<PAGE>
File Number 33-47858
811-6666
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 7
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 7
SEPARATE ACCOUNT I OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
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(Exact Name of Trust)
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
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440 Lincoln Street
Worcester Massachusetts 01653
(508) 855-1000
(Registrant's telephone number including area code)
Richard J. Baker, Vice President and Secretary
State Mutual Life Assurance Company of America
440 Lincoln Street
Worcester Massachusetts 01653
(Name and complete address of agent for service)
It is proposed that this filing will become effective:
___ on ____________ pursuant to paragraph (a) of Rule 485
___ 60 days after filing pursuant to paragraph (a) of Rule 485
___ immediately after filing pursuant to paragraph (b) of Rule 485
X on October 16, 1995 pursuant to paragraph (b) of Rule 485
VARIABLE ANNUITY CONTRACTS
Pursuant to Reg. Section 270.24F-2 of the Investment Company Act of 1940,
Registrant hereby declares that an indefinite amount of its securities is being
registered under the Securities Act of 1933. The Rule 24f-2 Notice for the
issuer's fiscal year ended December 31, 1994 was filed on February 21, 1995.
<PAGE>
Cross Reference Sheet Showing Location in Prospectus of
Items Called for by Form N-4
FORM N-4 ITEM NO. CAPTION IN PROSPECTUS
1. . . . . . . . . . . . . . Cover Page
2. . . . . . . . . . . . . . "Special Terms"
3. . . . . . . . . . . . . . "Summary"; "Annual and Transaction Expenses"
4. . . . . . . . . . . . . . Omitted
5. . . . . . . . . . . . . . "Description of the Company, the Separate
Account and the Trust"
6. . . . . . . . . . . . . . "Charges and Deductions:
7. . . . . . . . . . . . . . "Description of the Contract"
8. . . . . . . . . . . . . . Omitted
9. . . . . . . . . . . . . . "Death Benefit"
10 . . . . . . . . . . . . . "Contributions"; "Computation of IRA Account
Values and Annuity Payments"
11 . . . . . . . . . . . . . "Surrender Privilege"; "Redemption Privilege"
12 . . . . . . . . . . . . . "Federal Tax Considerations"
13 . . . . . . . . . . . . . "Legal Matters"
14 . . . . . . . . . . . . . "Table of Contents of the Statement of
Additional Information"
FORM N-4 ITEM NO. CAPTION IN STATEMENT OF ADDITIONAL INFORMATION
15 . . . . . . . . . . . . . "Cover Page"
16 . . . . . . . . . . . . . "Table of Contents"
17 . . . . . . . . . . . . . "General Information and History"
18 . . . . . . . . . . . . . "Services"
19 . . . . . . . . . . . . . "Underwriters"
20 . . . . . . . . . . . . . "Underwriters"
21 . . . . . . . . . . . . . "Performance Information"
22 . . . . . . . . . . . . . "Annuity Payments"
23 . . . . . . . . . . . . . "Financial Statements"
<PAGE>
PROSPECTUS SUPPLEMENT
Separate Account I
(Supplement to prospectus dated May 1, 1995)
Effective October 16, 1995, State Mutual Life Assurance Company of America
converted from a Massachusetts mutual life insurance company to a Massachusetts
stock life company, and concurrently changed its name to FIRST ALLMERICA
FINANCIAL LIFE INSURANCE COMPANY ("Company"). The Company is a wholly-owned
subsidiary of Allmerica Financial Corporation, 440 Lincoln Street, Worcester,
Massachusetts, 01653. The attached prospectus is hereby amended to delete the
name "State Mutual Life Assurance Company of America" and to substitute FIRST
ALLMERICA FINANCIAL LIFE INSURANCE COMPANY.
* * *
The following is inserted as the third paragraph, under the caption "B.
Transfer Privilege":
Effective November 1, 1995, automatic transfers may also be made from policy
value allocated to the Company's General Account (a) to one or more of the
Subaccounts or (b) in order to reallocate Policy value among the Subaccounts.
Automatic transfers from the General Account may be made on a monthly,
bimonthly, or quarterly basis, provided that: (I) the amount of each monthly
transfer cannot exceed 10% of policy value in the General Account as of the date
of the first transfer; (ii) each bimonthly transfer cannot exceed 20% of policy
value in the General Account as of the date of the first transfer; (iii) each
quarterly transfer cannot exceed 25% of policy value in the General Account as
of the date of the first transfer.
* * *
SUPPLEMENT DATED OCTOBER 16, 1995
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STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
GROUP VARIABLE ANNUITY CONTRACTS FUNDED THROUGH
SEPARATE ACCOUNT I
This Prospectus describes group variable annuity contracts ("Contracts") offered
by State Mutual Life Assurance Company of America ("Company"). Each Contract
establishes for the benefit of Participant-Owners under the Contracts individual
retirement annuities ("IRA Accounts") qualified under Section 408(b) of the
Internal Revenue Code ("Code"). (For information about the tax status of IRA
Accounts, see "FEDERAL TAX CONSIDERATIONS.") Such Participant-Owners are
employees or former employees of the Policyholder (or spouses of such employees
or former employees, in the case of spousal IRA Accounts). An individual
certificate of coverage ("Certificate") will be issued to each Participant-Owner
as evidence of his or her rights and benefits under the Contract. The Contracts
permit net contributions to each IRA Account to be allocated among Sub-Accounts
of Separate Account I, which invest in the following funds of Allmerica
Investment Trust ("Trust"): the Growth Fund, Investment Grade Income Fund,
Money Market Fund, Equity Index Fund and Government Bond Fund (the "Underlying
Funds"). More information about the Underlying Funds can be found in the
prospectus for the Trust. The "SUMMARY" that follows provides basic information
about the Contracts. More detailed information can be found under the
referenced captions in the Prospectus.
This Prospectus generally describes only the variable accumulation aspects of
the Contracts, except where General Account interests, including fixed values
and annuity payments, are specifically mentioned. ALLOCATIONS TO AND TRANSFERS
TO AND FROM THE GENERAL ACCOUNT ARE NOT PERMITTED IN CERTAIN STATES. Certain
additional information about the Contracts is contained in a Statement of
Additional Information, dated May 1, 1995, as may be amended from time to time,
which has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The Table of Contents for the Statement of
Additional Information is listed on page 5 of this Prospectus. The Statement of
Additional Information is available upon request and without charge. To obtain
the Statement of Additional Information, contact Allmerica Institutional
Services, Station C-36, State Mutual Life Assurance Company, 440 Lincoln Street,
Worcester, Massachusetts 01653, 1-800-533-7865.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS OF
ALLMERICA INVESTMENT TRUST.
INVESTORS SHOULD RETAIN A COPY OF THIS PROSPECTUS FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
DATED MAY 1, 1995
<PAGE>
SUMMARY
IRA ACCOUNT. Each IRA Account established under the Contract is intended to be
an individual retirement annuity qualified under Section 408(b) of the Internal
Revenue Code ("Code"). See "Individual Retirement Annuities." An IRA Account
may be established by a Participant-Owner with a rollover distribution from a
qualified retirement plan maintained by the Policyholder. Such Participant-
Owner may also establish an additional IRA Account for his or her spouse.
Separate IRA Accounts will be maintained under the Contract for rollover
contributions and annual deductible and non-deductible contributions, unless a
Participant-Owner requests otherwise in writing. A separate Certificate will be
issued for each IRA Account maintained for the Participant-Owner.
INVESTMENT OPTIONS. The Contracts permit net contributions to each IRA Account
to be allocated among Sub-Accounts of Separate Account I ("Separate Account"), a
separate account of the Company, and of the General Account, where available.
The Separate Account is registered as a unit investment trust under the
Investment Company Act of 1940, as amended, (the "1940 Act"), but such
registration does not involve the supervision of the management or investment
practices or policies of the Separate Account by the Securities and Exchange
Commission (the "SEC"). For information about the Separate Account and the
Company, see "DESCRIPTION OF THE COMPANY, THE SEPARATE ACCOUNT, AND THE TRUST."
For more information about the General Account, see APPENDIX A, "MORE
INFORMATION ABOUT THE GENERAL ACCOUNT."
Each Sub-Account of the Separate Account invests its assets without sales charge
in a corresponding investment series of Allmerica Investment Trust (the
"Trust"). The Trust is an open-end, diversified series investment company. The
following five funds of the Trust are offered under this Prospectus: the Growth
Fund, Investment Grade Income Fund, Money Market Fund, Equity Index Fund and
Government Bond Fund (the "Underlying Funds"). Each Underlying Fund operates
pursuant to different investment objectives, discussed below.
INVESTMENT IN THE SUB-ACCOUNTS OF THE SEPARATE ACCOUNT. Until the Valuation
Date that is 15 days from the date the IRA Account was established, all
Separate Account allocations will be held in the Money Market Sub-Account.
Thereafter, all amounts will be allocated according to the
Participant-Owner's instructions. The value of each Sub-Account of the
Separate Account will vary daily depending on the performance of the
investments made by the respective Underlying Funds.
There can be no assurance that the investment objectives of the Underlying Funds
can be achieved or that the value of an IRA Account will equal or exceed the
aggregate amount of contributions made to the IRA Account. For more information
about the investments of the Underlying Funds, see "DESCRIPTION OF THE COMPANY,
THE SEPARATE ACCOUNT, AND THE TRUST." The accompanying prospectus of the Trust
describes the investment objectives and risks of each of the Underlying Funds.
Dividends or capital gains distributions received from an Underlying Fund are
reinvested in additional shares of that Underlying Fund, which are retained as
assets of the Sub-Account.
TRANSFERS AMONG SUB-ACCOUNTS. The Contracts permit amounts to be transferred
prior to the Annuity Date among the Sub-Accounts of the Separate Account and,
where available, the General Account, subject to certain limitations described
under "Transfer Privilege."
ANNUITY PAYMENTS. The Participant-Owner may choose the form of annuity benefit
to commence on the Participant-Owner's Annuity Date. All annuity benefits are
funded through the General Account and are guaranteed by the Company.
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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REVOCATION RIGHTS. A Participant-Owner may revoke his or her IRA Account at any
time between the date of the application for the IRA Account and the date 10
days after receipt of his or her Certificate. For more information about
revocation rights, see "RIGHT TO REVOKE IRA ACCOUNT."
CONTRIBUTION MINIMUMS AND MAXIMUMS. Under the Contracts, additional
contributions are not limited as to frequency and number, except that certain
contributions must be received by the Company by April 15 of the year following
the calendar year to which the contributions are attributable. See
"Contributions."
The minimum initial contribution from a rollover distribution is the lesser of
(1) $3,500, or (2) such smaller amount as meets the Company's then current
rules. The maximum initial contribution is the amount equal to the taxable
portion of the Participant-Owner's rollover distribution.
A Participant-Owner may make additional contributions, subject to the following
requirements: The minimum additional contribution is the lesser of (1) $1,000,
or (2) such smaller amount as meets the Company's then current rules. The
maximum additional contributions, including both deductible and nondeductible
contributions, for any taxable year of the Participant-Owner to an IRA Account
established by a Participant-Owner with a rollover distribution is the lesser of
(1) $2,000, or (2) 100% of the Participant-Owner's compensation for that taxable
year. A Participant-Owner may make an additional rollover contribution.
Additional rollover contributions are not subject to maximum contribution
limits.
A Participant-Owner who has established an IRA Account may also establish a
spousal IRA Account. The maximum total contributions to both IRA accounts in
any taxable year is $2,250, of which amount no more than $2,000 may be
contributed to any one IRA Account.
CHARGES AND DEDUCTIONS. For a complete discussion of charges, see "CHARGES AND
DEDUCTIONS."
SURRENDER AND REDEMPTION CHARGE. No sales charge is deducted from contributions
at the time the contributions are made. However, a withdrawal charge of 4% will
be made on any amount withdrawn from a General Account Sub-Account on other than
its maturity date, and upon the election of an annuity for a specified number of
years, subject to certain exceptions. No sales charge is deducted upon
withdrawal from any Sub-Account of the Separate Account. In those states where
allocations to and transfers to and from the General Account are not permitted,
no withdrawal charge applies.
PREMIUM TAXES. A deduction for State and local premium taxes, if any, may be
made as described under "Premium Taxes."
ANNUAL IRA ACCOUNT FEE. Prior to the Annuity Date, an IRA Account Fee equal
to $25 will be deducted annually from each IRA Account for administrative
expenses. The fee will be deducted on the last Valuation Date of the month of
the anniversary of the establishment of the IRA Account and on the date the
IRA Account is surrendered.
SEPARATE ACCOUNT ASSET CHARGES. A daily charge, equivalent to 0.90% per annum,
is made on the value of each Separate Account Sub-Account at each Valuation
Date. The charge is retained for the mortality and expense risks the Company
assumes. In addition, to cover Separate Account administrative expenses, the
Company deducts a daily charge of 0.25% per annum of the value of the average
net assets in the Separate Account Sub-Accounts.
CHARGES OF THE UNDERLYING FUNDS. In addition to the charges described above,
certain fees and expenses are deducted from the assets of the Underlying Funds.
These charges vary among the Underlying Funds and may range from an annual rate
of 0.43% to an annual rate of 0.60% of average daily net assets.
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SURRENDER AND REDEMPTION PRIVILEGE. At any time before the Annuity Date, the
Participant-Owner has the right either to surrender the IRA Account in full and
receive its Surrender Value (Accumulated Value minus the IRA Account Fee and any
applicable withdrawal charge) or to redeem a portion of the Accumulated Value of
the IRA Account subject to certain limits and any applicable withdrawal charge.
DEATH BENEFIT. If a Participant-Owner dies before the Annuity Date, a death
benefit will be paid to the beneficiary. The death benefit will be equal to the
Accumulated Value of the IRA Account.
SALES OF CONTRACTS AND CERTIFICATES. The Contracts and Certificates thereunder
are sold by agents of the Company who are registered representatives of
Allmerica Investments, Inc. ("Allmerica Investments"), a broker-dealer affiliate
of the Company.
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<PAGE>
TABLE OF CONTENTS
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION . . .5
SPECIAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . .6
ANNUAL AND TRANSACTION EXPENSES. . . . . . . . . . . . . . . . . .7
CONDENSED FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . .9
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . 10
WHAT IS AN INDIVIDUAL RETIREMENT ANNUITY?. . . . . . . . . . . . 10
RIGHT TO REVOKE INDIVIDUAL RETIREMENT ANNUITY. . . . . . . . . . 11
DESCRIPTION OF THE COMPANY, THE SEPARATE ACCOUNT AND THE TRUST . 11
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . 11
THE SEPARATE ACCOUNT. . . . . . . . . . . . . . . . . . . . 12
ALLMERICA INVESTMENT TRUST. . . . . . . . . . . . . . . . . 12
INVESTMENT OBJECTIVES AND POLICIES. . . . . . . . . . . . . 12
INVESTMENT ADVISORY SERVICES TO THE TRUST . . . . . . . . . 13
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS . . . . . 14
VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . 15
CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . . . . . 16
SURRENDER AND REDEMPTION CHARGE . . . . . . . . . . . . . . 16
PREMIUM TAXES . . . . . . . . . . . . . . . . . . . . . . . 17
IRA ACCOUNT FEE . . . . . . . . . . . . . . . . . . . . . . 17
ANNUAL CHARGES AGAINST SEPARATE ACCOUNT ASSETS. . . . . . . 17
OTHER CHARGES . . . . . . . . . . . . . . . . . . . . . . . 18
DESCRIPTION OF THE CONTRACT. . . . . . . . . . . . . . . . . . . 18
CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . 19
TRANSFER PRIVILEGE. . . . . . . . . . . . . . . . . . . . . 20
SURRENDER PRIVILEGE . . . . . . . . . . . . . . . . . . . . 20
REDEMPTION PRIVILEGE. . . . . . . . . . . . . . . . . . . . 20
DEATH BENEFIT . . . . . . . . . . . . . . . . . . . . . . . 21
THE SPOUSE OF THE PARTICIPANT-OWNER AS BENEFICIARY. . . . . 21
OWNERSHIP AND NON-ALIENATION OF IRA ACCOUNTS. . . . . . . . 21
ELECTING THE FORM OF ANNUITY AND THE ANNUITY DATE . . . . . 21
DESCRIPTION OF ANNUITY OPTIONS. . . . . . . . . . . . . . . 22
COMPUTATION OF IRA ACCOUNT VALUES AND ANNUITY PAYMENTS. . . 23
FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . 24
TAXATION OF THE CONTRACTS IN GENERAL. . . . . . . . . . . . 25
TAX WITHHOLDING AND PENALTIES . . . . . . . . . . . . . . . 25
INDIVIDUAL RETIREMENT ANNUITIES IN GENERAL. . . . . . . . . 26
REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
CHANGES IN OPERATION OF THE SEPARATE ACCOUNT . . . . . . . . . . 27
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 27
FURTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 27
APPENDIX A - MORE INFORMATION ABOUT THE GENERAL ACCOUNT. . . . . 27
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY. . . . . . . . . . . . . . . . . .2
TAXATION OF THE SEPARATE ACCOUNT AND THE COMPANY . . . . . . . . .2
SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
UNDERWRITERS . . . . . . . . . . . . . . . . . . . . . . . . . . .3
ANNUITY PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . .3
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . .5
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . .6
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<PAGE>
SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated meanings:
ACCUMULATED VALUE: the value of an IRA Account on any Valuation Date prior to
the Annuity Date, equal to the sum of the value of all Accumulation Units in the
Sub-Accounts of the Separate Account and of the value of all accumulations in
the General Account of the Company then credited to the IRA Account.
ACCUMULATION UNIT: a measure of the Participant-Owner's interest in a Sub-
Account of the Separate Account prior to the Annuity Date.
ANNUITY DATE: the date on which annuity payments are to start.
GENERAL ACCOUNT: all the assets of the Company other than those held in a
separate investment account.
PARTICIPANT-OWNER: an employee or former employee of the Policyholder who makes
contributions under the Contract in accordance with its provisions.
SEPARATE ACCOUNT: Separate Account I of the Company. Separate Account I
consists of assets segregated from other assets of the Company. The investment
performance of the assets of the Separate Account is determined separately from
the other assets of the Company. The assets of the Separate Account are not
chargeable with liabilities arising out of any other business which the Company
may conduct.
SUB-ACCOUNT: respecting the Separate Account, a subdivision offered under this
Prospectus which invests exclusively in the shares of an Underlying Fund of
Allmerica Investment Trust; respecting the General Account, an account, with a
fixed interest rate guaranteed until a specified maturity date, maintained
within the General Account for crediting interest to Participant-Owner
contributions allocable to the General Account.
SURRENDER VALUE: the Accumulated Value of an IRA Account minus any IRA Account
Fee and withdrawal charge applicable upon surrender.
UNDERLYING FUNDS: the Growth Fund, Investment Grade Income Fund, Money Market
Fund, Equity Index Fund and Government Bond Fund of Allmerica Investment Trust.
VALUATION DATE: a day on which the Accumulated Values of all IRA 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 payment, partial withdrawal, or surrender of a Contract or
Certificate was received) when there is a sufficient degree of trading in an
Underlying Fund's portfolio securities such that the current net asset value of
the Sub-Accounts of the Separate Account may be materially affected.
VALUATION PERIOD: the interval between two consecutive Valuation Dates.
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<PAGE>
ANNUAL AND TRANSACTION EXPENSES
The purpose of the following tables is to assist the Participant-Owner in
understanding the various costs and expenses that a Participant-Owner will bear
directly or indirectly under the Contract. The tables reflect charges under the
Contract, expenses of the Separate Account Sub-Accounts, and expenses of the
Underlying Funds. In addition to the charges and expenses described below, in
some states premium taxes may be applicable.
PARTICIPANT-OWNER TRANSACTION EXPENSES
SURRENDER AND REDEMPTION CHARGE:
None on value in Separate Account Sub-Accounts. (A charge may be made on
surrender or partial redemption of the IRA Account, equal to 4% of the
amount withdrawn from a General Account Sub-Account on other than its
maturity date.)
TRANSFER CHARGE:
None.
ANNUAL IRA ACCOUNT FEE:
An annual IRA Account Fee of $25 is deducted prior to the Annuity Date.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
MORTALITY AND EXPENSE RISK CHARGE:
0.90%
ADMINISTRATIVE EXPENSE CHARGE:
0.25%
TOTAL ANNUAL EXPENSES:
1.15%
ALLMERICA INVESTMENT TRUST
<TABLE>
<CAPTION>
Investment Money Equity Government
Growth Grade Income Market Index Bond
ANNUAL FUND EXPENSES Fund Fund Fund Fund Fund
------ ------------ ------ ------ ----------
<S> <C> <C> <C> <C> <C>
Management Fees 0.48% 0.42% 0.31% 0.35% 0.50%
Other Fund Expenses 0.08% 0.16% 0.14% 0.22% 0.20%
------ ------------ ------ ------ ----------
Total Fund Expenses 0.56% 0.58% 0.45% 0.57% 0.70%
</TABLE>
Under the Management Agreement with the Trust, Allmerica Investment Management
Company, Inc. ("Manager") has declared a voluntary expense limitation of 1.20%
of average net assets for the Growth Fund, 1.00% for the Investment Grade Income
Fund and Government Bond Fund and 0.60% for the Money Market Fund and Equity
Index Fund. The total operating expenses of the Growth Fund, Investment Grade
Income Fund, Money Market Fund, Equity Index Fund and Government Bond Fund were
less than their respective expense limitations throughout 1994. The declaration
of a voluntary expense limitation in any year does not bind the Manager to
declare future expense limitations with respect to any Fund.
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<PAGE>
The following Examples demonstrate the cumulative expenses which would be paid
by the Participant-Owner at 1-year, 3-year, 5-year and 10-year intervals,
assuming a $1,000 investment in a Separate Account Sub-Account and a 5% annual
return on assets. Because the expenses of the Underlying Funds differ, separate
Examples are used to illustrate the expenses incurred by a Participant-Owner on
an investment in the various Sub-Accounts of the Separate Account. No
withdrawal charge is illustrated in the Examples because there is no withdrawal
charge applied to investments in a Separate Account Sub-Account. Whether or not
the Participant-Owner surrenders or annuitizes at the end of the applicable
period, the illustrated expenses would be the same.
THE INFORMATION GIVEN UNDER THE FOLLOWING EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
<TABLE>
<CAPTION>
1 Year 3 Year 5 Year 10 Year
<S> <C> <C> <C> <C>
Growth Fund $20.40 $63.03 $108.21 $233.01
Investment Grade Income Fund $20.60 $63.66 $109.28 $235.33
Money Market Fund $19.29 $59.58 $102.29 $220.26
Equity Index Fund $20.50 $63.35 $108.75 $234.17
Government Bond Fund $21.82 $67.42 $115.74 $249.24
</TABLE>
As required in rules promulgated under the 1940 Act, the IRA Account Fee has
been reflected in the Examples by a method intended to show the "average" impact
of the IRA Account Fee on an investment in the Separate Account. The total IRA
Account Fees collected under the Contracts by the Company are divided by the
total average net assets attributable to the Contracts. The resulting
percentage is .30%, and the amount of the IRA Account Fees is assumed to be
$3.00 in the Examples. After annuitization, the IRA Account Fee is not
deducted.
-8-
<PAGE>
CONDENSED FINANCIAL INFORMATION
State Mutual Life Assurance Company of America
Separate Account I
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Growth
Sub Account 1
Net Asset Value:
Beginning of Period 107.455 100.000 *
End of Period 106.389 107.455
Number of Units Outstanding at End of 4 3
Period (in thousands)
Investment Grade Income
Sub-Account 2
Net Asset Value:
Beginning of Period 104.357 100.000 *
End of Period 100.109 104.357
Number of Units Outstanding at End of 1 1
Period (in thousands)
Money Market
Sub-Account 3
Net Asset Value:
Beginning of Period 101.316 100.000 *
End of Period 104.088 101.316
Number of Units Outstanding at End of 4 1
Period (in thousands)
Index Stock
Sub-Account 4
Net Asset Value:
Beginning of Period 106.555 100.000 *
End of Period 106.437 106.555
Number of Units Outstanding at End of 1 1
Period (in thousands)
Government Bond
Sub-Account 5
Net Asset Value:
Beginning of Period 101.808 100.000 *
End of Period 99.753 101.808
Number of Units Outstanding at End of 1 3
Period (in thousands)
<FN>
* The inception date respecting Sub-Accounts 2 and 3 was April 6, 1993. The
inception date respecting Sub-Accounts 1 and 4 was May 14, 1993. The
inception date respecting Sub-Account 5 was May 17, 1993.
</TABLE>
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<PAGE>
PERFORMANCE INFORMATION
The Company 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 certain 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 $25
annual IRA Account Fee.
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 Morning Star, 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 Underlying 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.
WHAT IS AN INDIVIDUAL RETIREMENT ANNUITY?
Each IRA Account established under the Contract is intended to be an individual
retirement annuity qualified under Section 408(b) of the Code. See "Individual
Retirement Annuities." An IRA Account may be established by a Participant-Owner
with a rollover distribution from a qualified retirement plan maintained by the
Policyholder which is eligible for rollover treatment as described in Section
402(a)(5), 402(a)(6) or 403(a)(4) of the Code. Such Participant-Owner may also
establish an additional IRA Account for his or her spouse. Separate IRA
Accounts will be maintained under the Contract for rollover contributions and
annual deductible and non-deductible contributions, unless a Participant-Owner
requests otherwise in writing. A separate Certificate will be issued for each
IRA Account maintained for the Participant-Owner.
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In general, an annuity is designed to provide a retirement income in the form of
monthly payments for the lifetime of the purchaser or an individual chosen by
the purchaser. The retirement income payments are called "annuity payments."
Under an annuity, the insurance company assumes a mortality risk and an expense
risk. The mortality risk arises from the insurance company's guarantee that
annuity payments will continue for the life of the payee, regardless of how long
the payee lives or how long all payees as a group live. The expense risk arises
from the insurance company's guarantee that charges will not be increased beyond
the limits specified in the contract, regardless of actual costs of operations.
The Participant-Owner's contributions, less any applicable deductions, are
invested by the insurance company. After retirement, annuity payments are paid
to the payee for life or for such other period chosen by the Participant-Owner.
Annuity payments under the Contracts are fixed and guaranteed by the insurance
company, which assumes the risk of making the investments to enable it to make
the guaranteed payments. For more information about fixed annuities, see
APPENDIX A, "MORE INFORMATION ABOUT THE GENERAL ACCOUNT."
During variable accumulation, values are not guaranteed but will vary depending
on the investment performance of a portfolio of securities. Any investment
gains or losses are reflected in accumulated value. If the portfolio increases
in value, the accumulated value increases. If the portfolio decreases in value,
the accumulated value decreases.
RIGHT TO REVOKE INDIVIDUAL RETIREMENT ANNUITY
The Participant-Owner may revoke his or her IRA Account at any time between the
date of the application for the IRA Account and the date 10 days after receipt
of the Certificate. Within seven days the Company will refund the greater of
(1) the entire contribution, or (2) the Accumulated Value plus any amounts
deducted from the IRA Account or by the Trust for taxes, charges or fees. In
order to revoke the IRA Account, the Participant-Owner must mail or deliver the
Certificate (if it has already been received), to the Home Office of the Company
at 440 Lincoln Street, Worcester, Massachusetts 01653, or to any local agency of
the Company. Mailing or delivery must occur on or before 10 days after receipt
of the Certificate for revocation to be effective.
The liability of the Separate Account under this provision is limited to the
Participant-Owner's Accumulated Value in the Separate Account on the date of
cancellation. Any additional amounts refunded to the Participant-Owner will be
paid by the Company.
DESCRIPTION OF THE COMPANY, THE SEPARATE ACCOUNT AND THE TRUST
THE COMPANY. The Company is a mutual life insurance company organized under the
laws of Massachusetts in 1844 and is the fifth oldest life insurance company in
America. Its principal office is located at 440 Lincoln Street, Worcester,
Massachusetts 01653, Telephone 508-855-1000 ("Home Office"). The Company is
subject to the laws of the Commonwealth of Massachusetts governing insurance
companies and to regulation by the Commissioner of Insurance of Massachusetts.
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, 1994, the Company and its subsidiaries had over $10 billion in
combined assets.
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THE SEPARATE ACCOUNT. Separate Account I (the "Separate Account") is a separate
investment account of the Company. The Separate Account currently consists of
five Sub-Accounts. The assets used to fund the variable portions of the
Contracts are set aside in the Sub-Accounts of the Separate Account and are kept
separate and apart from the general assets of the Company. Each Sub-Account is
administered and accounted for as part of the general business of the Company,
but the income, capital gains, or capital losses of each Sub-Account are
allocated to such Sub-Account, without regard to other income, capital gains, or
capital losses of the Company. Under Massachusetts law, as provided in the
Contracts the assets of the Separate Account cannot be charged with any
liabilities arising out of any other business of the Company.
The Separate Account was authorized by vote of the Board of Directors of the
Company on August 20, 1991. The Separate Account meets the definition of
"separate account" under federal securities laws and is registered with the
Securities and Exchange Commission ("Commission") as a unit investment trust
under the Investment Company Act of 1940 ("1940 Act"). Such registration does
not involve the supervision of management or investment practices or policies of
the Separate Account or the Company by the Commission.
The Company reserves the right, subject to compliance with applicable law, to
change the names of the Separate Account and the Sub-Accounts.
ALLMERICA INVESTMENT TRUST. Allmerica Investment Trust (the "Trust") is an
open-end, diversified management investment company registered with the
Commission under the 1940 Act. Such registration does not involve supervision
by the Commission of the investments or investment policy of the Trust or its
separate investment Funds.
The Trust was established by the Company 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 the Company or other
affiliated insurance companies. Currently, the Trust has eleven investment
portfolios, each issuing a series of shares. Five investment portfolios of the
Trust ("Underlying Funds") are offered under this Prospectus: the Growth Fund,
Investment Grade Income Fund, Money Market Fund, Equity Index Fund, and
Government Bond Fund. The assets of each Underlying Fund are held separate from
the assets of the other Underlying Funds. Each Underlying Fund operates as a
separate investment vehicle and the income or losses of one Underlying Fund have
no effect on the investment performance of another Underlying Fund. Shares of
the Trust are not offered to the general public but solely to such separate
accounts.
Allmerica Investment Management Company, Inc. ("Manager") serves as investment
adviser of the Trust. The Manager has entered into sub-adviser agreements with
Miller, Anderson & Sherrerd, One Tower Bridge, West Conshohocken, Pennsylvania,
which is the sub-adviser for the Growth Fund, and with Allmerica Asset
Management, Inc., an indirect wholly owned subsidiary of the Company, which is
the sub-adviser for the Investment Grade Income Fund, Money Market Fund, Equity
Index Fund and Government Bond Fund.
INVESTMENT OBJECTIVES AND POLICIES. A summary of investment objectives of each
of the Underlying Funds is set forth below. MORE DETAILED INFORMATION REGARDING
THE INVESTMENT OBJECTIVES, RESTRICTIONS AND RISKS, EXPENSES PAID BY THE
UNDERLYING FUNDS, AND OTHER RELEVANT INFORMATION REGARDING THE UNDERLYING FUNDS
MAY BE FOUND IN THE PROSPECTUS OF THE TRUST, WHICH ACCOMPANIES THIS PROSPECTUS
AND SHOULD BE READ CAREFULLY BEFORE INVESTING. Also, the Statement of
Additional Information of the Trust is available upon request.
GROWTH SUB-ACCOUNT - invests solely in shares of the Growth Fund of the Trust.
This Fund is invested primarily in common stocks and securities convertible into
common stocks that are believed to represent significant underlying value in
relation to current market prices. The primary objective of the Growth Fund is
long-term growth of capital. Realization of current income, if any, is
incidental to this objective.
INVESTMENT GRADE INCOME SUB-ACCOUNT - invests solely in shares of the Investment
Grade Income Fund of the Trust. This Fund is invested in a diversified
portfolio of fixed income securities with the objective
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of seeking as high a level of total return (including both income and
realized and unrealized capital gains) as is consistent with prudent
investment management.
MONEY MARKET SUB-ACCOUNT - invests solely in shares of the Money Market Fund of
the Trust. This Fund is invested in a diversified portfolio of high-quality,
short-term debt instruments with the objective of obtaining maximum current
income consistent with the preservation of capital and liquidity.
EQUITY INDEX SUB-ACCOUNT - invests solely in shares of the Equity Index Fund of
the Trust. This Fund seeks to provide investment results that correspond
generally to the composite price and yield performance of United States publicly
traded common stocks. The Equity Index Fund seeks to achieve its objective by
attempting to replicate the composite price and yield performance of the
Standard & Poor's 500 composite Stock Index.
GOVERNMENT BOND SUB-ACCOUNT - invests solely in shares of the Government Bond
Fund of the Trust. This Fund has the investment objective of seeking high
income, preservation of capital and maintenance of liquidity, primarily through
investments in debt instruments issued or guaranteed by the U.S. Government or
its agencies or instrumentalities and in related options, futures and repurchase
agreements.
IN SOME STATES, INSURANCE REGULATIONS MAY RESTRICT THE AVAILABILITY OF
PARTICULAR SUB-ACCOUNTS.
In the event of a material change in the investment policy of a Sub-Account or
the Underlying Fund in which it invests, the Participant-Owner will be notified
of the change. If a Participant-Owner has Accumulated Value in that Sub-
Account, the Company will transfer it without charge on written request by the
Participant-Owner to another Sub-Account of the Separate Account or to a General
Account Sub-Account, if available. The Company must receive the written request
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 Participant-
Owner's right to transfer.
INVESTMENT ADVISORY SERVICES TO THE TRUST. The overall responsibility for the
supervision of the affairs of the Trust vests in the Trustees. The Trustees
have entered into a Management Agreement with Allmerica Investment Management
Company, Inc. ("Manager"), an indirect wholly-owned subsidiary of the Company,
to handle the day-to-day affairs of the Trust. The Manager, subject to review
by the Trustees, is responsible for the actual 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 Commission, 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, and reports to shareholders, and
other expenses.
Pursuant to the Management Agreement with the Trust, the Manager has entered
into agreements ("Sub-Adviser Agreements") with Miller, Anderson & Sherrerd and
Allmerica Asset Management, Inc. ("Sub-Advisers") under which each Sub-Adviser
manages the investments of the Funds. (The Management Agreement and the Sub-
Adviser Agreements are referred to collectively as the "Agreements.") Miller,
Anderson & Sherrerd manages the Growth Fund. Allmerica Asset Management, Inc.
manages the Investment Grade Income Fund, Money Market Fund, Equity Index Fund
and Government Bond Fund.
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<PAGE>
Under the Agreements, the Sub-Advisers are authorized to engage in portfolio
transactions on behalf of their respective Funds, subject to such general or
specific instructions as may be given by the Trustees. The terms of each
Agreement cannot be changed without the approval of a majority in interest of
the shareholders of the affected Fund.
For providing the services described above, the Manager receives a fee, computed
daily at an annual rate based on the average daily net asset value of each fund
as follows:
<TABLE>
<CAPTION>
Investment Money Equity Government
Growth Grade Income Market Index Bond
NET ASSET VALUE Fund Fund Fund Fund Fund
------ ------------ ------ ------ ----------
<S> <C> <C> <C> <C> <C>
First $50 Million 0.60% 0.50% 0.35% 0.35% 0.50%
Next $200 Million 0.50% 0.35% 0.25% 0.30% 0.50%
On the Remainder 0.35% 0.25% 0.20% 0.25% 0.50%
</TABLE>
The fee computed with respect to each Fund is paid from the assets of such
Fund. The Manager is solely responsible for the payment of all fees to
Miller, Anderson & Sherrerd and to the Company.
For its services to the Fund, Miller, Anderson & Sherrerd receives from the
Manager a fee based on the aggregate assets of the Growth Fund and certain other
accounts of the Company and its affiliates (collectively, the "Affiliated
Accounts") which are managed by Miller, Anderson & Sherrerd. The amount of the
annual advisory fee paid by the Manager on behalf of the Growth Fund is based on
an aggregation of all assets of the Affiliated Accounts managed by Miller,
Anderson & Sherrerd under the following schedule:
Aggregate Average Assets Rate
------------------------ ------
First $50 million 0.500%
$50 - 100 million 0.375%
$100 - 500 million 0.250%
$500 - 850 million 0.200%
Over $850 million 0.150%
For its services to the Investment Grade Income Fund, Money Market Fund,
Equity Index Fund and Government Bond Fund, Allmerica Asset Management, Inc.
will receive from the Manager a fee computed daily at an annual rate based on
the average daily net assets of the respective Funds as follows:
Investment Money Equity Government
Grade Income Market Index Bond
Fund Fund Fund Fund
------------ ------- ------ ----------
0.20% 0.10% 0.10% 0.20%
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS. The Company reserves the
right, subject to applicable law, to make additions to, deletions from, or
substitutions for the shares that are held in the Separate Account
Sub-Accounts or that the Separate Account Sub-Accounts may purchase. If the
shares of any Underlying Fund are no longer available for investment or if in
the Company's judgment further investment in any Underlying Fund should
become inappropriate in view of the purposes of the Separate Account or the
affected Sub-Account, the Company may redeem the shares of that
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Underlying Fund and substitute shares of another registered open-end management
company. The Company will not substitute any shares attributable to an IRA
Account interest in a Sub-Account without notice to the Participant-Owner and
prior approval of the Commission and state insurance authorities, to the extent
required by the 1940 Act or other applicable law. The Separate Account may, to
the extent permitted by law, purchase other securities for other contracts or
certificates or permit a conversion between certificates upon request by a
Participant-Owner.
The Company also reserves the right to establish additional Separate Account
Sub-Accounts, each of which would invest in shares corresponding to a new
Underlying Fund or in shares of another investment company having a specified
investment objective. Subject to applicable law and any required Commission
approval, the Company 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 Participant-Owners on a basis to be determined by the Company.
Shares of the Underlying Funds are also issued to separate accounts of the
Company 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
policyowners/participant-owners. Although the Company and the Trust do not
currently foresee any such disadvantage to either variable life insurance or
variable annuity policyowners/participant-owners, the Company and the Trustees
of the Trust 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,
the Company will bear the attendant expenses.
If any of these substitutions or changes are made, the Company may by
appropriate endorsement change the Contract and Certificate thereunder to
reflect the substitution or change and will notify Participant-Owners of all
such changes. If the Company deems it to be in the best interest of
Participant-Owners, and subject to any approvals that may be required under
applicable law, the Separate Account or any of its Sub-Accounts 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 the Company.
VOTING RIGHTS
The Company will vote Underlying Fund shares held by each Sub-Account in
accordance with instructions received from Participant-Owners, who will be
provided with proxy materials of the Underlying Fund together with a form with
which to give voting instructions to the Company. Shares for which no timely
instructions are received will be voted in proportion to the instructions which
are received. The Company will also vote shares in a Sub-Account that it owns
and which are not attributable to Contracts in the same proportion. 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 the Company
determines that it is permitted to vote shares in its own right, whether or not
such shares are attributable to the Policies, the Company reserves the right to
do so.
The number of votes which a Participant-Owner may cast will be determined by the
Company as of the record date established by the Underlying Fund.
The number of Underlying Fund shares attributable to each Participant-Owner will
be determined by dividing the dollar value of the Accumulation Units of the Sub-
Account credited under the Contract by the net asset value of one Underlying
Fund share.
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CHARGES AND DEDUCTIONS
Deductions under the Contracts and charges against the assets of the Separate
Account Sub-Accounts are described below. Other deductions and expenses paid
out of the assets of the Underlying Funds are described in the Prospectus and
Statement of Additional Information of the Trust.
SURRENDER AND REDEMPTION CHARGE. No charge for sales expenses is deducted from
contributions at the time the contributions are made. However, a withdrawal
charge of 4% will be made on any amount withdrawn from a General Account Sub-
Account on other than its maturity date, and upon election of an annuity for a
specified number of years, subject to certain exceptions described below. No
sales charge is deducted upon withdrawals from any Sub-Accounts of the Separate
Account.
LED DISTRIBUTIONS. A Participant-Owner may elect to make a series of systematic
withdrawals from his or her IRA Account according to a life expectancy
distribution ("LED"), by returning a properly signed LED request form to the
Company's Home Office. The LED permits the Participant-Owner to make systematic
withdrawals from the IRA Account over his or her lifetime. The amount withdrawn
from the IRA Account 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 6.5 years.
If a Participant-Owner elects the LED, in each calendar year a fraction of
the Accumulated Value is withdrawn from the IRA Account based on the
Participant-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 Participant-Owner, as determined annually by the Company. The resulting
fraction, expressed as a percentage, is applied to the Accumulated Value of
the IRA Account at the beginning of the year to determine the amount to be
distributed during the year. The Participant-Owner may elect monthly,
bimonthly, quarterly, semiannual or annual distributions and may terminate
the LED at any time. The Participant-Owner may also elect to receive
distributions under an LED which is determined on the joint life expectancy
of the Participant-Owner and a beneficiary. The Company may also offer other
systematic withdrawals.
The Company will impose no withdrawal charge respecting any amount received in a
calendar year as part of a series of LED distributions that:
(1) does not exceed the minimum amount required to be distributed to satisfy
the requirements of Section 401(a)(9) of the Code;
(2) is withdrawn from a Separate Account Sub-Account;
(3) is withdrawn from a General Account Sub-Account on its maturity date; or
(4) is withdrawn from one or more General Account Sub-Accounts, but does not
exceed 20% of the portion of the Accumulated Value allocated to the General
Account on the preceding December 31.
If a Participant-Owner makes withdrawals under the LED distribution prior to age
59 1/2, the withdrawals may be treated by the Internal Revenue Service as
premature distributions from the IRA Account. The payments would then be taxed
on an "income first" basis and be subject to a 10% federal tax penalty. For
more information, see "FEDERAL TAX CONSIDERATIONS," " Taxation of the Contracts
in General."
SURRENDERS. In a complete surrender, the amount received by the Participant-
Owner is equal to the entire Accumulated Value of his or her IRA Account, net of
any applicable withdrawal charge, IRA Account Fee and tax withholding. For
further information on surrender and partial redemption, including minimum
limits on amount redeemed and amount remaining in the IRA Account for partial
redemptions, see
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"Surrender" and "Partial Redemption" under "THE VARIABLE ANNUITY CONTRACTS" and
see "FEDERAL TAX CONSIDERATIONS."
CHARGE AT THE TIME ANNUITY PAYMENTS BEGIN. If a period certain option is chosen
(Option V), a withdrawal charge will be deducted from the Accumulated Value of
the IRA Account. Such charge is the same as that which would apply had the IRA
Account been surrendered on the Annuity Date.
No withdrawal charge is imposed at the time of annuitization in any Certificate
year under an option involving a life contingency (Options I, II, III, IV-A
or IV-B).
SALES EXPENSE. Currently, no commissions on the Contracts or Certificates
thereunder are paid by the Company. Sales expenses do not result in any
additional charge to Participant-Owners or to the Separate Account. The Company
intends to recoup sales expenses through a combination of anticipated withdrawal
charges, described above, and profits from the General Account. Any withdrawal
charges assessed under a Contract will be retained by the Company except for
amounts it may pay to Allmerica Investments for services it performs and
expenses it may incur as principal underwriter and general distributor.
PREMIUM TAXES. Some states and municipalities impose a premium tax on variable
annuity contracts. State premium taxes currently range up to 3.5%.
The Company makes a charge for state and municipal premium taxes, where
applicable. In accordance with the laws of the state involved, the premium tax
charge usually is deducted in one of two ways:
(1) the premium tax charge is deducted at the time the contribution is received
(and the contributions allocated to the General Account or Separate Account
Sub-Accounts will be net of such charge); or
(2) the premium tax charge is deducted at the time annuity payments begin.
Where permitted by state law, it is the Company's policy to follow the practice
in (2) above. However, if no amount for premium tax was deducted at the time
the contribution was received, but subsequently tax is determined to be due
prior to the Annuity Date, the Company reserves the right to deduct the premium
tax from the Accumulation Value of the IRA Account at the time such
determination is made.
IRA ACCOUNT FEE. Prior to the Annuity Date, an IRA Account Fee is deducted
annually on the last Valuation Date of the month of the anniversary of the
establishment of the IRA Account ("Anniversary Deduction") and upon full
surrender of the IRA Account. The IRA Account Fee is $25. For IRA Accounts
established after April 30, 1993, the IRA Account Fee will be waived in the
following circumstances: if the contribution establishing the IRA Account was
at least $15,000, the IRA Account Fee will be waived on the first Anniversary
Deduction; if the Accumulated Value of the IRA Account was at least $15,000 as
of December 31 of the calendar year previous to any subsequent Anniversary
Deduction, the IRA Account Fee will be waived on such subsequent Anniversary
Deduction.
Where Accumulation Value has been allocated to more than one General Account or
Separate Account Sub-Account, a percentage of the total IRA Account Fee will be
deducted from the Accumulation Value in each Sub-Account. The portion of the
charge deducted from each Sub-Account will be equal to the percentage which the
Accumulation Value in that Sub-Account represents of the total Accumulated Value
of the IRA Account. The deduction of the IRA Account Fee will result in
cancellation of a number of Accumulation Units equal in value to the percentage
of the charge deducted from any Separate Account Sub-Account. No deduction from
a General Account Sub-Account will be permitted to reduce credited interest to a
rate lower than the minimum guaranteed interest rates stated in Appendix A,
"MORE INFORMATION ABOUT THE GENERAL ACCOUNT."
ANNUAL CHARGES AGAINST SEPARATE ACCOUNT ASSETS. The following annual charges
are deducted against the assets of the Separate Account:
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MORTALITY AND EXPENSE RISK CHARGE. The Company makes a charge of 0.90% on an
annual basis of the daily value of each Separate Account Sub-Account's assets to
cover the mortality and expense risk which the Company assumes in relation to
the variable portion of the Contracts. The charge is imposed only during the
accumulation period. The mortality risk arises from the Company's guarantee
that it will make annuity payments in accordance with annuity rate provisions
established at the time the Certificate is issued for the life of the payee (or
in accordance with the annuity option selected), no matter how long the payee
lives and no matter how long all payees as a class live. The expense risk
arises from the Company's guarantee that the charges it makes will not exceed
the limits described in the Contracts and in this Prospectus.
If the charge for mortality and expense risks is not sufficient to cover actual
mortality experience and expenses, the Company will absorb the losses. If
expenses are less than the amounts provided to the Company by the charge, the
difference will be a profit to the Company. To the extent this charge results
in a profit to the Company, such profit will be available for use by the Company
for, among other things, the payment of distribution, sales and other expenses.
Since mortality and expense risks involve future contingencies which are not
subject to precise determination in advance, it is not feasible to identify
specifically the portion of the charge which is applicable to each. The Company
estimates that a reasonable allocation might be .25% for mortality risk and .65%
for expense risk.
ADMINISTRATIVE EXPENSE CHARGE. The Company assesses each Separate Account Sub-
Account with a daily charge at an annual rate of 0.25% of the average daily net
assets of the Sub-Account. The charge is imposed only during the accumulation
period. The daily Administrative Expense Charge is assessed to help defray
administrative expenses actually incurred in the administration of the Separate
Account Sub-Account, without profits. However, there is no direct relationship
between the amount of administrative expenses imposed under a given Certificate
and the amount of expenses actually attributable to that Certificate.
Deductions for the IRA Account Fee (described under "IRA Account Fee") and for
the Administrative Expense Charge are designed to reimburse the Company for the
cost of administration and related expenses and are not expected to be a source
of profit. The administrative functions and expense assumed by the Company in
connection with the Separate Account and the IRA Accounts 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.
OTHER CHARGES. Because the Separate Account Sub-Accounts purchase shares of
the Underlying Funds, the value of the net assets of the Sub-Accounts will
reflect the investment advisory fee and other expenses incurred by the
Underlying Funds. The Prospectus and Statement of Additional Information of
the Trust contain additional information concerning expenses of the
Underlying Funds.
DESCRIPTION OF THE CONTRACT
The Contract is designed for use in connection with individual retirement
annuities. Participant-Owners and beneficiaries are cautioned that the rights
of any person to any benefits under the Contract may be subject to the terms and
conditions of Section 408 of the Code, regardless of the terms and conditions of
the Contract. Distributions under the Contract must be made or commenced not
later than the April 1 following the taxable year in which the Participant-Owner
attains age 70 1/2 and must be made in accordance with Section 401(a)(9) of the
Code.
The Contracts and Certificates thereunder offered by the Prospectus may be
purchased from representatives of Allmerica Investments, a registered broker-
dealer under the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc. (NASD). Allmerica Investments, 440
Lincoln Street, Worcester, Massachusetts 01653, is indirectly wholly-owned by
the Company.
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Participant-Owners may direct any inquiries to the Company's Home Office, State
Mutual Life Assurance Company, 440 Lincoln Street, Worcester, Massachusetts
01653.
Written requests required under the Contract must be in a form satisfactory to
the Company and filed at its Home Office. However, with the consent of the
Company, IRA Account investment transfers, contribution allocation instructions
and other specified transactions may also be made by the Participant-Owner by
telephone request, if a properly completed authorization form is then on file at
the Company's Home Office.
CONTRIBUTIONS. Contributions are payable to the Company at its Home Office and
must be made by cash or check. For each contribution, the Participant-Owner
must indicate in writing (1) the type of contribution being made, (2) the
taxable year for which the contribution is intended (if applicable), and (3)
investment allocation instructions.
The initial contribution will be credited to an IRA Account as of the date that
the Company has at its Home Office both (1) a properly completed application for
the IRA Account, and (2) the initial contribution. If an application is
incomplete, or does not specify how payments are to be allocated among the Sub-
Accounts, the initial contribution will be returned within five business days.
For additional contributions made after an IRA Account has been established,
Accumulation Units will be credited at the unit value computed as of the
Valuation Date that the additional contribution is received at the Company's
Home Office.
Under the Contracts, additional contributions are not limited as to frequency
and number, except that deductible and nondeductible contributions and
contributions to a spousal IRA Account must be received by the Company by April
15 of the year following the calendar year to which the contributions are
attributable.
The minimum initial contribution from a rollover distribution is the lesser of
(1) $3,500, or (2) such smaller amount as meets the Company's then current
rules. The maximum initial contribution is the amount equal to the taxable
portion of the Participant-Owner's rollover distribution.
After an IRA Account has been established, a Participant-Owner may make
additional contributions, subject to the following requirements: The minimum
additional contribution is the lesser of (1) $1,000, or (2) such smaller amount
as meets the Company's then current rules. For any taxable year of the
Participant-Owner, the maximum for total additional deductible and nondeductible
contributions is the lesser of (1) $2,000, or (2) 100% of the Participant-
Owner's compensation for the taxable year as defined in Section 219(f) of the
Code. This maximum does not apply to additional rollover contributions or
spousal IRA contributions discussed below.
A Participant-Owner may make an additional rollover contribution as defined in
Section 402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8) or 408(d)(3) of
the Code. Additional rollover contributions are subject to the minimum
additional contribution discussed above, but not to any maximum for total
additional contributions.
A Participant-Owner may also establish and maintain a spousal IRA Account in
accordance with Sections 219(c) and 408(b) of the Code. The maximum total
contributions to both IRA Accounts in any taxable year is $2,250, of which
amount no more than $2,000 may be contributed to any one IRA Account.
Generally, contributions will be allocated among the Sub-Accounts according to
the Participant-Owner's instructions. However, until the Valuation Date that is
15 days from the date the IRA Account was established, all Separate Account
allocations will be held in the Money Market Sub-Account. Thereafter, all
amounts will be allocated according to the Participant-Owner's instructions.
If no contributions have been credited to the IRA Account for three consecutive
Certificate years and, at any time thereafter, the IRA Account's Accumulated
Value is less than $1,000, the Company reserves the right to terminate the IRA
Account for its Accumulated Value.
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TRANSFER PRIVILEGE. Prior to the Annuity Date, a Participant-Owner may have
amounts transferred among the Sub-Accounts, subject to the restrictions stated
below. Requests for transfers must be in writing. Transfers will be made on
the Valuation Date coincident with, or next following, the date the written
request is received by the Company.
During each calendar year, the Participant-Owner may make up to four transfers
among Separate Account or General Account Sub-Accounts, where available. In
addition, the Participant-Owner may transfer from a General Account Sub-Account
on the Sub-Account maturity date.
The maximum dollar amount that may be transferred during a calendar year from
General Account Sub-Accounts prior to their maturity date is 20% of the value on
the preceding December 31 of the portion of the Accumulated Value of the IRA
Account that was allocated to the General Account. Transfers from such Sub-
Accounts will be made on a LIFO (last-in-first-out) basis, so that transfers
will be first made from the most recently established Sub-Account.
All transfers from Sub-Accounts must involve a minimum of $500, or the entire
amount in Sub-Account, if less. If any transfer would reduce the value of the
Sub-Account from which the transfer is to be made to less than $1,000, the
Company reserves the right to include such remaining value in the amount
transferred.
The Company makes no charge for transfers.
SURRENDER PRIVILEGE. At any time prior to the Annuity Date, a
Participant-Owner may request surrender of the IRA Account and receive its
Surrender Value. The Participant-Owner must return a signed, written request
for surrender and the Certificate to the Company's Home Office. The
Surrender Value will be based on the Accumulated Value of the IRA Account as
of the Valuation Date coincident with or next following the date the Company
receives the written request and Certificate at its Home Office.
A withdrawal charge may be deducted when an IRA Account is surrendered if all
or a portion of the Accumulated Value is allocated to General Account
Sub-Accounts. See "CHARGES AND DEDUCTIONS." The IRA Account Fee will be
deducted upon surrender of the IRA Account.
Any amount surrendered is normally payable within seven days following the
Company's receipt of the surrender request. The Company reserves the right
to defer surrenders and partial redemptions of amounts in each Separate
Account Sub-Account during any period which (1) trading on the New York Stock
Exchange is restricted as determined by the SEC or such Exchange is closed
for other than weekends and holidays, (2) the SEC has by order permitted such
suspension, or (3) an emergency, as determined by the SEC, exists such that
disposal of portfolio securities or valuation of the assets of the Separate
Account is not reasonably practicable.
The right is reserved by the Company to defer surrenders and partial
redemptions of amounts allocated to a General Account Sub-Account for a
period not to exceed six months.
For important tax consequences which may result from surrender, see "FEDERAL
TAX CONSIDERATIONS."
REDEMPTION PRIVILEGE. At any time prior to the Annuity Date, a
Participant-Owner may redeem a portion of the Accumulated Value of his or her
IRA Account, subject to the limits stated below. The Participant-Owner must
file a signed, written request for redemption at the Company's Home Office.
The written request must indicate the dollar amount the Participant-Owner
wishes to receive and the Separate Account Sub-Account from which such amount
is to be redeemed. Withdrawals from General Account Sub-Accounts will be made
on a LIFO (last-in-first-out) basis, so that withdrawals will be first made
from the most recently established General Account Sub-Account. The amount
redeemed equals the amount requested
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by the Participant-Owner plus any applicable withdrawal charge, as described
under "CHARGES AND DEDUCTIONS."
Where allocations have been made to more than one Sub-Account, a percentage of
the partial redemption may be allocated to each Sub-Account. A partial
redemption from a Separate Account Sub-Account will result in cancellation of a
number of units equivalent in value to the amount redeemed, computed as of the
Valuation Date coincident with or next following the date the Company receives
the written request at its Home Office.
Each partial redemption must be in a minimum amount of $500. No partial
redemption will be permitted if the Accumulated Value remaining in the IRA
Account would be reduced to less than $1,000. Partial redemptions will be paid
in accordance with the time limitations described under "Surrender."
For important tax consequences which may result from partial redemptions, see
"FEDERAL TAX CONSIDERATIONS."
DEATH BENEFIT. If the Participant-Owner's death occurs prior to the Annuity
Date, a death benefit will be paid to the beneficiary. The death benefit is
equal to the Accumulated Value of the IRA Account as of the Valuation Date
coincident with or next following the date of receipt of due proof of death at
the Company's Home Office.
The death benefit generally will be paid to the beneficiary in one sum.
However, the Participant-Owner may direct that all or part of the death benefit
be paid under one or more of the annuity options provided in the Contract. See
"Description of Annuity Options." The beneficiary may also request in writing
to be paid in accordance with an annuity option under the Contract.
If the Participant-Owner's death occurs on or after the Annuity Date but before
the completion of all guaranteed monthly annuity payments, any unpaid amounts or
installments will be paid to the beneficiary. If there is more than one
beneficiary, the death benefit will be paid in one sum. This sum will be the
commuted value of any unpaid payments certain, commuted on the basis of the
interest rate used in the determination of the annuity benefit as of the
Valuation Date coincident with or next following the date of receipt by the
Company at its Home Office of due proof of death.
If the beneficiary elects to receive the death benefit in one sum, the death
benefit will be paid within seven days of the date on which due proof of death
is received at the Company's Home Office. The death benefit will reflect any
earnings or losses experienced during the period and any withdrawals.
THE SPOUSE OF THE PARTICIPANT-OWNER AS BENEFICIARY. If the Participant-Owner
dies prior to the Annuity Date leaving his or her spouse as beneficiary, at the
written request of the spousal beneficiary and with the consent of the Company,
the death benefit will not be paid and the spousal beneficiary will become the
Participant-Owner of the IRA Account. However, all or a portion of the death
benefit may be withdrawn without charge within one year of the date on which
notice of death is received at the Company's Home Office. All rights and
benefits provided under the Contract will continue, except that any subsequent
spouse of such new Participant-Owner will not be entitled to continue the IRA
Account upon such new Participant-Owner's death.
OWNERSHIP AND NON-ALIENATION OF IRA ACCOUNTS. Each Participant-Owner is the
owner of his or her IRA Account. IRA Accounts may not be transferred by the
Participant-Owner. No part of the Participant-Owner's interest in an IRA
Account can be forfeited. A Participant Owner may not make any loans under an
IRA Account. An IRA Account cannot be pledged, assigned or otherwise used to
secure a loan.
ELECTING THE FORM OF ANNUITY AND THE ANNUITY DATE. Subject to certain
restrictions described below, the Participant-Owner has the right to select the
annuity option under which annuity
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payments are to be made. Annuity payments are determined according to the
annuity tables in the Contract and by the annuity option selected. All
annuity options are funded through the General Account. See APPENDIX A,
"MORE INFORMATION ABOUT THE GENERAL ACCOUNT." Accumulated Value will be
transferred to the General Account of the Company, and the annuity payments
will be fixed in amount.
The annuity option selected must produce an initial payment of at least $50. If
the annuity option(s) selected does not produce initial payments which meet this
minimum, the Company will pay the Surrender Value or death benefit, as the case
may be, in one sum. Once the Company begins making annuity payments, the
Participant-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 Participant-Owner. The Annuity Date may be
the first day of any month on or after the Participant-Owner's 50th birthday but
before the Participant-Owner's 85th birthday. The Participant-Owner may elect
to change the Annuity Date by sending a written request to the Company's Home
Office at least one month before the new Annuity Date. The Code imposes
limitations on the age at which distributions may commence. See "FEDERAL TAX
CONSIDERATIONS" for further information.
If the Participant-Owner does not elect otherwise, annuity payments will be made
in accordance with Option I, a life annuity with 120 monthly payments
guaranteed. Changes in an annuity option choice can be made up to one month
prior to the Annuity Date.
DESCRIPTION OF ANNUITY OPTIONS. The Company currently provides the annuity
options described below. Other annuity options may be offered by the Company.
OPTION I -- Life Annuity with 120 Monthly Payments Guaranteed
An annuity payable monthly during the lifetime of the payee with the guarantee
that if the payee should die before 120 monthly payments have been paid, the
monthly annuity payments will continue to the beneficiary until a total of 120
monthly payments have been paid.
OPTION II -- Life Annuity
An annuity payable monthly only during the lifetime of the payee. It would be
possible under this option 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 III -- Unit Refund Life Annuity
An annuity payable monthly during the lifetime of the payee with the guarantee
that if (1) exceeds (2) then monthly annuity payments will continue to the
beneficiary until the number of such payments equals the number determined in
(1).
Where: (1) is the dollar amount of the Accumulated Value divided by the
dollar amount of the first monthly payment (which determines the
greatest number of payments payable to the beneficiary), and
(2) is the number of monthly payments paid prior to the death of the
payee.
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OPTION IV-A -- Joint and Survivor Life Annuity
A monthly 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 amount paid during the joint lifetime of
the two payees. One of the payees must be either the Participant-Owner or the
beneficiary. There is no minimum number of payments under this option.
OPTION IV-B -- Joint and Two-thirds Survivor Life Annuity
A monthly 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 monthly payment to the survivor is based upon two-thirds of the
amount which applied during the joint lifetime of the two payees. One of the
payees must be the Participant-Owner or the beneficiary. There is no minimum
number of payments under this option.
OPTION V -- Period Certain Annuity
A monthly annuity payable for a stipulated number of from one to thirty years.
The annuity value applied under this option will be the Surrender Value. If the
payee dies before the completion of the period stipulated under Option V,
payments will continue to be paid to the beneficiary.
It should be noted that Option V does not involve a life contingency. In the
computation of the payments under this option (see "Determination of 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 IRA ACCOUNT VALUES AND ANNUITY PAYMENTS. IRA Account values and
annuity payments are computed as follows:
THE ACCUMULATION UNIT. Each net contribution is allocated to the Sub-Account(s)
selected by the Participant-Owner. Allocations to the Separate Account Sub-
Accounts are credited to the IRA Account in the form of Accumulation Units.
Accumulation Units are credited separately for each Separate Account Sub-
Account. The number of Accumulation Units of each Sub-Account credited to the
IRA Account is equal to the portion of the net contribution allocated to the
Sub-Account, divided by the dollar value of the applicable Accumulation Unit as
of the Valuation Date such contribution is allocated. The number of
Accumulation Units resulting from each contribution will remain fixed unless
changed by a subsequent split of Accumulation Unit value, a transfer, a partial
redemption, or surrender. The dollar value of an Accumulation Unit of each 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 Underlying Funds. The value of an Accumulation Unit
was set at $100.0000 on the first Valuation Date for each Separate Account Sub-
Account.
Allocations to General Account Sub-Accounts are not converted into Accumulation
Units, but are credited interest at a rate periodically set by the Company. See
APPENDIX A, "MORE INFORMATION ABOUT THE GENERAL ACCOUNT."
The Accumulated Value of the IRA Account is determined by (1) multiplying the
number of Accumulation Units in each Separate Account 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
General Account Sub-Accounts, if any.
ADJUSTED GROSS INVESTMENT RATE. At each Valuation Date an adjusted gross
investment rate for each Separate Account 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
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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
Separate Account 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 1.15% 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.
DETERMINATION OF ANNUITY PAYMENTS. The amount of the first monthly 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 -- the
Surrender Value; (2) if any other annuity option offered by the Company is
chosen -- the Accumulated Value; and (3) 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
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 monthly payment under each form of annuity for each $1,000 of applied
annuity value. Guaranteed life annuity rates in the Contract are based on a
modification of the 1983 Group Annuity Mortality Table on unisex rates.
The amount of the first monthly payment depends upon the form of annuity
selected, the age of the payee and the value of the amount applied under the
annuity option. The dollar amount of each monthly annuity payment is fixed and
will not change, except under the joint and two-thirds survivor annuity option.
The Company may from time to time offer its Participant-Owners fixed annuity
rates more favorable than those contained in the Contract. Any such rates will
be applied uniformly to all Participant-Owners of the same class.
FEDERAL TAX CONSIDERATIONS
The effect of federal income taxes on the value of an IRA Account, on
redemptions or surrenders, on annuity payments, and on the economic benefit to
the Participant-Owner or beneficiary depends upon a variety of factors. The
following discussion is based upon the Company's understanding of current
federal income tax laws as they are interpreted as of the date of this
Prospectus. No representation is made regarding the likelihood of continuation
of current federal income tax laws or of current interpretations by the Internal
Revenue Service.
IT SHOULD BE RECOGNIZED THAT THE FOLLOWING DISCUSSION OF FEDERAL INCOME TAX
ASPECTS OF AMOUNTS RECEIVED UNDER VARIABLE ANNUITY CONTRACTS AND INDIVIDUAL
RETIREMENT ANNUITIES IS NOT EXHAUSTIVE, DOES NOT
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PURPORT TO COVER ALL SITUATIONS AND IS NOT INTENDED AS TAX ADVICE. A
QUALIFIED TAX ADVISER SHOULD ALWAYS BE CONSULTED WITH REGARD TO THE
APPLICATION OF LAW TO INDIVIDUAL CIRCUMSTANCES.
The Company intends to make a charge for any effect which the income, assets, or
existence of the Contracts, the Separate Account or its Sub-Accounts may have
upon the Company's tax. The Separate Account presently is not subject to tax,
but the Company 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 Participant-Owners and with respect to each Separate Account as
though that Separate Account were a separate taxable entity.
The Separate Account is considered to be a part of and taxed with the operations
of the Company. The Company is taxed as a life insurance company under
subchapter L of the Internal Revenue Code ("Code"). The Company files a
consolidated tax return with certain of its subsidiaries.
TAXATION OF THE CONTRACTS IN GENERAL. The Company believes that the Contracts
and IRA Accounts described in this Prospectus will be considered annuities under
Section 72 of the Code. This section provides for the taxation of annuities.
The following discussion concerns annuities subject to Section 72.
With certain exceptions, any increase in the Accumulated Value of the IRA
Account is not taxable to the Participant-Owner until it is withdrawn. If the
IRA Account 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 IRA Account would be taxed as ordinary income.
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 Participant-
Owner, or in the case of the "total disability" (as defined in the Code) of the
Participant-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
Participant-Owner elects to have distributions made over his or her life
expectancy, or over the joint life expectancy of the Participant-Owner and
beneficiary.
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 Policy's life expectancy distribution
("LED")), 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 Participant-Owner who receives distributions under the LED 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.
When annuity payments are commenced under the Contract and the Participant-Owner
has a cost basis, 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 IRA Account bears to the
expected return under the IRA Account. The portion of the payment in excess of
this excludable amount is taxable as ordinary income. Once all cost basis in
the IRA Account 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 AND PENALTIES. The Code requires withholding with respect to
payments or distributions from annuities, unless a taxpayer elects not to have
withholding. In addition, the Code
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requires reporting to the Internal Revenue Service of the amount of income
received with respect to payment or distributions from annuities.
In certain situations, the Code provides for a tax penalty if, prior to death,
disability or attainment of age 59-1/2, a Participant-Owner makes a withdrawal
or receives any amount under the Policy, unless the distribution is in the form
of a life annuity (including life expectancy distributions). The penalty is 10%
of the amount includible in income by the Participant-Owner.
INDIVIDUAL RETIREMENT ACCOUNTS IN GENERAL. 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, the IRA Account offered under the Contracts.
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 if they file a joint return. Contributions to the two IRAs
together are deductible up to the lesser of $2,250 or 100% of compensation.
No deduction is allowed for contributions made for the year in which the
individual attains age 70-1/2 and years thereafter. Contributions for that year
and for years thereafter will result in certain adverse tax consequences.
Non-deductible contributions may be made to IRAs until the year in which the
individual attains age 70 1/2. Although these contributions may not be
deducted, taxes on their earnings are deferred until 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, the Company 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.
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Distributions which are a return of a non-deductible contribution are non-
taxable, as they represent a return of basis. If the required information is
not provided to the Internal Revenue Service, distributions from an IRA to which
both deductible and non-deductible contributions have been made are presumed to
be fully taxable.
REPORTS
A Participant-Owner is sent a report semi-annually which states certain
financial information about the Underlying Funds. The Company will also furnish
an annual report to the Participant-Owner containing a statement of his or her
account, including unit values and other information required by applicable law,
rules and regulations.
CHANGES IN OPERATION OF THE SEPARATE ACCOUNT
The Company reserves the right, subject to compliance with applicable law, to
(1) transfer assets from the Separate Account or any of its Sub-Accounts to
another of the Company's separate accounts or sub-accounts having assets of the
same class, (2) to operate the Separate Account or any of its 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 Underlying Fund shares held by a
Separate Account Sub-Account, in the event that Underlying Fund shares are
unavailable for investment, or if the Company determines that further investment
in such Underlying 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 Participant-Owners in accordance with the 1940 Act.
The Company reserves the right, subject to compliance with applicable law, to
change the name of the Separate Account or any of its Sub-Accounts.
LEGAL MATTERS
There are no legal proceedings pending to which the Separate Account is a party.
FURTHER INFORMATION
A Registration Statement under the Securities Act of 1933 relating to this
offering has been filed with the Securities and Exchange Commission. Certain
portions of the Registration Statement and amendments have been omitted from
this Prospectus pursuant to the rules and regulations of the Commission. The
omitted information may be obtained from the Commission's principal office in
Washington, D.C., upon payment of the Commission's prescribed fees.
APPENDIX A
MORE INFORMATION ABOUT THE GENERAL ACCOUNT
Because of exemption and exclusionary provisions in the securities laws,
interests in the General Account are not generally subject to regulation under
the provisions of the Securities Act of 1933 or the Investment Company Act of
1940. Disclosures regarding the fixed portion of the Contract and the General
Account Sub-Accounts 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 GENERAL ACCOUNT ARE NOT PERMITTED IN CERTAIN STATES.
The General Account of the Company is made up of all of the general assets of
the Company other than those allocated to any separate account. Allocations to
the General Account become part of the assets of the Company and are used to
support insurance and annuity obligations.
-27-
<PAGE>
A portion or all of net contributions may be allocated to a General Account Sub-
Account to accumulate at a fixed rate of interest. Such net amounts are
guaranteed by the Company as to principal and a minimum rate of interest. Under
the Contracts, the minimum interest which may be credited on amounts allocated
to a General Account Sub-Account is 4.5% compounded annually for the first five
Certificate years, 4% compounded annually for the next five Certificate years,
and 3.5% compounded annually thereafter. Additional "excess interest" may or
may not be credited at the sole discretion of the Company. Currently, General
Account Sub-Accounts will mature at three-year intervals. In no case will
excess interest be guaranteed for periods of less than one year.
Additional contributions allocated all or in part to a General Account Sub-
Account must be received by the Company no later than 1:00 p.m. Eastern time to
be applied to the General Account Sub-Account on the date of receipt.
Additional contributions received after 1:00 p.m. will be credited to the
General Account Sub-Account the next business day.
At least 30 days prior to the maturity date of a General Account Sub-Account,
the Company will notify the Participant-Owner of the new interest rate and
maturity date that will apply to the new Sub-Account on the maturity date.
Unless the Participant-Owner directs otherwise, the Accumulated Value of the IRA
Account allocated to the matured Sub-Account will be allocated to the new Sub-
Account.
If an IRA Account with Accumulated Value allocated to one or more General
Account Sub-Accounts is surrendered, or if a partial redemption is made from a
General Account Sub-Account, a withdrawal charge of 4% will be made on any
amounts withdrawn from such General Account Sub-Accounts. The withdrawal charge
will not apply to amounts withdrawn on a maturity date or under a LED
distribution as provided in the Contract, see "LED Distributions."
If a period certain option is chosen (Option V), a withdrawal charge will be
deducted from the Accumulated Value of the IRA Account. Such charge is the same
as that which would apply had the IRA Account been surrendered on the Annuity
Date.
-28-
<PAGE>
Supplement to the Statement of Additional Information
for Separate Account VA-I
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(Supplement to Statement of Additional Information dated October 16, 1995)
* * *
The first paragraph of Note 2 to the December 31, 1994 financial statements of
State Mutual Life Assurance Company of America, which appear at the end of the
Statement of Additional Information, has been replaced with the following
UNAUDITED
- ---------
On February 28, 1995, State Mutual's Board of Directors adopted, pursuant to
Massachusetts insurance law, a plan of reorganization (the "Plan") whereby
State Mutual will convert from a Massachusetts mutual life insurance company
to a Massachusetts stock life company and will become a wholly-owned
subsidiary of Allmerica Financial Corporation ("AFC"). On June 30, 1995, the
policyholders approved the Plan and on August 2, 1995 (following a hearing on
the Plan), the Commissioner of the Massachusetts Division of Insurance
approved the Plan. In October, 1995, the closing of an initial public
offering of AFC Common Stock and other financings were completed, and certain
proceeds thereof were contributed to State Mutual which was concurrently
renamed First Allmerica Financial Life Insurance Company. As a result, all
conditions to the effectiveness of the Plan have been satisfied and the Plan
is effective.
* * *
SUPPLEMENT DATED OCTOBER 16, 1995
<PAGE>
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
STATEMENT OF ADDITIONAL INFORMATION
FOR
GROUP VARIABLE ANNUITY CONTRACTS FUNDED THROUGH
SEPARATE ACCOUNT I
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS FOR THE SEPARATE ACCOUNT DATED MAY 1, 1995
("THE PROSPECTUS"). THE PROSPECTUS MAY BE OBTAINED FROM ALLMERICA INSTITUTIONAL
SERVICES, STATION C-36, FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY, 440
LINCOLN STREET, WORCESTER, MASSACHUSETTS 01653
DATED OCTOBER 16, 1995
<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................................................... 3
PERFORMANCE INFORMATION............................................ 5
FINANCIAL STATEMENTS............................................... 6
GENERAL INFORMATION AND HISTORY
Separate Account VA-I ("Separate Account") is a separate investment account of
First Allmerica Financial Life Insurance Company ("the Company") established
pursuant to a vote by the Board of Directors dated August 20, 1991. The Company
was originally organized as a mutual life insurance company under the laws of
Massachusetts in 1844. In October, 1995, the Company converted from a mutual
life insurance company known as State Mutual Life Assurance Company of America
to a stock life insurance company under its present name. The Company is a
wholly-owned subsidiary of Allmerica Financial Corporation. Their principal
offices are located at 440 Lincoln Street, Worcester, Massachusetts 01653,
telephone (508) 855-4194.
The Separate Account currently consists of five Sub-Accounts. Each Sub-Account
invests in a corresponding investment portfolio of Allmerica Investment Trust
("Trust"). The Trust is managed by Allmerica Investment Management Company,
Inc. ("Manager").
The Trust is an open-end, diversified series investment company. Five different
investment portfolios of the Trust are available under the Contracts: the
Growth Fund, Investment Grade Income Fund, Money Market Fund, Equity Index Fund
and Government Bond Fund ("Funds"). Each Fund has its own investment
objectives, sub-adviser and certain attendant risks.
TAXATION OF THE CONTRACTS, SEPARATE
ACCOUNT AND THE COMPANY
The Company currently imposes no charge for taxes payable in connection with the
Contracts, 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
-2-
<PAGE>
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 Policies 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 Participant-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. Fund shares owned by the Sub-Accounts are held on an open
account basis. A Sub-Account's ownership of Fund shares is reflected on the
records of the Fund and not represented by any transferable stock certificates.
EXPERTS. The financial statements of the Company at December 31, 1994 and 1993
and for each of the three years in the period ended December 31, 1994 and of
Separate Account I of the Company at December 31, 1994 and the periods in 1994
and 1993 indicated, included in this Statement of Additional Information
constituting part of the Registration Statement, have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The financial statements of the Company included herein should be considered
only as bearing on the ability of the Company to meet its obligations under the
Contracts.
UNDERWRITERS
Allmerica Investments, Inc., a registered broker-dealer under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc. (NASD), serves as principal underwriter for the Contracts pursuant
to a contract among Allmerica Investments, Inc., the Company and the Separate
Account. Allmerica Investments, Inc. distributes the Policies on a best efforts
basis. Allmerica Investments, Inc., 440 Lincoln Street, Worcester,
Massachusetts 01653 was organized in 1969 as a wholly-owned subsidiary of the
Company and is, at present, indirectly wholly-owned by the Company.
All persons selling the Contracts and Certificates thereunder are required to be
licensed by their respective state insurance authorities for the sale of
variable annuity Contracts. Commissions are not paid by the Company on sales of
the Contracts and Certificates.
The Company intends to recoup against the fixed account of the Company's general
account, sales expense through a combination of anticipated surrender, partial
redemption, and/or annuitization charges, the investment earnings on amounts
allocated to accumulate on a fixed basis in excess of the interest credited on
fixed accumulations by the Company, and the profit, if any, from the mortality
and expense risk charge.
ANNUITY PAYMENTS
The method by which the Accumulated Value under the Policy is determined is
described in detail under "COMPUTATION OF IRA ACCOUNT VALUES AND ANNUITY
PAYMENTS" in the Prospectus.
ILLUSTRATION OF ACCUMULATION UNIT CALCULATION USING HYPOTHETICAL EXAMPLE. The
Accumulation
-3-
<PAGE>
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>
<CAPTION>
<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 1.15% per annum)............ 0.000032
(6) Net Investment Rate (4)-(5)...................................... 0.000303
(7) Net Investment Factor 1.000000 + (6)............................. 1.000303
(8) Accumulation Unit Value - Current Period (1)x(7)............... $ 1.135344
</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
$1.134583.
The method for determining the amount of annuity payments is described in detail
under "K. Computation of Policy Values and Annuity Payments" in the Prospectus.
ILLUSTRATION OF VARIABLE ANNUITY PAYMENT CALCULATION USING HYPOTHETICAL EXAMPLE.
The determination of the Annuity Unit value and the variable annuity payment may
be illustrated by the following hypothetical example: Assume a Participant-
Owner 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 Policy is $44,800 (40,000 x $1.120000). Assume also that the Participant
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 surrender or
redemption charge, the first monthly payment would be 44.800 multiplied by
$6.57, or $294.34.
Next, assume that the Annuity Unit value for the assumed rate of 3-1/2% per
annum for the Valuation Date as of which the first payment was calculated was
$1.100000. Annuity Unit values will not be the same as Accumulation Unit values
because the former reflect the 3-1/2% assumed interest rate used in the annuity
rate calculations. When the Annuity Unit value of $1.100000 is divided into the
first monthly payment the number of Annuity Units represented by that payment is
determined to be 267.5818. The value of this same number of Annuity Units will
be paid in each subsequent month under most options. Assume further that the
net investment factor for the Valuation Period applicable to the next annuity
payment is 1.000190. Multiplying this factor by .999906 (the one-day adjustment
factor for the assumed interest rate of 3-1/2% per annum) produces a factor of
1.000096. This is then multiplied by the Annuity Unit value on the immediately
preceding Valuation Date (assumed here to be $1.105000). The result is an
Annuity Unit value of $1.105106 for the current monthly payment. The current
monthly
-4-
<PAGE>
payment is then determined by multiplying the number of Annuity Units by the
current Annuity Unit value, or 267.5818 times $1.105106, which produces a
current monthly payment of $295.71.
PERFORMANCE INFORMATION
The following describes how performance information will be calculated with
respect to the Sub-Accounts.
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 the deduction of the $25 IRA Account Fee.
Total Return figures are calculated by standardized methods prescribed by rules
of the Securities and Exchange Commission. The quotations are computed by
finding the average annual compounded rates of return over the specified periods
that would equate the initial amount invested to the ending redeemable values,
according to the following formula:
n
P(1 + T) = ERV
Where: P = a hypothetical initial payment to the Separate Account of $1,000
T = average annual total return
n = number of years
ERV = the ending redeemable value of the $1,000 payment at the end of the
specified period
The calculation of Total Return includes the annual charges against the asset of
the Sub-Account. This charge is 1.15% 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 IRA Account at the end of the
period.
YIELD AND EFFECTIVE YIELD - MONEY MARKET SUB-ACCOUNT
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 1.15%
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:
-5-
<PAGE>
(365/7)
Effective Yield = [(base period return + 1) ] - 1
The calculations of yield and effective yield do NOT reflect the $25 Annual IRA
Account Fee.
FINANCIAL STATEMENTS
Financial Statements are included for the Company and for Separate Account I.
-6-
<PAGE>
STATE MUTUAL LIFE
ASSURANCE COMPANY
OF AMERICA
FINANCIAL STATEMENTS
DECEMBER 31, 1994 and 1993
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
December 31, 1994
Financial Statements
Report of Independent Accountants...................................... 1
Statement of Financial Position ...................................... 2
Statement of Operations and Contingency Reserves....................... 3
Statement of Cash Flows................................................ 4
Notes to Financial Statements.......................................... 5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
February 13, 1995, except as to Note 2,
which is as of February 28, 1995
To the Board of Directors and Policyholders of
State Mutual Life Assurance Company of America
In our opinion, the accompanying statement of financial position and the
related statements of operations and changes in contingency reserves and of
cash flows present fairly, in all material respects, the financial position
of State Mutual Life Assurance Company of America at December 31, 1994 and
1993, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1 to the financial statements, the Company implemented a
new accounting pronouncement in 1993 and may adopt Statement of Financial
Accounting Standards No. 120, "Accounting and Reporting by Mutual Life
Insurance Enterprises and by Insurance Enterprises for Certain Long-Duration
Participating Contracts", and Financial Accounting Standards Board
Interpretation No. 40, "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises", in 1996. If
these pronouncements are adopted, the financial statements for the year ended
December 31, 1994 will be retroactively restated for the effects of these
changes in accounting principles.
Price Waterhouse LLP
Boston, Massachusetts
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
STATEMENT OF FINANCIAL POSITION
as of December 31
(In thousands)
<TABLE>
<CAPTION>
ASSETS 1994 1993
---- ----
<S> <C> <C>
Cash $ 21,931 $ 22,378
Investments:
Bonds 3,063,890 3,172,304
Stocks 14,638 48,713
Investments in subsidiaries 797,879 971,339
Mortgage loans 825,611 1,045,748
Policy loans 248,310 258,845
Real estate, including home office property 185,128 192,333
Short term investments 72,159 61,176
Other invested assets 45,978 22,180
---------- ----------
Total cash and investments 5,275,524 5,795,016
Premiums deferred and uncollected 95,890 91,434
Investment income due and accrued 84,066 89,756
Other assets 79,165 87,238
Assets held in separate accounts 1,096,032 922,069
---------- ----------
$6,630,677 $6,985,513
---------- ----------
---------- ----------
LIABILITIES AND CONTINGENCY RESERVES
Liabilities:
Policy liabilities:
Life reserves $ 965,896 $ 969,223
Annuity and other fund reserves 3,561,965 3,981,281
Accident and health reserves 50,096 45,424
Claims payable 122,677 112,509
Dividends payable 33,930 35,406
---------- ----------
Total policy liabilities 4,734,564 5,143,843
Expenses and taxes payable 137,676 99,301
Other liabilities 73,427 33,616
Asset valuation reserve 124,254 260,714
Obligations related to separate account business 1,095,430 921,648
---------- ----------
Total liabilities 6,165,351 6,459,122
---------- ----------
---------- ----------
Contingency reserves:
Special contingency reserves 26,522 25,238
General contingency reserves 438,804 501,153
---------- ----------
Total contingency reserves 465,326 526,391
---------- ----------
$6,630,677 $6,985,513
---------- ----------
---------- ----------
</TABLE>
The accompanying note are an integral part of these financial statements.
2
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
STATEMENT OF OPERATIONS AND
CHANGES IN CONTINGENCY RESERVES
for the year ended December 31
(In thousands)
<TABLE>
<CAPTION>
REVENUE 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Premiums and other considerations:
Life $ 100,956 $ 92,314 $ 101,929
Annuities 950,980 762,724 768,050
Accident and health 225,132 246,842 338,534
Reinsurance commissions and reserve adjustments 10,117 10,853 11,700
---------- ---------- ----------
Total premiums and other considerations 1,287,185 1,112,733 1,220,213
Net investment income 406,071 520,508 503,754
Realized capital losses, net of tax (28,341) (33,334) (5,261)
Other revenue 43,651 29,121 14,849
---------- ---------- ----------
Total revenue 1,708,566 1,629,028 1,733,555
---------- ---------- ----------
POLICY BENEFITS AND OPERATING EXPENSES
Policy benefits:
Claims, surrenders and other benefits 1,697,943 1,314,540 1,459,941
Decrease in policy reserves (412,090) (175,726) (153,971)
Dividends to policyholders 33,233 32,773 25,955
---------- ---------- ----------
Total policy benefits 1,319,086 1,171,587 1,331,925
Operating and selling expenses 141,460 138,566 141,456
Taxes, except capital gains tax 33,747 18,664 14,565
Net transfers to separate accounts 173,607 185,374 141,183
---------- ---------- ----------
Total policy benefits and operating expenses 1,667,900 1,514,191 1,629,129
---------- ---------- ----------
NET INCOME 40,666 114,837 104,426
CONTINGENCY RESERVES AT BEGINNING OF YEAR 526,391 444,427 338,683
Unrealized capital gains (losses) on investments:
Unconsolidated subsidiaries (222,155) 47,292 101,155
Other investments 24,579 (14,159) (61,479)
---------- ---------- ----------
(197,576) 33,133 39,676
---------- ---------- ----------
Transfer from (to) asset valuation reserve 136,460 (25,173) (40,188)
Other adjustments (40,615) (40,833) 1,830
---------- ---------- ----------
CONTINGENCY RESERVES AT END OF YEAR $ 465,326 $ 526,391 $ 444,427
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
STATEMENT OF CASH FLOWS
for the year ended December 31
(In thousands)
<TABLE>
<CAPTION>
CASH FLOW FROM OPERATING ACTIVITIES 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Premiums, deposits and other income $ 1,327,496 $ 1,120,816 $ 1,230,872
Allowances and reserve adjustments
on reinsurance ceded 10,862 11,773 8,836
Net investment income 372,428 432,631 443,668
Net repayments on policy loans 10,535 17,637 21,062
Benefits to policyholders and
beneficiaries (1,684,684) (1,313,978) (1,467,104)
Operating and selling expenses and
taxes (155,162) (111,125) (177,946)
Net transfers to separate accounts (160,623) (201,442) (135,921)
Dividends to policyholders (34,709) (27,777) (42,874)
Other sources (applications) 3,775 (40,938) 9,560
---------- ---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (310,082) (112,403) (109,847)
---------- ---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES
New borrowings 932,497 116,800 261,000
Repayment of borrowings (932,497) (116,800) (261,000)
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES -- -- --
---------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Sales and maturities of long term investments:
Bonds 993,365 841,548 776,693
Stocks 1,835 4,361 2,948
Real estate and other invested assets 19,200 24,122 23,886
Repayment of mortgage principal 193,842 211,360 136,252
Capital gains tax (1,086) (2,232) --
Acquisition of long term investments:
Bonds (881,081) (887,976) (821,694)
Stocks (4,557) (62,318) (6,674)
Real estate and other invested assets (31,504) (3,931) (32,404)
Mortgage loans (1,529) (1,185) (6,313)
Other investing activities 32,133 (5,199) (743)
---------- ---------- ----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 320,618 118,550 71,951
---------- ---------- ----------
Net change in cash and short term investments 10,536 6,147 (37,896)
CASH AND SHORT TERM INVESTMENTS
Beginning of year 83,554 77,407 115,303
---------- ---------- ----------
End of year $ 94,090 $ 83,554 $ 77,407
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION - State Mutual Life Assurance Company
of America (State Mutual or the "Company") is presently organized as a mutual
life insurance company and accordingly, the Company's financial statements
have been prepared on the basis of accounting practices prescribed or
permitted by the Division of Insurance of the Commonwealth of Massachusetts
and in conformity with practices prescribed by the National Association of
Insurance Commissioners (NAIC), which are generally accepted accounting
principles for mutual life insurance companies. The Company is pursuing a
plan of reorganization which includes conversion to a stock life insurance
company. (Refer to Note 2 for a description of the reorganization.)
Certain reclassifications have been made to prior years amounts to conform
with the current year presentation.
ACCOUNTING FOR UNCONSOLIDATED SUBSIDIARIES - State Mutual's interest in
unconsolidated subsidiaries consists primarily of SMA Life Assurance Company
(SMA Life), a wholly owned life insurance company, a 57.4% interest in
Allmerica Property & Casualty Companies, Inc. (Allmerica P&C), a Delaware
domiciled business corporation which owns The Hanover Insurance Company
(Hanover), and several wholly owned non-insurance subsidiaries. Hanover owns
an 80.6% interest in Citizens Corporation, parent company of Citizens
Insurance Company of America (Citizens). Allmerica P&C is accounted for at
market value. During 1993, the Securities Valuation Office of the NAIC
instituted a discount to market values for subsidiaries previously carried at
market value. The discount applied to Allmerica P&C was determined to be
16%, to be phased in over a five year period (3% per year in 1993 to 1996
and 4% in 1997). SMA Life and the non-insurance subsidiaries are accounted
for under the equity method. The Company's equity in the earnings of
unconsolidated subsidiaries is reflected in net income. Any remaining
changes in Allmerica P&C's value and direct charges to SMA Life's surplus are
reflected in contingency reserves.
VALUATION OF INVESTMENTS - Investments in bonds are carried principally at
amortized cost in accordance with NAIC guidelines. Preferred stocks are
carried generally at cost and common stocks are carried at market value.
Policy loans are carried principally at unpaid principal balances.
Mortgage loans on real estate are stated at unpaid principal balances, net of
unamortized discounts. Mortgage loans are reduced for losses expected by
management to be realized on transfers of mortgage loans to real estate (upon
foreclosure), on the disposition or settlement of mortgage loans and on
mortgage loans which management believes may not be collectible in full. In
determining the amount of the loss, management considers, among other things,
the estimated fair value of the underlying collateral.
Investment real estate and real estate acquired through foreclosure are
carried at the lower of depreciated cost or market value. Home office
property is carried at depreciated cost.
An asset valuation reserve (AVR) for bonds, mortgage loans, stocks, real
estate, and other invested assets is maintained by appropriations from
surplus in accordance with a formula specified by the NAIC and is classified
as a liability.
FINANCIAL INSTRUMENTS - In the normal course of business, the Company enters
into transactions involving various types of financial instruments including
investments such as bonds and stocks, investment and loan commitments,
foreign currency swaps, and futures contracts. These instruments involve
credit risk and also may be subject to risk of loss due to currency risk and
interest rate fluctuations. The Company evaluates and monitors each
financial instrument individually and, when appropriate, obtains collateral
or other security to minimize losses.
RECOGNITION OF PREMIUM INCOME AND ACQUISITION COSTS - In general, premiums
are recognized as revenue over the premium paying period of the policies;
commissions and other costs of acquiring the policies are charged to
operations when incurred.
SEPARATE ACCOUNTS - Separate account assets and liabilities represent
segregated funds administered and invested by the Company for the benefit of
certain variable life insurance policyholders and certain pension and annuity
contractholders.
5
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
Assets consist principally of bonds, common stocks, and short term
obligations at market value. The investment income, gains, and losses of
these accounts generally accrue to the contractholders and, therefore, are
not included in the Company's net income. Appreciation and depreciation of
the Company's interest in the separate accounts, including undistributed net
investment income, is reflected in contingency reserves.
INSURANCE RESERVES AND ANNUITY AND OTHER FUND RESERVES - Reserves for life
insurance, annuities, and accident and health insurance are established in
amounts adequate to meet the estimated future obligations of policies in
force based on accepted actuarial methods. These liabilities are computed
based upon mortality, morbidity and interest rate assumptions applicable to
these coverages, including a provision for adverse deviation. Interest rates
range from 2 1/2% to 6% for life insurance and 2% to 9 1/2% for annuities, and
mortality and morbidity assumptions reflect the Company's experience and
industry standards. The assumptions vary by plan, age at issue, year of
issue and duration.
Reserves for group accident and health claims include estimated provisions
for both reported and unreported claims incurred and related expenses.
Claims reserves are computed based on historical experience modified for
expected trends in frequency and severity. Other fund reserves are for
guaranteed investment contracts and other group and individual contract
deposit funds and consist of deposits received from customer's and investment
earnings on their fund balances.
Withdrawal characteristics of annuity and other fund reserves vary by
contract. At both December 31, 1994 and 1993, approximately 87% of the
contracts (included in both the general account and the separate accounts of
the Company) were not subject to discretionary withdrawal or were subject to
withdrawal at book value less surrender charge.
FEDERAL INCOME TAXES - State Mutual, its non-insurance domestic subsidiaries
and SMA Life file a consolidated United States Federal income tax return.
Entities included within the consolidated group are segregated into either a
life insurance or non-life insurance company subgroup. The consolidation of
these subgroups is subject to certain statutory restrictions on the
percentage of eligible non-life taxable operating losses that can be applied
to offset life company taxable income. Allmerica P&C and its subsidiaries
file a separate United States Federal income tax return.
The Federal income tax for the non-life insurance subsidiaries is calculated
on a separate return basis. Any current tax liability (benefit) is paid to
(reimbursed by) State Mutual. Tax benefits resulting from taxable operating
losses of the non-life subsidiaries are not reimbursed currently by State
Mutual. However, to the extent such losses are utilized by the consolidated
group, they are reflected as a liability of State Mutual.
The Federal income tax for the life companies is calculated on a line of
business basis, excluding the operating results of the non-insurance
subsidiaries and Allmerica P&C. The tax is allocated to each life company
based on its contribution to the taxable income or loss of each line of
business.
CAPITAL GAINS AND LOSSES - Realized capital gains and losses, net of
applicable capital gains tax or benefit, exclusive of those transferred to
the interest maintenance reserve (IMR), are included in the statement of
operations. Unrealized capital gains and losses are reflected as direct
credits or charges to contingency reserves. The IMR, which is included in
other liabilities, establishes a reserve for realized gains and losses, net
of tax, resulting from changes in interest rates on short and long term fixed
income investments. Net realized gains and losses charged to the IMR are
amortized into net investment income over the remaining life of the
investment sold.
DIVIDENDS TO POLICYHOLDERS - Certain life, health and annuity insurance
policies contain dividend payment provisions that enable the policyholder to
participate in the earnings of the Company. The amount of policyholders'
dividends to be paid is determined annually by the Board of Directors. The
aggregate amount of policyholders' dividends is related to the actual
interest, mortality, morbidity and expense experience for the year and the
Company's judgment as to the appropriate level of statutory surplus to be
retained.
Dividends on individual life insurance, individual accident and health
insurance, and individual annuity policies are provided on the basis of
amounts payable in the following calendar year. Dividends on all other
insurance are provided on the basis of amounts incurred for the current year.
6
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
PENDING ACCOUNTING PRONOUNCEMENT - In April 1993, the Financial Accounting
Standards Board (FASB) issued Interpretation No. 40, "Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance and Other
Enterprises" (FIN 40), which establishes a different definition of generally
accepted accounting principles for mutual life insurance companies. Under the
Interpretation, financial statements of mutual life insurance companies which
are prepared on the basis of statutory accounting, will no longer be
characterized as in conformity with generally accepted accounting principles.
In January 1995, the FASB issued Statement of Financial Accounting Standards
No. 120, "Accounting and Reporting by Mutual Life Insurance Enterprises and
by Insurance Enterprises for Certain Long-Duration Participating Contracts"
(SFAS No. 120), and the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position No. 95-1, "Accounting for Certain
Insurance Activities of Mutual Life Insurance Enterprises" (SOP 95-1). SFAS
No. 120 extends the requirements of SFAS No. 60, "Accounting and Reporting by
Insurance Enterprises," No. 97, "Accounting and Reporting by Insurance
Enterprises for Certain Long-Duration Contracts and for Realized Gains and
Losses from the Sale of Investments," and No. 113, "Accounting and Reporting
for Reinsurance of Short-Duration and Long-Duration Contracts," to mutual
life insurance enterprises. SOP 95-1 establishes accounting for certain
participating life insurance contracts for mutual life insurance enterprises.
SFAS No. 120 requires mutual life insurance enterprises (and permits stock
life insurance enterprises) to apply the provisions of SOP 95-1 to those
contracts which meet the conditions in SFAS No. 120.
FIN 40, SFAS No. 120 and SOP 95-1 are all effective for financial statements
issued for fiscal years beginning after December 15, 1995.
In as much as the Company is pursuing a plan of reorganization which includes
conversion to a stock life insurance company, and would result in future
financial statements being prepared in accordance with generally accepted
accounting principles for stock life insurance companies, the new
pronouncement may not be applicable to future financial statements. If the
Company does not demutualize, the new pronouncement will be adopted in 1996,
by retroactive restatement of the earliest year presented. Management of the
Company has not yet determined the effect on its financial statements of
applying these new pronouncements.
ACCOUNTING CHANGES - In December 1992, the NAIC issued a statutory accounting
policy for accounting for postretirement benefits other than pensions for
current retirees and employees who have vested rights in those benefits. The
Company implemented this statutory requirement in 1993 and elected to
immediately recognize the unfunded postretirement benefit obligation and
reported the cumulative effect of this change as a direct charge to
contingency reserves (see Note 9 for additional information).
NOTE 2 - REORGANIZATION
On February 28, 1995, State Mutual's Board of Directors adopted, pursuant to
Massachusetts insurance law, a plan of reorganization (the "Plan") whereby
State Mutual will convert from a Massachusetts mutual life insurance company
to a Massachusetts stock life insurance company and will become a wholly
owned subsidiary of Allmerica Financial Corporation ("AFC"). Currently, the
unsatisfied conditions to the effectiveness of the Plan of Demutualization
are the approval of the Commissioner of the Massachusetts Division of
Insurance (the "Commissioner") of the Plan after a hearing thereon, the
approval of the policyholders of the Plan, the closing of an initial public
offering of AFC Common Stock and certain other conditions set forth in the
Plan. The Plan is also subject to the review of other insurance regulators.
The Plan will become effective on the date of the closing of the initial
public offering of the Common Stock of AFC.
Under the Plan, the eligible policyholders of State Mutual will receive
shares of Common Stock of AFC, policy credits or cash in exchange for the
policyholders' membership interest in State Mutual.
Under the Plan, State Mutual will establish and operate a closed block of
participating business for the benefit of the policies included therein (the
"Closed Block"). Such business (the" Closed Block Business") will contain
those classes of individual or joint life insurance participating policies,
individual deferred annuity contracts and supplementary contracts not
involving life contingencies which are in force on the effective date. The
Closed Block will continue in effect until no more policies included therein
are in force or until the Commissioner consents to the termination of the
Closed Block. The duration of the Closed Block is expected to be in excess
of 50 years.
7
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
State Mutual will allocate to the Closed Block an amount of assets expected
to produce cash flows which, together with anticipated revenues from the
Closed Block Business, are reasonably sufficient to support the Closed Block
Business, including provision for payments of claims, certain expenses and
taxes, and for continuation of 1994 dividend scales if experience underlying
such scales continues. Future changes in actual reinvestment rates over the
long term from assumed reinvestment rates, like changes in other assumptions
made in funding the Closed Block, may cause dividend scales to change.
To the extent that over time cash flows from the assets allocated to the
Closed Block and other experience related to the Closed Block Business are,
in the aggregate, more favorable than assumed in establishing the Closed
Block, total dividends paid to Closed Block policyholders in future years
will be greater than the total dividends that would have been paid to such
policyholders if the dividend scales payable in 1994 had been continued.
Conversely, to the extent that over time such cash flows and other experience
are, in the aggregate, less favorable than assumed in setting up the Closed
Block, total dividends paid to Closed Block policyholders in future years
will be less than the total dividends that would have been paid to such
policyholders if the dividend scales payable in 1994 had been continued. In
addition, if the assets allocated to the Closed Block, the cash flows
therefrom and the revenues from the Closed Block Business prove to be
insufficient to pay the benefits guaranteed under the policies and contracts
included in the Closed Block, State Mutual will be required to make such
payments from its general funds. Since the Closed Block will be funded to
provide for payment of guaranteed benefits on such policies and contracts
and, in addition, for continuation of dividends paid under 1994 dividend
scales, it will not be necessary to use general funds to pay guaranteed
benefits unless the Closed Block Business experiences very substantial
adverse deviations in investment, mortality, persistency or other experience
factors.
NOTE 3 - INVESTMENTS
BONDS - The carrying value and fair value of investments in
bonds, are as follows:
<TABLE>
<CAPTION>
December 31, 1994
-----------------
Gross Gross
Carrying Unrealized Unrealized Fair
(In thousands) Value Appreciation Depreciation Value
----- ------------ ------------ -----
<S> <C> <C> <C> <C>
Federal government bonds $ 13,250 $ 246 $ 534 $ 12,962
State, local and government agency bonds 550 7 -- 557
Foreign government bonds 70,217 1,126 6,510 64,833
Corporate securities 2,939,333 22,052 96,285 2,865,100
Mortgage-backed securities 40,540 58 1,895 38,703
---------- -------- -------- ----------
Total $3,063,890 $ 23,489 $105,224 $2,982,155
---------- -------- -------- ----------
---------- -------- -------- ----------
December 31, 1993
-----------------
Federal government bonds $ 19,442 $ 1,484 $ 40 $ 20,886
State, local and government agency bonds 12,048 235 -- 12,283
Foreign government bonds 64,951 4,417 14 69,354
Corporate securities 3,075,146 182,272 18,589 3,238,829
Mortgage-backed securities 717 43 -- 760
---------- -------- -------- ----------
Total $3,172,304 $188,451 $ 18,643 $3,342,112
---------- -------- -------- ----------
---------- -------- -------- ----------
</TABLE>
8
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
The carrying value and fair value by contractual maturity at December 31,
1994, are shown below. Actual maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties or the Company may have the
right to put or sell the obligation back to the issuer. Mortgage-backed
securities are classified based on expected maturities.
<TABLE>
<CAPTION>
Carrying Fair
(In thousands) Value Value
----- -----
<S> <C> <C>
Due in one year or less $ 566,301 $ 567,013
Due after one year through five years 1,691,897 1,651,469
Due after five years through ten years 607,819 571,345
Due after ten years 197,873 192,328
---------- ----------
Total $3,063,890 $2,982,155
---------- ----------
---------- ----------
</TABLE>
MORTGAGE LOANS AND REAL ESTATE Mortgage loans and real estate investments
are diversified by property type and location. Real estate investments,
except home office, have been obtained primarily through foreclosure.
Mortgage loans are collateralized by the related properties and are generally
no more than 75% of the property value at the time the original loan is made.
Mortgage loan and real estate investments, including home office of $67,920
thousand and $61,363 thousand at December 31, 1994 and 1993, respectively,
were distributed by the following types and geographic regions at December 31:
<TABLE>
<CAPTION>
(In thousands)
Property Type 1994 1993
- ------------- ---- ----
<S> <C> <C>
Office buildings $ 445,222 $ 514,575
Residential 148,155 233,459
Retail 168,536 197,496
Industrial/Warehouse 93,323 135,766
Other 155,503 156,785
---------- ----------
Total $1,010,739 $1,238,081
---------- ----------
---------- ----------
Geographic Region
- -----------------
South Atlantic $ 263,883 $ 342,345
Pacific 189,547 212,371
New England 142,371 142,263
West South Central 99,065 141,375
Middle Atlantic 108,531 113,716
East North Central 71,937 114,694
East South Central 48,232 66,139
West North Central 72,919 82,883
Mountain 14,254 22,295
---------- ----------
Total $1,010,739 $1,238,081
---------- ----------
---------- ----------
</TABLE>
FUTURES CONTRACTS - State Mutual purchases and sells futures contracts on
margin to hedge against interest rate fluctuations and their effect on the
net cash flows from the sales of guaranteed investment contracts. Because
the Company purchases and sells futures contracts through brokers who assume
the risk of loss, the Company's exposure to credit risk under futures
contracts is limited to the margin deposited with the broker. The maturity of
all futures contracts outstanding is less than one year.
Gains and losses on hedge contracts related to interest rate fluctuations are
deferred and recognized in income over the period being hedged corresponding
to related guaranteed investment contracts. The amount of hedging gains
(losses) explicitly deferred were $(7,658) thousand, $6,953 thousand and
$4,976 thousand for the years ended December 31, 1994,
9
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
1993 and 1992, respectively. Gains and losses on hedges that are deemed
ineffective by management are immediately recognized into income.
A reconciliation of notional amounts for all futures contracts outstanding
for the year ended December 31 is as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
---- ----
<S> <C> <C>
Contracts outstanding, January 1 $ 141,700 $ 120,000
New contracts 816,000 493,300
Contracts expired -- --
Contracts terminated (831,000) (471,600)
--------- ---------
Contracts outstanding, December 31 $ 126,700 $ 141,700
--------- ---------
--------- ---------
</TABLE>
FOREIGN CURRENCY SWAP CONTRACTS - The Company enters into foreign currency
swap contracts to hedge the exposure to currency risks on fixed maturity
investments. Interest and principal related to foreign fixed maturity
investments payable in foreign currencies, at market currency exchange rates,
are exchanged for the equivalent payment translated at a specific currency
exchange rate. The Company's maximum exposure to counterparty credit risk is
the difference between the foreign currency exchange rates, as agreed upon in
the swap contract, and the foreign currency spot rate on the date of
exchange. State Mutual recognizes net interest received or paid over the life
of the swap contract as an adjustment to net investment income. The decrease
in net investment income related to foreign currency swap contracts was
$(1,400) thousand, $(800) thousand and $(200) thousand for the years ended
December 31, 1994, 1993 and 1992, respectively.
The contractual amounts and maturity dates of foreign currency swap contracts
were as follows:
<TABLE>
<CAPTION>
December 31, 1994
-----------------
After
(In thousands) 1995 1996 1997 1998 1998 Total
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Currency:
Swiss franc $14,100 $10,600 $ -- $ -- $ 6,600 $ 31,300
Canadian dollar -- -- -- -- 15,000 15,000
British pound sterling -- -- 8,200 -- 18,800 27,000
Italian lire -- 20,000 -- -- -- 20,000
Other -- 5,400 10,000 -- 10,000 25,400
------- ------- ------- ------- ------- --------
Balance, December 31 $14,100 $36,000 $18,200 $ -- $50,400 $118,700
------- ------- ------- ------- ------- --------
------- ------- ------- ------- ------- --------
December 31, 1993
-----------------
After
(In thousands) 1994 1995 1996 1997 1997 Total
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Currency:
Swiss franc $ 5,000 $14,100 $10,600 $ -- $ 6,600 $ 36,300
Canadian dollar -- -- -- -- 15,000 15,000
British pound sterling -- -- -- 8,200 18,800 27,000
Italian lire -- -- 20,000 -- -- 20,000
Other 10,100 -- 5,400 10,000 5,000 30,500
------- ------- ------- ------- ------- --------
Balance, December 31 $15,100 $14,100 $36,000 $18,200 $45,400 $128,800
------- ------- ------- ------- ------- --------
------- ------- ------- ------- ------- --------
</TABLE>
10
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
A reconciliation of the contractual amounts of foreign currency swap
contracts outstanding for the year ended December 31 is as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
---- ----
<S> <C> <C>
Contracts outstanding, January 1 $128,800 $ 95,000
New contracts 10,100 50,700
Contracts expired (15,100) (16,900)
Contracts terminated (5,100) --
-------- --------
Contracts outstanding, December 31 $118,700 $128,800
-------- --------
-------- --------
</TABLE>
NET INVESTMENT INCOME - The components of net investment income for the year
ended December 31 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Bonds $261,176 $276,077 $285,415
Stocks 1,305 1,062 938
Investments in subsidiaries 37,478 107,603 67,239
Mortgage loans 87,670 114,831 130,480
Real estate 50,431 48,072 47,061
Policy loans 14,457 15,282 16,271
Other investments 2,765 (264) 2,649
Short term investments 359 2,284 1,045
-------- -------- --------
455,641 564,947 551,098
Less investment expenses 52,123 45,556 47,405
-------- -------- --------
Net investment income, before IMR amortization 403,518 519,391 503,693
IMR amortization 2,553 1,117 61
-------- -------- --------
Net investment income $406,071 $520,508 $503,754
-------- -------- --------
-------- -------- --------
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES - Realized capital gains (losses) on
investments for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Bonds $ 2,144 $ 4,953 $ 1,855
Stocks 84 87 472
Mortgage loans (21,351) (12,709) 49
Real estate (8,990) (11,743) (5,799)
Other 2,505 (2,734) (572)
-------- -------- --------
(25,608) (22,146) (3,995)
Less Federal income tax 1,086 2,232 961
-------- -------- --------
Net realized capital losses before transfer to IMR (26,694) (24,378) (4,956)
Net realized capital gains transferred to IMR (1,647) (8,956) (305)
-------- -------- --------
Net realized capital losses $(28,341) $(33,334) $ (5,261)
-------- -------- --------
-------- -------- --------
</TABLE>
Proceeds from voluntary sales of investments in bonds during 1994, 1993 and
1992 were $222,644 thousand, $222,865 thousand and $136,458 thousand,
respectively. Gross gains of $3,753 thousand, $3,337 thousand and $1,504
thousand and gross losses of $2,945 thousand, $1,300 thousand and $1,159
thousand, respectively, were realized on those sales.
11
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
NOTE 4 - INVESTMENTS IN SUBSIDIARIES
Summarized financial information concerning all unconsolidated subsidiaries
as of December 31 is as follows:
<TABLE>
<CAPTION>
Property & Casualty
(In thousands) Life Insurance Insurance Non-Insurance
-------------- --------- -------------
<S> <C> <C> <C>
1994
- ----
Assets $4,072,045 $4,337,564 $ 74,597
Liabilities 3,882,722 3,347,785 29,883
Equity in net income (loss) 6,403 42,753 (11,678)
1993
- ----
Assets $3,504,724 $4,200,463 $ 70,014
Liabilities 3,322,508 3,240,364 26,479
Equity in net income (loss) 19,782 95,741 (7,920)
</TABLE>
The Company provides management, operating personnel, facilities and other
services to various subsidiaries and affiliates. Reimbursements for such
services and facilities amounted to $261,913 thousand, $225,044 thousand and
$112,777 thousand in 1994, 1993 and 1992, respectively. Net amounts
receivable from subsidiaries and affiliates were $37,514 thousand and $30,188
thousand at December 31, 1994 and 1993, respectively.
NOTE 5 - FAIR VALUE DISCLOSURES OF FINANCIAL INFORMATION
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" requires disclosure of fair value information
about certain financial instruments (insurance contracts, real estate,
goodwill and taxes are excluded) for which it is practicable to estimate such
values, whether or not these instruments are included in the balance sheet.
The fair values presented for certain financial instruments are estimates
which, in many cases, may differ significantly from the amounts which could
be realized upon immediate liquidation. In cases where market prices are not
available, estimates of fair value are based on discounted cash flow analyses
which utilize current interest rates for similar financial instruments which
have comparable terms and credit quality. Fair values of futures contracts
and foreign currency swaps were not material to State Mutual as of December 31,
1994 and 1993.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
FINANCIAL ASSETS:
CASH AND SHORT TERM INVESTMENTS - The carrying amounts reported in the
statement of financial position approximate fair value.
BONDS - Fair values are based on quoted market prices, if available. If a
quoted market price is not available, fair values are estimated using
independent pricing sources or internally developed pricing models using
discounted cash flow analyses.
STOCKS - Fair values are based on quoted market prices, if available. If a
quoted market price is not available, fair values are estimated using
independent pricing sources or internally developed pricing models.
MORTGAGE LOANS - Fair values are estimated by discounting the future
contractual cash flows using the current rates at which similar loans would
be made to borrowers with similar credit ratings. The fair value of below
investment grade mortgage loans is limited to the lesser of the present value
of future cash flows or book value.
POLICY LOANS - The carrying amount reported in the statement of financial
position approximates fair value since policy loans have no defined maturity
dates and are inseparable from the insurance contracts.
12
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
FINANCIAL LIABILITIES:
INVESTMENT CONTRACTS (WITHOUT MORTALITY/MORBIDITY FEATURES) - Fair values
for the Company's liabilities under guaranteed investment type contracts are
estimated using discounted cash flow calculations using current interest
rates for similar contracts with maturities consistent with those remaining
for the contracts being valued. Other liabilities are based on surrender
values.
The estimated fair values of the financial instruments as of December 31 were
as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
Carrying Fair Carrying Fair
(In thousands) Value Value Value Value
----- ----- ----- -----
<S> <C> <C> <C> <C>
Financial Assets:
Cash $ 21,931 $ 21,931 $ 22,378 $ 22,378
Short term investments 72,159 72,159 61,176 61,176
Bonds 3,063,890 2,982,155 3,172,304 3,342,112
Stocks 14,638 14,638 48,713 48,713
Mortgage loans 825,611 814,047 1,045,748 1,077,707
Policy loans 248,310 248,310 258,845 258,845
Financial Liabilities:
Guaranteed investment contracts $2,170,643 $2,134,046 $2,463,938 $2,582,392
Other group contract deposit funds 980,327 969,627 1,087,732 1,116,800
Supplemental contracts without life contingencies 8,647 8,647 11,013 11,013
Dividend accumulations 84,482 84,482 84,808 84,808
Other individual contract deposit funds 107,400 106,893 124,081 122,908
Individual annuity contracts 8,185 7,943 -- --
</TABLE>
NOTE 6 - BORROWED MONEY
State Mutual issues commercial paper primarily to manage imbalances between
operating cash flows and existing commitments. Commercial paper borrowing
arrangements are supported by various lines of credit. As of December 31,
1994, State Mutual has approximately $165,000 thousand in unused committed
lines of credit provided by U.S. banks. These lines of credit generally have
terms of less than one year, and require the Company to pay annual commitment
fees ranging from 0.10% to 0.125% of the available credit. Interest that
would be charged for usage of these lines of credit is based upon negotiated
arrangements.
State Mutual has no borrowed money outstanding at December 31, 1994 and 1993.
Interest expense related to borrowed money was $2,485 thousand, $154
thousand and $580 thousand for the years ended December 31, 1994, 1993 and
1992, respectively.
NOTE 7 - FEDERAL INCOME TAXES
The federal income tax provisions (benefit) for 1994, 1993 and 1992 were
$17,476 thousand, $9,265 thousand and $(208) thousand, respectively, which
include taxes applicable to realized capital gains of $1,086 thousand, $2,232
thousand and $961 thousand.
The effective federal income tax rates were 30.1%, 7.5% and (0.2)% in 1994,
1993 and 1992, respectively. The differences between the federal statutory
rate and the Company's effective tax rates are primarily related to:
decreases in taxable income for the utilization of net operating loss
carryforwards and write-offs of mortgage loans and real estate; increases in
taxable income for differences in policyholder liabilities for federal income
tax purposes and financial reporting purposes, the accrual of market
discounts on investments and the deferral of policy acquisition costs for
federal tax purposes. The
13
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
policyholder dividends adjustment affecting mutual life insurance companies
resulted in an increase in taxable income in 1994 and 1992 and a decrease in
taxable income in 1993. At December 31, 1994, the Company has no available
net operating loss carryforwards; however, there are available alternative
minimum tax credit carryforwards of $1,540 thousand.
The Company's Federal income tax returns are routinely audited by the
Internal Revenue Service (IRS) and provisions are routinely made in the
financial statements in anticipation of the results of these audits. The
Internal Revenue Service (IRS) has completed its examination of all of the
Company's federal income tax returns through 1988. Deficiencies asserted
with respect to tax years 1977 through 1981 have been paid and recorded and
the Company has filed a recomputation of such years with appeals claiming a
refund with respect to certain agreed upon issues, but has not recognized any
benefit in its financial statements. The Company is currently considering
its response to certain adjustments proposed by the IRS with respect to the
Company's federal income tax returns for 1982 and 1983. If upheld, these
proposed adjustments would result in additional payments; however, the
Company will vigorously defend its position with respect to these
adjustments. In management's opinion, adequate tax liabilities have been
established for all years.
NOTE 8 - PENSION PLANS
The Company provides retirement benefits to substantially all of its
employees and all agents hired prior to 1982 under defined benefit pension
plans. Through December 31, 1994, retirement benefits were based primarily
on years of service and compensation. Benefit accruals under the defined
benefit formula were frozen for most employees (but not for eligible agents)
effective December 31, 1994. In their place, the Company plans to adopt a
defined benefit cash balance formula, under which the Company would annually
provide a contribution to each eligible employee as a percentage of that
employee's salary, similar to a defined contribution plan arrangement.
Employees would then be allowed to direct the investment of their awards and
to borrow against them. Adoption of the defined benefit cash balance formula
is subject to the resolution of certain technical and design issues, and may
be subject to receipt of a favorable determination letter from the IRS that
the Company's pension plans, as amended to reflect the cash balance formula,
will continue to satisfy the requirements of Section 401(a) of the Internal
Revenue Code. The Company's funding policy is to contribute annually the
minimum contribution determined using the net unit credit cost method and
applicable regulations of the Employee Retirement Income Security Act of
1974. The Company's accounting policy follows FASB Statement No. 87,
"Employers' Accounting for Pensions".
Components of net pension expense (benefit) for the years ended December 31,
were as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 5,403 $ 3,980 $ 3,222
Interest accrued on projected benefit
obligations 11,706 11,675 9,948
Actual return on plan assets (1,671) (13,942) (13,071)
Net amortization and deferral (10,399) 302 (1,192)
-------- -------- --------
Net pension expense (benefit) $ 5,039 $ 2,015 $ (1,093)
-------- -------- --------
-------- -------- --------
</TABLE>
14
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
The following table summarizes the status as of December 31, of the Company's
pension plans. The plans' assets exceeded accumulated benefits. The net
pension asset is included in the statement of financial position with Other
Assets.
<TABLE>
<CAPTION>
(In thousands) 1994 1993
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $140,230 $153,244
-------- --------
-------- --------
Accumulated benefit obligation $141,727 $154,058
-------- --------
-------- --------
Pension asset included in Other Assets:
Projected benefit obligation for service rendered to date $153,334 $171,506
Plan assets at fair value 154,209 161,224
-------- --------
Plan assets in excess (deficit) of projected benefit obligation 875 (10,282)
Unrecognized net loss from past experience 41,438 45,945
Unrecognized prior service cost (12,568) 403
Unamortized transition asset (18,184) (19,466)
-------- --------
Net pension asset $ 11,561 $ 16,600
-------- --------
-------- --------
</TABLE>
Determination of the projected benefit obligation was based on a weighted
average discount rate of 8.5% in 1994 and 7% in 1993. The assumed long-term
rate of return on plan assets was 9% for both years. The actuarial present
value of the projected benefit obligation was determined using assumed rates
of increase in future compensation levels ranging from 5.5% to 6% for both
years. Updated mortality tables were used in 1993 to reflect the longer life
expectancy of retirees. Plan assets are invested primarily in various
separate accounts and the general account of State Mutual.
The Company has a Profit Sharing and 401(k) Plan for which substantially all
employees are eligible. The Company also has a similar integrated defined
contribution plan for substantially all of its agents. Effective for plan
years beginning after 1994, the profit sharing formula for employees has been
discontinued and a 401(k) match feature has been added to the continuing
401(k) plan for the employees.
NOTE 9 - OTHER POSTRETIREMENT BENEFIT PLANS
In addition to the Company's pension plans, the Company currently provides
postretirement medical and death benefits to certain full-time employees and
dependents, under a plan sponsored by State Mutual. Generally, employees
become eligible at age 55 with at least 15 years of service. Spousal
coverage is generally provided for up to two years after death of the
retiree. Benefits include hospital, major medical and a payment at death
equal to retirees' final compensation up to certain limits. The medical
plans have varying copayments and deductibles, depending on the plan. This
plan is unfunded.
Effective January 1, 1993, the Company adopted the statutory accounting
policy for employers' accounting for postretirement benefits other than
pensions for its postretirement benefit plans. The accounting policy
requires companies to recognize the estimated future cost of providing health
and other postretirement benefits on an accrual basis. Previously, such
costs were generally recognized as an expense when paid. The Company elected
to immediately record the transition obligation in the amount of $23,495
thousand as a direct charge to contingency reserves. The cost for benefits
earned during 1993, subsequent to adoption, and charged to operating expenses
was approximately $1,600 thousand more than the expense that would have been
recorded under the previous accounting method.
15
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
The status of the Company's plan at December 31, was as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
---- ----
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $20,156 $21,143
Active employees eligible to retire 7,512 5,806
------- -------
Accumulated postretirement benefit obligation accrued 27,668 26,949
Unrecognized actuarial loss (772) (1,800)
------- -------
Net postretirement benefit liability $26,896 $25,149
------- -------
------- -------
</TABLE>
The components of net periodic postretirement benefit expense
for the years ended December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
---- ----
<S> <C> <C>
Service cost $1,291 $1,400
Interest cost on accumulated postretirement benefit obligation 2,051 1,932
Amortization of unrecognized (gain) loss 214 --
------ ------
Net periodic postretirement benefit expense $3,556 $3,332
------ ------
------ ------
</TABLE>
For purposes of measuring the accumulated postretirement benefit obligation
at December 31, 1994, health care costs were assumed to increase 11%,
declining thereafter to an ultimate rate of 6% over seven years. At
December 31, 1993, health care costs were assumed to increase 12%, declining
to an ultimate rate of 5.5% over eight years. The weighted average discount
rate used in determining the accumulated postretirement benefit obligation was
8.5% and 7.0% at December 31, 1994 and 1993, respectively.
For purposes of measuring the accumulated postretirement benefit obligation
at January 1, 1993 (the transition adjustment), health care costs were
assumed to increase 15% for pre-1965 retirees and 13% for post-1965 retirees,
declining thereafter to 6% over 10 years for pre-1965 retirees and 8 years
for post-1965 retirees. The weighted average discount rate used in
determining the accumulated postretirement benefit obligation at January 1,
1993 was 8.5%.
The health care costs trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care cost trend
rate by 1% in each year would increase the accumulated postretirement benefit
obligation as of December 31, 1994 by $1,800 thousand, and the estimated
service cost and interest cost components of net periodic postretirement
benefit costs for 1994 by $265 thousand.
NOTE 10 - CONTINGENCY RESERVES
Other adjustments to contingency reserves for the years ended December 31 are
as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Change in non-admitted assets:
Demutualization costs $(10,299) $ (4,000) $ --
Other (3,711) 171 (372)
-------- -------- ------
Total change in non-admitted assets (14,010) (3,829) (372)
Transition adjustment for post retirement benefit obligation -- (23,495) --
Prior year taxes (3,383) (13,915) --
Prior year expense (13,827) -- --
FAS 87 adjustment for non-qualified pension plans (7,132) -- --
Other miscellaneous changes (2,263) 406 2,202
-------- -------- ------
Total other adjustments $(40,615) $(40,833) $1,830
-------- -------- ------
-------- -------- ------
</TABLE>
16
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
NOTE 11 - REINSURANCE
The Company participates in reinsurance to reduce overall risks, including
exposure to large losses and to permit recovery of a portion of direct
losses. Reinsurance contracts do not relieve the Company from its obligation
to its policyholders. Reinsurance financial data for the years ended
December 31, is as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C>
Reinsurance premiums assumed $ 62,127 $40,289 $ 35,679
Reinsurance premiums ceded $105,142 $81,545 $ 64,366
Deduction from insurance liability
including reinsurance recoverable on unpaid claims $ 90,244 $83,768 $106,774
</TABLE>
The Company assumes from SMA Life approximately 10% of the individual life
business of SMA Life. Premiums assumed by State Mutual aggregated $7,771
thousand, $9,000 thousand and $9,586 thousand in 1994, 1993 and 1992,
respectively. The Company also has entered into reinsurance agreements
whereby the Company cedes to SMA Life certain insurance risks related to
individual accident and health business, premium income and related expenses.
Premiums ceded pursuant to these agreements aggregated $3,788 thousand,
$4,190 thousand and $4,614 thousand in 1994, 1993 and 1992, respectively.
NOTE 12 - DIVIDEND RESTRICTIONS
Delaware, New Hampshire and Michigan have enacted laws governing the payment
of dividends and other distributions to stockholders by insurers. These laws
affect the dividend paying ability of SMA Life, Hanover and Citizens,
respectively.
Pursuant to Delaware's statute, the maximum amount of dividends and other
distributions that an insurer may pay in any twelve month period, without the
prior approval of the Delaware Commissioner of Insurance, is limited to the
greater of (i) 10% of its statutory policyholders' surplus as of the
preceding December 31 or (ii) the individual company's statutory net gain
from operations for the preceding calendar year (if such insurer is a life
company) or its net income (not including realized capital gains) for the
preceding calendar year (if such insurer is not a life company). Any
dividends to be paid by an insurer, whether or not in excess of the
aforementioned threshold, from a source other than earned surplus would also
require the prior approval of the Delaware Commissioner of Insurance. While
SMA Life is currently operating on a profitable basis, it has a negative
earned surplus position and, accordingly, is precluded from paying dividends
to State Mutual without the approval of the Delaware Commissioner of
Insurance.
Pursuant to New Hampshire's statute, extraordinary dividends and other
distributions may only be paid from statutory policyholders' surplus,
excluding dividends paid, as of the December 31st preceding. An
extraordinary dividend or distribution includes any dividend or distribution
of cash or other property, whose fair market value together with that of
other dividends or distributions made within the preceding 12 months exceeds
10% of such insurers surplus as regards policyholders as of December 31, next
preceding. Based on the 1994 statutory financial statements of Hanover, the
maximum dividend that may be paid to Allmerica P&C at January 1, 1995 without
prior approval from the New Hampshire Commissioner of Insurance is $92,400
thousand.
Under the Michigan Insurance Code, cash dividends may be paid by Citizens
only from earnings and policyholders' surplus. In addition, a Michigan
insurer may not pay an "extraordinary" dividend to its stockholders without
prior approval of the Michigan Insurance Commissioner. An extraordinary
dividend or distribution is defined as a dividend or distribution of cash or
other property whose fair market value, together with that of other dividends
and distributions made within the preceding 12 months, exceeds the greater of
10% of policyholders' surplus as of December 31 of the preceding year or the
statutory net income less realized gains, for the immediately preceding
calendar year. At January 1, 1995, Citizens could pay dividends of $32,700
thousand without approval of the Michigan Insurance Commissioner.
17
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
NOTE 13 - LITIGATION
The Company has been named a defendant in various legal proceedings arising
in the normal course of business. In the opinion of management, based on the
advice of legal counsel, the ultimate resolution of these proceedings will
not have a material effect on the Company's financial statements.
18
<PAGE>
SEPARATE ACCOUNT I
STATEMENTS OF ASSETS AND LIABILITIES - December 31, 1994
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
1 2 3
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of Allmerica Investment Trust . . $ 444,484 $ 111,248 $ 376,577
LIABILITIES:
Payable to State Mutual Life Assurance Company
of America(Sponsor) . . . . . . . . . . . . . . . . 422 110 337
----------- ----------- -----------
Net assets . . . . . . . . . . . . . . . . . . . . . . $ 444,062 $ 111,138 $ 376,240
----------- ----------- -----------
----------- ----------- -----------
Net asset distribution by category:
Qualified variable annuity policies . . . . . . . . $ 444,062 $ 111,138 $ 376,240
----------- ----------- -----------
----------- ----------- -----------
Qualified units outstanding, December 31, 1994 . . . . 4,174 1,110 3,615
Net asset value per qualified unit, December 31, 1994. $106.389147 $100.109050 $104.088584
The accompanying notes are an integral part of these financial statements.
<PAGE>
SEPARATE ACCOUNT I
<CAPTION>
- --------------------------------------------------------------------------------------------
Sub-Account Sub-Account
4 5
- --------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investment in shares of Allmerica Investment Trust . . $ 105,121 $ 123,217
LIABILITIES:
Payable to State Mutual Life Assurance Company
of America(Sponsor) . . . . . . . . . . . . . . . . 98 157
----------- -----------
Net assets . . . . . . . . . . . . . . . . . . . . . . $ 105,023 $ 123,060
----------- -----------
----------- -----------
Net asset distribution by category:
Qualified variable annuity policies . . . . . . . . $ 105,023 $ 123,060
----------- -----------
----------- -----------
Qualified units outstanding, December 31, 1994 . . . . 987 1,234
Net asset value per qualified unit, December 31, 1994. $106.437408 $ 99.753769
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SEPARATE ACCOUNT I
Statements of Operations For the Year Ended December 31, 1994
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
1 2 3
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . $ 28,986 $ 7,553 $ 5,642
EXPENSES:
Mortality and expense risk fees . . . 3,700 1,113 1,181
Administrative expense fees . . . . . 1,028 309 328
---------- ---------- ----------
Total expenses. . . . . . . . . . . 4,728 1,422 1,509
---------- ---------- ----------
Net investment income . . . . . . . . 24,258 6,131 4,133
---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss). . . . . . . (7,214) (1,965) ---
Net unrealized (loss) . . . . . . . . (19,429) (9,199) ---
---------- ---------- ----------
Net realized and unrealized
gain (loss) on investments . . . . . (26,643) (11,164) ---
---------- ---------- ----------
Net increase (decrease) in
net assets from operations . . . . . $ (2,385) $ (5,033) $ 4,133
---------- ---------- ----------
---------- ---------- ----------
The accompanying notes are an integral part of these financial statements.
<PAGE>
<CAPTION>
SEPARATE ACCOUNT I
- -------------------------------------------------------------------------------
Sub-Account Sub-Account
4 5
- -------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . $ 3,411 $ 15,644
EXPENSES:
Mortality and expense risk fees . . . 842 2,691
Administrative expense fees . . . . . 234 747
---------- ----------
Total expenses. . . . . . . . . . . 1,076 3,438
---------- ----------
Net investment income . . . . . . . . 2,335 12,206
---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss). . . . . . . 1,851 (14,172)
Net unrealized (loss) . . . . . . . . (3,828) (3,709)
---------- ----------
Net realized and unrealized
gain (loss) on investments . . . . . (1,977) (17,881)
---------- ----------
Net increase (decrease) in
net assets from operations . . . . . $ 358 $ (5,675)
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SEPARATE ACCOUNT I
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT 1 SUB-ACCOUNT 2
FOR THE YEAR ENDED FOR THE PERIOD FOR THE YEAR ENDED FOR THE PERIOD
12/31/94 5/14/93* to 12/31/93 12/31/94 4/06/93* to 12/31/93
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . $ 24,258 $ 30,707 $ 6,131 $ 3,265
Net realized gain (loss) from
security transactions. . . . . . . (7,214) 70 (1,965) 50
Net unrealized gain (loss) on
investments. . . . . . . . . . . . (19,429) (22,372) (9,199) (2,610)
----------- ----------- ---------- ----------
Net increase (decrease) in net
assets from operations . . . . . . (2,385) 8,405 (5,033) 705
----------- ----------- ---------- ----------
FROM CAPITAL TRANSACTIONS:
Net deposits. . . . . . . . . . . . 202,325 368,523 33,040 123,895
Terminations. . . . . . . . . . . . (156,935) -- (29,798) --
Annuity benefits. . . . . . . . . . -- -- -- --
Other transfers from (to)
the General Account of
State Mutual Life Assurance
Company of America (Sponsor) . . . 26,541 (2,412) (4,510) (7,161)
----------- ----------- ---------- ----------
Net increase(decrease) in net
assets from capital transactions . 71,931 366,111 (1,268) 116,734
----------- ----------- ---------- ----------
Net increase(decrease) in net
assets . . . . . . . . . . . . . . 69,546 374,516 (6,301) 117,439
NET ASSETS:
Beginning of year . . . . . . . . . 374,516 --- 117,439 ---
----------- ----------- ---------- ----------
End of year . . . . . . . . . . . . $ 444,062 $ 374,516 $ 111,138 $ 117,439
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
<FN>
* Date of initial investment.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SEPARATE ACCOUNT I
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT 3 SUB-ACCOUNT 4
FOR THE YEAR ENDED FOR THE PERIOD FOR THE YEAR ENDED FOR THE PERIOD
12/31/94 4/06/93* TO 12/31/93 12/31/94 5/14/93* TO 12/31/93
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . $ 4,133 $ 268 $ 2,335 $ 1,098
Net realized gain (loss) from
security transactions. . . . . . . -- -- 1,851 310
Net unrealized gain (loss) on
investments. . . . . . . . . . . . -- -- (3,828) 2,665
----------- ----------- ---------- ----------
Net increase (decrease) in net
assets from operations . . . . . . 4,133 268 358 4,073
----------- ----------- ---------- ----------
FROM CAPITAL TRANSACTIONS:
Net deposits. . . . . . . . . . . . 320,783 49,577 69,280 113,328
Terminations. . . . . . . . . . . . (116,913) (14,351) (72,498) (9,614)
Annuity benefits. . . . . . . . . . -- -- -- --
Other transfers from (to)
the General Account of
State Mutual Life Assurance
Company of America (Sponsor) . . . 132,746 (3) 87 9
----------- ----------- ---------- ----------
Net increase(decrease) in net
assets from capital transactions . 336,616 35,223 (3,131) 103,723
----------- ----------- ---------- ----------
Net increase(decrease) in net
assets . . . . . . . . . . . . . . 340,749 35,491 (2,773) 107,796
NET ASSETS:
Beginning of year . . . . . . . . . 35,491 -- 107,796 --
----------- ----------- ---------- ----------
End of year . . . . . . . . . . . . $ 376,240 $ 35,491 $ 105,023 $ 107,796
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
<CAPTION>
- ---------------------------------------------------------------------------------
SUB-ACCOUNT 5
FOR THE YEAR ENDED FOR THE PERIOD
12/31/94 5/17/93* TO 12/31/93
- ---------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . $ 12,206 $ 6,366
Net realized gain (loss) from
security transactions. . . . . . . (14,172) (35)
Net unrealized gain (loss) on
investments. . . . . . . . . . . . (3,709) (5,623)
----------- -----------
Net increase (decrease) in net
assets from operations . . . . . . (5,675) 708
----------- -----------
FROM CAPITAL TRANSACTIONS:
Net deposits. . . . . . . . . . . . 71,032 317,983
Terminations. . . . . . . . . . . . (57,403) (8,350)
Annuity benefits. . . . . . . . . . -- --
Other transfers from (to)
the General Account of
State Mutual Life Assurance
Company of America (Sponsor) . . . (195,292) 57
----------- -----------
Net increase(decrease) in net
assets from capital transactions . (181,663) 309,690
----------- -----------
Net increase(decrease) in net
assets . . . . . . . . . . . . . . (187,338) 310,398
NET ASSETS:
Beginning of year . . . . . . . . . 310,398 --
----------- -----------
End of year . . . . . . . . . . . . $ 123,060 $ 310,398
----------- -----------
----------- -----------
<FN>
* Date of initial investment.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SEPARATE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS - December 31, 1994
NOTE 1 - ORGANIZATION
Separate Account I (SA-I) is a separate investment account of State Mutual
Life Assurance Company of America (the Company). SA-I was established on October
1, 1992 for the purpose of separating from the general assets of the Company
those assets used to fund certain variable annuity policies issued by the
Company. Under applicable insurance law, the assets and liabilities of SA-I are
clearly identified and distinguished from the other assets and liabilities of
the Company. SA-I cannot be charged with liabilities arising out of any other
business of the Company.
SA-I is registered as a unit investment trust under the Investment Company Act
of 1940, as amended (the 1940 Act). SA-I currently offers five Sub-Accounts.
Each Sub-Account invests exclusively in a corresponding investment portfolio of
the Allmerica Investment Trust (the Trust) managed by Allmerica Investment
Management Company, Inc., a wholly-owned subsidiary of the Company. The Trust is
an open-end, diversified series management investment company registered under
the 1940 Act.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Investments - Security transactions are recorded on the trade date.
Investments in shares of the Trust are stated at the net asset value per share
of the respective investment portfolio of the Trust. Net realized gains and
losses on securities sold are determined on the average cost method. Dividends
and capital gain distributions are recorded on the ex-dividend date and are
reinvested in additional shares of the respective investment portfolio of the
Trust at net asset value.
Federal Income Taxes - The Company is taxed as a "life insurance company"
under Subchapter L of the Internal Revenue Code and files a consolidated Federal
Income Tax return. The Company anticipates no tax liability resulting from the
operations of SA-I. Therefore, no provision for income taxes has been charged
against SA-I.
Capital Transactions - The components of the prior year's net increase
(decrease) in net assets from capital transactions have been disclosed in the
current year Statements of Changes in Net Assets to conform to the current year
presentation.
<PAGE>
SEPARATE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS - December 31, 1994, Continued
NOTE 3 - INVESTMENTS
The number of shares owned, aggregate cost, and net asset value per share of
each Sub-Account's investment in the Trust at December 31, 1994 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
PORTFOLIO INFORMATION
SUB- INVESTMENT NUMBER OF AGGREGATE NET ASSET
ACCOUNT PORTFOLIO SHARES COST VALUE PER SHARE
- ------------------------------------------------------------------------------
Allmerica Investment Trust:
<S> <C> <C> <C> <C>
1 Growth 245,030 $ 486,285 $ 1.814
2 Investment Grade Income 109,929 123,057 1.012
3 Money Market 376,577 376,577 1.000
4 Equity Index 71,608 106,284 1.468
5 Government Bond 123,588 132,549 0.997
</TABLE>
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company makes a charge of .90% per annum based on the average daily net
assets of each Sub-Account at each valuation date for mortality and expense
risks. The Company also charges each Sub-Account .25% per annum based on the
average daily net assets of each Sub-Account for administrative expenses. These
charges are deducted from the daily value of each Sub-Account but are paid to
the Company on a monthly basis. Net deposits represent gross deposits less
applicable state taxes.
An IRA account fee is currently deducted on the policy anniversary date and
upon full surrender of the IRA account. The IRA account fee is $25. For IRA
accounts established after April 30, 1993, the IRA account fee will be waived in
the following circumstances: if the contribution establishing the IRA account
was at least $15,000, the IRA account fee will be waived on the first
anniversary deduction; if the accumulated value is $15,000 as of December 31 of
the calendar year previous to any subsequent anniversary deduction, the IRA
account fee will be waived on such subsequent anniversary deduction. For the
year ended December 31, 1994, IRA account fees deducted from accumulated value
in the Separate Account amounted to $425.
Allmerica Investments, Inc., (Allmerica Investments), a wholly-owned
subsidiary of the Company, is principal underwriter and general distributor of
SA-I, and does not receive any compensation for sales of the IRA policies.
Commissions are paid to registered representatives of Allmerica Investments by
the Company.
<PAGE>
SEPARATE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS - December 31, 1994, Continued
NOTE 5 - POLICYOWNERS AND SPONSOR TRANSACTIONS
Transactions from policyowners and sponsor were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
PERIOD ENDED DECEMBER 31,
1994 1993
---- ----
UNITS AMOUNT UNITS AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sub-Account 1
Issuance of units. . 2,185 $ 232,422 3,508 $ 368,523
Redemption of units. (1,496) (160,491) (23) (2,412)
------ --------- ------ ---------
Net increase . . . . 689 $ 71,931 3,485 $ 366,111
------ --------- ------ ---------
------ --------- ------ ---------
Sub-Account 2
Issuance of units. . 321 $ 32,965 1,193 $ 123,895
Redemption of units. (336) (34,233) (68) (7,161)
------ --------- ------ ---------
Net increase (decrease) (15) $ (1,268) 1,125 $ 116,734
------ --------- ------ ---------
------ --------- ------ ---------
Sub-Account 3
Issuance of units. . 5,040 $ 518,505 492 $ 49,577
Redemption of units. (1,775) (181,889) (142) (14,354)
------ --------- ------ ---------
Net increase 3,265 $ 336,616 350 $ 35,223
------ --------- ------ ---------
------ --------- ------ ---------
Sub-Account 4
Issuance of units. . 650 $ 69,367 1,103 $ 113,328
Redemption of units. (675) (72,498) (91) (9,605)
------ --------- ------ ---------
Net increase (decrease) (25) $ (3,131) 1,012 $ 103,723
------ --------- ------ ---------
------ --------- ------ ---------
Sub-Account 5
Issuance of units. . 706 $ 79,132 3,131 $ 317,983
Redemption of units. (2,521) (260,795) (82) (8,293)
------ --------- ------ ---------
Net increase (decrease) (1,815) $(181,663) 3,049 $ 309,690
------ --------- ------ ---------
------ --------- ------ ---------
</TABLE>
<PAGE>
SEPARATE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS - December 31, 1994, Continued
NOTE 6 - DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code, a
variable annuity contract, other than a contract issued in connection with
certain types of employee benefit plans, will not be treated as an annuity
contract for federal income tax purposes for any period for which the
investments of the segregated asset account on which the contract is based are
not adequately diversified. The Code provides that the "adequately diversified"
requirement may be met if the underlying investments satisfy either a statutory
safe harbor test or diversification requirements set forth in regulations issued
by the Secretary of Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of
the Code. The Company believes that SA-I satisfies the current requirements of
the regulations, and it intends that SA-I will continue to meet such
requirements.
NOTE 7 - PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of the Trust shares by SA-I during
the year ended December 31, 1994 were as follows:
<TABLE>
<CAPTION>
SUB-
ACCOUNT INVESTMENT PORTFOLIO PURCHASES SALES
------- ---------------------- ------------- ----------
<S> <C> <C> <C>
1 Growth . . . . . . . . . . $ 254,658 $ 158,331
2 Investment Grade Income. . 39,857 34,981
3 Money Market . . . . . . . 497,101 156,058
4 Equity Index . . . . . . . 72,770 73,570
5 Government Bond. . . . . . 92,114 261,543
--------- ---------
Totals . . . . . . . . . . $ 956,500 $ 684,483
--------- ---------
--------- ---------
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of State Mutual
Life Assurance Company of America and
Policyowners of Separate Account I of
State Mutual Life Assurance Company of America
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of Sub-Accounts 1, 2, 3, 4 and 5
(constituting the Separate Account I of State Mutual Life Assurance Company of
America) at December 31, 1994, the results of each of their operations and the
changes in each of their net assets for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of State Mutual Life Assurance Company of America's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1994 by correspondence with the Trust, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 13, 1995
<PAGE>
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS
FINANCIAL STATEMENTS INCLUDED IN PART A
None
FINANCIAL STATEMENTS INCLUDED IN PART B
Financial Statements for Separate Account I
Financial Statements of the Company
FINANCIAL STATEMENTS INCLUDED IN PART C
None
(B) EXHIBITS
Exhibit 1 - Votes Authorizing Establishment of Registrant dated August 20,
1991 was previously filed on May 11, 1992.
Exhibit 2 - Not Applicable. Pursuant to Rule 26a-2, the Insurance Company
may hold the assets of the Registrant NOT pursuant to a trust
indenture or other such instrument.
Exhibit 3 - Specimen Sales and Administrative Services Agreement was
previously filed on May 11, 1992 and is incorporated herein by
reference.
Exhibit 4 - Specimen Generic Contract and Certificate Forms was previously
filed on May 11, 1992 and is incorporated herein by reference.
Exhibit 5 - Specimen Application Form was previously filed on May 11, 1992
and is incorporated herein by reference.
Exhibit 6 - The Depositor's restated Articles of Incorporation and Bylaws
Exhibit 7 - Not Applicable.
Exhibit 8 - AUV Calculation Services Agreement with The Shareholder Services
Group dated March 31, 1995 was previously filed on May 1, 1995
and is incorporated herein by reference.
Exhibit 9 - Consent and Opinion of Counsel.
Exhibit 10 - Consent of Independent Accountants.
Exhibit 11 - None.
Exhibit 12 - None.
Exhibit 13 - None.
Exhibit 14 - Not Applicable.
Exhibit 15 - Power of Attorney was previously filed on May 11, 1992 and is
incorporated herein by reference.
<PAGE>
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR.
NAME AND POSITION PRINCIPAL OCCUPATION
----------------- --------------------
Michael P. Angelini, Esq., Director Bowditch & Dewey
311 Main Street
Worcester, MA 01608
David A. Barrett, Director Consultant
MCCM, Inc. and The Medical Center
of Central Massachusetts
11 Shattuck Street
Worcester, MA 01605
Gail L. Harrison, Director Senior Vice President
The Wexler Group
Suite 600, 1317 F Street, N.W.
Washington, DC 20004
J. Terrence Murray, Director Chairman, President and Chief
Executive Officer Fleet/Norstar
Financial Group, Inc.
50 Kennedy Plaza
Providence, RI 02903
Guy W. Nichols, Director Woods Hole Oceanographic
Institution
25 Research Drive
Westborough, MA 01582
John F. O'Brien, Director President and Chief Executive
Officer
First Allmerica Financial
Life Insurance Company
440 Lincoln Street
Worcester, MA 01653
Dr. John L. Sprague, Director President
John L. Sprague Associates
One Cranberry Hill
Lexington, MA 02173
Robert G. Stachler, Esq., Director Taft, Stettinius & Hollister
1800 Star Bank Center
425 Walnut Street
Cincinnati, OH 45202
Herbert M. Varnum, Director Chairman and Chief Executive
Officer
Quabaug Corporation
17 School Street
North Brookfield, MA 01535
Richard Manning Wall, Esq., Director General Counsel and Asst. to the
Chairman
Flexcon Company, Inc.
Flexcon Industrial Park
Spencer, MA 01562
<PAGE>
The principal business address of all the following Directors and Officers is:
440 Lincoln Street
Worcester, Massachusetts 01653
NAME PRINCIPAL OCCUPATION
---- --------------------
Barry Z. Aframe Vice President and Counsel
Bruce C. Anderson Vice President and Assistant Secretary
Richard J. Baker Vice President and Secretary
Whitworth F. Bird, Jr., M.D. Vice President and Medical Director
William P. Bishop Vice President
Lawrence E. Blanchard Vice President
Alan R. Boyer Vice President
Mark R. Colborn Vice President and Controller
Lisa M. Coleman Vice President
Deborah A. Culhane Vice President
Dix F. Davis Vice President
Valentina T. Dingle Vice President
Denzil C. Drewry Vice President
Leonard D. Driscoll Vice President
Bruce A. Emond Vice President
Edward W. Ford Vice President
Bruce H. Freedman Vice President
Thomas E. Hardy Vice President
William Hayward Vice President
Brian L. Hirst Vice President and Actuary
Kruno Huitzingh Vice President and Chief Information Officer
Richard E. Johnson Vice President
John P. Kavanaugh Vice President
John F. Kelly Senior Vice President, General Counsel and
Assistant Secretary
Kathleen M. Klein Vice President
Richard H. Kremer Vice President
Jeffrey P. Lagarce Vice President
Walter M. Laliberte Vice President
Frank A. LoPiccolo Vice President
Joseph W. MacDougall, Jr. Vice President, Associate General Counsel and
Assistant Secretary
<PAGE>
William H. Mawdsley Vice President and Actuary
Roderick A. McGarry, II Vice President
John W. Nunley Vice President
John F. O'Brien Director, President and Chief Executive Officer
Stephen Parker Vice President
Edward J. Parry, III Vice President and Treasurer
Jean S. Peters Vice President
Richard M. Reilly Vice President
Rachelle Reisberg Vice President
Larry C. Renfro Vice President
Winifred "Una" Rice Vice President
Stephen P. Rutman Vice President
Henry P. St. Cyr Vice President and Assistant Treasurer
Eric A. Simonsen Vice President and Chief Financial Officer
Mark T. Smith Vice President
Philip E. Soule Vice President
Ann K. Tripp Vice President
James S. Wakefield Vice President
Jerome F. Weihs Vice President
Diane E. Wood Vice President
Item 26. PERSONS UNDER COMMON CONTROL WITH REGISTRANT. The Registrant is a
separate account of First Allmerica Financial Life Insurance Company
("Company"). The following entities are under common control with the Company.
<TABLE>
<CAPTION>
NAME ADDRESS TYPE OF BUSINESS
---- ------- ----------------
<S> <C> <C>
AAM Equity Fund 440 Lincoln Street Massachusetts Grantor
Worcester MA 01653 Trust
Allmerica Asset Management, Inc. 440 Lincoln Street Investment advisory
Worcester MA 01653 services
Allmerica Employees Insurance 440 Lincoln Street Insurance Agency
Agency, Inc. Worcester MA 01653
Allmerica Financial Life 440 Lincoln Street Life insurance, accident
Insurance and Annuity Worcester MA 01653 & health insurance,
Company (formerly SMA Life annuities,
variable Assurance Company) annuities and variable
life insurance
Allmerica Financial Services 440 Lincoln Street Insurance Agency
Insurance Agency, Inc. Worcester, MA 01653
Allmerica Funds 440 Lincoln Street Investment Company
Worcester MA 01653
<PAGE>
Allmerica Institutional Services, Inc. 440 Lincoln Street Accounting,
Worcester MA 01653 marketing and
shareholder
services for
investment
companies
Allmerica Investment Services, Inc. 440 Lincoln Street Holding Company
(formerly Allmerica Financial Worcester, MA 01653
Services, Inc.)
Allmerica Investment Management 440 Lincoln Street Investment Advisory
Company, Inc. Worcester MA 01653 Services
Allmerica Investments, Inc. 440 Lincoln Street Securities, retail broker-
Worcester MA 01653 dealer
Allmerica Investment Trust 440 Lincoln Street Investment Company
(formerly SMA Investment Trust) Worcester MA 01653
Allmerica Property and Casualty 440 Lincoln Street Holding Company
Companies, Inc. Worcester MA 01653
Allmerica Realty Advisors, Inc. 440 Lincoln Street Investment Advisory
Worcester MA 01653 services
Allmerica Securities Trust 440 Lincoln Street Investment Company
Worcester MA 01653
Allmerica Services, Inc. 440 Lincoln Street Service Company
Worcester MA 01653
Allmerica Trust Company, N.A. 440 Lincoln Street Limited purpose
Worcester, MA 01653 national trust
company
AMGRO, Inc. 472 Lincoln Street Premium financing
Worcester MA 01653
APC Funding Corp. 440 Lincoln Street Special purpose funding
Worcester MA 01653 vehicle for commercial
paper
Beltsville Drive Limited 440 Lincoln Street Real estate partnership
Partnership Worcester MA 01653
Citizens Corporation 440 Lincoln Street Holding Company
Worcester MA 01653
Citizens Insurance Company of America 645 West Grand River Multi-line fire &
Howell MI 48843 casualty insurance
Citizens Insurance Company of Ohio 645 West Grand River Multi-line fire &
Howell MI 48843 casualty insurance
Citizens Management, Inc. 645 West Grand River Services management
Howell MI 48843 company
Greendale Special Placements Fund 440 Lincoln Street Massachusetts Grantor
Worcester MA 01653 Trust
The Hanover American Insurance 100 North Parkway Multi-line fire &
Company Worcester MA 01653 casualty insurance
The Hanover Insurance Company 100 North Parkway Multi-line fire &
Worcester MA 01605 casualty insurance
Hanover Texas Insurance 801 East Campbell Road Incorporated Branch
<PAGE>
Management Company, Inc. Richardson TX 75081 Office of The Hanover
Insurance Company
Attorney-in-fact for
Hanover Lloyd's
Insurance Company
Hanover Lloyd's Insurance Company 801 East Campbell Road Multi-line fire &
Richardson TX 75081 casualty insurance
Hollywood Center, Inc. 440 Lincoln Street General business
Worcester MA 01653 corporation
Linder Skokie Real Estate 440 Lincoln Street General business
Corporation Worcester MA 01653 corporation
Lloyds Credit Corporation 440 Lincoln Street Premium financing
Worcester MA 01653 service franchises
Logan Wells Water Company, Inc. 603 Heron Drive Water Company, serving
Bridgeport NJ 08014 land development
investment
Massachusetts Bay Insurance 100 North Parkway Multi-line fire &
Company Worcester MA 01653 casualty
SMA Financial Corp. 440 Lincoln Street Holding Company
Worcester MA 01653
Somerset Square, Inc. 440 Lincoln Street General business
Worcester MA 01653 corporation
Sterling Risk Management Services, Inc. 100 North Parkway Risk management
Worcester MA 01605 services
</TABLE>
Item 27. NUMBER OF CONTRACT OWNERS.
As of December 31, 1994, the Separate Account had 153 Policy owners.
Item 28. INDEMNIFICATION.
To the fullest extent permissible under Massachusetts General Laws, no director
shall be personally liable to the Company or any policyholder for monetary
damages for any breach of fiduciary duty as a director, notwithstanding any
provision of law to the contrary; provided, however, that this provision shall
not eliminate or limit the liability of a director:
1. for any breach of the director's duty of loyalty to the Company or its
policyholders;
2. for acts or omissions not in good faith, or which involve intentional
misconduct or a knowing violation of law;
3. for liability, if any, imposed on directors of insurance companies pursuant
to M.G.L.A. c. 156B Section 61 or M.G.L.A. c.156B Section 62;
4. for any transactions from which the director derived an improper personal
benefit.
Item 29. PRINCIPAL UNDERWRITERS.
(a) Allmerica Investments, Inc. also acts as principal underwriter for the
following:
- VEL Account, VEL II Account, Inheiritage Account, Separate Accounts VA-A,
VA-B, VA-C, VA-G, VA-H, VA-K, VA-P and Allmerica Select Separate Account
of Allmerica Financial Life Insurance and Annuity Company (formerly SMA
Life Assurance Company)
- VEL II Account, Inheiritage Account, Separate Accounts VA-K, VA-P and
Allmerica Select Separate Account of the Company
- Allmerica Investment Trust
<PAGE>
(b) The Principal Business Address of each of the following Directors and
Officers of Allmerica Investments, Inc. is:
440 Lincoln Street
Worcester, Massachusetts 01653
NAME POSITION OR OFFICE WITH UNDERWRITER
---- -----------------------------------
Abigail M. Armstrong Secretary and Counsel
Philip J. Coffey Vice President
Bob A. Freelove Vice President
John F. Kelly Director
Eric S. Levy Assistant Vice President and Chief Financial
Officer
John F. O'Brien Director
Stephen Parker President and CEO
Edward J. Parry, III Treasurer
Richard M. Reilly Director
Eric A. Simonsen Director
Ronald K. Smith Vice President
Mark Steinberg Senior Vice President
Robert T. Stemple Vice President and Controller
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
Each account, book or other document required to be maintained by Section 31(a)
of the Investment Company Act of 1940 and Rules 31a-1 to 31a-3 thereunder are
maintained by the Company at 440 Lincoln Street, Worcester, Massachusetts or on
behalf of the Company by the Shareholder Services Group, Inc., at 290 Donald
Lynch Boulevard, Marlborough, Massachusetts.
Item 31. MANAGEMENT SERVICES.
Effective March 31, 1995, the Company has engaged The Shareholder Services
Group, Inc., 53 State Street, Boston, Massachusetts to provide daily unit value
calculations and related services for the Company's separate accounts.
Item 32. UNDERTAKINGS.
(a) Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
(b) The registrant hereby undertakes to include as part of an application to
purchase a certificate under the Contract a space that the applicant can check
to request a Statement of Additional Information.
(c) The registrant hereby undertakes to deliver a Statement of Additional
Information promptly upon written or oral request, according to the requirements
of Form N-4.
(d) Insofar as indemnification for liability arising under the 1933 Act may be
permitted to Directors, Officers and Controlling Persons of Registrant under any
registration statement, underwriting agreement or otherwise, Registrant has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification
<PAGE>
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a Director, Officer or Controlling Person of Registrant in
the successful defense of any action, suit or proceeding) is asserted by such
Director, Officer or Controlling Person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
Item 33. REPRESENTATIONS CONCERNING WITHDRAWAL RESTRICTIONS ON SECTION 403(B)
PLANS.
Not Applicable
<PAGE>
EXHIBIT TABLE
Exhibit 6 - Company's restated Articles of Incorporation and Bylaws
Exhibit 9 - Consent and Opinion of Counsel
Exhibit 10 - Consent of Independent Accountants
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, Registrant has duly caused the Post-Effective Amendment to
its Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, all in the City of Worcester and Commonwealth of
Massachusetts on the 10th day of October, 1995. Registrant certifies that it
meets the requirement of Securities Act Rule 485(b) for effectiveness of this
Post-Effective Amendment to its Registration Statement.
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
SEPARATE ACCOUNT I
Attest: /s/ Richard J. Baker
-----------------------------
Richard J. Baker
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ John F. O'Brien Director, President and October 10, 1995
- ------------------------ Chief Executive Officer
John F. O'Brien
/s/ Eric A. Simonsen Vice President and
- ------------------------ Chief Financial Officer
Eric A. Simonsen
/s/ Mark R. Colborn Vice President and
- ------------------------ Controller
Mark R. Colborn
Michael P. Angelini, Esq.
Mr. David A. Barrett
Ms. Gail L. Harrison
Mr. J. Terrence Murray
Mr. Guy W. Nichols A majority of the Directors
Dr. John L. Sprague
Robert G. Stachler, Esq.
Mr. Herbert M. Varnum
Richard Manning Wall, Esq.
Richard J,. Baker, by signing his name hereto, does hereby sign this document on
behalf of each of the above-named Directors of State Mutual Life Assurance
Company of America pursuant to the Powers of Attorney duly executed by such
persons.
/s/ Richard J. Baker
- ---------------------------------
Richard J. Baker
Attorney-In-Fact
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
FEDERAL IDENTIFICATION
NO. 04-1867050
-------------------
MICHAEL JOSEPH CONNOLLY
SECRETARY OF STATE
ONE ASHBURTON PLACE, BOSTON, MASS: 02108
RESTATED ARTICLES OF ORGANIZATION
GENERAL LAWS, CHAPTER 175
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
restated articles of organization. The fee for filing this certificate is
prescribed by General Laws, Chapter 156B, Section 114. Make check payable to
the Commonwealth of Massachusetts.
-----------
We,
John F. O'Brien PRESIDENT
and Richard J. Baker SECRETARY
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Name of Corporation)
located at 440 Lincoln Street, Worcester, Massachusetts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
do hereby certify that the following restatement of the articles of organization
of the corporation was duly adopted at a meeting held on June 30, 1995, by
vote of
.. . . . . . . shares of . . . . . . . . . . , out of . . . . . . . . . . . . . .
(Class of Stock)
.. . . . . . . shares of . . . . . . . . . . , out of . . . . . . . . . . . . . .
(Class of Stock)
.. . . . . . . shares of . . . . . . . . . . , out of . . . . shares outstanding,
(Class of Stock)
being at least two-thirds of the policyholders present in person or by proxy or
mail and entitled to vote
1. The name by which the corporation shall be known is; -
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
2. The purposes for which the corporation is formed are as follows: -
SEE PAGE 2A
<PAGE>
3. The total number of shares and the par value, if any, of each class of
stock which the corporation is authorized to issue is as follows:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE WITH PAR VALUE
----------------- --------------
CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE
- -------------- ---------------- ---------------- ----------
<S> <C> <C> <C>
Preferred -- -- --
Common -- 1,000,000 $10.00
</TABLE>
*4. If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting
powers, qualifications, special or relative rights or privileges as to
each class thereof and any series now established:
N/A
*5. The restrictions, if any, imposed by the articles of organization upon
the transfer of shares of stock of any class are as follows:
Transfer is subject in certain circumstances to approval of the
commissioner of insurance of The Commonwealth of Massachusetts.
*6. Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary
dissolution, or for limiting, defining, or regulating the powers of
the corporation, or of its directors or stockholders, or of any class
of stockholders:
See pages 6A through D hereof.
*If there are no provisions, state "None".
<PAGE>
Foregoing restated articles of organization effect no amendments to the articles
of organization of the corporation as heretofore amended, except amendments to
the following articles. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(*If there are no such amendments, state "None".)
Briefly describe amendments in space below:
To effect amendments related to the conversion of the corporation
from a mutual life insurance company to a stock life insurance
company including change of name to "First Allmerica Financial
Life Insurance Company", the authorization of 1,000,000 shares of
Common Stock, $10.00 par value, the restatement and amendment of
corporate purposes, and the addition of Article 6 provisions.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed
our names this
day of October in the year 1995
/s/ John F. O'Brien President/Vice President
/s/ Richard J. Baker Secretary
SEE PAGE 7A
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
I hereby approve the within restated
articles of organization and, the filing
fee in the amount of $ having
been paid, said articles are deemed to have
been filed with me this
day of October, 1995.
MICHAEL JOSEPH CONNOLLY
SECRETARY OF STATE
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF RESTATED ARTICLES OF ORGANIZATION TO BE SENT
TO:
Richard J. Baker, Esq.
440 Lincoln Street
Worcester, MA 01653
Telephone (508) 855-1000
Copy Mailed
<PAGE>
Article 2. CORPORATE PURPOSES
The Corporation is constituted for the purpose of transacting on the
stock plan, and when qualified and licensed by law to do so, the kinds of
insurance now or hereafter described in or permitted by Clauses 6th and 16th
of Section 47 and Sections 47A and 54G of Chapter 175 of the General Laws of
The Commonwealth of Massachusetts and any acts in amendment thereof or in
addition thereto, and such other kinds of insurance as may be permitted now
or hereafter to be transacted by insurance corporations organized or
authorized to transact any of the kinds of insurance now or hereafter
described or permitted by said Clauses of Section 47 and Sections 47A and
54G; and including any form of insurance which may be permitted by paragraphs
(b) and (g) of Section 51 of said Chapter 175; and any acts in amendment
thereof or in addition thereto; thus including the authority pursuant to said
Clauses of Section 47 and Sections 47A and 54G; and including, pursuant to
the provisions of paragraph (g) of said Section 51, authority to write such
other form or forms of insurance coverage not included in the provisions of
said Section 47 and Sections 47A and 54G, and not contrary to the law, as
the Commissioner of Insurance, in his or her discretion, may authorize and
license subject to such terms and conditions as he or she may from time to
time prescribe.
The Board of Directors may permit the issuance of participating
policies, and may permit the policyholders of the Company from time to time
to participate in the profits of its operations through the payment of
dividends. The Board of Directors shall have the power to make reasonable
classification or classifications of policies and to take such other action,
in accordance with the law, as may be necessary or desirable to carry into
effect any participation by policyholders in the profits of the operations of
the Company. No policyholder shall have any right to participate in the
profits of the operations of the Company unless and until the Directors of
the Company, in the exercise of their discretion, affirmatively authorize
such participation, and then only to the extent so authorized.
-2A-
<PAGE>
ARTICLE 6
Other Lawful Provisions
6.1 The corporation may carry on any business, operation or activity
referred to in Article 2 to the same extent as might an individual, whether as
principal, agent, contractor or otherwise, and either alone or in conjunction or
a joint venture or other arrangement with any corporation, association, trust,
firm or individual.
6.2 The corporation may carry on any business, operation or activity
through a wholly or partly owned subsidiary.
6.3 The corporation may be a partner in any business enterprise which it
would have power to conduct by itself.
6.4 The directors may make, amend or repeal the by-laws in whole or in
part, except with respect to any provision thereof which by law or the by-laws
requires action by the stockholders.
6.5 Meetings of the stockholders may be held anywhere in the United
States.
6.6 Except as otherwise provided by law, no stockholder shall have any
right to examine any property or any books, accounts or other writings of the
corporation if there is reasonable ground for belief that such examination will
for any reason be adverse to the interests of the corporation, and a vote of the
directors refusing permission to make such examination and setting forth that in
the opinion of the directors such examination would be adverse to the interests
of the corporation shall be prima facie evidence that such examination would be
adverse to the interests of the corporation. Every such examination shall be
subject to such reasonable regulations as the directors may establish in regard
thereto.
6.7 The directors may specify the manner in which the accounts of the
corporation shall be kept and may determine what constitutes net earnings,
profits and surplus, what amounts, if any, shall be reserved for any corporate
purpose, and what amounts, if any, shall be declared as dividends. Unless the
board of directors otherwise specifies, the excess of the consideration for any
share of its capital stock with par value issued by it over such par value shall
be surplus. The board of directors may allocate to capital stock less than all
of the consideration for any share of its capital stock without par value issued
by it, in which case the balance of such consideration shall be surplus. All
surplus shall be available for any corporate purpose, including the payment of
dividends.
-6A-
<PAGE>
6.8 The purchase or other acquisition or retention by the corporation of
shares of its own capital stock shall not be deemed a reduction of its capital
stock. Upon any reduction of capital or capital stock, no stockholder shall
have any right to demand any distribution from the corporation, except as and to
the extent that the stockholders shall have provided at the time of authorizing
such reduction.
6.9 The directors shall have the power to fix form time to time their
compensation. No person shall be disqualified from holding any office by reason
of any interest. In the absence of fraud, any director, officer or stockholder
of this corporation individually, or any individual having any interest in any
concern which is a stockholder of this corporation, or any concern in which any
of such directors, officers, stockholders or individuals has an interest, may be
a party to, or may be pecuniarily or otherwise interested in, any contract,
transaction or other act of the corporation, and
(1) such contract, transaction or act shall not be in any way invalidated
or otherwise affected by that fact;
(2) no such director, officer, stockholder or individual shall be liable
to account to the corporation for any profit or benefit realized
through any such contract, transaction or act; and
(3) any such director of the corporation may be counted in determining the
existence of a quorum at any meeting of the directors or of any
committee thereof which shall authorize any such contract, transaction
or act, and may vote to authorize the same;
provided, however, that any contract, transaction or act in which any director
or officer of the corporation is so interested individually or as a director,
officer, trustee or member of any concern which is not a subsidiary or affiliate
of the corporation, or in which any directors or officers are so interested as
holders, collectively, of a majority of shares of capital stock or other
beneficial interest at the time outstanding in any concern which is not a
subsidiary or affiliate of the corporation, shall be duly authorized or ratified
by a majority of the directors who are not so interested, to whom the nature of
such interest has been disclosed and who have made any findings required by law;
the term "interest" including personal interest and interest as a
director, officer, stockholder, shareholder, trustee, member or beneficiary
of any concern;
-6B-
<PAGE>
the term "concern" meaning any corporation, association, trust,
partnership, firm, person or other entity other than the corporation; and
the phrase "subsidiary or affiliate" meaning a concern in which a majority
of the directors, trustees, partners or controlling persons is elected or
appointed by the directors of the corporation, or is constituted of the
directors or officers of the corporation.
To the extent permitted by law, the authorizing or ratifying vote of the holders
of shares representing a majority of the votes of the capital stock of the
corporation outstanding and entitled to vote for the election of directors at
any annual meeting or a special meeting duly called for the purpose (whether
such vote is passed before or after judgment rendered in a suit with respect to
such contract, transaction or act) shall validate any contract, transaction or
act of the corporation, or of the board of directors or any committee thereof,
with regard to all stockholders of the corporation, whether or not of record at
the time of such vote, and with regard to all creditors and other claimants
under the corporation; provided, however, that
A. with respect to the authorization or ratification of contracts,
transactions or acts in which any of the directors, officers or
stockholders of the corporation have an interest, the nature of such
contracts, transactions or acts and the interest of any director,
officer or stockholder therein shall be summarized in the notice of
any such annual or special meeting, or in a statement or letter
accompanying such notice, and shall be fully disclosed at any such
meeting;
B. the stockholders so voting shall have made any findings required by
law;
C. the stockholders so interested may vote at any such meeting except to
the extent otherwise provided by law; and
D. any failure of the stockholders to authorize or ratify such contract,
transaction or act shall not be deemed in any way to invalidate the
same or to deprive the corporation, its directors, officers or
employees of its or their right to proceed with or enforce such
contract, transaction or act.
If the corporation has more than one class or series of capital stock
outstanding, the vote required by this paragraph shall be governed by the
provisions of the Articles of Organization applicable to such classes or series.
-6C-
<PAGE>
No contract, transaction or act shall be avoided by reason of any provision of
this paragraph 6.9 which would be valid but for such provision or provisions.
6.10 A director of the corporation shall not be liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent that exculpation from liability is not permitted
under the Massachusetts Business Corporation Law as in effect at the time such
liability is determined. No amendment or repeal of this paragraph 6.10 shall
apply to or have any effect on the liability or alleged liability of any
director of the corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
6.11 The corporation shall have all powers granted to corporations by the
laws of The Commonwealth of Massachusetts, provided that no such power shall
include any activity inconsistent with the Business Corporation Law or the
general laws of said Commonwealth.
-6D-
<PAGE>
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, the undersigned,
constituting a majority of the board of directors have hereto signed our names
this 19th day of September in the year 1995.
/s/ John F. O'Brien
- -------------------------------
John F. O'Brien
- -------------------------------
Michael P. Angelini
/s/ David A. Barrett
- -------------------------------
David A. Barrett
/s/ Gail L. Harrison
- -------------------------------
Gail L. Harrison
/s/ J. Terrence Murray
- -------------------------------
J. Terrence Murray
/s/ Guy W. Nichols
- -------------------------------
Guy W. Nichols
/s/ Robert G. Stachler
- -------------------------------
Robert G. Stachler
/s/ John L. Sprague
- -------------------------------
John L. Sprague
/s/ Richard Manning Wall
- -------------------------------
Richard Manning Wall
/s/ Herbert M. Varnum
- -------------------------------
Herbert M. Varnum
-7A-
<PAGE>
AMENDED AND RESTATED
BY-LAWS
of
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
Section 1. ARTICLES OF ORGANIZATION
The name and purposes of the corporation shall be as set forth in the
Articles of Organization. These By-laws, the powers of the corporation and of
its directors and stockholders, or of any class of stockholders if there shall
be more than one class of stock, and all matters concerning the conduct and
regulation of the business and affairs of the corporation shall be subject to
such provisions in regard thereto, if any, as are set forth in the Articles of
Organization as from time to time in effect.
Section 2. STOCKHOLDERS
2.1. ANNUAL MEETING. The annual meeting of stockholders shall be held
at 10:00 A.M. on the third Tuesday in March in each year (unless that day be a
legal holiday at the place where the meeting is to be held in which case the
meeting shall be held at the same hour on the next succeeding day not a legal
holiday) or at such other date and time as shall be determined from time to time
by the board of directors. Purposes for which an annual meeting is to be held,
additional to those prescribed by law, by the Articles of Organization or by
these By-laws, may be specified by the president or by the directors.
2.2. SPECIAL MEETINGS. A special meeting of the stockholders may be
called at any time by the president or by the directors. Each call of a meeting
shall state the place, date, hour and purposes of the meeting.
2.3. PLACE OF MEETINGS. All meetings of the stockholders shall be held at
the principal office of the corporation in Massachusetts or, to the extent
permitted by the Articles of Organization, at such other place within the United
States as shall be fixed by the president or the directors. Any adjourned
session of any meeting of the stockholders shall be held at the same city or
town as the initial session, or within Massachusetts, in either case at the
place designated in the vote of adjournment.
<PAGE>
2.4. NOTICE OF MEETINGS. A written notice of each meeting of
stockholders, stating the place, date and hour and the purposes of the
meeting, shall be given at least seven days before the meeting to each
stockholder entitled to vote there at and to each stockholder who, by law, by
the Articles of Organization or by these By-laws, is entitled to notice, by
leaving such notice with him or at his residence or usual place of business,
or by mailing it, postage prepaid, addressed to such stockholder at his
address as it appears in the records of the corporation. Such notice shall
be given by the clerk or an assistant clerk or by an officer designated by
the directors. Whenever notice of a meeting is required to be given to a
stockholder under any provision of the Business Corporation Law of the
Commonwealth of Massachusetts or of the Articles of Organization or these
By-laws, a written waiver thereof, executed before or after the meeting by
such stockholder or his attorney before or after the meeting by such
stockholder or his attorney thereunto authorized and filed with the records
of the meeting, shall be deemed equivalent to such notice.
2.5. QUORUM OF STOCKHOLDERS. At any meeting of the stockholders, a quorum
as to any matter shall consist of a majority of the votes entitled to be cast on
the matter, except when a larger quorum is required by law, by the Articles of
Organization or by these By-laws. Stock owned directly or indirectly by the
corporation, if any, shall not be deemed outstanding for this purpose. Any
meeting may be adjourned from time to time by a majority of the votes properly
cast upon the question, whether or not a quorum is present, and the meeting may
be held as adjourned without further notice.
2.6. ACTION BY VOTE. When a quorum is present at any meeting, a
plurality of the votes properly cast for election to any office shall elect to
such office, and a majority of the votes properly cast upon any question other
than an election to an office shall decide the question, except when a larger
vote is required by law, by the Articles of Organization or by these By-laws.
no ballot shall be required for any election unless requested by a stockholder
present or represented at the meeting and entitled to vote in the election.
2.7. VOTING. Stockholders entitled to vote shall have one vote for each
share of stock entitled to vote held by them of record according to the records
of the corporation, unless otherwise provided by the Articles of Organization.
The corporation shall not, directly or indirectly, vote any share of its own
stock.
-2-
<PAGE>
2.8. ACTION BY WRITING. Any action required or permitted to be taken at
any meeting of the stockholders may be taken without a meeting if all
stockholders entitled to vote on the matter consent to the action in writing and
the written consents are filed with the records of the meetings of stockholders.
Such consents shall be treated for all purposes as a vote at a meeting.
2.9. PROXIES. To the extent permitted by law, stockholders entitled to
vote may vote either in person or by proxy. Except to the extent permitted by
law, no proxy dated more than six months before the meeting named therein shall
be valid. Unless otherwise specifically limited by their terms, such proxies
shall entitle the holders thereof to vote at any adjournment of such meeting but
shall not be valid after the final adjournment of such meeting.
Section 3. BOARD OF DIRECTORS
3.1. NUMBER. At the annual meeting of stockholders such stockholders
as have the right to vote for the election of directors shall fix the number
of directors at not less than seven nor more than fifteen directors and shall
elect the number of directors so fixed. The number of directors may be
increased at any time or from time to time either by the stockholders or by
the directors by vote of a majority of the directors then in office. The
number of directors may be decreased to any number permitted by law at any
time or from time to time either by the stockholders or by the directors by a
vote of a majority of the directors then in office, but only to eliminate
vacancies existing by reason of the death, resignation, removal or
disqualification of one or more directors. No director need be a
stockholder.
3.2. TENURE. Except as otherwise provided by law, by the Articles of
Organization or by these By-laws, each director shall hold office until the next
annual meeting of the stockholders and until his successor is duly elected and
qualified, or until he sooner dies, resigns, is removed or becomes disqualified.
3.3. POWERS. Except as reserved to the stockholders by law, by the
Articles of Organization or by these By-laws, the business of the corporation
shall be managed by the directors who shall have and may exercise all the powers
of the corporation. In particular, and without limiting the generality of the
foregoing, the directors may at any time issue all or from time to time any part
of the unissued capital stock of the corporation from time to time authorized
under the Articles of Organization and may determine, subject to any
requirements of law, the consideration for which stock is to be issued and the
manner of allocating such consideration between capital and surplus.
-3-
<PAGE>
3.4. COMMITTEES. The directors may, by vote of a majority of the
directors then in office, elect from their number an executive committee and
other committees and delegate to any such committee or committees some or all of
the powers of the directors except those which by law, by the Articles of
Organization or these By-laws they are prohibited from delegating. Except as
the directors may otherwise determine, any such committee may make rules for the
conduct of its business, but unless otherwise provided by the directors or such
rules, its business shall be conducted as nearly as may be in the same manner as
is provided by these By-laws for the conduct of business by the directors.
3.5. REGULAR MEETINGS. Regular meetings of the directors may be held
without call or notice at such places and at such times as the directors may
from time to time determine, provided that reasonable notice of the first
regular meeting following any such determination shall be given to absent
directors. A regular meeting of the directors may be held without call or
notice immediately after and at the same place as the annual meeting of the
stockholders.
3.6. SPECIAL MEETINGS. Special meetings of the directors may be held at
any time and at any place designated in the call of the meeting, when called by
the chairman of the board, if any, the president or the secretary, reasonable
notice thereof being given to each director by the secretary or an assistant
secretary, or by the officer calling the meeting.
3.7. NOTICE. It shall be sufficient notice to a director to send notice
by mail at least forty-eight hours or by telegram at least twenty-four hours
before the meeting addressed to him at his usual or last known business or
residence address or to give notice to him in person or by telephone at least
twenty-four hours before the meeting. Notice of a meeting need not be given to
any director if a written waiver of notice, executed by him before or after the
meeting, is filed with the records of the meeting, or to any director who
attends the meeting without protesting prior thereto or at its commencement the
lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
3.8. QUORUM. At any meeting of the directors a majority of the directors
then in office shall constitute a quorum. Any meeting may be adjourned from
time to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
3.9. ACTION BY VOTE. When a quorum is present at any meeting, a
majority of the directors present may take any action, except when a larger vote
is required by law, by the Articles of Organization or by these By-laws.
-4-
<PAGE>
3.10. ACTION BY WRITING. Unless the Articles of Organization otherwise
provide, any action required or permitted to be taken at any meeting of the
directors may be taken without a meeting if all the directors consent to the
action in writing and the written consents are filed with the records of the
meetings of the directors. Such consents shall be treated for all purposes as a
vote taken at a meeting.
3.11. PRESENCE THROUGH COMMUNICATIONS EQUIPMENT. Unless otherwise
provided by law or the Articles of Organization, members of the board of
directors may participate in a meeting of such board by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting.
Section 4. OFFICERS AND AGENTS
4.1. ENUMERATION; QUALIFICATION. The officers of the corporation
shall be a president, a treasurer, a secretary, and such other officers, as
the directors from time to time, may in their discretion elect or appoint.
The corporation may also have such agents, if any, as the directors from time
to time, may in their discretion appoint. Any officer may be but none need
be a director or stockholder. Any two or more offices may be held by the
same person. Any officer may be required by the directors to give bond for
the faithful performance of his duties to the corporation in such amount and
with such sureties as the directors may determine.
4.2. POWERS. Subject to law, to the Articles of Organization and to the
other provisions of these By-laws, each officer shall have, in addition to the
duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such duties and powers as the directors may from time
to time designate.
4.3. ELECTION. The president, the treasurer and the secretary shall be
elected annually by the directors. Other officers, if any, may be elected or
appointed by the board of directors at any other time.
4.5. TENURE. Except as otherwise provided by law or by the Articles of
Organization or by these By-laws, the president, the treasurer and the secretary
and other officers shall hold office until their respective successors are
chosen and qualified, unless a shorter period shall have been specified by the
terms of his election or appointment, or in each case until he sooner dies,
resigns, is removed or becomes disqualified.
-5-
<PAGE>
4.5 CHIEF EXECUTIVE OFFICER. The chief executive officer of the
corporation shall be the chairman of the board, if any, the president or such
other officer as is designated by the directors and shall, subject to the
control of the directors, have general charge and supervision of the business of
the corporation. If no such designation is made, the president shall be the
chief executive officer. Unless the board of directors otherwise specifies, if
there is no chairman of the board, the chief executive officer shall preside, or
designate the person who shall preside, at all meetings of the stockholders and
of the board of directors.
4.6 CHAIRMAN OF THE BOARD. If a chairman of the board of directors is
elected, he shall have the duties and powers specified in these By-laws and
shall have such other duties and powers as may be determined by the directors.
Unless the board of directors otherwise specifies, the chairman of the board
shall preside, or designate the person who shall preside, at all meetings of the
stockholders and of the board of directors.
4.7 PRESIDENT AND VICE PRESIDENTS. The president shall have the duties
and powers specified in these By-laws and shall have such other duties and
powers as may be determined by the directors.
Any vice presidents shall have such duties and powers as shall be
designated from time to time by the directors.
4.8 TREASURER AND ASSISTANT TREASURERS. Except as the directors shall
otherwise determine, the treasurer shall be the chief financial and accounting
officer of the corporation and shall be in charge of its funds and valuable
papers, books of account and accounting records, and shall have such other
duties and powers as may be designated from time to time by the directors.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the directors.
4.9 SECRETARY AND ASSISTANT SECRETARY. The secretary shall record all
proceedings of the stockholders in a book or series of books to be kept
therefor, which book or books shall be kept at the principal office of the
corporation or at the office of its transfer agent or of its secretary and
shall be open at all reasonable times to the inspection of any stockholder.
In the absence of the secretary from any meeting of stockholders, an assitant
secretary, or if there be none or he is absent, a temporary secretary chosen
at the meeting, shall record the proceedings thereof in the aforesaid book.
Unless a transfer agent has been appointed the secretary shall keep or cause
to be kept the stock and transfer records of the corporation, which shall
contain the names and record addresses of all stockholders
-6-
<PAGE>
and the amount of stock held by each. The secretary shall keep a true record of
the proceedings of all meetings of the directors and in his absence from any
such meeting an assistant secretary, or if there be none or he is absent, a
temporary secretary chosen at the meeting, shall record the proceedings thereof.
Any assistant secretaries shall have such other duties and powers as shall
be designated from time to time by the directors.
4.10 POWERS. The chief executive officer, Chairman of the board,
President or any one of the Vice Presidents, including any Executive Vice
President, Senior Vice President, Second Vice President or Assistant Vice
President, and such other employees of the Company specifically authorized by
the chief executive officer shall have authority to transfer securities, to
execute releases, extensions, partial releases, and assignments without recourse
of mortgages, and to execute deeds and other instruments or documents on behalf
of the Company, and whenever necessary to affix the seal of the Company to the
same. The chief executive officer, Chairman of the Board, the President, any
Executive Vice President, Senior Vice President, Vice President, Second Vice
President, or Assistant Vice President may, whenever necessary, delegate
authority to perform any of the acts referred to in this paragraph to any person
pursuant to a special power of attorney.
The Treasurer shall have charge of all moneys and securities of the Company
and shall collect all proceeds from investments which the Company's records
establish to be due.
The Treasurer or an Assistant Treasurer shall have authority to transfer
securities; to execute releases, extensions, partial releases, and assignments
without recourse of mortgages; to execute deeds and other instruments or
documents on behalf of the Company, whenever necessary to affix the seal of the
company to the same; and shall have power to vote, on behalf of the Company, in
any case where the Company, as holder of any security, is entitled to vote.
Section 5. RESIGNATIONS AND REMOVALS
Any director or officer may resign at any time by delivering his
resignation in writing to the chairman of the board, if any, the president, the
treasurer or the secretary. In addition, a director may resign by delivering
his resignation in writing to a meeting of the directors. Such resignation
shall be effective upon receipt unless specified to be effective at some other
time. A director (including persons elected by directors to fill vacancies in
the board) may be removed from office (a) with or without cause by the vote of
the holders of a majority of the shares issued and outstanding and entitled to
vote in the election of directors, provided that the directors of a class
elected by a particular class of stockholders may be removed only
-7-
<PAGE>
by the vote of the holders of a majority of the shares of such class, or (b)
with cause by the vote of a majority of the directors then in office. The
directors may remove any officer elected by them with or without cause by the
vote of a majority of the directors then in office. A director or officer may
be removed for cause only after reasonable notice and opportunity to be heard
before the body proposing to remove him. No director or officer removed, shall
have any right to any compensation as such director or officer for any period
following his resignation or removal, or any right to damages on account of such
removal, whether his compensation be by the month or by the year or otherwise;
unless the body acting on the removal, shall in their or its discretion provide
for compensation.
Section 6. VACANCIES
Any vacancy in the board of directors, including a vacancy resulting from
the enlargement of the board, may be filled by the stockholders or, in the
absence of stockholder action, by the directors by vote of a majority of the
directors then in office. The directors shall elect a successor if the office
of the president, treasurer or secretary becomes vacant and may elect a
successor if any other office becomes vacant. Each such successor
shall hold office for the unexpired term and in the case of the president,
treasurer and secretary until his successor is chosen and qualified, or in each
case until he sooner dies, resigns, is removed or becomes disqualified. The
directors shall have and may exercise all their powers notwithstanding the
existence of one or more vacancies in their number.
Section 7. CAPITAL STOCK
7.1. NUMBER AND PAR VALUE. The total number of shares and the par value,
if any, of each class of stock which the corporation is authorized to issue
shall be as stated in the Articles of Organization.
7.2. SHARES REPRESENTED BY CERTIFICATES AND UNCERTIFICATED SHARES. The
board of directors may provide by resolution that some or all of any or all
classes and series of shares shall be uncertificated shares. Unless such a
resolution has been adopted, a stockholder shall be entitled to a certificate
stating the number and the class and the designation of the series, if any, of
the shares held by him, in such form as shall, in conformity to law, be
prescribed from time to time by the directors. Such certificate shall be signed
by the chairman of the board, if any, the president or a vice president and by
the treasurer or an assistant treasurer. Such signatures may be facsimiles if
the certificate is signed by a transfer agent, or by a registrar, other than a
director, officer or employee of the corporation. In case any officer who has
signed or whose
-8-
<PAGE>
facsimile signature has been placed on such certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the time of its
issue.
7.3. LOSS OF CERTIFICATES. In the case of the alleged loss or
destruction or the mutilation of a certificate of stock, a duplicate certificate
may by issued in place thereof, upon such conditions as the directors may
prescribe.
Section 8. TRANSFER OF SHARES OF STOCK
8.1. TRANSFER ON BOOKS. Subject to the restrictions, if any, stated or
noted on the stock certificates, shares of stock may be transferred on the
books of the corporation by the surrender to the corporation or its transfer
agent of the certificate therefor properly endorsed or accompanied by a
written assignment and power of attorney properly executed, with necessary
transfer stamps affixed, and with such proof of the authenticity of signature
as the directors or the transfer agent of the corporation may reasonably
require. Except as may be otherwise required by law, by the Articles of
Organization or by these By-laws, the corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock
for all purposes, including the payment of dividends and the right to receive
notice and to vote with respect thereto, regardless of any transfer, pledge
or other disposition of such stock until the shares have been transferred on
the books of the corporation in accordance with the requirements of these
By-laws.
It shall be the duty of each stockholder to notify the corporation of his
post office address.
8.2 RECORD DATE AND CLOSING TRANSFER BOOKS. The directors may fix in
advance a time, which shall not be more than sixty days before the date of
any meeting of stockholders or the date for the payment of any dividend or
making of any distribution to stockholders or the last day on which the
consent or dissent of stockholders may be effectively expressed for any
purpose, as the record date for determining the stockholders having the right
to notice of and to vote at such meeting and any adjournment thereof or the
right to receive such dividend or distribution or the right to give such
consent or dissent, and in such case only stockholders of record on such
record date shall have such right, notwithstanding any transfer of stock on
the books of the corporation after the record date; or without fixing such
record date the directors may for any of such purposes close the transfer
books for all or any part of such period. If no record date is fixed and the
transfer books are not closed:
(1) The record date for determining stockholders having the right to
notice of or to vote at a meeting of stockholders shall
-9-
<PAGE>
be at the close of business on the date next preceding the day on which notice
is given.
(2) the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of directors
acts with respect thereto.
Section 9. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the extent legally permissible, indemnify each of
its directors and officers (including persons who serve at its request as
directors, officers or trustees of another organization, or in any capacity with
respect to any employee benefit plan) against all liabilities and expenses,
including amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees, reasonably incurred by him in connection with
the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, in which he may be involved or with which he may be
threatened, while in office or thereafter, by reason of his being or having been
such a director or officer, except with respect to any matter as to which he
shall have been adjudicated in any proceeding not to have acted in good faith
in the reasonable belief that his action was in the best interest of the
corporation (any person serving another organization in one or more of the
indicated capacities at the request of the corporation who shall have acted
in good faith in the reasonable belief that his action was in the best
interest of such other organization to be deemed as having acted in such
manner with respect to the corporation) or, to the extent that such matter
relates to service with respect to any employee benefit plan, in the best
interest of the participants or beneficiaries of such employee benefit plan;
provided, however, that as to any matter disposed of by a compromise payment
by such director or officer, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses
shall be provided unless such compromise shall be approved as in the best
interest of the corporation, after notice that it involves such indemnification:
(a) by a disinterested majority of the directors then in office; or (b) by a
majority of the disinterested directors then in office, provided that there has
been obtained an opinion in writing of independent legal counsel to the effect
that such director or officer appears to have acted in good faith in the
reasonable belief that his action was in the best interest of the corporation;
or (c) by the holders of a majority of the outstanding stock at the time
entitled to vote for directors, voting as a single class, exclusive of any stock
owned by any interested director or officer. Expenses, including counsel fees,
reasonably incurred by any director or officer in connection with the defense or
disposition of any such action, suit or other proceeding may be paid from time
to time by the corporation in advance of the final disposition thereof upon
-10-
<PAGE>
receipt of an undertaking by such director or officer to repay the amounts so
paid to the corporation if it is ultimately determined that indemnification for
such expenses is not authorized under this section. The right of
indemnification hereby provided shall not be exclusive of or affect any other
rights to which any director or officer may be entitled. As used in this
section, the terms "director" and "officer" include the relevant individual's
heirs, executors and administrators, and an "interested" director or officer is
one against whom in such capacity the proceedings in question or another
proceeding on the same or similar grounds is then pending. Nothing contained in
this section shall affect any rights to indemnification to which corporate
personnel other than directors and officers may be entitled by contract or
otherwise under law.
Section 10. CORPORATE SEAL
The seal of the corporation shall, subject to alteration by the directors,
consist of a flat-faced circular die with the word "Massachusetts", together
with the name of the corporation and the year of its organization, cut or
engraved thereon.
Section 11. EXECUTION OF PAPERS
The chief executive officer, Chairman of the Board, President or any one of
the Vice Presidents, including any Executive Vice President, Senior Vice
President, Second Vice President or Assistant Vice President, and such other
employees of the Company specifically authorized by the chief executive officer
shall have authority to transfer securities, to execute releases, extensions,
partial releases, and assignments without recourse of mortgages; and to execute
deeds and other instruments or documents on behalf of the Company, and whenever
necessary to affix the seal of the company to the same. The chief executive
officer, Chairman of the Board, the President, any Executive Vice President,
Senior Vice President, Vice President, Second Vice President, Vice President,
Second Vice President, or Assistant Vice President may, whenever necessary,
delegate authority to perform any of the acts referred to in this paragraph to
any person pursuant to a special power of attorney.
Section 12. FISCAL YEAR
The fiscal year of the corporation shall end on December 31.
Section 13. AMENDMENTS
These By-laws may be altered amended or repealed at any annual or special
meeting of the stockholders called for the purpose, of which the notice shall
specify the subject matter of the proposed alteration, amendment or repeal or
the sections to be affected thereby, by vote of the stockholders. These By-laws
may also be altered, amended or repealed by vote of a majority of
-11-
<PAGE>
the directors then in office, except that the directors shall not take any
action which provides for indemnification of directors nor any action to amend
this Section 13, and except that the directors shall not take any action unless
permitted by law.
Any By-law so altered, amended or repealed by the directors may be further
altered or amended or reinstated by the stockholders in the above manner.
<PAGE>
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
October 10, 1995
State Mutual Life Assurance Company of America
440 Lincoln Street
Worcester MA 01653
Gentlemen:
In my capacity as Counsel of State Mutual Life Assurance Company of America (the
"Company"), I have participated in the preparation of this Post-Effective
Amendment to the Registration Statement for Separate Account I on Form N-4 under
the Securities Act of 1933 and the Investment Company Act of 1940, with respect
to the Company's group variable annuity contracts.
I am of the following opinion:
1. Separate Account I is a separate account of the Company validly existing
pursuant to the Massachusetts Insurance Code and the regulations issued
thereunder.
2. The assets held in Separate Account I are not chargeable with liabilities
arising out of any other business the Company may conduct.
3. The group variable annuity contracts, when issued in accordance with the
Prospectus contained in the Registration Statement and upon compliance with
applicable local law, will be legal and binding obligations of the Company
in accordance with their terms and when sold will be legally issued, fully
paid and non-assessable.
In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as in my judgment are necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to the Post-
Effective Amendment to the Registration Statement filed under the Securities Act
of 1933.
Very truly yours,
/s/ Sheila B. St. Hilaire
Sheila B. St. Hilaire
Counsel
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 7 to the Registration
Statement on Form N-4 of our report dated February 13, 1995, except as to Note
2, which is as of February 28, 1995, relating to the financial statements of
State Mutual Life Assurance Company of America and our report dated February 13,
1995, relating to the financial statements of Separate Account I of State Mutual
Life Assurance Company of America, both of which appear in such Statement of
Additional Information. We also consent to the reference to us under the
heading "Experts" in such Statement of Additional Information.
/s/ Price Waterhouse LLP
Boston, Massachusetts
October 16, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 164
<NAME> SM SEPARATE ACCOUNT I SUB-ACCOUNT 001
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 486,285
<INVESTMENTS-AT-VALUE> 444,484
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 444,484
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 422
<TOTAL-LIABILITIES> 422
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<NAME> SM SEPARATE ACCOUNT I SUB-ACCOUNT 002
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<NAME> SM SEPARATE ACCOUNT I SUB-ACCOUNT 003
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<NAME> SM SEPARATE ACCOUNT I SUB-ACCOUNT 004
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<NAME> SM SEPARATE ACCOUNT I SUB-ACCOUNT 005
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