<PAGE>
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 Allmerica Financial Life Insurance and Annuity Company
("Allmerica Financial"),formerly named SMA Life Assurance Company, an indirect
wholly-owned subsidiary of First Allmerica Financial Life Insurance Company
("First Allmerica") (formerly named State Mutual Life Assurance Company of
America). The Contracts are funded through Allmerica Financial'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 INTERNATIONAL STOCK PORTFOLIO
SELECT AGGRESSIVE GROWTH FUND
SELECT CAPITAL APPRECIATION FUND
SELECT GROWTH FUND
FIDELITY VIP GROWTH PORTFOLIO
SELECT GROWTH AND INCOME FUND
FIDELITY VIP EQUITY-INCOME PORTFOLIO
FIDELITY VIP HIGH INCOME PORTFOLIO
SELECT INCOME FUND
MONEY MARKET 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 April 30, 1996 ("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. THE FIDELITY VIP 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.
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 DEPOSIT INSURANCE
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.
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.
April 30, 1996
<PAGE>
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 - Allmerica Financial Life Insurance and
Annuity Company ("Allmerica Financial"). 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 Allmerica Financial 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
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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. 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 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 Provident Investment Counsel
- Select Growth Fund
Managed by United Asset Management Corporation
- Fidelity VIP Growth Portfolio
Managed by Fidelity Management & Research Company
- Select Growth and Income Fund
Managed by John A. Levin & Co., Inc.
- Fidelity VIP Equity-Income Portfolio
Managed by Fidelity Management & Research Company
- Fidelity VIP 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."
Allmerica Financial also offers a guaranteed account ("Fixed Account"), where
available. The Fixed Account is part of the General Account of Allmerica
Financial 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 agreements with experienced investment
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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
RogersCasey Consulting, Inc., a leading pension consulting firm.
RogersCasey Consulting, Inc. provides consulting services to pension plans
representing over $300 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 VIP. 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
$20 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
Allmerica Financial. 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, Allmerica Financial will deduct
a $30 Contract Fee from your Contract. Allmerica Financial 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. Allmerica Financial may limit the number of free
transfers and the number of total transfers in a Contract year to six.
Allmerica Financial 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 ALLMERICA FINANCIAL, THE SEPARATE ACCOUNT AND THE TRUST .... 11
ALLMERICA FINANCIAL ................................................... 11
ALLMERICA SELECT SEPARATE ACCOUNT ..................................... 11
ALLMERICA INVESTMENT TRUST ............................................ 12
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 .................................................... 18
SURRENDER ............................................................. 19
PARTIAL REDEMPTION .................................................... 20
LIFE EXPECTANCY DISTRIBUTION .......................................... 20
PAYMENT ON DEATH ...................................................... 20
THE SPOUSE OF THE CONTRACT OWNER AS BENEFICIARY ....................... 21
ASSIGNMENT ............................................................ 21
ELECTING THE FORM OF ANNUITY AND THE ANNUITY DATE ..................... 21
DESCRIPTION OF VARIABLE ANNUITY OPTIONS ............................... 22
COMPUTATION OF CONTRACT VALUES AND ANNUITY PAYMENTS ................... 23
FEDERAL TAX CONSIDERATIONS ................................................ 24
VOTING RIGHTS ............................................................. 28
DISTRIBUTION .............................................................. 28
REPORTS ................................................................... 29
PERFORMANCE INFORMATION ................................................... 29
CHANGES IN OPERATION OF THE SEPARATE ACCOUNT .............................. 30
LEGAL MATTERS ............................................................. 30
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS ......................... 30
FURTHER INFORMATION ....................................................... 31
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION .............. 31
APPENDIX A - MORE INFORMATION ABOUT THE FIXED ACCOUNT ..................... 32
APPENDIX B - EXCHANGE OFFER ............................................... 32
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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 Capital Appreciation Fund, Select Growth Fund, Select Growth and
Income Fund, Select Income Fund and Money Market Fund; the following
investment portfolios of Variable Insurance Products Fund: the Fidelity VIP
Growth Portfolio, the Fidelity VIP Equity-Income Portfolio and the Fidelity
VIP High Income Portfolio; and the International Stock Portfolio of T. Rowe
Price International Series, Inc. Allmerica Financial may designate
additional eligible mutual fund investments as Funds.
SEPARATE ACCOUNT: Allmerica Select Separate Account, a separate investment
account of Allmerica Financial.
SUB-ACCOUNT: a subdivision of the Separate Account investing exclusively in the
shares of a given Fund.
GENERAL ACCOUNT: all the assets of Allmerica Financial 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.
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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>
CONTRACT CHARGES YEARS FROM
DATE OF PAYMENT CHARGE
------------------ ------
<S> <C> <C>
-Contingent Deferred Sales Charge:
This charge may be assessed 0-1 6.5%
upon surrender, redemption or, 2 6.0%
in some cases, annuitization 3 5.0%
under a period certain option. 4 4.0%
The charge is a percentage of 5 3.0%
purchase payments applied to 6 2.0%
the amount surrendered (in 7 1.0%
excess of any amount that is
free of charge) within the
indicated time
periods.
- -Transfer Charge:
This charge is currently
imposed for transfers in excess
of twelve transfers in a
Contract year. $25
(Allmerica Financial may limit
the number of free transfers in a
Contract year to six.)
- -Contract Fee:
The Fee is deducted annually and upon
surrender, prior to the annuity date. $30
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>
FUND MANAGEMENT OTHER FUND TOTAL FUND
FEE EXPENSES EXPENSES
--------- --------- ----------
<S> <C> <C> <C>
Select International Equity Fund................. 1.00% 0.24% 1.24%*
T. Rowe Price International Stock Portfolio...... 1.05% 0.00% 1.05%
Select Aggressive Growth Fund.................... 1.00% 0.09% 1.09%*
Select Capital Appreciation Fund................. 0.93% 0.42% 1.35%*
Select Growth Fund............................... 0.85% 0.12% 0.97%*
Fidelity VIP Growth Fund......................... 0.61% 0.09% 0.70%+
Select Growth and Income Fund.................... 0.75% 0.10% 0.85%*
Fidelity VIP Equity-Income Portfolio............. 0.51% 0.10% 0.61%+
Fidelity VIP High Income Portfolio............... 0.60% 0.11% 0.71%+
Select Income Fund............................... 0.59% 0.20% 0.79%*
Money Market Fund................................ 0.29% 0.07% 0.36%*
</TABLE>
*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 and the Select Capital
Appreciation 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 1995 the total
operation expenses of the Select Capital Appreciation Fund would have been
1.42%.
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+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.
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 Price 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 VIP Growth Fund........................ $81 $113 $144 $250
Select Growth and Income Fund................... $83 $120 $154 $272
Fidelity VIP Equity-Income Portfolio............ $80 $110 $138 $239
Fidelity VIP 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 Price 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 VIP Growth Fund........................ $22 $68 $117 $250
Select Growth and Income Fund................... $24 $75 $128 $272
Fidelity VIP Equity-Income Portfolio............ $21 $65 $111 $239
Fidelity VIP High Income Portfolio.............. $22 $69 $118 $252
Select Income Fund.............................. $24 $72 $124 $265
Money Market Fund............................... $20 $61 $105 $226
</TABLE>
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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.
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CONDENSED FINANCIAL INFORMATION
Allmerica Financial Life Insurance And Annuity Company
Allmerica Select Separate Account
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Select Aggressive Growth Fund
Unit Value:
Beginning of Period 1.354 1,405 1.192
End of Period 1.768 1.354 1.405
Number of Units Outstanding at End of
Period (in thousands) 51,006 36,330 17,538
Select Growth Fund
Unit Value:
Beginning of Period 1.069 1.101 1.104
End of Period 1.315 1.069 1.101
Number of Units Outstanding at End of
Period (in thousands) 53,073 38,752 20,366
Select Growth & Income Fund
Unit Value:
Beginning of Period 1.074 1.082 0.994
End of Period 1.382 1.074 1.082
Number of Units Outstanding at End of
Period (in thousands) 61,942 43,292 20,983
Select Income Fund
Unit Value:
Beginning of Period 1.028 1.095 1.001
End of Period 1.186 1.028 1.095
Number of Units Outstanding at End of
Period (in thousands) 46,845 32,823 18,320
Money Market Fund
Unit Value:
Beginning of Period 1.045 1.019 1.003
End of Period 1.091 1.045 1.019
Number of Units Outstanding at End of
Period (in thousands) 45,589 31,836 19,802
Select International Equity Fund
Unit Value:
Beginning of Period 0.956 1.000 ---
End of Period 1.128 0.956 ---
Number of Units Outstanding at End of
Period (in thousands) 35,558 22,183 ---
</TABLE>
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RIGHT TO REVOKE CONTRACT
The Contract may be revoked at any time between the date of the application and
the date 10 days (or longer if required under state law) 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 Allmerica Financial at 440 Lincoln Street, Worcester, Massachusetts 01653, or
to an Allmerica Financial agent. Mailing or delivery must occur on or before 10
days after receipt of the Contract for revocation to be effective.
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 Allmerica Financial.
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 ALLMERICA FINANCIAL, THE SEPARATE ACCOUNT,
THE TRUST, VIP AND T. ROWE PRICE
ALLMERICA FINANCIAL. The Company is a life insurance company organized under the
laws of Delaware in July, 1974. Its Principal Office is located at 440 Lincoln
Street, Worcester, Massachusetts 01653, Telephone 508-855-1000. The Company is
subject to the laws of the state of Delaware governing insurance companies and
to regulation by the Commissioner of Insurance of Delaware. In addition, the
Company is subject to the insurance laws and regulations of other states and
jurisdictions in which it is licensed to operate. As of December 31, 1995, the
Company had over $5 billion in assets and over $18 billion of life insurance in
force.
Effective October 1, 1995, the Company changed its name from SMA Life Assurance
Company to Allmerica Financial Life Insurance and Annuity Company. The Company
is an indirect wholly-owned subsidiary of First Allmerica Financial Life
Insurance Company ("First Allmerica"), which in turn is a wholly-owned
subsidiary of Allmerica Financial Corporation ("AFC"). First Allmerica,
originally organized under the laws of Massachusetts in 1844 as a mutual life
insurance company and known as State Mutual Life Assurance Company of America,
converted to a stock life insurance company on October 16, 1995 and adopted its
present name. First Allmerica is the fifth oldest life insurance company in
America. As of December 31, 1995 First Allmerica and its subsidiaries
(including the Company) had over $11 billion in combined assets and over
$35.2 billion in life insurance in force.
ALLMERICA SELECT SEPARATE ACCOUNT. Allmerica Select Separate Account ("Separate
Account") is a separate investment account of Allmerica Financial 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 Allmerica
Financial. Each Sub-Account is administered and accounted for as part of the
general business of Allmerica Financial. 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 Allmerica
Financial. Under Delaware law, the assets of the Separate Account may not be
charged with any liabilities arising out of any other business of Allmerica
Financial.
The Separate Account was authorized by vote of the Board of Directors of
Allmerica Financial 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 Allmerica Financial by the SEC.
Allmerica Financial reserves the right, subject to compliance with applicable
law, to change the names of the Separate Account and the Sub-Accounts.
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<PAGE>
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 was established as a Massachusetts business trust on October 11,
1984, for the purpose of providing a vehicle for the investment of assets of
various separate accounts established by Allmerica Financial or other
affiliated insurance companies. 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."
VIP. VIP, 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 PRICE. T. Rowe Price, 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, VIP AND T. ROWE PRICE 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 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 Provident Investment Counsel.
FIDELITY VIP 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.
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<PAGE>
FIDELITY VIP 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 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 VIP prospectus.
FIDELITY VIP 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 VIP 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 Allmerica Financial 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 Trust has
entered into a Management Agreement with Allmerica Investment Management
Company, Inc. ("Manager"), an indirectly wholly-owned subsidiary of First
Allmerica, 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 First
Allmerica, 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 RogersCasey Consulting, Inc., a leading pension
consulting firm. The cost of such consultation is borne by the Manager.
RogersCasey Consulting, Inc. provides consulting services to pension plans
representing over $300 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 Allmerica
Financial.
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 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.
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<PAGE>
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 Limited Select Int'l. Equity First $50 million 0.45%
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%
Provident Investment Counsel 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%
</TABLE>
* 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.
INVESTMENT ADVISORY SERVICES TO VIP: For managing investments and business
affairs, each Portfolio pays a monthly fee to Fidelity Management. The
Prospectus of VIP 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 Fidelity VIP 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 Fidelity VIP 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 Fidelity VIP Growth and Fidelity VIP 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 Fidelity VIP Growth
Portfolio and 0.20% for the Fidelity VIP 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 Fidelity VIP 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 Fidelity VIP Equity-Income Portfolio may have a fee as high as
0.72% of its average net assets.
INVESTMENT ADVISORY SERVICES TO T. ROWE PRICE. To cover investment management
and operating expenses, the T. Rowe Price International Stock Portfolio pays
Price-Fleming a single, all-inclusive fee of 1.05% of its average daily net
assets.
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<PAGE>
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, VIP and T. Rowe Price.
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 Allmerica Financial 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.)
The contingent deferred sales charge is applied as follows:
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<PAGE>
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, Allmerica Financial 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 Allmerica Financial'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 Allmerica Financial 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, Allmerica Financial 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 Allmerica Financial 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 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.
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<PAGE>
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. Allmerica Financial 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. Allmerica Financial 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 Allmerica Financial assumes for the variable interests in the
Contracts. The mortality risk arises from the Contract's guarantees respecting
payment on death and Allmerica Financial'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 Allmerica Financial'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 Allmerica Financial 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, Allmerica Financial will absorb the losses.
If expenses are less than the amounts provided to Allmerica Financial by the
charge, the difference will be a profit to Allmerica Financial. To the extent
this charge results in a profit to Allmerica Financial, such profit will be
available for use by Allmerica Financial for, among other things, the payment of
distribution, sales and other expenses.
ADMINISTRATIVE EXPENSE CHARGE. Allmerica Financial 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 Allmerica Financial 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 Allmerica Financial 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, Allmerica Financial will impose a charge of $25 to reimburse
Allmerica Financial for the costs of processing the transfer. Allmerica
Financial 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%. Allmerica
Financial pays state and municipal premium taxes, when applicable, and deducts
the amount paid as a premium tax charge. The current practice of Allmerica
Financial is to deduct the premium tax charge in one of two ways:
(1) if the premium tax was paid by Allmerica Financial 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 (Allmerica
Financial 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.
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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, VIP andT.Rowe Price 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 Allmerica Financial 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 Allmerica Financial'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
Allmerica Financial'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, Allmerica Financial 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.
Allmerica Financial 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. 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 Allmerica
Financial'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 Allmerica
Financial 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
Allmerica Financial 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. Allmerica Financial will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine; otherwise,
Allmerica Financial may be liable for any losses due to unauthorized or
fraudulent instructions. The procedures Allmerica Financial 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 Allmerica Financial'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, Allmerica Financial will impose a
charge of $25 to reimburse it for the expense of processing transfers. Allmerica
Financial 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, Allmerica Financial 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.
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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, Allmerica Financial 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 Allmerica Financial'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 Allmerica Financial, 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.
Any amount surrendered is normally payable within seven days following Allmerica
Financial's receipt of the surrender request. Allmerica Financial 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 Allmerica Financial 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."
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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 Allmerica Financial, 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 $100. 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 Allmerica Financial. 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. Allmerica Financial 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 "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, Allmerica
Financial 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), Allmerica Financial 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, Allmerica Financial 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.
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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 Allmerica Financial 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 Allmerica Financial, 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. Allmerica Financial 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. Allmerica Financial will not be deemed to have knowledge of an
assignment unless it is made in writing and filed at the Principal Office.
Allmerica Financial will not assume responsibility for determining the validity
of any assignment. If an assignment of the Contract is in effect on the Annuity
Date, Allmerica Financial 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. Allmerica Financial 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.
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 Allmerica Financial, 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.
Allmerica Financial 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,
Allmerica Financial will pay the Surrender Value or guaranteed payment on death,
as the case may be, in one sum. Once Allmerica Financial 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
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Annuitant. Allmerica Financial 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. Allmerica Financial 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 Allmerica Financial.
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.
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, Allmerica
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Financial currently follows a practice of permitting persons receiving payments
under Option V to elect to convert to a variable annuity involving a life
contingency. Allmerica Financial 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 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
Allmerica Financial. 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.
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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 Allmerica Financial 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 Allmerica Financial are based on a 3 1/2% assumed interest rate.
Variable payments are affected by the assumed interest rate used in calculating
the annuity option rates. Variable annuity payments will increase over periods
when the actual net investment result of the 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 life contingency option
or a variable period certain option for 10 years or more is determined by
multiplying (1) the Accumulated Value applied under that option (after deduction
for premium tax charge, if any) divided by $1,000, by (2) the applicable amount
of the first payment per $1,000 of value. If a variable period certain option
for less than 10 years or any fixed period certain option is chosen, the
surrender value less any premium tax will be applied. 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.
Allmerica Financial 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 Allmerica Financial'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.
Allmerica Financial 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 Allmerica Financial's tax. The Separate Account presently is not
subject to tax, but Allmerica Financial 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.
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<PAGE>
The Separate Account is considered to be a part of and taxed with the operations
of Allmerica Financial. Allmerica Financial is taxed as a life insurance
company under subchapter L of the Code. Allmerica Financial files a
consolidated tax return with its parent, First Allmerica, 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, VIP andT.Rowe Price 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 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. Allmerica Financial 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
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<PAGE>
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 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.
Allmerica Financial 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, Allmerica Financial 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 nondeductible 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.
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.
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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, Allmerica Financial 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 Allmerica
Financial. Shares for which no timely instructions are received will be voted
in proportion to the instructions which are received. Allmerica Financial 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
Allmerica Financial determines that it is permitted to vote shares in its own
right, whether or not such shares are attributable to the Contracts, Allmerica
Financial reserves the right to do so.
The number of votes which a Contract Owner or Annuitant may cast will be
determined by Allmerica Financial 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 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 First Allmerica.
Allmerica Financial 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.
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Allmerica Financial intends to recoup commissions and other sales expenses
through a combination of anticipated contingent deferred sales charges and
profits from Allmerica Financial'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 Allmerica
Financial.
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. Allmerica Financial 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
Allmerica Financial 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.
Allmerica Financial 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 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.
ANNUAL AVERAGE TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1995
(Assuming COMPLETE redemption of the investment)
<TABLE>
<CAPTION>
For year 10 years or
NAME OF FUND ended 3 Years 5 Years since
------------ 12/31/95 ------- ------- inception
-------- -----------
<S> <C> <C> <C> <C>
Money Market -2.06% 1.23% 2.55% 4.42%
Select Aggressive Growth 24.05% 12.73% N/A 17.67%
Select Growth 16.45% 4.50% N/A 7.47%
Select Growth and Income 22.11% 10.26% N/A 9.13%
Select Income 8.93% 4.32% N/A 4.13%
Select Int'l. Equity 11.55% N/A N/A 4.01%
Select Capital Appreciation N/A N/A N/A 31.72%
Fidelity VIP High Income 12.53% 9.70% 16.93% 9.90%
Fidelity VIP Equity-Income 26.70% 16.71% 19.32% 11.74%
Fidelity VIP Growth 26.96% 14.43% 18.79% 13.22%
T. Rowe Price Int'l Stock 3.21% N/A N/A 2.16%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1995
(Assuming NO redemption of the investment)
<TABLE>
<CAPTION>
For year 10 years or
NAME OF FUND ended 3 Years 5 Years since
------------ 12/31/95 ------- ------- inception
-------- -----------
<S> <C> <C> <C> <C>
Money Market 4.38% 2.81% 3.08% 4.42%
Select Aggressive Growth 30.49% 14.01% N/A 18.48%
Select Growth 22.88% 5.99% N/A 8.46%
Select Growth and Income 28.55% 11.60% N/A 10.09%
Select Income 15.36% 5.81% N/A 5.20%
Select Int'l. Equity 17.99% N/A N/A 7.47%
Select Capital Appreciation N/A N/A N/A 38.22%
Fidelity VIP High Income 19.03% 11.07% 17.25% 9.90%
Fidelity VIP Equity-Income 33.20% 17.92% 19.62% 11.74%
Fidelity VIP Growth 33.46% 15.69% 19.09% 13.22%
T. Rowe Price Int'l Stock 9.62% N/A N/A 5.80%
</TABLE>
LOANS (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 value on a pro-rata
basis. The maximum loan amount is the amount determined under Allmerica
Financial'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
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will be transferred to a fixed, minimum guarantee loan assets account in
Allmerica Financial'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. When repayments are received they will be
allocated in accordance with the Contract Owner's most recent allocation
instructions.
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.
CHANGES IN OPERATION OF THE SEPARATE ACCOUNT
Allmerica Financial reserves the right, subject to compliance with applicable
law, to (1) transfer assets from the Separate Account or any Sub-Account to
another of Allmerica Financial'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 Allmerica
Financial 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.
Allmerica Financial 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
Allmerica Financial 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 Allmerica Financial's
judgment further investment in any Fund should become inappropriate in view of
the purposes of the Separate Account or the affected Sub-Account, Allmerica
Financial may redeem the shares of that Fund and substitute shares of another
registered open-end management company. Allmerica Financial 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.
Allmerica Financial 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, Allmerica Financial
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 Allmerica Financial.
Shares of the Funds are also issued to separate accounts of Allmerica Financial
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 Allmerica Financial, the Trust, VIP and T.Rowe Price do not
currently foresee any such disadvantage to either variable life insurance or
variable annuity Contract Owners, Allmerica Financial and the Trustees of the
Trust, VIP and T. Rowe Price 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, Allmerica Financial will bear the attendant expenses.
If any of these substitutions or changes are made, Allmerica Financial may by
appropriate endorsement change the Contract to reflect the substitution or
change and will notify Contract Owners of all such changes. If Allmerica
Financial 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 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 Allmerica
Financial.
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<PAGE>
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.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
GENERAL INFORMATION AND HISTORY. . . . . . . . . . . . . . . . . . 2
TAXATION OF THE SEPARATE ACCOUNT AND ALLMERICA FINANCIAL . . . . . 2
SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
UNDERWRITERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ANNUITY PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 4
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . 5
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
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<PAGE>
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 Allmerica Financial is made up of all of the general
assets of Allmerica Financial other than those allocated to any separate
account. Allocations to the Fixed Account become part of the assets of
Allmerica Financial 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 Allmerica Financial 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 Allmerica Financial. 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, Allmerica Financial 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 Allmerica Financial
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.
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 Allmerica
Financial, 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, Allmerica Financial 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
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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, Allmerica
Financial 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,
Allmerica Financial 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 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.
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<PAGE>
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
Allmerica Financial. 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 Allmerica Financial'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 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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<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 APRIL 30, 1996
("THE PROSPECTUS"). THE PROSPECTUS MAY BE OBTAINED FROM ALLMERICA INVESTMENTS,
INC., 440 LINCOLN STREET, WORCESTER, MASSACHUSETTS 01653, (508) 855-3590.
DATED APRIL 30, 1996
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY . . . . . . . . . . . . . . . . . . . . . . 2
TAXATION OF THE CONTRACT, THE SEPARATE ACCOUNT AND THE
COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
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 Annuity Company ("Company")
authorized by vote of the Board of Directors on March 5, 1992. The Company is a
life insurance company organized under the laws of Delaware in July, 1974. Its
Principal Office is located at 440 Lincoln Street, Worcester, Massachusetts
01653, Telephone 508-855-1000. The Company is subject to the laws of the state
of Delaware governing insurance companies and to regulation by the Commissioner
of Insurance of Delaware. In addition, the Company is subject to the insurance
laws and regulations of other states and jurisdictions in which it is licensed
to operate. As of December 31, 1995, the Company had over $5 billion in assets
and over $18 billion of life insurance in force.
Effective October 1, 1995, the Company changed its name from SMA Life Assurance
Company to Allmerica Financial Life Insurance and Annuity Company. The Company
is an indirect wholly-owned subsidiary of First Allmerica Financial Life
Insurance Company ("First Allmerica"), which in turn is a wholly-owned
subsidiary of Allmerica Financial Corporation ("AFC"). First Allmerica,
originally organized under the laws of Massachusetts in 1844 as a mutual life
insurance company and known as State Mutual Life Assurance Company of America,
converted to a stock life insurance company on October 16, 1995 and adopted its
present name. First Allmerica is the fifth oldest life insurance company in
America. As of December 31, 1995 First Allmerica and its subsidiaries
(including the Company) had over $11 billion in combined assets and over
$35.2 billion in life insurance in force.
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 ("VIP")
or T. Rowe Price International Series, Inc. ("T. Rowe Price").
The Trust, VIP and T. Rowe Price 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 VIP are available under the Policies: the Fidelity VIP High
Income Portfolio, Fidelity VIP Equity-Income Portfolio and Fidelity VIP
Growth Portfolio. One portfolio of T. Rowe Price is available under the
Policies: the T. Rowe Price 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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<PAGE>
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, 1995 and
1994 and for each of the three years in the period ended December 31, 1995, and
of Allmerica Select Separate Account as of December 31, 1995 and for the
periods 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 First Allmerica and is an indirect wholly-owned subsidiary of
First Allmerica.
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 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 1995, $0.00 in 1994 and $833,623.78 in 1993. The aggregate
amount of commissions paid to independent broker/dealers was $8,979,395.64 in
1995, $7,542,837.54 in 1994 and $5,124,559.37 in 1993.
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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.
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
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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 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:
P(1 + T)n = ERV
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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:
YEARS FROM DATE OF PURCHASE CHARGE AS PERCENTAGE
PAYMENT TO DATE OF WITHDRAWAL OF NEW PURCHASE PAYMENTS
REDEEMED*
0-1 6.5%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
*Subject to the maximum limit described in the prospectus.
No contingent deferred sales charge is deducted upon expiration of the periods
specified above. In 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:
P(1 + T)n = 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
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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, 1995:
Yield 5.69
Effective Yield 5.53
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.
The Money Market Sub-Account computes effective yield by compounding the
unannualized base period return by using the formula:
Effective Yield = [(base period return + 1)(365/7)] - 1
The calculations of yield and effective yield do NOT reflect the $30 Annual
Policy fee.
FINANCIAL STATEMENTS
Financial Statements are included for Allmerica Financial Life Insurance and
Annuity Company and for its Allmerica Select Separate Account.
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