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PROSPECTUS SUPPLEMENT
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
INHEIRITAGE ACCOUNT (PROSPECTUS B)
ALLMERICA SELECT SEPARATE ACCOUNT AND
ALLMERICA SELECT SEPARATE ACCOUNT II
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
INHEIRITAGE ACCOUNT (PROSPECTUS B)
ALLMERICA SELECT SEPARATE ACCOUNT
ALLMERICA INVESTMENT TRUST
(SUPPLEMENT EFFECTIVE AUGUST 15, 1997 TO PROSPECTUSES DATED MAY 1, 1997)
At the Special Meeting of Shareholders of Allmerica Investment Trust
("Trust") which was held on August 15, 1997, shareholders approved all
proposals, including (1) amendments to the Trust's Management Agreement and
certain Sub-adviser Agreements and (2) amendments to the investment
objectives, policies and restrictions of certain Funds of the Trust. The
attached variable insurance product prospectus and Trust prospectus are
hereby amended as follows (all references are to the Trust prospectus unless
otherwise noted):
The second paragraph under "What are the Investment Objectives and Policies?"
is amended to read:
A Fund's investment objective and investment policies are not
fundamental and may be changed without shareholder approval.
_______________
The following is included under "Investment Policies" in the section
entitled "What are the Investment Objectives and Policies?" for the Select
Income Fund:
The Fund may invest up to 25% of its assets in lower-rated securities,
commonly known as "junk bonds," which involve risks discussed under
"Certain Investment Strategies and Policies." For more information
concerning the rating categories of corporate debt securities, see the
Appendix to the Prospectus.
_______________
The following is included under "Investment Policies" in the section entitled
"What are the Investment Objectives and Policies?" for the Money Market Fund:
The Fund may invest up to 25% of its assets in U.S. dollar denominated
foreign securities (not including its investments in American Depositary
Receipts).
_______________
The following is included under "Investment Policies" in the section entitled
"What are the Investment Objectives and Policies?" for the Money Market Fund:
The Fund may invest up to 10% of its net assets in securities which are
illiquid because they are not readily marketable.
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The management and sub-advisory fee tables under "Management Fees and
Expenses" of the Trust prospectus and the management and sub advisory fee
sections in the variable product prospectus are amended to read as follows:
For the services to the Funds, the Manager receives fees computed daily
at an annual rate based on the average daily net asset value of each
Fund as set forth below.
Select Select Capital Select Select
Aggressive Appreciation International Growth
Growth Fund Fund Equity Fund Fund
----------- -------------- ------------- -------
Manager Fee (1) (1) (1) 0.85%
Select Growth Select Money
and Income Income Market
Fund Fund Fund
------------- ------ -------
Manager Fee (1) (2) (3)
(1) The Manager's fees for the Select Aggressive Growth Fund, Select
Capital Appreciation Fund, Select International Equity Fund, and
Select Growth and Income Fund, computed daily at an annual rate
based on the average daily net assets of each Fund, are based on
the following schedule:
<TABLE>
<CAPTION>
Select Select Growth
Select Aggressive Select Capital International and Income
Growth Fund Appreciation Fund Equity Fund Fund
----------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
Assets
First $100 Million........... 1.00% 1.00% 1.00% 0.75%
$100 to $250 Million......... 0.90% 0.90% 0.90% 0.70%
$250 to $500 Million......... 0.85% 0.85% 0.85% 0.65%
Over $500 Million............ 0.85% 0.85% 0.85% 0.65%
</TABLE>
(2) The Manager's fees for the Select Income Fund, computed daily at an
annual rate based on the average daily net assets of each Fund, are
based on the following schedule:
Select
Income
Assets Fund
------ ------
First $50 Million.............................. 0.60%
$50 to $100 Million............................ 0.55%
Over $100 Million.............................. 0.45%
(3) The Manager's fees for the Money Market Fund, computed daily at an
annual rate based on the average daily net assets of the Fund, are
based on the following schedule:
Money
Market
Assets Fund
------ -------
First $50 Million.............................. 0.35%
Next $200 Million.............................. 0.25%
Over $250 Million.............................. 0.20%
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The Manager is responsible for the payment of all fees to the Sub-Advisers.
The Manager pays each Sub-Adviser fees computed daily at an annual rate based
on the average daily net asset value of each Fund as set forth below. In
certain Funds, Sub-Adviser fees vary according to the level of assets in such
Funds, which will reduce the fees paid by the Manager as Fund assets grow but
will not reduce the operating expenses of such Funds.
Select Select Capital Select Select
Aggressive Appreciation International Growth
Growth Fund Fund Equity Fund Fund
----------- -------------- ------------- -------
Sub-Adviser Fee (4) (4) (5) (6)
Select Growth Select Money
and Income Income Market
Fund Fund Fund
------------- ------ -------
Sub-Adviser Fee (7) 0.20% 0.10%
(4) For their services, NACM and JCC will receive a fee computed daily
at an annual rate based on the average daily net assets of the
Select Aggressive Growth Fund and Select Capital Appreciation Fund,
respectively, under the following schedule:
Assets Rate
------ -----
First $100 Million......................... 0.60%
Next $150 Million.......................... 0.55%
Next $250 Million.......................... 0.50%
Over $500 Million.......................... 0.45%
(5) For its services, BIAM will receive a fee computed daily at an
annual rate based on the average daily net assets of the Select
International Equity Fund, under the following schedule:
Assets Rate
------ -----
First $50 Million.......................... 0.45%
Next $50 Million........................... 0.40%
Over $100 Million.......................... 0.30%
(6) For its services, Putnam will receive a fee computed daily at an
annual rate based on the average daily net assets of the Select
Growth Fund, under the following schedule:
Assets Rate
------ -----
First $50 Million.......................... 0.50%
Next $100 Million.......................... 0.45%
Next $100 Million.......................... 0.35%
Next $100 Million.......................... 0.30%
Over $350 Million.......................... 0.25%
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(7) For its services, JAL will receive a fee computed daily at an
annual rate based on the average daily net assets of the Select
Growth and Income Fund, under the following schedule:
Assets Rate
------ -----
First $100 Million.......................... 0.40%
Next $200 Million........................... 0.25%
Over $300 Million........................... 0.30%
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The section on Foreign Securities under "Certain Investment Strategies and
Policies" is amended to change the heading as follows and insert the
following sentence after the fourth sentence of the first paragraph:
Foreign Securities (applicable to all Funds).
The Money Market Fund may invest only in U.S. dollar denominated foreign
securities.
The heading, first sentence of the first paragraph and the second paragraph
of the section on Options and Futures Transactions under "Certain Investment
Strategies and Policies" are amended to read:
Options and Futures Transactions (applicable to each Fund except the
Money Market Fund), Forward Contracts (applicable to Select Capital
Appreciation Fund and Select International Equity Fund) and swaps
(applicable to the Select Capital Appreciation Fund)
Through the writing and purchase of put and call options on its securities,
financial indices and foreign currencies, and the purchase and sale of
futures contracts and related options with respect to securities, financial
indices and (in the case of the Select Capital Appreciation Fund and Select
International Equity Fund) foreign currencies in which it may invest, each
Fund except the Money Market Fund at times may seek to hedge against
fluctuations in net asset value.
Additionally, the Select Capital Appreciation Fund and Select International
Equity Fund may invest in forward contracts and the Select Capital
Appreciation Fund in Swaps which may expose these Funds to additional risks
and transaction costs.
_______________
The parenthetical phrase in the heading for the section on Restricted
Securities under "Certain Investment Strategies and Policies" is deleted and
the second sentence in the section is amended to read:
However, each Fund will not invest more than 15% (10% for the Money
Market Fund) of its net assets in restricted securities (and other
securities deemed to be illiquid) unless the Board of Trustees
determines, based upon a continuing review of the trading markets
for the specific restricted security, that such restricted
securities are liquid.
_______________
The heading and first two paragraphs of the section on High Yield
Securities under "Certain Investment Strategies and Policies" are
amended to read as follows. Also, "25%" is added to the percentages
listed in the next to last sentence of the last paragraph in the
section.
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HIGH YIELD SECURITIES (APPLICABLE TO THE SELECT CAPITAL
APPRECIATION FUND, SELECT GROWTH FUND, SELECT GROWTH AND INCOME
FUND AND SELECT INCOME FUND)
Corporate debt securities purchased by the Select Capital
Appreciation Fund, Select Growth Fund, Select Growth and Income
Fund and Select Income Fund will be rated at the time of purchase B
or better by Moody's or S&P, or equivalently rated by another
NRSRO, or unrated but believed by the Sub-adviser to be of
comparable quality under the guidelines established for the Funds.
The Select Growth Fund and the Select Growth and Income Fund may
not invest more than 15% of their assets, the Select Income Fund
may not invest more than 25% of its assets and the Select Capital
Appreciation Fund may not invest more than 35% of its assets at the
time of investment in securities rated below Baa by Moody's or BBB
by S&P, or equivalently rated by another NRSRO, or unrated but
believed by the Sub-Adviser to be of comparable quality.
Securities rated B by Moody's or S&P (or equivalently by another
NRSRO) are below investment grade and are considered, on balance,
to be predominantly speculative with respect to capacity to pay
interest and repay principal and will generally involve more credit
risk than securities in the higher rating categories.
Periods of economic uncertainty and changes can be expected to
result in increased volatility of market prices of lower-rated
securities, commonly known as "high yield" securities or "junk
bonds," and of the asset value of the Select Capital Appreciation
Fund, Select Growth Fund, Select Growth and Income Fund and Select
Income Fund. Many issuers of high yield corporate debt securities
are leveraged substantially at times, which may impair their
ability to meet debt service obligations. Also, during an economic
downturn or substantial period of rising interest rates, highly
leveraged issuers may experience financial stress.
_______________
The heading and last sentence of the first paragraph of the section on
Asset-Backed Securities and Mortgage-Backed Securities under "Certain
Investment Strategies and Policies" are amended to read as follows:
Asset-Backed Securities and Mortgage-Backed Securities (applicable
to Select Income Fund and Money Market Fund)
A Fund will not invest more than 20% of its total assets in asset-
backed securities.
_______________
The heading for the section on Stripped Mortgage-Backed Securities under
"Certain Investment Strategies and Policies" is amended to read:
Stripped Mortgage-Backed Securities (applicable to Select Income
Fund and Money Market Fund)
_______________
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The following is inserted at the end of the section entitled "Certain
Investment Strategies and Policies":
STAND-BY COMMITMENTS (applicable to Select Income Fund and Money
Market Fund)
Under a stand-by commitment, a dealer agrees to purchase from the
Fund, at the Fund's option, specified securities at a specified
price. Stand-by commitments are exercisable by the Fund at any
time before the maturity of the underlying security, and may be
sold, transferred or assigned by the Fund only with respect to the
underlying instruments.
Although stand-by commitments are often available without the
payment of any direct or indirect consideration, if necessary or
advisable, the Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for securities which
are acquired subject to the commitment.
Where the Fund pays any consideration directly or indirectly for a
stand-by commitment, its cost will be reflected as unrealized
depreciation for the period during which the commitment is held by
the Fund.
The Fund will enter into stand-by commitments only with banks and
broker-dealers which present minimal credit risks. In evaluating
the creditworthiness of the issuer of a stand-by commitment, the
Sub-Adviser will review periodically the issuer's assets,
liabilities, contingent claims and other relevant financial
information.
The Fund will acquire stand-by commitments solely to facilitate
liquidity and does not intend to exercise its rights thereunder for
trading purposes. Stand-by commitments will be valued at zero in
determining the Fund's net asset value.
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