<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT I
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES - DECEMBER 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
GROWTH INVESTMENT GRADE INCOME MONEY MARKET
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
1 2 3
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of Allmerica Investment Trust .... $ 716,766 $ 159,683 $ 304,465
LIABILITIES:
Payable to First Allmerica Financial Life Insurance
Company (Sponsor).................................... 706 157 299
----------- ----------- -----------
Net assets.......................................... $ 716,060 $ 159,526 $ 304,166
=========== =========== ===========
Net asset distribution by category:
Qualified variable annuity policies................. $ 716,060 $ 159,526 $ 304,166
=========== =========== ===========
Qualified units outstanding, December 31, 1995......... 5,127 1,368 2,793
Net asset value per qualified unit, December 31, 1995.. $139.673528 $116.632734 $108.898245
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY INDEX GOVERNMENT BOND
SUB-ACCOUNT SUB-ACCOUNT
4 5
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investment in shares of Allmerica Investment Trust..... $ 127,852 $ 173,087
LIABILITIES:
Payable to First Allmerica Financial Life Insurance
Company (Sponsor).................................... 127 169
----------- -----------
Net assets.......................................... $ 127,725 $ 172,918
=========== ===========
Net asset distribution by category:
Qualified variable annuity policies................. $ 127,725 $ 172,918
=========== ===========
Qualified units outstanding, December 31, 1995......... 891 1,551
Net asset value per qualified unit, December 31, 1995.. $143.302251 $111.492739
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT I
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
GROWTH INVESTMENT GRADE INCOME MONEY MARKET
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
1 2 3
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends........................................ $ 67,610 $ 9,156 $ 17,969
-------- -------- --------
EXPENSES:
Mortality and expense risk fees.................. 5,117 1,202 2,809
Administrative expense fees...................... 1,421 334 780
-------- -------- --------
Total expenses................................. 6,538 1,536 3,589
-------- -------- --------
Net investment income............................ 61,072 7,620 14,380
-------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss................................ (464) (149) --
Net unrealized gain.............................. 92,586 13,040 --
-------- -------- --------
Net realized and unrealized gain on investments.. 92,122 12,891
-------- -------- --------
Net increase in net assets from operations....... $153,194 $ 20,511 $ 14,380
======== ======== ========
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY INDEX GOVERNMENT BOND
SUB-ACCOUNT SUB-ACCOUNT
4 5
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends........................................ $ 8,309 $ 8,571
-------- --------
EXPENSES:
Mortality and expense risk fees.................. 911 1,244
Administrative expense fees...................... 253 346
-------- --------
Total expenses................................. 1,164 1,590
-------- --------
Net investment income............................ 7,145 6,981
-------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss)......................... 3,196 (1,013)
Net unrealized gain.............................. 18,996 8,986
-------- --------
Net realized and unrealized gain on investments.. 22,192 7,973
-------- --------
Net increase in net assets from operations....... $ 29,337 $ 14,954
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT I
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
GROWTH INVESTMENT GRADE INCOME
SUB-ACCOUNT 1 SUB-ACCOUNT 2
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income............................................ $ 61,072 $ 24,258 $ 7,620 $ 6,131
Net realized gain (loss) from security transactions.............. (464) (7,214) (149) (1,965)
Net unrealized gain (loss) on investments........................ 92,586 (19,429) 13,040 (9,199)
--------- --------- ---------- ---------
Net increase (decrease) in net assets from operations............ 153,194 (2,385) 20,511 (5,033)
--------- --------- ---------- ---------
FROM CAPITAL TRANSACTIONS:
Net deposits..................................................... 190,334 202,325 35,941 33,040
Terminations..................................................... (71,551) (156,935) (10,187) (29,798)
Other transfers from (to) the General Account of
First Allmerica Financial Life Insurance Company (Sponsor)..... 21 26,541 2,123 (4,510)
--------- --------- ---------- ---------
Net increase (decrease) in net assets from capital transactions.. 118,804 71,931 27,877 (1,268)
--------- --------- ---------- ---------
Net increase (decrease) in net assets............................ 271,998 69,546 48,388 (6,301)
NET ASSETS:
Beginning of year................................................ 444,062 374,516 111,138 117,439
--------- --------- ---------- ---------
End of year...................................................... $ 716,060 $ 444,062 $ 159,526 $ 111,138
========= ========= ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT I
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET EQUITY INDEX GOVERNMENT BOND
SUB-ACCOUNT 3 SUB-ACCOUNT 4 SUB-ACCOUNT 5
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 14,380 $ 4,133 $ 7,145 $ 2,335 $ 6,981 $ 12,206
-- -- 3,196 1,851 (1,013) (14,172)
-- -- 18,996 (3,828) 8,986 (3,709)
--------- --------- --------- --------- --------- ---------
14,380 4,133 29,337 358 14,954 (5,675)
--------- --------- --------- --------- --------- ---------
73,363 320,783 19,664 69,280 54,856 71,032
(159,752) (116,913) (28,719) (72,498) (19,947) (57,403)
(65) 132,746 2,420 87 (5) (195,292)
--------- --------- --------- --------- --------- ---------
(86,454) 336,616 (6,635) (3,131) 34,904 (181,663)
--------- --------- --------- --------- --------- ---------
(72,074) 340,749 22,702 (2,773) 49,858 (187,338)
376,240 35,491 105,023 107,796 123,060 310,398
--------- --------- --------- --------- --------- ---------
$ 304,166 $ 376,240 $ 127,725 $ 105,023 $ 172,918 $ 123,060
========= ========= ========= ========= ========= =========
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT I
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
NOTE 1 - ORGANIZATION
Separate Account I (SA-I) is a separate investment account of First Allmerica
Financial Life Insurance Company (the Company), 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.
Effective October 16, 1995, concurrent with the demutualization, the Company's
name was changed from State Mutual Life Assurance Company of America. 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.
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, 1995 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO INFORMATION
SUB- INVESTMENT NUMBER OF AGGREGATE NET ASSET
ACCOUNT PORTFOLIO SHARES COST VALUE PER SHARE
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Allmerica Investment Trust:
1 Growth......................... 329,396 $ 665,980 $ 2.176
2 Investment Grade Income........ 142,957 158,452 1.117
3 Money Market................... 304,465 304,465 1.000
4 Equity Index................... 69,979 110,018 1.827
5 Government Bond................ 162,983 173,433 1.062
</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.
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, 1995, there were no IRA account fees deducted from
accumulated value in the Separate Account.
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.
NOTE 5 - POLICYOWNERS AND SPONSOR TRANSACTIONS
<TABLE>
<CAPTION>
Transactions from policyowners were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994
---- ----
UNITS AMOUNT UNITS AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sub-Account 1
Issuance of units.......... 1,560 $ 194,420 2,185 $ 232,422
Redemption of units........ (607) (75,616) (1,496) (160,491)
------ --------- ------- ----------
Net increase............... 953 $ 118,804 689 $ 71,931
====== ========= ======= ==========
Sub-Account 2
Issuance of units.......... 366 $ 40,028 321 $ 32,965
Redemption of units........ (108) (12,151) (336) (34,233)
------ --------- ------- ----------
Net increase (decrease).... 258 $ 27,877 (15) $ (1,268)
====== ========= ======= ==========
Sub-Account 3
Issuance of units.......... 699 $ 73,511 5,040 $ 518,505
Redemption of units........ (1,521) (159,965) (1,775) (181,889)
------ --------- ------- ----------
Net increase (decrease).... (822) $ (86,454) 3,265 $ 336,616
====== ========= ======= ==========
Sub-Account 4
Issuance of units.......... 173 $ 24,090 650 $ 69,367
Redemption of units........ (269) (30,725) (675) (72,498)
------ --------- ------- ----------
Net increase (decrease..... (96) $ (6,635) (25) $ (3,131)
====== ========= ======= ==========
Sub-Account 5
Issuance of units.......... 549 $ 54,856 706 $ 79,132
Redemption of units........ (232) (19,952) (2,521) (260,795)
------ --------- ------- ----------
Net increase (decrease..... 317 $ 34,904 (1,815) $ (181,663)
====== ========= ======= ==========
</TABLE>
<PAGE>
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, 1995 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SUB-
ACCOUNT INVESTMENT PORTFOLIO PURCHASES SALES
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
1 Growth..................................... $ 279,506 $ 99,346
2 Investment Grade Income.................... 50,022 14,478
3 Money Market............................... 93,194 165,306
4 Equity Index............................... 86,566 86,027
5 Government Bond............................ 65,470 23,572
--------- ---------
Totals..................................... $ 574,758 $ 388,729
========= =========
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of First Allmerica Financial
Life Insurance Company and
Policyowners of Separate Account I of
First Allmerica Financial Life Insurance Company
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the Sub-Accounts (1, 2,
3, 4 and 5) constituting the Separate Account I of First Allmerica Financial
Life Insurance Company at December 31, 1995, the results of each of their
operations for the year then ended, and the changes in each of their net assets
for each of the two years in the period then ended, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of First Allmerica Financial Life Insurance Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of investments owned at
December 31, 1995 by correspondence with the Trust, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 23, 1996
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