have been elected and qualified.
Seventh: The following additional provisions not inconsistent with law are
hereby established for the management, conduct, and regulation of the
business and officers of the Corporation, and for creating, limiting,
defining, and
<PAGE>
regulating the powers of the Corporation and of its directors and
stockholders:
(a) The affairs and business of the Corporation shall be managed and
controlled by a Board of Directors consisting of not less than
three (3).
(b) The Directors shall be elected in such number, for such terms, and
in such manner as shall be provided in the By-laws and any
Director of the Corporation may be removed at any annual or
special meeting of stockholders by the same vote as that required
to elect a Director.
(c) Meetings of stockholders may be held outside the State of Delaware
if the By-laws so provide, in such place as shall be designated in
the notice of meeting. Except as otherwise required by law, the
presence in person or by proxy of the holders of a majority of the
shares of stock entitled to vote shall constitute a quorum at any
meeting of stockholders.
Eighth: The Corporation shall have perpetual existence unless sooner
terminated by the affirmative vote of the holders of two-thirds (2/3)
of the issued and outstanding stock.
Ninth: These Articles of Incorporation may be amended by written
authorization of the holders of a majority of the shares of stock
outstanding and entitled to vote or by affirmative vote of such a
majority voting at a lawful meeting of such stockholders provided
notice given for such meeting includes due notice of the proposal to
amend.
We, the undersigned, for the purpose of forming a corporation under the laws of
the State of Delaware, do make, file, and record this Certificate, and do
certify that the facts herein stated are true; and we have accordingly hereunto
set our respective hands.
Dated at July 26, 1974.
Ralph L. Diller
Gaynelle G. Jones
Marilyn G. Quattrocchi
<PAGE>
Commonwealth of Massachusetts )
)ss
County of Worcester )
Be it remembered, that on this 26th day of July, 1974, there personally appeared
before me, the undersigned, a notary public, Ralph L. Diller, Gaynelle G. Jones,
Marilyn G. Quattrocchi, parties to the foregoing Certificate of Incorporation,
known to me personally to be such, and I having first made known to them and
each of them the contents of said Certificate, they did each severally
acknowledge that they signed, sealed, and delivered the same as their voluntary
act and deed, and each deposed that the facts therein stated were truly set
forth.
Given under my hand and seal of office the day of the year aforesaid.
Robert G. Juneau
Notary Public
My Commission Expires: May 30, 1980
<PAGE>
AGREEMENT OF MERGER
AMERICAN VARIABLE ANNUITY LIFE ASSURANCE COMPANY
(AN ARKANSAS COMPANY)
AND
AMERICAN VARIABLE ANNUITY LIFE ASSURANCE COMPANY, INC.
(A DELAWARE COMPANY)
This Agreement and Plan of Merger (hereinafter referred to as "Agreement")
made as of this 23rd day of September, 1974, between American Variable Annuity
Life Assurance Company (hereinafter referred to as AVA Co.), a stock insurance
company incorporated and existing under the laws of the State of Arkansas and
having its principal place of business in Little Rock, Arkansas, and American
Variable Annuity Life Assurance Company, Inc. (hereinafter referred to as AVA,
Inc.), a stock insurance company incorporated and existing under the laws of the
State of Delaware and having its registered office in Dover, Delaware and its
principal place of business in Worcester, Massachusetts. (Said companies being
sometimes hereinafter called "Constituent Companies").
Whereas, the purpose of this Agreement is to accomplish the transfer of the
domicile of AVA Co. from the State of Arkansas to the State of Delaware through
the utilization of the merger statutes of the respective states, and
Whereas, after full consideration, the Boards of Directors of the
Constituent Companies have deemed it is in the best interests of the Companies
and their shareholders that the Constituent Companies be merged as a single
company and the Surviving Company of said merger comprise the same business
enterprise as AVA Co.
WITNESSETH:
IN CONSIDERATION of the terms and of the mutual agreements, covenants, and
provisions herein contained, and pursuant to the laws of Arkansas and of
Delaware, this Agreement of Merger is made and entered into by and between the
Board of Directors of the said AVA Co. and the Board of Directors of the said
AVA, Inc., do hereby agree as follows:
(1) At the effective date and time set forth herein, AVA Co. is hereby
merged into and with AVA, Inc. with AVA, Inc. the surviving and continuing
company under the laws of the State of Delaware. At the effective date of
merger AVA, Inc. shall assume the name of American Variable Annuity Life
Assurance Company (hereinafter referred to as the "Surviving Company").
(2) The Surviving Company shall continue as a stock insurance company,
and shall have the objects and purposes stated in its Certificate of
Incorporation, Exhibit A annexed, and in general terms have the power and
authority to transact any business which AVA Co. is empowered and authorized to
transact, and shall have the authority to transact any business which domestic
life and health insurance companies are now or hereafter may be authorized to
transact under the laws of the State of Delaware.
(3) At the said effective date and time, and by operation of the
applicable
<PAGE>
laws and statutes of the State of Arkansas and the State of Delaware relating to
the merger of stock insurance corporations, all of the rights and assets of AVA
Co. including without limitation assets tangible and intangible, real and
personal, of whatsoever kind and character and wheresoever located, including
all separate accounts of AVA Co., shall become the assets of the Surviving
Company.
(4) At the effective date and time and by operation of the applicable
laws and statutes of the State of Arkansas and the State of Delaware, the
Surviving Company shall assume and shall be liable and responsible for any and
all of the legal liabilities and legal obligations of AVA Co. then outstanding,
including without limitation, all liabilities for taxes, all liabilities under
insurance contracts theretofore issued or then on binder, and all other legal
liabilities and obligations of AVA Co.
(5) Prior to the merger, the Board of Directors of AVA, Inc. shall
adopt a resolution to be effective at the time of the merger providing that such
separate account or accounts as may be established and maintained by AVA Co. at
the time of the merger shall be deemed to be separate accounts of the Surviving
Company pursuant to the provisions of Delaware law and that the existence of
such separate account or accounts shall continue uninterrupted.
(6) The Surviving Company, through its appropriate officers and
directors, is hereby authorized in the name of either of the Constituent
Companies or in its own name, to execute, acknowledge, and deliver all
instruments of further assurance and to do all other such acts or things as it
may, at any time, deem necessary or desirable to vest in the Surviving Company
any property or rights of any of the merged corporations, or to carry out any of
the purposes expressed in this Agreement.
(7) The registered office of the Surviving Company in Delaware shall be
in Dover, County of Kent, Delaware. The principal office of the Surviving
Company shall be in the City of Worcester, in the County of Worcester,
Massachusetts.
(8) The present By-Laws of AVA, Inc. set forth in Exhibit 3, shall be
the By-Laws of the Surviving Company unless and until altered, amended or
repealed in the manner therein provided.
(9) All shares if authorized and outstanding capital stock of AVA,
Inc., such stock being owned in its entirety AVA Co., shall be cancelled on the
effective date of the merger.
(10) All shares of authorized and outstanding capital stock of AVA Co.
owned in its entirety by State Mutual Life Assurance Company of America, shall
be cancelled effective the date of the merger and stock of the Surviving Company
shall be issued to State Mutual in amounts equivalent to the stock owned in AVA
Co. prior to the merger.
(11) The Constituent Companies agree to do and perform each and every
act required by the laws of Delaware and Arkansas to effectuate such merger.
(12) The proper officers of the respective companies hereto are
authorized and directed from time to time, as the occasion may arise, to do all
acts and to execute and acknowledge all affidavits, deeds, contracts,
assurances, assignments and instruments in writing, and to sign and deliver all
checks on the bank accounts of the respective parties hereto, and do anything
else deemed necessary or proper to
<PAGE>
carry out the provisions of this Agreement, and to affix the corporate seals of
the respective parties to any such instrument in writing.
(13) The merger shall become effective at the close of business December
31, 1974.
(14) In order to clarify the intention of the parties hereto or to
effect or facilitate the filing, recording or official approval of this
Agreement and Plan of Merger and the consummation hereof in accordance with the
purpose and intent of this Agreement, any of the terms or conditions of this
Agreement may be, at any time prior to the merger, amended by mutual agreement
of the Constituent Companies by action duly taken by the respective Boards of
Directors.
(15) This Agreement shall be contingent upon approval by the
shareholders of the Constituent Companies and upon approval by a majority of the
variable annuity contract owners of AVA Co. as the term majority is defined in
the By-Laws and Regulations of its separate account American Variable Annuity
Fund.
(16) This Agreement shall be and become void and of no effect and the
merger contemplated hereby shall be deemed to be abandoned if a majority of the
Board of Directors of either Constituent Companies, at a meeting thereof duly
called and held, shall be resolution deem that it is inadvisable to consummate
the merger.
(17) This Agreement shall further be contingent upon obtaining necessary
approval from the Commissioners of Insurance in the States of Arkansas and
Delaware and the approval of the appropriate governmental regulatory agencies.
(18) No director or officer of either of the Constituent Companies or of
any parent corporation or subsidiary insurer, shall receive any fee, commission,
other compensation or valuable consideration whatever other than regular salary
directly or indirectly, for in any manner aiding, promoting or assisting in the
merger.
(19) Without further action of the shareholders of AVA Co. or AVA, Inc.
or the Boards of Directors of the Constituent Companies, the officers of the
Surviving Company shall be the officers of AVA, Inc. immediately prior to the
merger and there shall be eight initial directors of the Surviving Company whose
names and addresses are as follows:
Harold E. Ahlquist, Jr. Member
75 Birchwood Drive
Holden MA 01520
W. Douglas Bell Chairman
50 Wyndhurst Drive
Holden MA 01520
Norman C. Cross Member
38 Dusty Miller Road
Falmouth MA 02540
Roland A. Erickson Member
101 M Lewis Street
Greenwich CT 06830
<PAGE>
Frederick Fedeli Member
22 High Street
Southboro MA 01772
John H. Freese Member
85 Wyndhurst Drive
Holden MA 01520
Ralph F. Gow Member
14 Monmouth Road
Worcester MA 01609
Paul R. O'Connell Member
34 Drury Lane
Worcester MA 01609
IN WITNESS WHEREOF, American Variable Annuity Life Assurance Company and
American Variable Annuity Life Assurance Company, Inc. have caused this
Agreement to be executed in their corporate names by their respective officers
and who by majorities of their Boards of Directors on this 23rd day of
September, 1974.
AMERICAN VARIABLE ANNUITY LIFE
ASSURANCE COMPANY
(Corporate Seal) By: John H. Freese, President
Attest: Ralph L. Diller, Secretary
Directors of American Variable Annuity Life Assurance Company:
Harold E. Ahlquist, Jr. Frederick Fedeli
W. Douglas Bell John H. Freese
Norman C. Cross Ralph G. Gow
Roland A. Erickson Paul R. O'Connell
AMERICAN VARIABLE ANNUITY LIFE
ASSURANCE COMPANY, INC.
/s/ John H. Freese
--------------------------------
(Corporate Seal) By: John H. Freese, President
Attest: Ralph L. Diller, Secretary
<PAGE>
Directors of American Variable Annuity Life Assurance Company, Inc.:
Harold E. Ahlquist, Jr. Frederick Fedeli
W. Douglas Bell John H. Freese
Norman C. Cross Ralph F. Gow
Roland A. Erickson Paul R. O'Connell
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
AMERICAN VARIABLE ANNUITY LIFE ASSURANCE COMPANY
INTO
AMERICAN VARIABLE ANNUITY LIFE ASSURANCE COMPANY, INC.
American Variable Annuity Life Assurance Company, a corporation organized under
the laws of the State of Arkansas does hereby certify:
FIRST: That it was organized pursuant to the provisions of the Arkansas
Insurance Laws on the 23rd day of January, 1967.
SECOND: That it owns all of the outstanding shares of capital stock of
American Variable Annuity Life Assurance Company, Inc., a corporation organized
pursuant to the provisions of the General Corporation Laws of the State of
Delaware on the 26th day of July, 1974.
THIRD: That its Board of Directors at a meeting held on the 30th day of July,
1974 determined to merge the Corporation into said American Variable Annuity
Life Assurance company, Inc. and did adopt the following resolution:
"RESOLVED: That subject to the approval of State Mutual Life
Assurance Company of America as the sole shareholder of the
company and the approval of the company's variable annuity
contract owners, the company enter into a merger agreement with
its wholly owned subsidiary, American Variable Annuity Life
Assurance Company, Inc. effective with the close of business,
December 31, 1974. The appropriate officers of the company are
hereby authorized to execute the merger agreement substantially
in the form attached hereto and take whatever action may be
necessary to carry out the terms of said merger agreement."
FOURTH: That the attached copy of the Agreement of Merger is the same as that
approved and authorized by resolution of the Board of Directors of the Company
on July 30,1974.
FIFTH: That the sole stockholder of the Company, State Mutual Life Assurance
Company of America, at a stockholder meeting duly called and held on August 16,
1974 for the purpose of approving the merger voted to approve the merger of the
Company into its wholly owned subsidiary, American Variable Annuity Life
Assurance Company, Inc. pursuant to the Agreement of Merger as authorized by the
Board of Directors of the Company on July 30, 1974.
SIXTH: That pursuant to the Agreement of Merger approved and authorized by
the Company's Board of Directors, the merger of American Variable Annuity Life
Assurance Company into American Variable Annuity Life Assurance Company, Inc.
shall be effective at the close of business December 31, 1974.
SEVENTH: That pursuant to the Agreement of Merger approved and authorized by
the Company's Board of Directors, the surviving company shall, effective with
the
<PAGE>
merger, assume the name American Variable Annuity Life Assurance Company.
IN WITNESS WHEREOF, said American Variable Annuity Life Assurance Company, has
caused this Certificate of Ownership and Merger to be signed by John H. Freese,
its President, and Ralph L. Diller, its Secretary, and its corporate seal to be
affixed thereto this 5th day of December, A.D. 1974.
AMERICAN VARIABLE ANNUITY LIFE
ASSURANCE COMPANY
By: /s/ John H. Freese
--------------------------------
President
By: /s/ Ralph L. Diller
--------------------------------
Secretary
(CORPORATE SEAL)
<PAGE>
STATE OF MASSACHUSETTS
COUNTY OF WORCESTER
BE IT REMEMBERED that on this 5th day of December, 1974, personally came
before me, a Notary Public in and for the County and State aforesaid, John H.
Freese, President and Ralph L. Diller, Secretary of American Variable Annuity
Life Assurance Company, a corporation of the State of Arkansas, and they duly
executed said certificate before me and severally acknowledged the said
certificate to be their act and deed and the act and deed of said corporation
and the facts stated therein are true; that the signatures of the said officers
are in the handwriting of each of said officers respectively; and that the seal
affixed to said certificate is the common or corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day
and year aforesaid.
Ethel Demark
Notary Public
(SEAL)
<PAGE>
BYLAWS
of
Allmerica Financial Life Insurance and Annuity Company
(Effective October 1, 1995)
ARTICLE I
Meetings of Stockholders
1. The Annual Meeting shall be held on the second Wednesday of April of each
year but if that day is a legal holiday at the place of meeting, the meeting
shall be held on the next following business day not a holiday. If more than
fifteen months are allowed to elapse without an annual stockholders' meeting
being held, any stockholder may call such a meeting to be held. The place of
any Annual Meeting may be outside of the State of Delaware and shall be fixed
from time to time by the Board of Directors.
2. The business to be transacted at the Annual Meeting shall be the election
of Directors, to receive and consider reports of the Corporation's Officers, and
such other business as shall properly be brought before the meeting.
3. At least ten days notice of each Annual Meeting, unless waived in writing,
stating the place, day, and hour thereof shall be given by the Secretary to each
stockholder by mailing postage prepaid to his address as it appears on the
Corporation's books; and no amendments to the Corporation's Articles of
Incorporation may be made at any meeting of the stockholders unless the proposal
to so amend is included in the notice of the meeting.
4. At any time upon written request of the President, any Director, or
stockholders holding in the aggregate one-third of the voting rights of all
stock outstanding, it shall be the duty of the Secretary to call a special
meeting of stockholders to be held at any such time as the Secretary may fix in
the written notice thereof, not less than five nor more than sixty days after
the receipt of request. If the Secretary fails to issue such call, the Director
or stockholders making the request may do so. The notice shall state the
purpose of the meeting and no business of which notice is not so given shall be
transacted at such meeting.
5. The presence in person or by proxy of the holders of the majority of the
shares of stock outstanding and entitled to vote shall constitute a quorum. The
stockholders present at a duly organized meeting can continue to do business
until adjournment notwithstanding the withdrawal of stockholders leaving less
than a quorum.
<PAGE>
6. If a meeting cannot be organized because a quorum has not attended, those
present may adjourn the meeting to such time as they may determine, but in the
case of any meeting called for the election of any Director, the adjournment
must be to the next day and those who attend the adjourned meeting although less
than a quorum as otherwise provided herein shall nevertheless constitute a
quorum for the purpose of electing a Director.
7. If any necessary Officer fails to attend a stockholders' meeting any
stockholder present may be elected to act temporarily in lieu of such absent
Officer.
8. An annual or special meeting of stockholders may be adjourned to another
date without new notice being given.
9. Any action required or permitted to be taken at any annual meeting or
special meeting of the stockholders may be taken without a meeting, without
prior notice, if a consent in writing setting forth the actions so taken is
signed by the holders of all of the outstanding stock of the Company.
ARTICLE II
Stockholders Voting and Other Rights
1. At each meeting of stockholders and upon each proposal presented at each
meeting each stockholder of record shall be entitled to one vote for each share
of stock standing in his name on the books of the Corporation on the record date
as hereafter established.
2. A stockholder may vote or be represented at any stockholders' meeting in
person or by written proxy, which may be revoked at will. The revocation of a
proxy shall not be effective until written notice thereof has been filed with
the Secretary of the Corporation.
3. Unless otherwise provided by law, the Articles of Incorporation, or these
Bylaws, all questions shall be determined by the holders of a majority of the
capital stock voting thereon.
4. The following shall be referred to as a record event:
(a) a meeting of stockholders,
(b) the payment of any dividend,
(c) the allotment of rights,
(d) a change, conversion, or exchange of capital stock.
-2-
<PAGE>
ARTICLE III
Directors
1. The number of Directors which shall constitute the whole Board shall be not
less than three nor more than fifteen. The Directors shall be elected at the
Annual Meeting of Stockholders except as hereinafter provided, and each Director
elected shall hold office for one year or until his successor is elected and
qualified. The Directors need not be stockholders or residents of the State of
Delaware.
2. Vacancies in the Board of Directors may be filled by the remaining members
of the Board, and each person so elected shall be a Director until his successor
is elected by the stockholders at the next Annual Meeting of Stockholders or at
any special meeting of stockholders called for that purpose and held prior to
such Annual Meeting.
3. The Board of Directors may establish the position of Chairman of the Board
and Vice Chairman of the Board and shall choose from among its members for such
positions. The Chairman of the Board as so chosen shall preside at meetings of
the Board and perform such other duties as are assigned to him by the Board. If
the Chairman is absent or unable to discharge the duties of his office, the Vice
Chairman may act in his stead.
4. The Board of Directors shall determine the amount of any expense
reimbursement or remuneration to be paid to its members for attendance at
meetings.
ARTICLE IV
Meetings of the Board of Directors
1. The Board of Directors may hold meetings, both regular and special, either
within or without the State of Delaware.
2. The Board of Directors shall hold an organizational meeting immediately
after the Annual Meeting of Stockholders or at such time as may be fixed by
written consent of a majority of all Directors or by notice given by the
President or Secretary.
3. Regular meetings of the Board of Directors may be held without notice at
such time and at such place as shall from time to time be determined by
resolution of the Board of Directors.
4. Special meetings of the Board may be called by the President on five days
notice to each Director. Special meetings shall be called by the President or
Secretary on like notice on the written request of a majority of the entire
Board of Directors. The notice shall indicate the purpose, time, and place of
the special meeting.
-3-
<PAGE>
5. At the meeting of the Board, a majority or five of the Directors, whichever
is less, shall constitute a quorum for the transaction of business. The
concurrence of a majority of Directors present at any meeting at which there is
a quorum shall constitute the act of the Board of Directors except as may be
otherwise provided by law.
6. Any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting, if written
consent thereto is signed by all members of the Board or such Committee, as the
case may be, and such written consent is filed with the minutes of the
proceedings of the Board or Committee.
ARTICLE V
Committees
1. The Board of Directors may elect, from its membership, a Finance Committee
of not less than five Directors, who shall have charge of the investment, sale,
loan, or deposit of funds under the ownership, direction, or control of the
Corporation.
2. The Board may also appoint from its own members, and where permitted by
law, from the Officers and/or employees, other standing committees and temporary
committees, vesting such committees with such powers and prescribing such duties
as the Board shall determine.
3. Each Committee shall keep regular minutes of its meetings and cause them to
be recorded in books to be kept for that purpose and shall report to the Board
from time to time as the Board may request.
ARTICLE VI
Officers
1. The Board of Directors shall choose a President, who shall be a Director, a
Secretary, and a Treasurer. The Directors may also choose one or more Vice
Presidents, Assistant Secretaries, and Assistant Treasurers and such other
Officers as may be deemed necessary. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
2. Any person may hold two (2) or more offices, except that the President
shall not be also the Secretary or Assistant Secretary.
3. The Officers shall hold office for one year and until their successors are
elected and qualified but the Board may remove any officer at will.
-4-
<PAGE>
ARTICLE VII
Duties of Officers
1. The Chief Executive Officer of the Corporation shall be the Chairman of the
Board, or the President, as determined by the Directors, and shall, subject to
the Board of Directors, direct and manage the affairs of the Corporation. If
the Chairman of the Board and Vice Chairman of the Board are both absent or
unable to discharge their duties, the President may fulfill the duties of the
Chairman of the Board.
2. If the President is absent or unable to discharge the duties of his office,
a Vice President may act in his stead. The Chairman of the Board, if he is the
Chief Executive Officer, the President, or any one of the Vice Presidents shall
have the authority to transfer securities, execute releases, extensions, partial
releases, or assignments without recourse of mortgages, to execute deeds and
other instruments or documents, including contracts or insurance and annuities,
on the part of the Company and whenever necessary to affix the Seal of the
Company to the same. The Chairman of the Board, the President, or any Vice
President may, whenever necessary, delegate this authority to perform any of the
acts referred to in this paragraph to any person pursuant to a special power-of-
attorney.
3. The Secretary shall keep a list of stockholders and of the number of shares
standing in the name of each and a record of the transfers thereof. He shall
keep a record of the votes and all other proceedings of all meetings of the
Directors and stockholders; and such other books and records as the Chief
Executive Officer or Directors may require. He shall give, or cause to be
given, notice of all meetings of stockholders and special meetings of the Board
of Directors. He shall have custody of the corporate records and Corporate Seal
and shall have the authority to affix the same to any instrument requiring it;
and when so affixed, it may be attested by his signature or the signature of an
Assistant Secretary; he shall also perform all acts usually incident to the
office of Secretary.
4. If the Secretary is absent or unable to discharge the duties of his office,
an Assistant Secretary may act.
5. The Treasurer shall have charge of all monies and securities of the
Company; and he shall collect all profits from investments which the Company
records establish to be due.
6. The Treasurer shall have authority to transfer securities, to execute
releases, extensions, partial releases, and assignments without recourse of
mortgages, to execute deeds and other instruments or documents on behalf of the
Company, and whenever necessary, to affix the Seal of the Company to the same.
He shall have the power to vote on behalf of the Company in any case where
-5-
<PAGE>
the Company as the holder of any securities had the authority to vote.
7. If the Treasurer is absent or unable to discharge the duties of his office,
an Assistant Treasurer may act.
ARTICLE VIII
Indemnification of Directors and Officers
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 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 judgment, 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.
ARTICLE IX
Notice
Whenever any notice is required to be given under the provisions of
statutes, the Articles of Incorporation, or these Bylaws, a waiver thereof, in
writing signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. Attendance at any meeting shall constitute a waiver of notice
unless attendance is for the purpose of objecting to the transaction of
business.
ARTICLE X
Corporate Seal
The Corporation's Corporate Seal shall contain the words, "Allmerica
Financial Life Insurance and Annuity Company," surrounding the words, "Corporate
Seal," and the same may be altered by the Board of Directors.
-6-
<PAGE>
ARTICLE XI
Amendment
These Bylaws may be amended or repealed by the Directors or by majority
vote of the shares of stock outstanding and entitled to vote.
-7-
<PAGE>
EXHIBIT 9
September 25, 1995
SMA Life Assurance Company
440 Lincoln Street
Worcester MA 01653
Gentlemen:
In my capacity as Counsel of SMA Life Assurance Company (the "Company"), I have
participated in the preparation of the Post-Effective Amendments to the
Registration Statements for the Allmerica Select Separate Account on Form N-4
under the Securities Act of 1933 and the Investment Company Act of 1940, with
respect to the Company's qualified variable annuity contracts and non-qualified
variable annuity contracts.
I am of the following opinion:
1. Allmerica Select Separate Account is a separate account of the Company
validly existing pursuant to the Delaware Insurance Code and the
regulations issued thereunder.
2. The assets held in Allmerica Select Separate Account 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
Statement 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 Amendment to the Registration Statement of Allmerica Select Separate
Account 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. 7 to the Registration
Statement on Form N-4 of our report dated February 13, 1995 relating to the
financial statements of SMA Life Assurance Company and our report dated February
13, 1995, relating to the financial statements of the Allmerica Select Separate
Account of SMA Life Assurance 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
September 25, 1995
<TABLE> <S> <C>
<PAGE>
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<NAME> SMA ALLMERICA SELECT SEPARATE ACCOUNT SUB-ACCOUNT 301
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 47,907,846
<INVESTMENTS-AT-VALUE> 49,181,325
<RECEIVABLES> 31,970
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,273,479
<NET-ASSETS> 49,213,295
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 531,128
<NET-INVESTMENT-INCOME> (531,128)
<REALIZED-GAINS-CURRENT> 207,996
<APPREC-INCREASE-CURRENT> (1,312,608)
<NET-CHANGE-FROM-OPS> (1,635,740)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27,423,000
<NUMBER-OF-SHARES-REDEEMED> 8,631,521
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 24,554,081
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<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 36,936,255
<PER-SHARE-NAV-BEGIN> 1.406
<PER-SHARE-NII> (.015)
<PER-SHARE-GAIN-APPREC> (.036)
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</TABLE>
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<PAGE>
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<NAME> SMA ALLMERICA SELECT SEPARATE ACCOUNT SUB-ACCOUNT 303
<S> <C>
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<INVESTMENTS-AT-COST> 47,750,493
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<INTEREST-INCOME> 0
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<REALIZED-GAINS-CURRENT> 1,454
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<NET-CHANGE-FROM-OPS> (378,517)
<EQUALIZATION> 0
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<NUMBER-OF-SHARES-SOLD> 27,804,581
<NUMBER-OF-SHARES-REDEEMED> 5,495,408
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 23,828,273
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<PER-SHARE-NAV-BEGIN> 1.082
<PER-SHARE-NII> .034
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</TABLE>
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<PAGE>
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<NUMBER> 86
<NAME> SMA ALLMERICA SELECT SEPARATE ACCOUNT SUB-ACCOUNT 304
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<DIVIDEND-INCOME> 1,688,807
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 389,342
<NET-INVESTMENT-INCOME> 1,299,465
<REALIZED-GAINS-CURRENT> (147,474)
<APPREC-INCREASE-CURRENT> (2,781,132)
<NET-CHANGE-FROM-OPS> (1,629,141)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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<NUMBER-OF-SHARES-SOLD> 23,000,672
<NUMBER-OF-SHARES-REDEEMED> 8,494,763
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<NET-CHANGE-IN-ASSETS> 13,685,043
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<PER-SHARE-NAV-BEGIN> 1.096
<PER-SHARE-NII> .040
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
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<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 87
<NAME> SMA ALLMERICA SELECT SEPARATE ACCOUNT SUB-ACCOUNT 305
<S> <C>
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<PAGE>
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<SERIES>
<NUMBER> 88
<NAME> SMA ALLMERICA SELECT SEPARATE ACCOUNT SUB-ACCOUNT 306
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</TABLE>
