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ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
WORCESTER, MASSACHUSETTS
This Prospectus provides important information about the Delaware Medallion II
variable annuity policies issued by Allmerica Financial Life Insurance and
Annuity Company and Delaware Medallion I variable annuity policies issued by
Allmerica Financial Life Insurance and Annuity Company and First Allmerica
Financial Life Insurance Company. The policy is a flexible payment tax-deferred
combination variable and fixed annuity offered on both a group and individual
basis. Neither of these policies is currently being sold in any jurisdiction.
PLEASE READ THIS PROSPECTUS CAREFULLY BEFORE INVESTING AND KEEP IT FOR FUTURE
REFERENCE. ANNUITIES INVOLVE RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL.
Information specific to Delaware Medallion I is set forth in Appendix B. Owners
of these policies should review this Appendix first.
A Statement of Additional Information dated May 1, 2000 containing more
information about this annuity is on file with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus. A copy may be
obtained free of charge by completing the attached request card or by calling
Annuity Client Services at 1-800-533-2124. The Table of Contents of the
Statement of Additional Information is listed on page 3 of this Prospectus. This
Prospectus and the Statement of Additional Information can also be obtained from
the Securities and Exchange Commission's website (http://www.sec.gov).
The Variable Account, known as Separate Account VA-K is subdivided into
Sub-Accounts. Each Sub-Account offered as an investment option under this policy
invests exclusively in shares of one of the following funds.
<TABLE>
<S> <C> <C>
DELAWARE GROUP PREMIUM FUND AIM VARIABLE INSURANCE FUNDS ALLIANCE VARIABLE PRODUCTS SERIES
DGPF Growth & Income Series AIM V.I. Growth Fund FUND, INC. (CLASS B)
DGPF Devon Series AIM V.I. High Yield Fund Alliance Growth Portfolio
DGPF Growth Opportunities Series AIM V.I. International Equity Fund Alliance Growth and Income Portfolio
DGPF U.S. Growth Series AIM V.I. Value Fund Alliance Premier Growth Portfolio
DGPF Select Growth Series Alliance Technology Portfolio
DGPF Social Awareness Series THE ALGER AMERICAN FUND
DGPF REIT Series Alger American Leveraged AllCap FRANKLIN TEMPLETON VARIABLE
DGPF Small Cap Value Series Portfolio INSURANCE PRODUCTS TRUST (CLASS 2)
DGPF Trend Series Alger American MidCap Growth Franklin Small Cap Fund
DGPF International Equity Series Portfolio Mutual Shares Securities Fund
DGPF Emerging Markets Series Alger American Small Capitalization Templeton Growth Securities Fund
DGPF Balanced Series Portfolio Templeton International Securities Fund
DGPF Convertible Securities Series
DGPF High Yield Series PIONEER VARIABLE CONTRACTS
DGPF Capital Reserves Series TRUST (CLASS II)
DGPF Strategic Income Series DGPF Pioneer Emerging Markets VCT
Cash Reserve Series Portfolio
DGPF Global Bond Series Pioneer Mid-Cap Value VCT Portfolio
</TABLE>
The Company's General Account is also available as an investment option and
offers a fixed interest rate guaranteed for one year from the time a payment is
received.
THIS ANNUITY IS NOT A BANK DEPOSITOR OR OBLIGATION; FEDERALLY INSURED; OR
ENDORSED BY ANY BANK OR GOVERNMENTAL AGENCY.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED THAT THE INFORMATION IN THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
DATED MAY 1, 2000
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TABLE OF CONTENTS
<TABLE>
<S> <C>
SPECIAL TERMS............................................... 4
SUMMARY OF FEES AND EXPENSES................................ 6
SUMMARY OF POLICY FEATURES.................................. 14
DESCRIPTION OF THE COMPANY, THE SEPARATE ACCOUNT, AND THE
UNDERLYING INVESTMENT COMPANIES............................ 18
INVESTMENT OBJECTIVES AND POLICIES.......................... 20
PERFORMANCE INFORMATION..................................... 24
CHARGES AND DEDUCTIONS...................................... 26
A. Surrender Charge..................................... 26
B. Premium Taxes........................................ 29
C. Policy Fee........................................... 29
D. Optional Minimum Guaranteed Annuity Payout (M-GAP)
Rider Charge............................................ 29
E. Annual Charges Against Separate Account Assets....... 29
THE VARIABLE ANNUITY POLICIES............................... 31
A. Purchase Payments.................................... 31
B. Transfer Privilege................................... 32
C. Surrender............................................ 33
D. Partial Redemption................................... 33
E. Death Benefit........................................ 34
F. The Spouse of the Owner as Beneficiary............... 35
G. Assignment........................................... 35
H. Electing the Form of Annuity and the Annuity Date.... 36
I. Description of Variable Annuity Options.............. 37
J. Optional Minimum Guaranteed Annuity Payout (M-GAP)
Rider................................................... 38
K. NORRIS Decision...................................... 40
L. Computation of Policy Values and Annuity Benefit
Payments................................................ 40
Determination of the First Variable Annuity Benefit
Payment............................................. 40
The Annuity Unit.................................... 41
Determination of the Number of Annuity Units........ 41
Dollar Amount of Subsequent Variable Annuity Benefit
Payments............................................ 41
FEDERAL TAX CONSIDERATIONS.................................. 42
A. General.............................................. 42
The Company......................................... 42
Diversification Requirements........................ 42
Investor Control.................................... 42
B. Qualified and Non-Qualified Policies................. 43
C. Taxation of the Policies in General.................. 43
Withdrawals Prior to Annuitization.................. 43
Annuity Payouts After Annuitization................. 43
Penalty on Distribution............................. 43
Assignments or Transfers............................ 44
Nonnatural Owners................................... 44
Deferred Compensation Plans of State and Local
Governments and Tax-Exempt Organizations............ 44
D. Tax Withholding...................................... 44
E. Provisions Applicable to Qualified Employer Plans.... 45
Corporate and Self-Employed Pension and Profit
Sharing Plans....................................... 45
Individual Retirement Annuities..................... 45
Tax-Sheltered Annuities............................. 45
Texas Optional Retirement Program................... 46
LOANS (QUALIFIED POLICIES ONLY)............................. 46
</TABLE>
2
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<TABLE>
<S> <C>
STATEMENTS AND REPORTS...................................... 46
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS........... 46
VOTING RIGHTS............................................... 48
CHANGES TO COMPLY WITH LAW AND AMENDMENTS................... 48
LEGAL MATTERS............................................... 48
FURTHER INFORMATION......................................... 48
APPENDIX A -- MORE INFORMATION ABOUT THE GENERAL ACCOUNT.... A-1
APPENDIX B -- INFORMATION APPLICABLE ONLY TO OWNERS OF
DELAWARE MEDALLION I ALLMERICA FINANCIAL LIFE INSURANCE AND
ANNUITY COMPANY (Policy Form A3019-92) FIRST ALLMERICA
FINANCIAL LIFE INSURANCE COMPANY (Policy Form
A3019-94GRC)............................................... B-1
APPENDIX C -- CONDENSED FINANCIAL INFORMATION............... C-1
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY............................. 2
TAXATION OF THE CONTRACT, THE VARIABLE ACCOUNT AND THE
COMPANY.................................................... 3
SERVICES.................................................... 3
UNDERWRITERS................................................ 3
ANNUITY BENEFIT PAYMENTS.................................... 4
EXCHANGE OFFER.............................................. 6
ENHANCED AUTOMATIC TRANSFER (DOLLAR COST AVERAGING)
PROGRAM.................................................... 8
PERFORMANCE INFORMATION................................... 8
FINANCIAL STATEMENTS........................................ F-1
</TABLE>
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SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated meanings:
ACCUMULATED VALUE: the total value of all Accumulation Units in the Sub-Accounts
plus the value of all accumulations in the General Account credited to the
Policy on any date before the Annuity Date.
ACCUMULATION UNIT: a unit of measure used to calculate the value of a
Sub-Account before annuity benefit payments begin.
ANNUITANT: the person designated in the Policy to whom the Annuity is to be
paid.
ANNUITY DATE: the date on which annuity benefit payments begin. This date may
not be later than the first day of the month before the Annuitant's 90th
birthday.
ANNUITY UNIT: a unit of measure used to calculate the value of the periodic
annuity payments under the Policy.
COMPANY: unless otherwise specified, any reference to the "Company" shall refer
exclusively to Allmerica Financial Life Insurance and Annuity Company for all
Delaware Medallion II policies (Form No. 3022-93) and for all Delaware Medallion
I policies (Form No. 3019-92) except for Delaware Medallion I policies issued in
New York on Form No. 301994 GRC on and after April 1, 1994. With regard to New
York policies issued on and after April 1, 1994, any reference to "Company"
refers exclusively to First Allmerica Financial Life Insurance Company.
FIXED ANNUITY PAYOUT: an annuity payout providing for payments which remain
fixed in amount throughout the annuity payment period.
GENERAL ACCOUNT: all the assets of the Company other than those held in a
separate account.
OWNER (YOU): the Owner of a Policy who may exercise all rights under the Policy,
subject to the consent of any irrevocable beneficiary. After the Annuity Date,
the Annuitant will be the Owner.
SEPARATE ACCOUNT: Separate Account VA-K of the Company, consisting 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 and are not chargeable with liabilities arising out of any other
business which the Company may conduct.
SUB-ACCOUNT: a subdivision of Separate Account VA-K investing exclusively in the
shares of a corresponding investment portfolio of Delaware Group Premium Fund
("DGPF"), AIM Variable Insurance Funds ("AVIF"), The Alger American Fund
("Alger"), Alliance Variable Products Series Fund, Inc. ("Alliance"), Franklin
Templeton Variable Insurance Products Trust ("FT VIP") and Pioneer Variable
Contracts Trust ("Pioneer VCT").
SURRENDER VALUE: the Accumulated Value of the Policy minus any Policy fee, rider
charge and/or surrender charge that may apply upon surrender.
UNDERLYING FUNDS (FUNDS): an investment portfolio of DGPF, AVIF, Alger,
Alliance, FT VIP and Pioneer VCT in which a Sub-Account invests.
VALUATION DATE: a day on which the net asset value of the shares of any of the
Underlying Funds is determined and unit values of the Sub-Accounts are
determined. Valuation dates currently occur on each day on which the New York
Stock Exchange is open for trading, and on such other days (other than a day
during
4
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which no payment, partial withdrawal, or surrender of a Policy was received)
when there is a sufficient degree of trading in an Underlying Fund portfolio
securities such that the current unit value of the Sub-Accounts may be
materially affected.
VALUATION PERIOD: the interval between two consecutive Valuation Dates.
VARIABLE ANNUITY PAYOUT: an annuity payout providing for payments varying in
amount in accordance with the investment experience of certain Underlying Funds.
5
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SUMMARY OF FEES AND EXPENSES
There are certain fees and expenses that you will bear under the Delaware
Medallion I and II Policies. The purpose of the following tables is to assist
you in understanding these fees and expenses. The tables show (1) charges under
the Policy, (2) annual expenses of the Sub-Accounts, and (3) annual expenses of
the Funds. In addition to the charges and expenses described below, premium
taxes are applicable in some states and are deducted as described under "B.
Premium Taxes" under CHARGES AND DEDUCTIONS.
<TABLE>
<CAPTION>
YEARS FROM
DATE OF PAYMENT CHARGE
1. POLICY CHARGES: --------------- ------
<S> <C> <C>
SURRENDER CHARGE:* 0-3 7.0%
This charge may be assessed upon surrender, withdrawal or 4 6.0%
annuitization under any commutable period certain option 5 5.0%
or a noncommutable period certain option of less than ten 6 4.0%
years. The charge is a percentage of payments applied to 7 3.0%
the amount surrendered (in excess of any amount that is More than 7 0%
free of surrender charge) within the indicated time
period.
TRANSFER CHARGE: None
The Company currently makes no charge for processing
transfers and guarantees that the first 12 transfers in a
Policy year will not be subject to a transfer charge. For
each subsequent transfer, the Company reserves the right
to assess a charge, guaranteed never to exceed $25, to
reimburse the Company for the costs of processing the
transfer.
ANNUAL POLICY FEE: $30
The fee is deducted annually and upon surrender prior to
the Annuity Date when Accumulated Value is $50,000 or
less. The fee is waived for Policies issued to and
maintained by the trustee of a 401(k) plan.
OPTIONAL RIDER CHARGES:
Under the following riders, 1/12th of the annual charge is
deducted pro-rata on a monthly basis at the end of each
month and, if applicable, at termination of the rider. The
charge on an annual basis as a percentage of the
Accumulated Value is:
Optional Minimum Guaranteed Annuity Payout (M-GAP) Rider 0.25%
with a ten-year waiting period:
Optional Minimum Guaranteed Annuity Payout (M-GAP) Rider 0.15%
with a fifteen-year waiting period:
2. ANNUAL SUB-ACCOUNT EXPENSES:
(on an annual basis as percentage of average daily net
assets)
Mortality and Expense Risk Charge: 1.25%
Administrative Expense Charge: 0.15%
------
Total Annual Expenses: 1.40%
</TABLE>
*From time to time the Company may allow a reduction of the surrender charge,
the period during which the charges apply, or both, and/or credit additional
amounts on Policies when (1) Policies are sold to individuals or groups of
individuals in a manner which reduces sales expenses, or (2) where the Owner or
the Annuitant on the date of issue is within certain classes of eligible
persons. For more information, see "A. Surrender Charge" under CHARGES AND
DEDUCTIONS.
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3. ANNUAL UNDERLYING FUND EXPENSES: Total expenses of the Underlying Funds are
not fixed or specified under the terms of the Policy and will vary from year to
year. The levels of fees and expenses also vary among the Underlying Funds. The
following table shows the expenses of the Underlying Funds as a percentage of
average net assets for the year ended December 31, 1999, as adjusted for any
material changes.
<TABLE>
<CAPTION>
TOTAL FUND
EXPENSES
MANAGEMENT FEE OTHER EXPENSES (AFTER ANY
(AFTER ANY (AFTER ANY WAIVERS/
FUND VOLUNTARY WAIVERS) 12B-1 FEES REIMBURSEMENTS) REIMBURSEMENTS)
- ---- ------------------ ---------- --------------- -----------------
<S> <C> <C> <C> <C>
DGPF Growth & Income Series.............. 0.60% -- 0.11% 0.71%(2)
DGPF Devon Series........................ 0.65% -- 0.12% 0.77%(2)
DGPF Growth Opportunities Series......... 0.75% -- 0.07% 0.82%(2)
DGPF U.S. Growth Series*................. 0.61% -- 0.14% 0.75%(1)(2)
DGPF Select Growth Series................ 0.74% -- 0.06% 0.80%(1)(2)
DGPF Social Awareness Series............. 0.70% -- 0.15% 0.85%(1)(2)
DGPF REIT Series......................... 0.64% -- 0.21% 0.85%(1)(2)
DGPF Small Cap Value Series.............. 0.75% -- 0.10% 0.85%(2)
DGPF Trend Series........................ 0.75% -- 0.07% 0.82%(2)
DGPF International Equity Series......... 0.83% -- 0.12% 0.95%(1)(2)
DGPF Emerging Markets Series............. 1.19% -- 0.28% 1.47%(1)(2)
DGPF Balanced Series..................... 0.65% -- 0.11% 0.76%(2)
DGPF Convertible Securities Series....... 0.75% -- 0.08% 0.83%(2)
DGPF High Yield Series................... 0.65% -- 0.09% 0.74%(2)
DGPF Capital Reserves Series............. 0.50% -- 0.26% 0.76%(2)
DGPF Strategic Income Series............. 0.65% -- 0.15% 0.80%(2)
DGPF Cash Reserve Series................. 0.45% -- 0.10% 0.55%(2)
DGPF Global Bond Series.................. 0.75% -- 0.10% 0.85%(2)
AIM V.I. Growth Fund..................... 0.63% -- 0.10% 0.73%
AIM V.I. High Yield Fund................. 0.63% -- 0.51% 1.14%(3)
AIM V.I. International Equity Fund....... 0.75% -- 0.22% 0.97%
AIM V.I. Value Fund...................... 0.61% -- 0.15% 0.76%
Alger American Leveraged AllCap
Portfolio............................... 0.85% -- 0.08%(4) 0.93%
Alger American MidCap Growth Portfolio... 0.80% -- 0.05% 0.85%
Alger American Small Capitalization
Portfolio............................... 0.85% -- 0.05% 0.90%
Alliance Growth Portfolio (Class B)...... 0.75% 0.25% 0.12% 1.12%
Alliance Growth and Income Portfolio
(Class B)............................... 0.63% 0.25% 0.09% 0.97%
Alliance Premier Growth Portfolio
(Class B)............................... 1.00% 0.25% 0.04% 1.29%
Alliance Technology Portfolio
(Class B)............................... 1.00% 0.25% 0.27% 1.52%(5)
Franklin Small Cap Fund (Class 2)........ 0.55% 0.25% 0.27% 1.07%(6)(7)
Mutual Shares Securities Fund
(Class 2)............................... 0.60% 0.25% 0.19% 1.04%(6)(8)
Templeton Growth Securities Fund
(Class 2)............................... 0.83%(9) 0.25% 0.05% 1.13%(6)(10)
Templeton International Securities Fund
(Class 2)............................... 0.69% 0.25% 0.19% 1.13%(6)(11)
Pioneer Emerging Markets VCT Portfolio**
(Class II).............................. 0.00% 0.25% 1.88% 2.13%(12)
Pioneer Mid-Cap Value VCT Portfolio**
(Class II).............................. 0.65% 0.25% 0.11% 1.01%
</TABLE>
*The DGPF U.S. Growth Series commenced operations on November 15, 1999. Expenses
shown are based on annualized amounts.
**Class II shares of the Pioneer Emerging Markets VCT Portfolio and Pioneer
Mid-Cap Value VCT Portfolio commenced operations on May 1, 2000; therefore,
expenses shown are estimated and annualized.
(1)For the fiscal year ended December 31, 1999, before waiver and/or
reimbursement by the investment adviser, total Series expenses as a percentage
of average daily net assets were 0.81% for DGPF Select Growth
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Series, 0.90% for DGPF Social Awareness Series, 0.96% for DGPF REIT Series,
1.53% for DGPF Emerging Markets Series, 0.97% for DGPF International Equity
Series and 0.79% for DGPF U.S. Growth Series.
(2)The investment adviser for the DGPF Growth & Income Series, DGPF Devon
Series, DGPF Growth Opportunities Series (formerly known as "DelCap Series"),
DGPF U.S. Growth Series, DGPF Select Growth Series (formerly known as
"Aggressive Growth Series"), DGPF Social Awareness Series, DGPF REIT Series,
DGPF Small Cap Value Series, DGPF Trend Series, DGPF Balanced Series (formerly
known as "Delaware Balanced Series"), DGPF Convertible Securities Series, DGPF
High Yield Series (formerly known as "Delchester Series"), DGPF Capital Reserves
Series, DGPF Strategic Income Series, and DGPF Cash Reserve Series is Delaware
Management Company, a series of Delaware Management Business Trust ("Delaware
Management"). The investment adviser for the DGPF International Equity Series,
DGPF Emerging Markets Series and the DGPF Global Bond Series is Delaware
International Advisers Ltd. ("Delaware International"). Effective May 1, 2000
through October 31, 2000, the investment advisers for the Series of DGPF have
agreed voluntarily to waive their management fees and reimburse each Series for
expenses to the extent that total expenses will not exceed 1.50% for the DGPF
Emerging Markets Series; 0.95% for the DGPF International Equity Series; 0.85%
for DGPF Growth Opportunities Series, DGPF Select Growth Series, DGPF Social
Awareness Series, DGPF REIT Series, DGPF Small Cap Value Series, DGPF Trend
Series, DGPF Convertible Securities Series and DGPF Global Bond Series, 0.75%
for DGPF U.S. Growth Series, and 0.80% for all other Series. The fee ratios
shown above have been restated, if necessary, to reflect the new voluntary
limitations which took effect on May 1, 2000. The declaration of a voluntary
expense limitation does not bind the investment advisers to declare future
expense limitations with respect to these Funds.
(3)Had there been no fee waivers or expense reimbursements, the Management Fee,
Other Expenses and Total Fund Expenses would have been 0.63%, 0.79% and 1.42%,
respectively.
(4)Included in "Other Expenses" of the Alger American Leveraged AllCap Portfolio
is 0.01% of interest expense.
(5)From time to time, the Alliance Technology Portfolio's investment adviser, in
its own discretion, may voluntarily waive all or part of its fees and/or
voluntarily assume certain portfolio expenses. An expense cap of 1.20% which was
in effect during 1999, is no longer in effect as of May 1, 2000. Therefore, the
expenses shown in the above table have been restated to reflect current fees
without the cap.
(6)The fund's class 2 distribution plan or "rule 12b-1 plan" is described in the
fund's prospectus.
(7)On 2/8/00, a merger and reorganization was approved that combined the assets
of the Franklin Small Cap Fund with a similar fund of the Templeton Variable
Products Series Fund, effective 5/1/00. On 2/28/00, fund shareholders approved
new management fees, which apply to the combined fund effective 5/1/00. The
table shows restated total expenses based on the new fees and assets of the fund
as of 12/31/99, and not the assets of the combined fund. However, if the table
reflected both the new fees and the combined assets, the fund's expenses after
May 1, 2000 would be estimated to be the same.
(8)On 2/8/00, a merger and reorganization was approved that combined the assets
of the Mutual Shares Securities Fund with a similar fund of the Templeton
Variable Products Series Fund, effective 5/1/00. The table shows total expenses
based on the fund's assets as of 12/31/99, and not the assets of the combined
fund.
(9)The fund administration fee is paid indirectly through the management fee.
(10)On 2/8/00, a merger and reorganization was approved that combined the assets
of the Templeton Growth Securities Fund with a similar fund of the Templeton
Variable Products Series Fund, effective 5/1/00. The table shows total expenses
based on the fund's assets as of 12/31/99, and not the assets of the combined
fund. However, if the table reflected combined assets, the fund's expenses after
5/1/00 would be estimated as: Management Fees 0.80%, 12b-1 Fees 0.25%, Other
Expenses 0.05%, and Total Fund Expenses 1.10%.
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(11)On 2/8/00, shareholders approved a merger and reorganization that combined
the fund with the Templeton International Equity Fund, effective 5/1/00. The
shareholders of that fund had approved new management fees, which apply to the
combined fund effective 5/1/00. The table shows restated total expenses based on
the new fees and the assets of the fund as of 12/31/99, and not the assets of
the combined fund. However, if the table reflected both the new fees and the
combined assets, the fund's expenses after 5/1/00 would be estimated as:
Management Fees 0.65%, 12b-1 Fees 0.25%, Other Expenses 0.20%, and Total Fund
Expenses 1.10%.
(12)Fees and expenses reflect waivers/reimbursements currently applicable to the
portfolio. As of May 1, 2000, Pioneer Investment Management, Inc. has agreed
voluntarily to limit its management fee and, if necessary, to limit other
operating expenses of Class I shares to 1.75% of the Pioneer Emerging Markets
VCT Portfolio's average daily net assets attributable to Class I shares. The
portion of portfolio expenses attributable to Class II shares will be reduced
only to the extent such expenses are reduced for Class I shares. This agreement
is voluntary and temporary and may be revised or terminated at any time.
The Underlying Fund information above was provided by the Underlying Funds and
was not independently verified by the Company.
EXPENSE EXAMPLES: The following examples demonstrate the cumulative expenses
which an Owner would pay at 1-year, 3-year, 5-year, and 10-year intervals under
certain contingencies. Each example assumes a $1,000 investment in a Sub-Account
and a 5% annual return on assets and assumes that the Underlying Fund expenses
listed above remain the same in each of the 1, 3, 5, and 10-year intervals. As
required by the rules of the Securities and Exchange Commission ("SEC"), the
Policy fee has been reflected in the examples by a method intended to show the
"average" impact of the Policy fee on an investment in the Separate Account. The
total Policy fees collected under the Policies by the Company are divided by the
total average net assets attributable to the Policies. The resulting percentage
is 0.03%, and the amount of the Policy fee is assumed to be $0.30 in the
examples. The Policy fee is deducted only when the Accumulated Value is $50,000
or less. Lower charges apply to Policies issued and maintained as part of a
401(k) plan. Because the expenses of the Underlying Fund differ, separate
examples are used to illustrate the expenses incurred by an Owner on an
investment in the various Sub-Accounts.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OF LESS THAN THOSE SHOWN.
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(1)(a) If, at the end of the applicable time period, you surrender your Policy
or annuitize* under any commutable fixed period certain option or a
noncommutable fixed period certain option of less than ten years, you would pay
the following expenses on a $1,000 investment, assuming a 5% annual return on
assets and no Rider:**
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
DGPF Growth & Income Series................................ $ 87 $136 $165 $247
DGPF Devon Series.......................................... $ 87 $137 $168 $253
DGPF Growth Opportunities Series........................... $ 88 $139 $170 $258
DGPF U.S. Growth Series.................................... $ 87 $137 $167 $251
DGPF Select Growth Series.................................. $ 87 $138 $169 $256
DGPF Social Awareness Series............................... $ 88 $140 $172 $262
DGPF REIT Series........................................... $ 88 $140 $172 $262
DGPF Small Cap Value Series................................ $ 88 $140 $172 $262
DGPF Trend Series.......................................... $ 88 $139 $170 $258
DGPF International Equity Series........................... $ 89 $142 $177 $272
DGPF Emerging Markets Series............................... $ 94 $157 $203 $322
DGPF Balanced Series....................................... $ 87 $137 $167 $252
DGPF Convertible Securities Series......................... $ 88 $139 $171 $260
DGPF High Yield Series..................................... $ 87 $136 $166 $250
DGPF Capital Reserves Series............................... $ 87 $137 $167 $252
DGPF Strategic Income Series............................... $ 87 $138 $169 $256
DGPF Cash Reserve Series................................... $ 85 $131 $157 $231
DGPF Global Bond Series.................................... $ 88 $140 $172 $262
AIM V.I. Growth Fund....................................... $ 87 $136 $166 $249
AIM V.I. High Yield Fund................................... $ 91 $148 $187 $290
AIM V.I. International Equity Fund......................... $ 89 $143 $178 $274
AIM V.I. Value Fund........................................ $ 87 $137 $167 $252
Alger American Leveraged AllCap Portfolio.................. $ 89 $142 $176 $270
Alger American MidCap Growth Portfolio..................... $ 88 $140 $172 $262
Alger American Small Capitalization Portfolio.............. $ 88 $141 $175 $267
Alliance Growth Portfolio.................................. $ 90 $147 $186 $289
Alliance Growth and Income Portfolio....................... $ 89 $143 $178 $274
Alliance Premier Growth Portfolio.......................... $ 92 $152 $194 $305
Alliance Technology Portfolio.............................. $ 94 $158 $205 $327
Franklin Small Cap Fund.................................... $ 90 $146 $183 $284
Mutual Shares Securities Fund.............................. $ 90 $145 $182 $281
Templeton Growth Securities Fund........................... $ 90 $147 $186 $290
Templeton International Securities Fund.................... $ 90 $147 $186 $290
Pioneer Emerging Markets VCT Portfolio..................... $100 $175 $233 $383
Pioneer Mid-Cap Value VCT Portfolio........................ $ 89 $144 $180 $278
</TABLE>
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(1)(b) If, at the end of the applicable time period, you surrender your Policy
or annuitize* under any commutable fixed period certain option or a
noncommutable fixed period certain option of less than ten years, you would pay
the following expenses on a $1,000 investment, assuming a 5% annual return on
assets and election of a Minimum Guaranteed Annuity Payout (M-GAP) Rider** with
a ten-year waiting period:
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
DGPF Growth & Income Series................................ $ 89 $143 $178 $273
DGPF Devon Series.......................................... $ 89 $144 $181 $279
DGPF Growth Opportunities Series........................... $ 90 $146 $183 $284
DGPF U.S. Growth Series.................................... $ 89 $144 $180 $277
DGPF Select Growth Series.................................. $ 90 $145 $182 $282
DGPF Social Awareness Series............................... $ 90 $147 $185 $287
DGPF REIT Series........................................... $ 90 $147 $185 $287
DGPF Small Cap Value Series................................ $ 90 $147 $185 $287
DGPF Trend Series.......................................... $ 90 $146 $183 $284
DGPF International Equity Series........................... $ 91 $149 $190 $296
DGPF Emerging Markets Series............................... $ 96 $164 $214 $346
DGPF Balanced Series....................................... $ 89 $144 $180 $278
DGPF Convertible Securities Series......................... $ 90 $146 $184 $285
DGPF High Yield Series..................................... $ 89 $143 $179 $276
DGPF Capital Reserves Series............................... $ 89 $144 $180 $278
DGPF Strategic Income Series............................... $ 90 $145 $182 $282
DGPF Cash Reserve Series................................... $ 87 $138 $169 $256
DGPF Global Bond Series.................................... $ 90 $147 $185 $287
AIM V.I. Growth Fund....................................... $ 89 $143 $179 $275
AIM V.I. High Yield Fund................................... $ 93 $155 $199 $315
AIM V.I. International Equity Fund......................... $ 91 $150 $191 $298
AIM V.I. Value Fund........................................ $ 89 $144 $180 $278
Alger American Leveraged AllCap Portfolio.................. $ 91 $149 $189 $294
Alger American MidCap Growth Portfolio..................... $ 90 $147 $185 $287
Alger American Small Capitalization Portfolio.............. $ 91 $148 $187 $291
Alliance Growth Portfolio.................................. $ 93 $154 $198 $313
Alliance Growth and Income Portfolio....................... $ 91 $150 $191 $298
Alliance Premier Growth Portfolio.......................... $ 94 $159 $206 $329
Alliance Technology Portfolio.............................. $ 96 $165 $217 $350
Franklin Small Cap Fund.................................... $ 92 $153 $195 $308
Mutual Shares Securities Fund.............................. $ 92 $152 $194 $305
Templeton Growth Securities Fund........................... $ 93 $154 $198 $314
Templeton International Securities Fund.................... $ 93 $154 $198 $314
Pioneer Emerging Markets VCT Portfolio..................... $102 $182 $244 $404
Pioneer Mid-Cap Value VCT Portfolio........................ $ 92 $151 $192 $302
</TABLE>
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<PAGE>
(2)(a) If, at the end of the applicable time period, you annuitize* under a life
option or a noncommutable fixed period certain option of ten years or longer, or
if you do NOT surrender or annuitize your Policy, you would pay the following
expenses on a $1,000 investment, assuming an annual 5% return on assets and no
Rider:**
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
DGPF Growth & Income Series................................ $22 $ 67 $115 $247
DGPF Devon Series.......................................... $22 $ 69 $118 $253
DGPF Growth Opportunities Series........................... $23 $ 70 $120 $258
DGPF U.S. Growth Series.................................... $22 $ 68 $117 $251
DGPF Select Growth Series.................................. $23 $ 70 $119 $256
DGPF Social Awareness Series............................... $23 $ 71 $122 $262
DGPF REIT Series........................................... $23 $ 71 $122 $262
DGPF Small Cap Value Series................................ $23 $ 71 $122 $262
DGPF Trend Series.......................................... $23 $ 70 $120 $258
DGPF International Equity Series........................... $24 $ 74 $127 $272
DGPF Emerging Markets Series............................... $29 $ 90 $153 $322
DGPF Balanced Series....................................... $22 $ 69 $117 $252
DGPF Convertible Securities Series......................... $23 $ 71 $121 $260
DGPF High Yield Series..................................... $22 $ 68 $116 $250
DGPF Capital Reserves Series............................... $22 $ 69 $117 $252
DGPF Strategic Income Series............................... $23 $ 70 $119 $256
DGPF Cash Reserve Series................................... $20 $ 62 $107 $231
DGPF Global Bond Series.................................... $23 $ 71 $122 $262
AIM V.I. Growth Fund....................................... $22 $ 68 $116 $249
AIM V.I. High Yield Fund................................... $26 $ 80 $137 $290
AIM V.I. International Equity Fund......................... $24 $ 75 $128 $274
AIM V.I. Value Fund........................................ $22 $ 69 $117 $252
Alger American Leveraged AllCap Portfolio.................. $24 $ 74 $126 $270
Alger American MidCap Growth Portfolio..................... $23 $ 71 $122 $262
Alger American Small Capitalization Portfolio.............. $24 $ 73 $125 $267
Alliance Growth Portfolio.................................. $26 $ 79 $136 $289
Alliance Growth and Income Portfolio....................... $24 $ 75 $128 $274
Alliance Premier Growth Portfolio.......................... $28 $ 84 $144 $305
Alliance Technology Portfolio.............................. $30 $ 91 $155 $327
Franklin Small Cap Fund.................................... $25 $ 78 $133 $284
Mutual Shares Securities Fund.............................. $25 $ 77 $132 $281
Templeton Growth Securities Fund........................... $26 $ 80 $136 $290
Templeton International Securities Fund.................... $26 $ 80 $136 $290
Pioneer Emerging Markets VCT Portfolio..................... $36 $109 $185 $383
Pioneer Mid-Cap Value VCT Portfolio........................ $25 $ 76 $130 $278
</TABLE>
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<PAGE>
(2)(b) If, at the end of the applicable time period, you annuitize* under a life
option or a noncommutable fixed period certain option of ten years or longer, or
if you do NOT surrender or annuitize your Policy, you would pay the following
expenses on a $1,000 investment, assuming an annual 5% return on assets and
election of a Minimum Guaranteed Annuity Payout (M-GAP) Rider** with a ten-year
waiting period:
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
DGPF Growth & Income Series................................ $24 $ 75 $128 $273
DGPF Devon Series.......................................... $25 $ 76 $131 $279
DGPF Growth Opportunities Series........................... $25 $ 78 $133 $284
DGPF U.S. Growth Series.................................... $25 $ 76 $130 $277
DGPF Select Growth Series.................................. $25 $ 77 $132 $282
DGPF Social Awareness Series............................... $26 $ 79 $135 $287
DGPF REIT Series........................................... $26 $ 79 $135 $287
DGPF Small Cap Value Series................................ $26 $ 79 $135 $287
DGPF Trend Series.......................................... $25 $ 78 $133 $284
DGPF International Equity Series........................... $27 $ 82 $140 $296
DGPF Emerging Markets Series............................... $32 $ 97 $165 $346
DGPF Balanced Series....................................... $25 $ 76 $130 $278
DGPF Convertible Securities Series......................... $25 $ 78 $134 $285
DGPF High Yield Series..................................... $25 $ 75 $129 $276
DGPF Capital Reserves Series............................... $25 $ 76 $130 $278
DGPF Strategic Income Series............................... $25 $ 77 $132 $282
DGPF Cash Reserve Series................................... $23 $ 70 $119 $256
DGPF Global Bond Series.................................... $26 $ 79 $135 $287
AIM V.I. Growth Fund....................................... $24 $ 75 $129 $275
AIM V.I. High Yield Fund................................... $29 $ 87 $149 $315
AIM V.I. International Equity Fund......................... $27 $ 82 $141 $298
AIM V.I. Value Fund........................................ $25 $ 76 $130 $278
Alger American Leveraged AllCap Portfolio.................. $26 $ 81 $139 $294
Alger American MidCap Growth Portfolio..................... $26 $ 79 $135 $287
Alger American Small Capitalization Portfolio.............. $26 $ 80 $137 $291
Alliance Growth Portfolio.................................. $28 $ 87 $148 $313
Alliance Growth and Income Portfolio....................... $27 $ 82 $141 $298
Alliance Premier Growth Portfolio.......................... $30 $ 92 $156 $329
Alliance Technology Portfolio.............................. $32 $ 99 $167 $350
Franklin Small Cap Fund.................................... $28 $ 85 $145 $308
Mutual Shares Securities Fund.............................. $28 $ 84 $144 $305
Templeton Growth Securities Fund........................... $28 $ 87 $148 $314
Templeton International Securities Fund.................... $28 $ 87 $148 $314
Pioneer Emerging Markets VCT Portfolio..................... $38 $116 $196 $404
Pioneer Mid-Cap Value VCT Portfolio........................ $27 $ 84 $142 $302
</TABLE>
*The Policy fee is not deducted after annuitization. No surrender charge is
assessed at the time of annuitization if you elect a life contingency option or
a noncommutable period certain option of ten years or more.
**If the Minimum Guaranteed Annuity Payout (M-GAP) Rider is exercised, you may
only annuitize under a fixed annuity payout option involving a life contingency
at the Company's guaranteed fixed annuity option rates listed under the Annuity
Option Tables in your Policy.
13
<PAGE>
SUMMARY OF POLICY FEATURES
INVESTMENT OPTIONS. During the life of the Policy, purchase payments may be
allocated among a total of seventeen of the available 35 Sub-Accounts in
addition to the DGPF Cash Reserve Series and, where offered, a fixed interest
account ("General Account") of the Company.
The variable Sub-Accounts are subdivisions of Separate Account VA-K ("Separate
Account"), a separate account of the Company. 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
SEC. For information about the Separate Account and the Company, see DESCRIPTION
OF THE COMPANY, THE SEPARATE ACCOUNT, AND THE UNDERLYING INVESTMENT COMPANIES.
For more information about the General Account see APPENDIX A -- MORE
INFORMATION ABOUT THE GENERAL ACCOUNT.
INVESTMENT IN THE SUB-ACCOUNTS. Each Sub-Account available under the Policies
invests its assets without sales charge in a corresponding investment portfolio
("Underlying Fund") of Delaware Group Premium Fund ("DGPF"), AIM Variable
Insurance Funds ("AVIF"), The Alger American Fund ("Alger"), Alliance Variable
Products Series Fund, Inc. ("Alliance"), Franklin Templeton Variable Insurance
Products Trust ("FT VIP") and Pioneer Variable Contracts Trust ("Pioneer VCT").
Each Underlying Fund operates pursuant to different investment objectives and
this range of investment options enables the Owner to allocate money among the
Funds to meet his/her particular investment needs. There can be no assurance
that the investment objectives of an Underlying Fund can be achieved or that the
value of a Policy will equal or exceed the aggregate amount of the purchase
payments made. For more information about the investments of the Underlying
Funds, see DESCRIPTION OF THE COMPANY, THE SEPARATE ACCOUNT, AND THE UNDERLYING
INVESTMENT COMPANIES. The accompanying prospectuses of the Funds describes the
investment objectives and risks of each of the Underlying Funds.
The value of each Sub-Account will vary daily depending on the performance of
the investments made by the respective 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 INVESTMENT OPTIONS. Prior to the Annuity Date and subject to
the 17-fund limitation discussed above, amounts may be transferred among the
Sub-Accounts and between the Sub-Accounts and the General Account as described
under "B. Transfer Privilege" under THE VARIABLE ANNUITY POLICIES. Automatic
Transfers (Dollar Cost Averaging) which gradually moves money to one or more of
the Underlying Funds and Automatic Account Rebalancing which ensures that assets
remain allocated according to your designated percentage allocation mix are also
available at no additional charge.
ANNUITY PAYMENTS. The owner of a Policy ("Owner") may select variable annuity
benefit payments based on the investment performance of certain Sub-Accounts,
fixed annuity payouts, or a combination of fixed and variable payments. Fixed
annuity payouts are guaranteed by the Company.
In addition, an optional Minimum Guaranteed Annuity Payout (M-GAP) Rider is
currently available in most jurisdictions for a separate monthly charge. If
elected, the Rider provides the Annuitant a guaranteed minimum amount of income
after the specified waiting period under a life contingent fixed annuity payout
option, subject to certain conditions. On each Policy anniversary a Minimum
Guaranteed Annuity Payout Benefit Base is determined. The Minimum Guaranteed
Annuity Payout Benefit Base (less any applicable premium taxes) is the value
that will be annuitized should you exercise the Rider. In order to exercise the
Rider, a fixed annuitization option involving a life contingency must be
selected. Annuitization under this
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<PAGE>
Rider will occur at the Company's guaranteed annuity option rates listed under
the Annuity Option Tables in your Policy. The Minimum Guaranteed Annuity Payout
Benefit Base is equal to the greatest of:
(a) the Accumulated Value on the Policy Anniversary that the M-GAP Benefit
Base is being determined; or
(b) the Accumulated Value on the effective date of the Rider compounded
daily at an effective annual yield of 5% plus gross payments made
thereafter compounded daily at an effective annual yield of 5%, starting
on the date each payment is applied, proportionately reduced to reflect
withdrawals; or
(c) the highest Accumulated Value on any Policy anniversary since the Rider
effective date, as determined after being increased for subsequent
payments and proportionately reduced for subsequent withdrawals.
For more details see "J. Optional Minimum Guaranteed Annuity Payout (M-GAP)
Rider" under THE VARIABLE ANNUITY POLICIES.
CANCELLATION RIGHTS. An individual purchasing a Policy ("IRA") may cancel it
within ten days of receipt. In certain states an Owner may have special
cancellation rights. For more information about cancellation rights, see RIGHT
TO CANCEL OR SURRENDER.
PAYMENT MINIMUMS AND MAXIMUMS. Purchase payments are not limited as to
frequency and number, but no payments may be submitted within one month of the
Annuity Date. Generally, the initial purchase payment must be at least $600 and
subsequent payments must be at least $50. Under a monthly automatic payment
plan, or a payroll deduction plan, each purchase payment must be at least $50.
In cases where the contribution on behalf of an employee under an
employer-sponsored retirement plan is less than $600 but more than $300
annually, however, the Company may issue a Policy on the employee if the plan's
average annual contribution per eligible plan participant is at least $600.
The Company reserves the right to set maximum limits on the aggregate purchase
payments made under the Policy. In addition, the Internal Revenue Code (the
"Code") imposes maximum limits on contributions under qualified annuity plans.
CHARGES AND DEDUCTIONS. For a complete discussion of charges, see CHARGES AND
DEDUCTIONS.
A. SURRENDER CHARGES
No sales charge is deducted from purchase payments at the time the payments are
made. However, a surrender charge may be assessed on withdrawals of payments
that have not been invested for seven full years.
B. ANNUAL POLICY FEE
The Company will deduct a Policy fee equal to $30 from the Accumulated Value on
the Policy anniversary, and upon full surrender of the Policy if the Accumulated
Value on those dates is $50,000 or less. The Policy fee is waived for policies
issued to a trustee of a 401(k) plan.
C. PREMIUM TAXES
A deduction for state and local premium taxes, if any, may be made as described
under "B. Premium Taxes." Premium taxes may range from 0 to 3.5%.
15
<PAGE>
D. SEPARATE ACCOUNT ASSET CHARGES
The Company will deduct on a daily basis, an annual charge equal to 1.25% of the
average daily net assets of each Sub-Account. The charge is retained for the
mortality and expense risks the Company assumes. In addition, to cover
administrative expenses, the Company deducts on a daily basis, an annual charge
of 0.15% of the average daily net assets in the Sub-Accounts.
E. TRANSFER CHARGE
The Company currently makes no charge for transfers. The Company guarantees that
the first twelve transfers in a Policy year will be free of charge. For each
subsequent transfer, the Company reserves the right to assess a charge,
guaranteed never to exceed $25, to reimburse the Company for the costs of
processing the transfer. If the Owner has elected automatic transfers or
automatic rebalancing, the first automatic transfer or rebalancing will count as
one transfer for purposes of the twelve which are guaranteed to be free of a
transfer charge in each Policy year. Each subsequent automatic transfer or
rebalancing is without transfer charge and does not reduce the remaining number
of transfers which may be made free of a transfer charge in that Policy year.
F. CHARGES OF THE UNDERLYING FUNDS
In addition to the charges described above, each Underlying Fund incurs certain
management fees and expenses which are more fully described in "Other Charges"
and in the prospectuses of the Underlying Funds. These charges vary among the
Underlying Funds and may change from year to year. In addition, management fee
waivers and/or reimbursements may be in effect for certain or all of the
Underlying Funds. For specific information regarding the existence and effect of
any waivers/reimbursements see "Annual Underlying Fund Expenses" under SUMMARY
OF FEES AND EXPENSES.
G. OPTIONAL MINIMUM GUARANTEED ANNUITY PAYOUT (M-GAP) RIDER CHARGE
Subject to state availability, the Owner may elect the following optional Rider.
If you elect the Rider, a separate monthly charge is deducted from the
Accumulated Value at the end of each month within which the Rider has been in
effect. The applicable charge is assessed by multiplying the Accumulated Value
on the last day of each month and, if applicable, on the date the Rider is
terminated by 1/12th of the following annual percentage rates:
<TABLE>
<S> <C>
Minimum Guaranteed Annuity Payout Rider with a ten-year
waiting period............................................ 0.25%
Minimum Guaranteed Annuity Payout Rider with a fifteen-year
waiting period............................................ 0.15%
</TABLE>
For a description of this Rider, see "D. Optional Minimum Guaranteed Annuity
Payout (M-GAP) Rider Charge" under CHARGES AND DEDUCTIONS, and "J. Optional
Minimum Guaranteed Annuity Payout (M-GAP) Rider" under THE VARIABLE ANNUITY
POLICIES.
SURRENDER OR PARTIAL REDEMPTION. At any time before the Annuity Date, the Owner
has the right either to surrender the Policy in full and receive its Surrender
Value or or to redeem a portion of the Policy's value subject to certain limits
and any applicable surrender charge. There may be tax consequences for surrender
or redemptions. For further information, see "C. Surrender" and "D. Partial
Redemption" under THE VARIABLE ANNUITY POLICIES, "A. Surrender Charge" under
CHARGES AND DEDUCTIONS and FEDERAL TAX CONSIDERATIONS.
DEATH BENEFIT. If the Annuitant or Owner should die before the Annuity Date, a
death benefit will be paid to the beneficiary. Upon death of the Annuitant, the
death benefit is equal to the greatest of (a) the Accumulated Value on the
Valuation Date that the Company receives due proof of death; (b) the sum of the
16
<PAGE>
gross payment(s) made under the Policy reduced proportionately to reflect the
amount of all partial redemptions, or (c) the death benefit that would have been
payable on the most recent fifth year Policy Anniversary, increased for
subsequent purchase payments and reduced proportionately to reflect withdrawals
after that date. Upon death of the Owner, who is not also the Annuitant, the
death benefit will equal the Accumulated Value of the Policy next determined
following receipt of due proof of death at the Principal Office. See "E. Death
Benefit" under THE VARIABLE ANNUITY POLICIES.
SALES OF POLICIES. The Policies were originally sold by agents of the Company
who are registered representatives of Allmerica Investments, Inc., a
broker-dealer affiliate of the Company. The Policies were also sold by certain
other broker-dealers which are members of the National Association of Securities
Dealers, Inc., and whose representatives are authorized by applicable law to
sell variable a annuity policies. See "Sales Expense." These policies are no
longer being issued.
17
<PAGE>
DESCRIPTION OF THE COMPANY, THE SEPARATE ACCOUNT, AND
THE UNDERLYING INVESTMENT COMPANIES
THE COMPANY. The Company is a life insurance company organized under the laws
of Delaware in July 1974. Its principal office ("Principal Office") is located
at 440 Lincoln Street, Worcester, MA 01653, telephone 508-855-1000. The Company
is subject to the laws of the state of Delaware governing insurance companies
and to regulation by the Commissioner of Insurance of Delaware. In addition, the
Company is subject to the insurance laws and regulations of other states and
jurisdictions in which it is licensed to operate. As of December 31, 1999 the
Company had over $17 billion in assets and over $26 billion of life insurance in
force.
Effective October 1, 1995, the Company changed its name from SMA Life Assurance
Company to Allmerica Financial Life Insurance and Annuity Company. The Company
is an indirect wholly owned subsidiary of First Allmerica Financial Life
Insurance Company ("First Allmerica") which, in turn, is a wholly owned
subsidiary of Allmerica Financial Corporation ("AFC"). First Allmerica,
originally organized under the laws of Massachusetts in 1844 as a mutual life
insurance company and known as State Mutual Life Assurance Company of America,
converted to a stock life insurance company and adopted its present name on
October 16, 1995. First Allmerica is among the five oldest life insurance
companies in America. As of December 31, 1998, First Allmerica and its
subsidiaries (including the Company) had over $25 billion in combined assets and
over $43 billion in life insurance in force.
The Company is a charter member of the Insurance Marketplace Standards
Association ("IMSA"). Companies that belong to IMSA subscribe to a rigorous set
of standards that cover the various aspects of sales and service for
individually sold life insurance and annuities. IMSA members have adopted
policies and procedures that demonstrate a commitment to honesty, fairness and
integrity in all customer contacts involving sales and service of individual
life insurance and annuity products.
THE SEPARATE ACCOUNT. Separate Account VA-K (the "Separate Account") is a
separate investment account of the Company. The assets used to fund the variable
portions of the Policies are set aside in the Sub-Accounts of the Separate
Account, and are kept separate 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. Obligations under the Policies are obligations
of the Company. Under Delaware law, the assets of the Separate Account may not
be charged with any liabilities arising out of any other business of the
Company.
The Board of Directors of the Company authorized the Separate Account on
November 1, 1990. The Separate Account is registered with the SEC as a unit
investment trust under the 1940 Act. Such registration does not involve the
supervision or management of investment practices or policies of the Separate
Account or the Company by the SEC. The Company reserves the right, subject to
compliance with applicable law, to change the names of the Separate Account and
the Sub-Accounts.
THE COMPANY OFFERS OTHER VARIABLE ANNUITY CONTRACTS INVESTING IN THE SEPARATE
ACCOUNT WHICH ARE NOT DISCUSSED IN THIS PROSPECTUS. THE SEPARATE ACCOUNT ALSO
INVESTS IN OTHER UNDERLYING FUNDS WHICH ARE NOT AVAILABLE TO THE POLICIES
DESCRIBED IN THIS PROSPECTUS.
THE UNDERLYING INVESTMENT COMPANIES
DELAWARE GROUP PREMIUM FUND. Delaware Group Premium Fund ("DGPF") is an
open-end, management investment company registered with the SEC under the 1940
Act. Such registration does not involve supervision by the SEC of the
investments or investment policy of DGPF or its separate investment series. DGPF
was established to serve as an investment medium for separate accounts
supporting variable insurance policies. DGPF currently has 18 investment
portfolios, each issuing a series of shares ("Series"): DGPF Growth & Income
Series, DGPF Devon Series, DGPF Growth Opportunities Series, DGPF U.S. Growth
Series, DGPF Select Growth Series, DGPF Social Awareness Series, DGPF REIT
Series, DGPF Small Cap
18
<PAGE>
Value Series, DGPF Trend Series, DGPF International Equity Series, DGPF Emerging
Markets Series, DGPF Balanced Series, DGPF Convertible Securities Series, DGPF
High Yield Series, DGPF Capital Reserves Series, DGPF Strategic Income Series,
DGPF Cash Reserve Series, and DGPF Global Bond Series. The assets of each
Series are held separate from the assets of the other Series. Each
Series operates as a separate investment vehicle, and the income or losses of
one have no effect on the investment performance of another Series. Shares of
the Series are not offered to the general public but solely to separate accounts
of life insurance companies.
The investment adviser for the DGPF Growth & Income Series, DGPF Devon Series,
DGPF Growth Opportunities Series, DGPF U.S. Growth Series, DGPF Select Growth
Series, DGPF Social Awareness Series, DGPF Small Cap Value Series, DGPF REIT
Series, DGPF Trend Series, DGPF Balanced Series, DGPF Convertible Securities
Series, DGPF High Yield Series, DGPF Capital Reserves Series, DGPF Strategic
Income Series, and DGPF Cash Reserve Series is Delaware Management Company, a
series of Delaware Management Business Trust. ("Delaware Management"). The
investment adviser for the DGPF International Equity Series, DGPF Emerging
Markets Series and the DGPF Global Bond Series is Delaware International
Advisers Ltd. ("Delaware International").
AIM VARIABLE INSURANCE FUNDS. AIM Variable Insurance Funds ("AVIF"), an
open-end, series, management investment company registered with the SEC under
the 1940 Act, was organized as a Maryland corporation on January 22, 1993 and
changed to a Delaware business trust on May 1, 2000. The investment adviser for
the AIM V.I. Growth Fund, AIM V.I. High Yield Fund, AIM V.I. International
Equity Fund, and AIM V.I. Value Fund is A I M Advisors, Inc. ("AIM"). AIM was
organized in 1976, and, together with its subsidiaries, manages or advises over
120 investment company portfolios encompassing a broad range of investment
objectives.
THE ALGER AMERICAN FUND. The Alger American Fund ("Alger"), is an open-end,
diversified management investment company established as a Massachusetts
business trust on April 6, 1988 and registered with the SEC under the 1940 Act.
The investment adviser for the Alger American Leveraged AllCap Portfolio, Alger
American MidCap Growth Portfolio, and Alger American Small Capitalization
Portfolio is Fred Alger Management, Inc.
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC. Alliance Variable Products
Series Fund, Inc. ("Alliance") is registered with the SEC as an open-end,
management investment company. Four of its separate investment portfolios are
currently available under the Policy. Alliance Capital Management, L.P.
("Alliance Capital"), serves as the investment adviser to Alliance. Alliance
Capital Management Corporation, the sole general partner of Alliance Capital, is
an indirect wholly owned subsidiary of The Equitable Life Assurance Society of
the United States, which is in turn a wholly owned subsidiary of the Equitable
Companies Incorporated, a holding company which is controlled by AXA, a French
insurance holding company.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST. Franklin Templeton
Variable Insurance Products Trust ("FT VIP") and the funds' investment managers
and their affiliates manage over $224 billion (as of December 31, 1999) in
assets. In 1992, Franklin joined forces with Templeton, a pioneer in
international investing. The Mutual Advisers organization became part of the
Franklin Templeton organization four years later. The investment adviser to the
Franklin Small Cap Fund is Franklin Advisers, Inc. Franklin Mutual Advisers, LLC
is the investment adviser to the Mutual Shares Securities Fund. Templeton Global
Advisors Limited is the investment adviser to the Templeton Growth Securities
Fund. Templeton Investment Counsel, Inc. is the investment adviser to the
Templeton International Securities Fund.
PIONEER VARIABLE CONTRACTS TRUST. Pioneer Variable Contracts Trust ("Pioneer
VCT") is an open-end, management investment company registered with the SEC
under the 1940 Act. Pioneer Investment Management, Inc. ("Pioneer") is the
investment adviser to the Pioneer Emerging Markets VCT Portfolio and Pioneer
Mid-Cap Value VCT Portfolio. Pioneer also provides investment research and
portfolio management services to a number of other retail mutual funds and
certain institutional clients. Pioneer is a wholly owned subsidiary of The
Pioneer Group, Inc. ("PGI"). PGI, established in 1928, is one of America's
oldest investment managers and has its principal place of business at 60 State
Street, Boston, Massachusetts.
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<PAGE>
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 INVESTMENT COMPANIES MAY BE FOUND
IN THE PROSPECTUSES OF THE FUNDS, WHICH ACCOMPANY THIS PROSPECTUS AND SHOULD BE
READ CAREFULLY BEFORE INVESTING. Also, the Statements of Additional Information
("SAI") of the Underlying Funds are available upon request. There can be no
assurance that the investment objectives of the Underlying Funds can be achieved
or that the value of the Policy will equal or exceed the aggregate amount of
payments made under the Policy.
DELAWARE PREMIUM GROUP FUND:
DGPF GROWTH & INCOME SERIES -- seeks the highest possible total rate of return
by selecting issues that exhibit the potential for capital appreciation while
providing higher than average dividend income. This Series formerly was known as
Decatur Total Return Series.
DGPF DEVON SERIES -- seeks current income and capital appreciation. It seeks to
achieve its objective by investing primarily in income-producing common stocks,
with a focus on common stocks that the investment manager believes exhibit the
potential for above-average dividend increases over time.
DGPF GROWTH OPPORTUNITIES SERIES -- seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. This Series formerly was known as the DelCap
Series.
DGPF U.S. GROWTH SERIES -- seeks to achieve maximum capital appreciation.
DGPF SELECT GROWTH SERIES -- seeks to provide long-term capital appreciation
which the Fund attempts to achieve by investing primarily in equity securities
of companies which the investment manager believes have the potential for high
earnings growth. This Series formerly was known as the Aggressive Growth Series.
DGPF SOCIAL AWARENESS SERIES -- seeks to achieve long-term capital appreciation.
It seeks to achieve its objective by investing primarily in equity securities of
medium- to large-sized companies expected to grow over time that meet the
Series' "Social Criteria" strategy.
DGPF REIT SERIES -- seeks to achieve maximum long-term total return. Capital
appreciation is a secondary objective. It seeks to achieve its objective by
investing in securities of companies primarily engaged in the real estate
industry.
DGPF SMALL CAP VALUE SERIES -- seeks capital appreciation by investing in small
cap common stocks whose market value appears low relative to their underlying
value or future earnings and growth potential. Emphasis also will be placed on
securities of companies that temporarily may be out of favor or whose value is
not yet recognized by the market.
DGPF TREND SERIES -- seeks long-term capital appreciation by investing primarily
in small-cap common stocks and convertible securities of emerging and other
growth-oriented companies. These securities will have been judged to be
responsive to changes in the marketplace and to have fundamental characteristics
to support growth. Income is not an objective.
DGPF INTERNATIONAL EQUITY SERIES -- seeks long-term growth without undue risk to
principal by investing primarily in equity securities of foreign issuers
providing the potential for capital appreciation and income.
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<PAGE>
DGPF EMERGING MARKETS SERIES -- seeks to achieve long-term capital appreciation.
It seeks to achieve its objective by investing primarily in equity securities of
issuers located or operating in emerging countries. The Series is an
international fund. As such, under normal market conditions, at least 65% of the
Series' assets will be invested in equity securities of issuers organized or
having a majority of their assets or deriving a majority of their operating
income in at least three countries that are considered to be emerging or
developing.
DGPF BALANCED SERIES -- seeks a balance of capital appreciation, income and
preservation of capital. It uses a dividend-oriented valuation strategy to
select securities issued by established companies that are believed to
demonstrate potential for income and capital growth. This Series formerly was
known as Delaware Balanced Series.
DGPF CONVERTIBLE SECURITIES SERIES -- seeks a high level of total return on its
assets through a combination of capital appreciation and current income by
investing primarily in convertible securities, including privately placed
convertible securities.
DGPF HIGH YIELD SERIES -- seeks total return and, as a secondary objective, high
current income. The Series invests in rated and unrated corporate bonds
(including high-yield bonds commonly known as "junk bonds"), foreign bonds, U.S.
government securities and commercial paper. Please read the Series' prospectus
disclosure regarding the risk factors before investing in this Series. This
Series formerly was known as Delchester Series.
DGPF CAPITAL RESERVES SERIES -- seeks a high, stable level of current income
while minimizing fluctuations in principal by investing in a diversified
portfolio of short- and intermediate-term securities.
DGPF STRATEGIC INCOME SERIES -- seeks high current income and total return. It
seeks to achieve its objective by using a multi-sector investment approach,
investing primarily in three sectors of the fixed-income securities market: high
yield, higher-risk securities; investment grade fixed-income securities; and
foreign government and other foreign fixed-income securities. The Series also
may invest in U.S. equity securities.
DGPF CASH RESERVE SERIES -- a money market fund which seeks the highest level of
income consistent with the preservation of capital and liquidity through
investments in short-term money market instruments.
DGPF GLOBAL BOND SERIES -- seeks current income consistent with preservation of
principal by investing primarily in fixed-income securities that also may
provide the potential for capital appreciation. At least 65% of the Series'
assets will be invested in fixed-income securities of issuers organized or
having a majority of their assets in or deriving a majority of the operating
income in at least three different countries, one of which may be the United
States.
AIM VARIABLE INSURANCE FUNDS:
AIM V.I. GROWTH FUND -- seeks to provide growth of capital primarily by
investing in seasoned and better capitalized companies considered to have strong
earnings momentum.
AIM V.I. HIGH YIELD FUND -- seeks to achieve a high level of current income. The
Fund seeks to meet this objective by investing at least 65% of the value of its
assets in publicly traded, lower-quality debt securities, i.e., "junk bonds".
AIM V.I. INTERNATIONAL EQUITY FUND -- seeks to provide long-term growth of
capital by investing in a diversified portfolio of international equity
securities whose issuers are considered to have strong earnings momentum.
AIM V.I. VALUE FUND -- seeks to achieve long-term growth of capital by investing
primarily in equity securities judged by the fund's investment advisor to be
undervalued relative to the investment advisor's
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<PAGE>
appraisal of the current or projected earnings of the companies issuing the
securities, or relative to current market values of assets owned by the
companies issuing the securities or relative to the equity market generally.
Income is a secondary objective.
THE ALGER AMERICAN FUND:
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO -- seeks long-term capital
appreciation. Under normal circumstances, the Portfolio invests in the equity
securities of companies of any size that demonstrate promising growth potential.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO -- seeks long-term capital appreciation.
The Portfolio focuses on midsize companies with promising growth potential.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO -- seeks long-term capital
appreciation. The Portfolio focuses on small, fast-growing companies that offer
innovative products, services or technologies to a rapidly expanding
marketplace.
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.:
ALLIANCE GROWTH PORTFOLIO (CLASS B) -- seeks to provide long-term growth of
capital. Current income is only an incidental consideration.
ALLIANCE GROWTH AND INCOME PORTFOLIO (CLASS B) -- seeks reasonable current
income and reasonable appreciation through investments primarily in
dividend-paying common stocks of good quality.
ALLIANCE PREMIER GROWTH PORTFOLIO (CLASS B) -- seeks growth of capital by
pursuing aggressive investment policies.
ALLIANCE TECHNOLOGY PORTFOLIO (CLASS B) -- seeks growth of capital and invests
for capital appreciation. Current income is only an incidental consideration.
FRANKIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST:
FRANKLIN SMALL CAP FUND (CLASS 2) -- seeks long-term capital growth. The fund
invests primarily in equity securities of small cap U.S. companies.
MUTUAL SHARES SECURITIES FUND (CLASS 2) -- seeks capital appreciation. Its
secondary goal is income. The fund invests primarily in equity securities of
companies the manager believes are available at market prices less than their
value based on certain recognized or objective criteria (intrinsic value).
TEMPLETON GROWTH SECURITIES FUND (CLASS 2) -- seeks long-term capital growth.
The fund invests primarily in the equity securities of companies located
anywhere in the world, including the U.S. and emerging markets.
TEMPLETON INTERNATIONAL SECURITIES FUND (CLASS 2) -- seeks long-term capital
growth. The fund invests in the equity securities of companies located outside
the U.S., including emerging markets.
PIONEER VARIABLE CONTRACTS TRUST:
PIONEER EMERGING MARKETS VCT PORTFOLIO (CLASS II) -- seeks long-term growth of
capital. The Portfolio invests primarily in securities of issuers in countries
with emerging economies or securities markets and related depositary receipts.
22
<PAGE>
PIONEER MID-CAP VALUE VCT PORTFOLIO (CLASS II) -- seeks capital appreciation
through a diversified portfolio of securities consisting primarily of common
stocks.
There is no assurance that the investment objectives of the Underlying Funds
will be met. In the event of a material change in the investment policy of a
Sub-Account or the Underlying Fund in which it invests, you will be notified of
the change. If you have Policy value in that Sub-Account, the Company will
transfer it without charge on written request by you to another Sub-Account or
to the General Account, where available. The Company must receive your written
request within 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 your right to
transfer.
IN SOME STATES, INSURANCE REGULATIONS MAY RESTRICT THE AVAILABILITY OF
PARTICULAR SUB-ACCOUNTS.
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<PAGE>
PERFORMANCE INFORMATION
Allmerica Financial Life Insurance and Annuity Company first offered Delaware
Medallion II to the public in 1993 and Delaware Medallion I in 1992. The
Company, however, may advertise "total return" and "average annual total return"
performance information based on (1) the periods that the Sub-Accounts have been
in existence and (2) the periods that the Underlying Funds have been in
existence. Performance results in Tables 1A and 2A are calculated with all
charges assumed to be those applicable to the Policy, the Sub-Accounts and the
Underlying Funds. Performance results also assume that the Policy is surrendered
at the end of the applicable period. Performance results in Tables 1B and 2B, do
not include the Policy fee and assume that the Policy is not surrendered at the
end of the applicable period. Both the total return and yield figures are based
on historical earnings and are not intended to indicate future performance. All
performance tables referenced in this section may be found in the SAI.
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 Sub-Account charges, and expressed as a percentage.
The average annual total return represents the average annual percentage change
in the value of an investment in the Sub-Account over a given period of time. It
represents averaged figures as opposed to the actual performance of a
Sub-Account, which will vary from year to year.
The yield of the Sub-Account investing in the DGPF Cash Reserve Series 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 yield of a Sub-Account investing in a Fund other than the DGPF Cash Reserve
Series refers to the annualized income generated by an investment in the
Sub-Account over a specified 30-day or one-month period. The yield is calculated
by assuming that the income generated by the investment during that 30-day or
one-month period is generated each period over a 12-month period and is shown as
a percentage of the investment.
Quotations of average annual total return as shown in Table 1A are calculated in
the manner prescribed by the SEC and show the percentage rate of return of a
hypothetical initial investment of $1,000 for the most recent one, five and ten
year period or for a period covering the time the Sub-Account has been in
existence, if less than the prescribed periods. The calculation is adjusted to
reflect the deduction of the annual Sub-Account asset charge of 1.40%, the $30
annual Policy fee, the charges of the Underlying Funds and the surrender charge
which would be assessed if the investment were completely withdrawn at the end
of the specified period. The calculation is not adjusted to reflect the
deduction of a Minimum Guaranteed Annuity Payout (M-GAP) Rider Charge.
Quotations of supplemental average total returns, as shown in Table 1B, are
calculated in exactly the same manner and for the same periods of time except
that they do not reflect the Policy fee and assume that the Policy is not
surrendered at the end of the periods shown.
The performance shown in Tables 2A and 2B in the SAI is calculated in exactly
the same manner as that in Tables 1A and 1B respectively; however, the period of
time is based on the Underlying Fund's lifetime, which may predate the
Sub-Account's inception date. These performance calculations are based on the
assumption that the Sub-Account corresponding to the applicable Underlying Fund
was actually in existence throughout the stated period and that the contractual
charges and expenses during that period were equal to those currently assessed
under the Policy.
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<PAGE>
For performance of the Delaware Medallion I policy issued by First Allmerica
Financial Life Insurance Company, see the SAI.
PERFORMANCE INFORMATION FOR ANY SUB-ACCOUNT REFLECTS ONLY THE PERFORMANCE OF A
HYPOTHETICAL INVESTMENT IN THE SUB-ACCOUNT DURING THE TIME PERIOD ON WHICH THE
CALCULATIONS ARE BASED. PERFORMANCE INFORMATION SHOULD BE CONSIDERED IN LIGHT OF
THE INVESTMENT OBJECTIVES AND POLICIES AND RISK CHARACTERISTICS 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.
Performance information for a Sub-Account may be compared, in reports and
promotional literature, to: (1) the Standard & Poor's 500 Composite Stock Price
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;
(2) other groups of variable annuity separate accounts or other investment
products tracked by Lipper, Inc., 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, who rank such investment products on overall
performance or other criteria; or (3) 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. In addition, relevant broad-based indices and performance from
independent sources may be used to illustrate the performance of certain policy
features.
At times, the Company may also advertise the ratings and other information
assigned to it by independent rating organizations such as A.M. Best Company
("A.M. Best"), Moody's Investors Service ("Moody's"), Standard & Poor's
Insurance Rating Services ("S&P") and Duff & Phelps. A.M. Best's and Moody's
ratings reflect their current opinion of the Company's relative financial
strength and operating performance in comparison to the norms of the life/health
insurance industry. S&P's and Duff & Phelps' ratings measure the ability of an
insurance company to meet its obligations under insurance policies it issues and
do not measure the ability of such companies to meet other non-policy
obligations. The ratings also do not relate to the performance of the Underlying
Funds.
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<PAGE>
CHARGES AND DEDUCTIONS
Deductions under the Policies and charges against the assets of the Sub-Accounts
are described below. Other deductions and expenses paid out of the assets of the
Underlying Funds are described in the Prospectuses and SAIs of the Underlying
Funds.
A. SURRENDER CHARGE
No charge for sales expense is deducted from purchase payments at the time the
payments are made. However, a surrender charge is deducted from the Accumulated
Value of the Policy in the case of surrender and/or partial redemption of the
Policy or at the time annuity benefit payments begin, within certain time limits
described below.
For purposes of determining the surrender charge, the Policy Value is divided
into three categories: (1) New Payments - purchase payments received by the
Company during the seven years preceding the date of the surrender; (2) Old
Payments - purchase payments invested in the Policy for more than seven years;
and (3) the amount available under the Free Withdrawal provision. See "Free
Withdrawal Amounts" below. For purposes of determining the amount of any
surrender charge, surrenders will be deemed to be taken first from Free
Withdrawal Amounts and then Old Payments, and finally from New Payments. Free
Withdrawal Amounts and Old Payments may be withdrawn from the Policy at any time
without the imposition of a surrender charge. If a withdrawal is attributable
all or in part to New Payments, a surrender charge may apply.
Where permitted by law, no surrender charge is imposed, and no commissions are
paid, on Policies issued after December 20, 1993 where the Owner and Annuitant
as of the date of application are both within the following class of
individuals: All employees and registered representatives of any broker-dealer
that has entered into a sales agreement with the Company to sell the Policies;
all officers, directors, trustees and bona fide full-time employees (including
former officers and directors and former employees who had been employed for at
least ten years) of Delaware Management, its affiliates and subsidiaries, and of
any Underlying Funds; and any spouses of the above persons or any children or
other legal dependents of the above persons who are under the age of 21. Any
elimination of or reduction in the amount or duration of the surrender charge
will not discriminate unfairly among purchasers. The Company will not make any
changes to the charge where prohibited by law.
CHARGES FOR SURRENDER AND PARTIAL REDEMPTION. If a Policy is surrendered, or if
New Payments are redeemed, while the Policy is in force and before the Annuity
Date, a surrender charge may be imposed. The amount of the charge will depend
upon the number of years that any New Payments to which the withdrawal is
attributed have remained credited under the Policy. Any Free Withdrawal Amount
is deducted first as described below. Additional amounts withdrawn are then
deducted first from Old Payments. Thereafter, for the purpose of calculating
surrender charges for New Payments, all amounts withdrawn are assumed to be
deducted first from the oldest New Payment and then from the next oldest New
Payment and so on, until all New Payments have been exhausted pursuant to the
FIFO method of accounting. (See FEDERAL TAX CONSIDERATIONS for a discussion of
how withdrawals are treated for income tax purposes.)
The Surrender Charge is as follows:
<TABLE>
<CAPTION>
YEARS FROM CHARGE AS PERCENTAGE OF
DATE OF PAYMENT NEW PAYMENTS WITHDRAWN
- --------------- -----------------------
<S> <C>
0-3 7%
4 6%
5 5%
6 4%
7 3%
More than 7 0%
</TABLE>
26
<PAGE>
The amount redeemed equals the amount requested by the Owner plus the charge, if
any, which is applied against the amount requested. For example, if the
applicable charge is 7% and the Owner has requested $200, the Owner will receive
$200 and the charge will be $14 (assuming no Free Withdrawal Amount, discussed
below) for a total withdrawal of $214. The charge is applied as a percentage of
the New Payments redeemed, but in no event will the total surrender charge
exceed a maximum limit of 8% of total gross New Payments. Such total charge
equals the aggregate of all applicable surrender charges for surrender, partial
redemptions, and annuitization.
In Maryland, a different surrender charge applies to monies in the General
Account. See APPENDIX A -- MORE INFORMATION ABOUT THE GENERAL ACCOUNT.
FREE WITHDRAWAL AMOUNTS. In each calendar year, the Company will waive the
surrender charge, if any, on an amount ("Free Withdrawal Amount") equal to the
greatest of (1), (2) or (3):
Where (1) is: The Accumulated Value as of the Valuation Date coincident with
or next following the date of receipt of the request for
withdrawal, reduced by total gross payments not previously
redeemed ("Cumulative Earnings");
Where (2) is: 10% of the Accumulated Value as of the Valuation Date
coincident with or next following the date of receipt of the
request for withdrawal, reduced by the total amount of any
prior partial redemptions made in the same calendar year to
which no surrender charge was applied;
Where (3) is: The amount calculated under the Company's life expectancy
distribution (see "Life Expectancy Distributions," below),
whether or not the withdrawal was part of such distribution
(applies only if the Owner and Annuitant are the same
individual).
For example, an 81-year-old Owner/Annuitant with an Accumulated Value of
$15,000, of which $1,000 is Cumulative Earnings, would have a Free Withdrawal
Amount of $1,530, which is equal to the greatest of:
(1) Cumulative Earnings ($1,000);
(2) 10% of Accumulated Value ($1,500); or
(3) LED of 10.2% of Accumulated Value ($1,530).
The Free Withdrawal Amount will be deducted first from Cumulative Earnings. If
the Free Withdrawal Amount exceeds Cumulative Earnings, the excess amount will
be deemed withdrawn from payments not previously redeemed on a last-in-first-out
("LIFO") basis. This means that the last payments credited to the Policy will be
withdrawn first. If more than one partial withdrawal is made during the year, on
each subsequent withdrawal the Company will waive the surrender charge, if any,
until the entire Free Withdrawal Amount has been redeemed.
LIFE EXPECTANCY DISTRIBUTIONS. Prior to the Annuity Date, an Owner who also is
the Annuitant may elect to make a series of systematic withdrawals from the
Policy according to the Company's life expectancy distribution ("LED") option by
returning a properly signed LED request form to the Principal Office.
The Owner may elect monthly, bi-monthly, quarterly, semi-annual, or annual LED
distributions, and may terminate the LED option at any time. If an Owner elects
the Company's LED option, in each calendar year a fraction of the Accumulated
Value is withdrawn without a surrender charge based on the Owner's then life
expectancy (or the joint life expectancy of the Owner and a beneficiary.) The
numerator of the fraction is 1 (one) and the denominator of the fraction is the
remaining life expectancy of the Owner, as determined annually by the Company.
The resulting fraction, expressed as a percentage, is applied to the Accumulated
Value at the beginning of the year to determine the amount to be distributed
during the year. Under the Company's LED option, the amount withdrawn from the
Policy 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
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<PAGE>
expectancy of 16 years, but a person who attains age 86 has a life expectancy of
another 6.5 years. Where the Owner is a trust or other nonnatural person, the
Owner may elect the LED option based on the Annuitant's life expectancy.
(Note: this option may not produce annual distributions that meet the definition
of "substantially equal periodic payments" as defined under Code Section 72(t).
As such, the withdrawals may be treated by the Internal Revenue Service (IRS) as
premature distributions from the Policy and be subject to a 10% federal tax
penalty. Owners seeking distributions over their life under this definition
should consult their tax advisor. For more information, see FEDERAL TAX
CONSIDERATIONS," C. Taxation of the Policies in General." In addition, if the
amount necessary to meet the substantially equal periodic payment definition is
greater than the amount of the Company's LED amount, a surrender charge may
apply to the amount in excess of the LED amount.)
The Company may discontinue or change the LED option at any time, but not with
respect to election of the option made prior to the date of any change in the
LED option.
SURRENDERS. In the case of a complete surrender, the amount received by the
Owner is equal to the Surrender Value, less any tax withholding if applicable.
Subject to the same rules that are applicable to partial redemptions, the
Company will not assess a surrender charge on a Free Withdrawal Amount. Because
Old Payments count in the calculation of the Free Withdrawal Amount, if Old
Payments equal or exceed the Free Withdrawal Amount, the Company may assess the
full applicable surrender charge on New Payments.
Where an Owner who is trustee under a pension plan surrenders, in whole or in
part, a Policy on a terminating employee, the trustee will be permitted to
reallocate all or a part of the total Accumulated Value under the Policy to
other policies issued by the Company and owned by the trustee, with no deduction
for any otherwise applicable surrender charge. Any such reallocation will be at
the unit values for the Sub-Accounts as of the valuation date on which a
written, signed request is received at the Principal Office.
For further information on surrender and partial redemption, including minimum
limits on amount redeemed and amount remaining under the Policy in the case of
partial redemption, and important tax considerations, see "C. Surrender" and "D.
Partial Redemption" under THE VARIABLE ANNUITY POLICIES, and see FEDERAL TAX
CONSIDERATIONS.
CHARGE AT THE TIME ANNUITY BENEFIT PAYMENTS BEGIN. If the Owner chooses a
period certain option (Option V or the comparable fixed annuity option), a
surrender charge will be deducted from the Accumulated Value of the Policy if
the Annuity Date occurs at any time during the surrender charge period. Such
charge is the same as that which would apply had the policy been surrendered on
the Annuity Date.
No surrender charge is imposed at the time of annuitization in any policy year
under an option involving a life contingency (Options I, II, III, IV-A, IV-B or
the comparable fixed annuity options).
SALES EXPENSE. The Company pays sales commissions, not to exceed 7.0% of
purchase payments, to entities which sell the Policies. To the extent permitted
by NASD rules, expense reimbursement allowances and additional payments for
other services not directly related to the sale of the Policies, including the
recruitment and training of personnel, production of promotional literature, and
similar services may also be made.
The Company intends to recoup the commissions and other sales expenses through a
combination of anticipated surrender charges, described above, and the
investment earnings on amounts allocated to accumulate on a fixed basis in
excess of the interest credited on fixed accumulations by the Company which may
include amounts derived from mortality and expense risk charges. There is no
additional charge to Owners or to the Separate Account. Any surrender charges
assessed on a Policy will be retained by the Company. Alternative commission
schedules are available with lower initial commission amounts based on purchase
payments, plus ongoing annual compensation of up to 1% of policy value.
28
<PAGE>
B. PREMIUM TAXES
Some states and municipalities impose a premium tax on variable annuity
policies. State premium taxes currently range up to 3.5%.
The Company makes a charge for state and municipal premium taxes, when
applicable, and deducts the amount paid as a premium tax charge. The current
practice of the Company is to deduct the premium tax charge in one of two ways:
(1) if the premium tax was paid by the Company when purchase payments were
received, to the extent permitted in the Policy the premium tax charge is
deducted on a pro-rata basis when partial withdrawals are made, upon
surrender of the Policy, or when annuity benefit payments begin (the
Company reserves the right instead to deduct the premium tax charge for
these Policies at the time the purchase payments are received); or
(2) the premium tax charge is deducted when annuity benefit payments begin.
If no amount for premium tax was deducted at the time the purchase
payment 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 Policy value at the time such determination is made.
C. POLICY FEE
The Company deducts a $30 Policy fee on the Policy anniversary date and upon
full surrender of the Policy if the Accumulated Value on any of these dates is
$50,000 or less. The Policy fee is not deducted after annuitization. The Policy
fee is waived for Policies issued to a trustee of a 401(k) plan.
Where Policy value has been allocated to more than one investment option
(General Account and/or one or more of the Sub-Accounts), a percentage of the
total Policy fee will be deducted from the Policy value in each investment
option. The portion of the charge deducted from each will be equal to the
percentage which the Policy value in that investment option represents of the
total Accumulated Value under the Policy. The deduction of the Policy fee will
result in cancellation of a number of Accumulation Units equal in value to the
percentage of the charge deducted from that option.
D. OPTIONAL MINIMUM GUARANTEED ANNUITY PAYOUT (M-GAP) RIDER CHARGE
The Company currently offers an optional Minimum Guaranteed Annuity Payout
(M-GAP) Rider that may be elected by the Owner in most jurisdictions. A separate
monthly charge is made for the Rider. The charge is made through a pro-rata
reduction of the Accumulated Value of the Sub-Accounts and the General Account
(based on the relative value that the Accumulation Units of the Sub-Accounts and
the dollar amounts in the General Account bear to the total Accumulated Value).
The applicable charge is assessed on the Accumulated Value on the last day of
each month within which the Rider has been in effect and, if applicable, on the
date the Rider is terminated, multiplied by 1/12th of the following annual
percentage rates:
<TABLE>
<S> <C>
Minimum Guaranteed Annuity Payout (M-GAP) Rider with
ten-year waiting period................................... 0.25%
Minimum Guaranteed Annuity Payout (M-GAP) Rider with
fifteen-year waiting period............................... 0.15%
</TABLE>
For a description of the Rider, see "J. Optional Minimum Guaranteed Annuity
Payout (M-GAP) Rider" under THE VARIABLE ANNUITY POLICIES.
E. ANNUAL CHARGES AGAINST SEPARATE ACCOUNT ASSETS
MORTALITY AND EXPENSE RISK CHARGE. The Company assesses a charge against the
assets of each Sub-Account to compensate for certain mortality and expense risks
it has assumed. The charge is imposed during
29
<PAGE>
both the accumulation period and the annuity period. The mortality risk arises
from the Company's special death benefit guarantee and its guarantee that it
will make annuity benefit payments in accordance with annuity rate provisions
established at the time the Policy is issued for the life of the Annuitant (or
in accordance with the annuity option selected), no matter how long the
Annuitant (or other payee) lives and no matter how long all Annuitants as a
class live. Therefore, the mortality charge is deducted during the annuity phase
on all Policies, including those that do not involve a life contingency, even
though the Company does not bear direct mortality risk with respect to variable
annuity settlement options that do not involve life contingencies. The expense
risk arises from the Company's guarantee that the charges it makes will not
exceed the limits described in the Policies 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.
The mortality and expense risk charge is assessed daily at an annual rate of
1.25% of each Sub-Account's average daily net assets. This charge may not be
increased. 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 .80% for mortality risk
and .45% for expense risk.
ADMINISTRATIVE EXPENSE CHARGE. The Company assesses each Sub-Account available
under the Policies with a daily charge at an annual rate of 0.15% of the average
daily net assets of the Sub-Account. This charge may not be increased. The
charge is imposed during both the accumulation period and the annuity period.
The daily administrative expense charge is assessed to help defray
administrative expenses actually incurred in the administration of the
Sub-Account, without profits. There is no direct relationship, however, between
the amount of administrative expenses imposed on a given Policy and the amount
of expenses actually attributable to that Policy.
Deductions for the Policy fee (described under "C. Policy 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 Policies include, but are not
limited to, clerical, accounting, actuarial and legal services, rent, postage,
telephone, office equipment and supplies, expenses of preparing and printing
registration statements, expense of preparing and typesetting prospectuses and
the cost of printing prospectuses not allocable to sales expense, filing and
other fees.
TRANSFER CHARGE. The Company currently makes no charge for transfers. The
Company guarantees that the first 12 transfers in a Policy year will be free of
a transfer charge. For each subsequent transfer, the Company reserves the right
to assess a charge, guaranteed never to exceed $25, to reimburse it for the
expense of processing transfers. If the Policy Owner has elected automatic
transfers or automatic rebalancing, the first automatic transfer or rebalancing
will count as one transfer for purposes of the twelve which are guaranteed to be
free of a transfer charge in each Policy year. Each subsequent automatic
transfer or rebalancing is without transfer charge and does not reduce the
remaining number of transfers which may be made free of a transfer charge in
that Policy year.
OTHER CHARGES. Because the 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
prospectuses and SAIs of the Underlying Funds contain additional information
concerning expenses of the Underlying Funds.
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THE VARIABLE ANNUITY POLICIES
The Policies are designed for use in connection with several types of retirement
plans, as well as for individual use. Participants under such plans, as well as
Owners, and beneficiaries, are cautioned that the rights of any person to any
benefits under such Policies may be subject to the terms and conditions of the
plans themselves, regardless of the terms and conditions of the Policies.
The Policies offered by this Prospectus may be purchased from representatives of
Allmerica Investments, Inc. and certain independent broker-dealers that are
registered under the Securities Exchange Act of 1934 and are members of the
National Association of Securities Dealers, Inc. (NASD). The principal
underwriter of the Policies is Allmerica Investments, Inc., 440 Lincoln Street,
Worcester, MA, 01653, an indirect wholly owned subsidiary of First Allmerica.
Owners may direct any inquiries to Client Services, Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, MA 01653.
A. PURCHASE PAYMENTS
Purchase payments are to be made payable to the Company. A net payment is equal
to the payment received less the amount of any applicable premium tax. The
initial payment is credited to the Policy as of the date that the properly
completed application which accompanies the payment is received by the Company
at its Principal Office. If an application is not completed within five business
days of the Company's receipt of the initial payment, or does not specify how
payments are to be allocated among the investment options, the initial purchase
payment will be returned within five business days. After a policy is issued,
Accumulation Units will be credited to the Policy at the unit value computed as
of the Valuation Date that a purchase payment is received at the Company's
Principal Office on the basis of accumulation unit value next determined after
receipt.
Payments may be made to the Policy at any time prior to the Annuity Date or
prior to payment of the death benefit. Purchase payments are not limited as to
frequency and number, but there are certain limitations as to amount. Generally,
the initial payment must be at least $600. Under a salary deduction or a monthly
automatic payment plan, the minimum initial payment is $50. In all cases, each
subsequent payment must be at least $50. Where the contribution on behalf of an
employee under an employer-sponsored retirement plan is less than $600 but more
than $300 annually, the Company may issue a Policy on the employee, if the
plan's average annual contribution per eligible plan participant is at least
$600. Total payments may not exceed the maximum limit specified in the Policy.
If the payments are divided among two or more investment options, a net amount
of at least $10 of each payment must be allocated to each option.
Generally, unless otherwise requested, all payments will be allocated among the
investment options in the same proportion that the initial net payment is
allocated or, if subsequently changed, according to the most recent allocation
instructions. As of the date of this Prospectus, payments may be allocated to a
maximum of seventeen variable Sub-Accounts during the life of the Policy in
addition to the DGPF Capital Reserve Series.
The Policy Owner may change allocation instructions for new payments pursuant to
written or telephone request. If the Policy Owner elects telephone requests, a
properly completed authorization form must be on file before telephone requests
will be honored. The policy of the Company and its agents and affiliates is that
they will not be responsible for losses resulting from acting upon telephone
requests reasonably believed to be genuine. The Company will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine;
otherwise, the Company may be liable for any losses due to unauthorized or
fraudulent instructions. The procedures may include, among other things,
requiring some form of personal identification prior to acting upon instructions
received by telephone. All telephone instructions are tape-recorded.
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B. TRANSFER PRIVILEGE
At any time prior to the Annuity Date, subject to the Company's then current
rules, an Owner may have amounts transferred among the Sub-Accounts or between a
Sub-Account and the General Account, where available. As of the date of this
Prospectus, transfers may be made to and among all of the available Sub-
Accounts. However, should additional funds be added to the Policy, the Company
reserves the right to limit the number of Sub-Accounts which may be used during
the life of the Policy. Transfer values will be effected at the Accumulation
Value next computed after receipt of the transfer order. The Company will make
transfers pursuant to written request or, if a properly completed authorization
is on file, pursuant to a telephone request.
Currently, the Company makes no charge for transfers. The first 12 transfers in
a Policy year are guaranteed to be free of any transfer charge. For each
subsequent transfer in a Policy year, the Company reserves the right to assess a
charge, guaranteed not to exceed $25, to reimburse it for the expense of
processing these additional transfers. If you authorize periodic transfers under
an Automatic Transfer option (Dollar Cost Averaging) or an Automatic Account
Rebalancing option, the first automatic transfer or rebalancing under a request
counts as one transfer for purposes of the 12 transfers guaranteed to be free of
a transfer charge in each Policy year. Each subsequent transfer or rebalancing
under that request is without charge and does not reduce the remaining number of
transfers which may be made free of charge in that Policy year.
Except for transfers made under the automatic transfer option (Dollar Cost
Averaging) and for transfers made under policies issued to residents of Texas,
no transfers from the General Account are permitted except during the 30-day
period beginning on each policy anniversary. During this 30-day "window" period,
any amount (up to 100%) of the policy value may be transferred. In Texas,
transfers from the Fixed Account are also permitted if there has been at least a
ninety day period since the last transfer from the General Account and the
amount of the transfer does not exceed the lesser of $100,000 or 25% of the
Accumulated Value.
The Company reserves the right to impose limitations on transfers including, but
not limited to (1) the minimum amount that may be transferred, (2) the minimum
amount that may remain in a Sub-Account following a transfer from that
Sub-Account, (3) the minimum period of time between transfers involving the
General Account, and (4) the maximum amount that may be transferred each time
from the General Account.
AUTOMATIC TRANSFERS (DOLLAR COST AVERAGING) AND AUTOMATIC ACCOUNT REBALANCING
OPTIONS. The Owner may elect automatic transfers of a pre-determined dollar
amount (Dollar Cost Averaging), not less than $100, on a periodic basis
(monthly, bi-monthly, quarterly, semi-annually or annually) from the Sub-Account
investing in the DGPF Capital Reserve Series, the DGPF Strategic Income Series,
or the DGPF Cash Reserve Series (the "source accounts") to one or more of the
Sub-Accounts. Automatic transfers may not be made into the General Account or,
if applicable, the Sub-Account being used as the source account. If an automatic
transfer would reduce the balance in the source account to less than $100, the
entire balance will be transferred proportionately to the chosen Sub-Accounts.
Automatic transfers will continue until the amount in the source account on a
transfer date is zero or the Owner's request to terminate the option is received
by the Company. If additional amounts are allocated to the source account after
its balance has fallen to zero, this option will not restart automatically and
the Owner must provide a new request to the Company.
The General Account may be used as the source account from which automatic
transfers can be made on a monthly, bi-monthly or quarterly basis provided that
(1) the amount of each monthly transfer cannot exceed 10% of the value in the
General Account as of the date of the first transfer; (2) the amount of each
bi-monthly transfer cannot exceed 20% of the value of the General Account as of
the date of the first transfer and (3) each quarterly transfer cannot exceed 25%
of the value in the General Account as of the date of the first transfer.
The Owner may request automatic rebalancing of Sub-Account allocations on a
monthly, bi-monthly, quarterly, semi-annual or annual basis in accordance with
percentage allocations specified by the Owner. As frequently as requested by the
Owner, the Company will review the percentage allocations in the Sub-Accounts
and, if necessary, transfer amounts to ensure conformity with the designated
percentage allocation
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mix. If the amount necessary to re-establish the mix on any scheduled date is
less than $100, no transfer will be made. Automatic Account Rebalancing will
continue until the Owner's request to terminate the option is received by the
Company.
The Company reserves the right to limit the number of Sub-Accounts that may be
used for automatic transfers and rebalancing, and to discontinue either option
upon advance written notice. The first automatic transfer or rebalancing and all
subsequent transfers or rebalancings effected in a Policy year under that
request count as one transfer towards the 12 transfers which are guaranteed to
be free of a transfer charge in each Policy year. Currently, automatic transfers
and automatic rebalancing may not be in effect simultaneously. Either option may
be elected at no additional charge when the Policy is purchased or at a later
date.
C. SURRENDER
At any time prior to the Annuity Date, an Owner may surrender the Policy and
receive its Surrender Value. The Owner must return the Policy and a signed,
written request for surrender, satisfactory to the Company to the Principal
Office. The Surrender Value will be calculated based on the Accumulated Value of
the Policy as of the Valuation Date on which the request and the Policy are
received at the Principal Office.
Before the Annuity Date, a surrender charge may be deducted when a Policy is
surrendered if payments have been credited to the Policy during the last seven
full Policy years. See CHARGES AND DEDUCTIONS. The Policy fee will be deducted
upon surrender of the Policy.
After the Annuity Date, only Policies annuitized under a commutable period
certain option (as in Annuity Option V) may be surrendered. The amount payable
is the commuted value of any unpaid installments, computed on the basis of the
assumed interest rate incorporated in such annuity benefit payments. No
surrender charge is imposed after the Annuity Date.
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 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 assets of each Separate Account is not reasonably
practicable.
The Company reserves the right to defer surrenders and partial redemptions of
amounts allocated to the Company's General Account for a period not to exceed
six months.
The surrender rights of Owners who are participants under Section 403(b) plans
or who are participants in the Texas Optional Retirement Program ("Texas ORP")
are restricted; see "Tax-Sheltered Annuities" and "Texas Optional Retirement
Program."
For important tax consequences which may result from surrender, see FEDERAL TAX
CONSIDERATIONS.
D. PARTIAL REDEMPTION
At any time prior to the Annuity Date, an Owner may redeem a portion of the
Accumulated Value of his or her Policy, subject to the limits stated below. The
Owner must file a signed, written request for redemption, satisfactory to the
Company, at the Principal Office. The written request must indicate the dollar
amount the Owner wishes to receive and the investment option from which such
amount is to be redeemed. The amount redeemed equals the amount requested by the
Owner plus any applicable surrender charge, as described under CHARGES AND
DEDUCTIONS.
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Where allocations have been made to more than one investment option, a
percentage of the partial redemption may be allocated to each. A partial
redemption from a Sub-Account will result in cancellation of a number of units
equivalent in value to the amount redeemed, computed as of the Valuation Date
that the request is received at the Principal Office.
Each partial redemption must be in a minimum amount of $100. No partial
redemption will be permitted if the Accumulated Value remaining under the Policy
would be reduced to less than $1,000. Partial redemptions will be paid in
accordance with the time limitations described under "C. Surrender."
After the Annuity Date, only Policies under which a period certain option has
been elected may be partially redeemed. A partial redemption after the Annuity
Date will result in cancellation of a number of Annuity Units equivalent in
value to the amount redeemed.
For important restrictions on withdrawals which are applicable to Owners who are
participants under Section 403(b) plans or under the Texas ORP, see
"Tax-Sheltered Annuities" and "J. Texas Optional Retirement Program."
For important tax consequences which may result from partial redemptions, see
FEDERAL TAX CONSIDERATIONS.
E. DEATH BENEFIT
If the Annuitant dies (or an Owner predeceases the Annuitant) before the Annuity
Date while the Policy is in force, a death benefit will be paid to the
beneficiary, except where the Policy continues as provided below in "F. The
Spouse of the Owner as Beneficiary." Upon death of the Annuitant (including an
Owner who is also the Annuitant), the death benefit is equal to the greatest of
(1) the Accumulated Value on the Valuation Date that the Company receives due
proof of death at the Principal Office, or (2) the total amount of gross
payments made under the Policy reduced proportionally to reflect the amount of
all prior partial withdrawals, or (3) the death benefit that would have been
payable on the most recent fifth year Policy anniversary, increased for
subsequent purchase payments and reduced proportionally to reflect withdrawals
after that date. A partial withdrawal will reduce the gross payments available
as a death benefit under (2) in the same proportion that the Accumulated Value
was reduced on the date of withdrawal. For each withdrawal, the reduction is
calculated by multiplying the total amount of gross payments by a fraction, the
numerator of which is the amount of the partial withdrawal and the denominator
of which is the Accumulated Value immediately prior to the withdrawal. For
example, if gross payments total $8,000 and a $3,000 withdrawal is made when the
Accumulated Value is $12,000, the proportional reduction of gross payments
available as a death benefit is calculated as follows: The Accumulated Value is
reduced by 1/4 (3,000 divided by 12,000); therefore, the gross amount available
as a death benefit under (2) also will be reduced by 1/4 (8,000 times 1/4 equals
$2,000), so that the $8,000 gross payments are reduced to $6,000. Payments made
after a withdrawal will increase the death benefit available under (2) by the
amount of the payment.
A partial withdrawal after the most recent fifth year Policy anniversary will
decrease the death benefit available under (3) in the same proportion that the
Accumulated Value was reduced on the date of the withdrawal. For example, if the
death benefit that would have been payable on the most recent fifth year Policy
anniversary is $12,000 and partial withdrawals totaling $5,000 are made
thereafter when the Accumulated Value is $15,000, the proportional reduction of
death benefit available under (3) is calculated as follows: The Accumulated
Value is reduced by 1/3 (5,000 divided by 15,000); therefore, the death benefit
that would have been payable on the most recent fifth year Policy anniversary
will also be reduced by 1/3 (12,000 times 1/3 or $4,000), so that the death
benefit available under (3) will be $8,000 ($12,000 minus $4,000). Payments made
after the most recent fifth year Policy anniversary will increase the death
benefit available under (3) by the amount of the payment.
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Upon death of an Owner who is not the Annuitant, the death benefit is equal to
the Accumulated Value on the Valuation Date that the Company receives due proof
of death.
The death benefit generally will be paid to the beneficiary in one sum. The
beneficiary may, however, by written request, elect one of the following
options:
(1) The payment of the one sum may be delayed for a period not to exceed
five years from the date of death.
(2) The death benefit may be paid in installments. Payments must begin
within one year from the date of death, and are payable over a period
certain not extended beyond the life expectancy of the beneficiary.
(3) All or a portion of the death benefit may be used to provide a life
annuity for the beneficiary. Benefits must begin within one year from the
date of death and are payable over a period not extended beyond the life
expectancy of the beneficiary. Any annuity benefits will be provided in
accordance with the annuity options of the Policy.
If there is more than one beneficiary, the death benefit will be paid to such
beneficiaries in one sum unless the Company consents to pay an annuity option
chosen by the beneficiaries.
With respect to any death benefit, the Accumulated Value under the Policy shall
be based on the unit values next computed after due proof of death has been
received at the Principal Office. If the beneficiary elects to receive the death
benefit in one sum, the death benefit will be paid within seven business days.
If the beneficiary (other than a spousal beneficiary under an IRA, see "F. The
Spouse of the Owner as Beneficiary," below) has not elected an annuity option
within one year from the date notice of death is received by the Company, the
Company will pay the death benefit in one sum. The death benefit will reflect
any earnings or losses experienced during the period and any withdrawals.
If the Annuitant's death occurs on or after the Annuity Date but before the
completion of all guaranteed monthly annuity payments, any unpaid amounts or
installments will be paid to the beneficiary. The Company must pay the remaining
payments at least as rapidly as under the payment option in effect on the date
of the Annuitant's death. If there is more than one beneficiary, the commuted
value of the payments, computed on the basis of the assumed interest rate
incorporated in the annuity option table on which such payments are based, shall
be paid to the beneficiaries in one sum.
F. THE SPOUSE OF THE OWNER AS BENEFICIARY
The Owner's spouse, if named as sole beneficiary ("spousal beneficiary"), may by
written request continue the Policy in force rather than receive the death
benefit. The spousal beneficiary will become the new Owner (and, if the deceased
Owner was also the Annuitant, the new Annuitant). All other rights and benefits
provided in the Policy will continue, except that any subsequent spouse of such
new Owner will not be entitled to continue the Policy upon such new Owner's
death.
G. ASSIGNMENT
The Policy may be assigned by the Owner at any time prior to the Annuity Date
and while the Annuitant is alive. Policies sold in connection with IRA plans and
certain other qualified plans, however, are not assignable. For more information
about these plans, see FEDERAL TAX CONSIDERATIONS.
The Company will not be deemed to have knowledge of an assignment unless it is
made in writing and filed at the Principal Office. The Company will not assume
responsibility for determining the validity of any assignment. If an assignment
of the Policy is in effect on the Annuity Date, the Company reserves the right
to pay to the assignee, in one sum, that portion of the Surrender Value of the
Policy to which the assignee appears
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to be entitled. The Company will pay the balance, if any, in one sum to the
Owner in full settlement of all liability under the Policy. The interest of the
Owner and of any beneficiary will be subject to any assignment.
H. ELECTING THE FORM OF ANNUITY AND THE ANNUITY DATE
Subject to certain restrictions described below, the Owner has the right (1) to
select the annuity option under which annuity payments are to be made, and
(2) to determine whether payments are to be made on a fixed basis, a variable
basis, or a combination fixed and variable basis. Certain options may be
commutable or noncommutable. A commutable option provides the Owner with the
right to request a lump sum payment of any remaining balance after annuity
payments have commenced. Under a noncommutable option, the Owner may not request
a lump sum payment. Annuity payments are determined according to the annuity
tables in the Policy, by the annuity option selected, and by the investment
performance of the Sub-Accounts selected.
To the extent a fixed annuity is selected, Accumulated Value will be transferred
to the General Account of the Company, and the annuity payments will be fixed in
amount. See APPENDIX A -- MORE INFORMATION ABOUT THE GENERAL ACCOUNT.
Under a variable annuity, a payment equal to the value of the fixed number of
Annuity Units in the Sub-Accounts is made each month. Since the value of an
Annuity Unit in a Sub-Account will reflect the investment performance of the
Sub-Account, the amount of each monthly payment will vary.
The annuity option selected must produce an initial payment of at least $50. If
a combination of fixed and variable payments is selected, the initial payment on
each basis must be at least $50. The Company reserves the right to increase
these minimum amounts. If the annuity option selected does not produce initial
payments which meet these minimums, the Company will pay the Accumulated Value
in one sum. Once the Company begins making annuity payments, the Annuitant
cannot make partial redemptions or surrender the annuity benefit, except in the
case where a commutable period certain option (Option V or a comparable fixed
option) has been chosen. Beneficiaries entitled to receive remaining payments
for a "period certain" may elect to instead receive a lump sum settlement.
The Owner selects the Annuity Date. To the extent permitted by state law, the
Annuity Date may be the first day of any month (1) before the Annuitant's 85th
birthday, if the Annuitant's age at the date of issue of the Policy is 75 or
under, or (2) within ten years from the date of issue of the Policy and before
the Annuitant's 90th birthday, if the Annuitant's age at the date of issue is
between 76 and 90. The Owner may elect to change the Annuity Date by sending a
request to the Principal Office at least one month before the Annuity Date. The
new Annuity Date must be the first day of any month occurring before the
Annuitant's 90th birthday. The new Annuity Date must be within the life
expectancy of the Annuitant. The Company shall determine such life expectancy at
the time a change in Annuity Date is requested. In no event will the latest
possible annuitization age exceed 90. The Code and the terms of qualified plans
impose limitations on the age at which annuity benefit payments may commence and
the type of annuity option selected. See FEDERAL TAX CONSIDERATIONS for further
information.
If the Owner does not elect otherwise, annuity benefit payments will be made in
accordance with Option I, a variable life annuity with 120 monthly payments
guaranteed. Changes in either the Annuity Date or annuity option can be made up
to one month prior to the Annuity Date.
If the Owner exercises the Minimum Guaranteed Annuity Payout (M-GAP) Rider,
annuity benefit payments must be made under a fixed annuity payout option
involving a life contingency and will be determined based on the Company's
guaranteed fixed annuity option rates listed under the Annuity Option Tables in
the Policy.
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I. DESCRIPTION OF VARIABLE ANNUITY OPTIONS
The Company currently provides the variable annuity options described below.
Variable annuity options may be funded through the DGPF Growth & Income Series,
the DGPF Capital Reserves Series and the DGPF Balanced Series.
The Company also provides fixed-amount annuity options which are comparable to
the variable annuity options. Regardless of how payments were allocated during
the accumulation period, any one of the variable annuity options or the
fixed-amount options may be selected, or any one of the variable annuity options
may be selected in combination with any one of the fixed-amount annuity options.
Other annuity options may be offered by the Company.
OPTION I -- VARIABLE LIFE ANNUITY WITH 120 MONTHLY PAYMENTS GUARANTEED. A
variable annuity payable periodically during the lifetime of the Annuitant with
the guarantee that if the Annuitant should die before 120 monthly payments have
been paid, the monthly annuity benefit payments will continue to the beneficiary
until a total of 120 monthly payments have been paid.
OPTION II -- VARIABLE LIFE ANNUITY. A variable annuity payable during the
lifetime of the Annuitant only. It would be possible under this option for the
Annuitant to receive only one annuity benefit payment if the Annuitant dies
prior to the due date of the second annuity payment, two annuity benefit
payments if the Annuitant dies before the due date of the third annuity benefit
payment, and so on. Payments will continue, however, during the lifetime of the
Annuitant, no matter how long he or she lives.
OPTION III -- UNIT REFUND VARIABLE LIFE ANNUITY. A variable annuity payable
periodically during the lifetime of the Annuitant with the guarantee that if
(1) exceeds (2), then monthly variable 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
Annuitant.
OPTION IV-A -- JOINT AND SURVIVOR VARIABLE LIFE ANNUITY. A variable annuity
payable jointly to the Annuitant and another individual during their joint
lifetime, and then continuing during the lifetime of the survivor. The amount of
each payment to the survivor is based on the same number of Annuity Units which
applied during the joint lifetime of the two payees. One of the payees must be
either the person designated as the Annuitant in the Policy or the beneficiary.
There is no minimum number of payments under this option. See Option IV-B,
below.
OPTION IV-B -- JOINT AND TWO-THIRDS SURVIVOR VARIABLE LIFE ANNUITY. A variable
annuity payable jointly to the Annuitant and another individual during their
joint lifetime, and then continuing thereafter during the lifetime of the
survivor. The amount of each periodic payment to the survivor, however, is based
upon two-thirds of the number of Annuity Units which applied during the joint
lifetime of the two payees. One of the payees must be the person designated as
the Annuitant in the Policy or the beneficiary. There is no minimum number of
payments under this option. See Option IV-A, above.
OPTION V -- PERIOD CERTAIN VARIABLE ANNUITY. A variable annuity payable for a
stipulated number of years ranging from one to 30 years. If the Annuitant dies
before the end of the period, remaining payments will continue to be paid. A
fixed period certain annuity may be either commutable or noncommutable. A
variable period certain annuity is automatically commutable.
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It should be noted that Option V does not involve a life contingency. In the
computation of the payments under this option, the Company deducts a charge for
annuity rate guarantees, which includes a factor for mortality risks. Although
not contractually required to do so, the Company currently follows a practice of
permitting persons receiving payments under Option V to elect to convert to a
variable annuity involving a life contingency. The Company may discontinue or
change this practice at any time, but not with respect to Owners who have
elected Option V prior to the date of any change in this practice. See FEDERAL
TAX CONSIDERATIONS for a discussion of the possible adverse tax consequences of
selecting Option V.
J. OPTIONAL MINIMUM GUARANTEED ANNUITY PAYOUT (M-GAP) RIDER
An optional Minimum Guaranteed Annuity Payout (M-GAP) Rider is available in most
jurisdictions for a separate monthly charge. The M-GAP Rider provides a
guaranteed minimum amount of fixed lifetime income during the annuity payout
phase, after a ten-year or fifteen-year waiting period, subject to the
conditions described below. On each Policy anniversary a Minimum Guaranteed
Annuity Payout Benefit Base is determined. The Minimum Guaranteed Annuity Payout
Benefit Base (less any applicable premium taxes) is the value that will be
annuitized if the Rider is exercised. In order to exercise the Rider, a fixed
annuitization option involving a life contingency must be selected.
Annuitization under this Rider will occur at the Company's guaranteed fixed
annuity option rates listed under the Annuity Option Tables in the Policy. The
Minimum Guaranteed Annuity Payout Benefit Base is equal to the greatest of:
(a) the Accumulated Value increased by any positive Market Value Adjustment,
if applicable, on the Policy anniversary that the M-GAP Benefit Base is
being determined;
(b) the Accumulated Value on the effective date of the Rider compounded
daily at an effective annual yield of 5% plus gross payments made
thereafter compounded daily at an effective annual yield of 5%, starting
on the date each payment is applied, proportionately reduced to reflect
withdrawals; or
(c) the highest Accumulated Value on any prior Policy anniversary since the
Rider effective date as determined after being increased for subsequent
payments and any positive Market Value Adjustment, if applicable, and
proportionately reduced for subsequent withdrawals.
For each withdrawal described in (b) and (c) above, the proportionate reduction
is calculated by multiplying the (b) or (c) value, whichever is applicable,
determined immediately prior to the withdrawal by the following fraction:
amount of the withdrawal
----------------------------------------------------------
Accumulated Value determined immediately prior to the withdrawal
CONDITIONS ON ELECTING THE M-GAP RIDER.
- The Owner may elect the M-GAP Rider at Policy issue or at any time
thereafter, however, if the Rider is not elected within thirty days after
Policy issue or within thirty days after a Policy anniversary date, the
effective date of the Rider will be the following Policy anniversary date.
- The Owner may not elect a Rider with a ten-year waiting period if at the
time of election the Annuitant has reached his/her 78th birthday. The
Owner may not elect a Rider with a fifteen-year waiting period if at the
time of election the Annuitant has reached his/her 73rd birthday.
EXERCISING THE M-GAP RIDER.
- The Owner may only exercise the M-GAP Rider within thirty days after any
Policy anniversary following the expiration of a ten or fifteen-year
waiting period from the effective date of the Rider.
- The Owner may only annuitize under a fixed annuity payout option involving
a life contingency as provided under "I. Description of Variable Annuity
Options."
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- The Owner may only annuitize at the Company's guaranteed fixed annuity
option rates listed under the Annuity Option Tables in the Policy.
TERMINATING THE M-GAP RIDER.
- The Owner may not terminate the M-GAP Rider prior to the seventh Policy
anniversary after the effective date of the Rider, unless such termination
(1) occurs on or within thirty days after any Policy anniversary and
(2) in conjunction with the repurchase of an M-GAP Rider with a waiting
period of equal or greater length at its then current price, if available.
- The Owner may terminate the Rider at any time after the seventh Policy
anniversary following the effective date of the Rider.
- The Owner may repurchase a Rider with a waiting period equal to or greater
than the Rider then in force at the new Rider's then current price, if
available, however, repurchase may only occur on or within thirty days of
a Policy anniversary.
- Other than in the event of a repurchase, once terminated the Rider may not
be purchased again.
- The Rider will terminate upon surrender of the Policy or the date that a
death benefit is payable if the Policy is not continued under "F. The
Spouse of the Owner as Beneficiary" under THE VARIABLE ANNUITY POLICIES.
From time to time the Company may illustrate minimum guaranteed income amounts
under the M-GAP Rider for individuals based on a variety of assumptions,
including varying rates of return on the value of the Policy during the
accumulation phase, annuity payout periods, annuity payout options and M-GAP
Rider waiting periods. Any assumed rates of return are for purposes of
illustration only and are not intended as a representation of past or future
investment rates of return.
For example, the illustration below assumes an initial payment of $100,000 for
an Owner age 60 (at issue) and exercise of an M-GAP Rider with a ten-year
waiting period. The illustration assumes that no subsequent payments or
withdrawals are made and that the annuity payout option is a Life Annuity With
Payments Guaranteed For 10 Years. The values below have been computed based on a
5% rate of return and are the guaranteed minimums that would be received under
the M-GAP Rider. The minimum guaranteed benefit base amounts are the values that
will be annuitized. Minimum guaranteed annual income values are based on a fixed
annuity payout.
<TABLE>
<CAPTION>
MINIMUM
POLICY MINIMUM GUARANTEED
ANNIVERSARY GUARANTEED ANNUAL
AT EXERCISE BENEFIT BASE INCOME(1)
- ----------- ------------ ----------
<S> <C> <C>
10 $162,889 $12,153
15 $207,892 $17,695
</TABLE>
(1) Other fixed annuity options involving a life contingency other than Life
Annuity With Payments 120 Monthly Paymnents Guaranteed are available. See "I.
Description of Variable Annuity Options."
The M-GAP Rider does not create Accumulated Value or guarantee performance of
any investment option. Because this Rider is based on guaranteed actuarial
factors, the level of lifetime income that it guarantees may often be less than
the level that would be provided by applying the then current annuity factors.
Therefore, the Rider should be regarded as providing a guarantee of a minimum
amount of annuity income. As described above, withdrawals will reduce the
benefit base. The Company reserves the right to terminate the availability of
the M-GAP Rider at any time. Such a termination would not effect M-GAP Riders
issued prior to the
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termination date, but as noted above, Owners would not be able to repurchase a
new Rider under the repurchase feature (see above, "TERMINATING THE M-GAP
RIDER.")
K. NORRIS DECISION
In the case of ARIZONA GOVERNING COMMITTEE V. NORRIS, the United States Supreme
Court ruled that, in connection with retirement benefit options offered under
certain employer-sponsored employee benefit plans, annuity options based on
sex-distinct actuarial tables are not permissible under Title VII of the Civil
Rights Act of 1964. The ruling requires that benefits derived from contributions
paid into a plan after August 1, 1983 be calculated without regard to the sex of
the employee. Annuity benefits attributable to payments received by the Company
under a policy issued in connection with an employer-sponsored benefit plan
affected by the NORRIS decision will be based on the greater of (1) the
Company's unisex Non-Guaranteed Current Annuity Option Rates, or (2) the
guaranteed male rates described in such Policy, regardless of whether the
Annuitant is male or female.
Although the Company believes that the Supreme Court ruling does not affect
Policies funding IRA plans that are not employer-sponsored, the Company will
apply certain aspects of the ruling to annuity benefits under such Policies,
except in those states in which it is prohibited. Such benefits will be based on
(1) the greater of the guaranteed unisex annuity rates described in the
Policies, or (2) the Company's sex-distinct Non-Guaranteed Current Annuity
Option Rates.
L. COMPUTATION OF POLICY VALUES AND ANNUITY BENEFIT PAYMENTS
DETERMINATION OF THE FIRST VARIABLE ANNUITY BENEFIT PAYMENT. The amount of the
first monthly payment depends upon the selected variable annuity option, the sex
(however, see "K. NORRIS Decision" above) and age of the Annuitant, and the
value of the amount applied under the annuity option ("annuity value"). The
Policy provides annuity rates that determine the dollar amount of the first
periodic payment under each variable annuity option for each $1,000 of applied
value. From time to time, the Company may offer its Owners both fixed and
variable annuity rates more favorable than those contained in the Policy. Any
such rates will be applied uniformly to all Owners of the same class.
The dollar amount of the first periodic annuity benefit payment is calculated
based upon the type of annuity option chosen, as follows:
- For life annuity options and noncommutable fixed period certain options of
ten years or more, the dollar amount is determined by multiplying (1) the
Accumulated Value applied under that option (after application of any
Market Value Adjustment and less premium tax, if any) divided by $1,000,
by (2) the applicable amount of the first monthly payment per $1,000 of
value.
- For commutable fixed and variable period certain options and any
noncommutable fixed period certain option of less than ten years, the
dollar amount is determined by multiplying (1) the Surrender Value less
premium taxes, if any, applied under that option (after application of any
Market Value Adjustment and less premium tax, if any) divided by $1,000,
by (2) the applicable amount of the first monthly payment per $1,000 of
value.
- For a death benefit annuity, the annuity value will be the amount of the
death benefit.
The first periodic annuity benefit payment is based upon the Accumulated Value
as of a date not more than four weeks preceding the date that the first annuity
benefit payment is due. The Company transmits variable annuity benefit payments
for receipt by the payee by the first of a month. Variable annuity benefit
payments are currently based on unit values as of the 15th day of the preceding
month.
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<PAGE>
THE ANNUITY UNIT. On and after the Annuity Date, the Annuity Unit is a measure
of the value of the monthly annuity benefit payments under a variable annuity
option. The value of an Annuity Unit in each Sub-Account initially was set at
$1.00. The value of an Annuity Unit under a Sub-Account on any Valuation Date
thereafter is equal to the value of such unit on the immediately preceding
Valuation Date, multiplied by the net investment factor of the Sub-Account for
the current Valuation Period and divided by the assumed interest rate for the
current Valuation Period The assumed interest rate, discussed below, is
incorporated in the variable annuity options offered in the Policy.
DETERMINATION OF THE NUMBER OF ANNUITY UNITS. The dollar amount of the first
variable annuity benefit payment is divided by the value of an Annuity Unit of
the selected Sub-Account(s) to determine the number of Annuity Units represented
by the first payment. This number of Annuity Units remains fixed under all
annuity options except the joint and two-thirds survivor annuity option.
DOLLAR AMOUNT OF SUBSEQUENT VARIABLE ANNUITY BENEFIT PAYMENTS. The dollar
amount of each periodic variable annuity benefit payment after the first will
vary with the value of the Annuity Units of the selected Sub-Account(s). The
dollar amount of each subsequent variable annuity benefit payment is determined
by multiplying the fixed number of Annuity Units (derived from the dollar amount
of the first payment, as described above) with respect to a Sub-Account by the
value of an Annuity Unit of that Sub-Account on the applicable Valuation Date.
The variable annuity options offered by the Company are based on a 3.5% assumed
interest rate, which affects the amounts of the variable annuity benefit
payments. Variable annuity benefit payments with respect to a Sub-Account will
increase over periods when the actual net investment result of the Sub-Account
exceeds the equivalent of the assumed interest rate. Variable annuity benefit
payments will decrease over periods when the actual net investment results are
less than the equivalent of the assumed interest rate.
For an illustration of a calculation of a variable annuity benefit payment using
a hypothetical example, see "Annuity Benefit Payments" in the SAI.
If the Owner elects the M-GAP Rider, at annuitization the annuity benefit
payments provided under the Rider (by applying the guaranteed annuity factors to
the Minimum Guaranteed Annuity Payout Benefit Base), are compared to the
payments that would otherwise be available with the Rider. If annuity benefit
payments under the Rider are higher, the Owner may exercise the Rider, provided
that the conditions of the Rider are met. If annuity benefit payments under the
Rider are lower, the Owner may choose not to exercise the Rider and instead
annuitize under current annuity factors. See "J. Optional Minimum Guaranteed
Annuity Payout (M-GAP) Rider" above.
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<PAGE>
FEDERAL TAX CONSIDERATIONS
The effect of federal income taxes on the value of a Policy, on withdrawals or
surrenders, on annuity benefit payments, and on the economic benefit to the
owner, annuitant, 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 IRS. In
addition, this discussion does not address state or local tax consequences that
may be associated with this Policy.
IT SHOULD BE RECOGNIZED THAT THE FOLLOWING DISCUSSION OF FEDERAL INCOME TAX
ASPECTS OF AMOUNTS RECEIVED UNDER VARIABLE ANNUITY POLICIES IS NOT EXHAUSTIVE,
DOES NOT PURPORT TO COVER ALL SITUATIONS, AND IS NOT INTENDED AS TAX ADVICE. A
QUALIFIED TAX ADVISER ALWAYS SHOULD BE CONSULTED WITH REGARD TO THE APPLICATION
OF LAW TO INDIVIDUAL CIRCUMSTANCES.
A. GENERAL
THE COMPANY. The Company intends to make a charge for any effect which the
income, assets, or existence of the Policy, the Separate Account or the
Sub-Accounts may have upon its 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 Owners and with respect to each separate account as though that
separate account were a separate taxable entity.
The Separate Account is considered 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. The Company files a consolidated tax return with its affiliates.
DIVERSIFICATION REQUIREMENTS. The IRS has issued regulations under Section
817(h) of the Code relating to the diversification requirements for variable
annuity and variable life insurance contracts. The regulations prescribed by the
Treasury Department provide that the investments of a segregated asset account
underlying a variable annuity contract are adequately diversified if no more
than 55% of the value of its assets is represented by any one investment, no
more than 70% by any two investments, no more than 80% by any three investments,
and no more than 90% by any four investments. Under this section of the Code, if
the investments are not adequately diversified, the Policy will not be treated
as an annuity contract and therefore, the income on the Policy, for any taxable
year of the Owner, would be treated as ordinary income received or accrued by
the Owner. It is anticipated that the Underlying Funds will comply with the
current diversification requirements. In the event that future IRS regulations
and/or rulings would require Policy modifications in order to remain in
compliance with the diversification standards, the Company will make reasonable
efforts to comply, and it reserves the right to make such changes as it deems
appropriate for that purpose.
INVESTOR CONTROL. In order for a variable annuity policy to qualify for tax
deferral, the Company, and not the variable policy owner, must be considered to
be the owner for tax purposes of the assets in the segregated asset account
underlying the variable annuity policy. In certain circumstances, however,
variable annuity policy owners may now be considered the owners of these assets
for federal income tax purposes. Specifically, the IRS has stated in published
rulings that a variable annuity policy owner may be considered the owner of
segregated account assets if the owner possesses incidents of ownership in those
assets, such as the ability to exercise investment control over the assets. The
Treasury Department has also announced, in connection with the issuance of
regulations concerning investment diversification, that those regulations do not
provide guidance governing the circumstances in which investor control of the
investments of a segregated asset account may cause the investor (i.e., the
policy owner), rather than the insurance company, to be treated as the owner of
the assets in the account. This announcement also states that guidance would be
issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular sub-
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<PAGE>
accounts without being treated as owners of the underlying assets." As of the
date of this Prospectus, no such guidance has been issued. The Company,
therefore, additionally reserves the right to modify the Policy as necessary in
order to attempt to prevent a contract owner from being considered the owner of
a pro rata share of the assets of the segregated asset account underlying the
variable annuity policies.
B. QUALIFIED AND NON-QUALIFIED POLICIES
From a federal tax viewpoint there are two types of variable annuity policies:
"qualified" policies and "non-qualified" policies. A qualified policy is one
that is purchased in connection with a retirement plan which meets the
requirements of Sections 401, 403, or 408 of the Code, while a non-qualified
policy is one that is not purchased in connection with one of the indicated
retirement plans. The tax treatment for certain withdrawals or surrenders will
vary, depending on whether they are made from a qualified policy or a
non-qualified policy. For more information on the tax provisions applicable to
qualified policies, see "E. Provisions Applicable to Qualified Employer Plans"
below.
C. TAXATION OF THE POLICIES IN GENERAL
The Company believes that the Policy described in this Prospectus will, with
certain exceptions (see "Nonnatural Owners" below), be considered an annuity
policy under Section 72 of the Code. Please note, however, if the Owner chooses
an Annuity Date beyond the Annuitant's 85th birthday, it is possible that the
Policy may not be considered an annuity for tax purposes and therefore, the
Owner may be taxed on the annual increase in Accumulated Value. The Owner should
consult tax and financial advisers for more information. This section governs
the taxation of annuities. The following discussion concerns annuities subject
to Section 72.
WITHDRAWALS PRIOR TO ANNUITIZATION. With certain exceptions, any increase in
the Policy's Accumulated Value is not taxable to the Owner until it is withdrawn
from the Policy. Under the current provisions of the Code, amounts received
under an annuity policy prior to annuitization (including payments made upon the
death of the annuitant or owner), generally are first attributable to any
investment gains credited to the policy over the taxpayer's "investment in the
policy." Such amounts will be treated as gross income subject to federal income
taxation. "Investment in the Policy" is the total of all payments to the Policy
which were not excluded from the Owner's gross income less any amounts
previously withdrawn which were not included in income. Section
72(e)(11)(A)(ii) requires that all non-qualified deferred annuity policies
issued by the same insurance company to the same owner during a single calendar
year be treated as one policy in determining taxable distributions.
ANNUITY PAYOUTS AFTER ANNUITIZATION. When annuity benefit payments are
commenced under the Policy, generally a portion of each payment may be excluded
from gross income. The excludable portion generally is determined by a formula
that establishes the ratio that the cost basis of the Policy bears to the
expected return under the Policy. The portion of the payment in excess of this
excludable amount is taxable as ordinary income. Once all cost basis in the
Policy is recovered, the entire payment is taxable. If the annuitant dies before
the cost basis is recovered, a deduction for the difference is allowed on the
annuitant's final tax return.
PENALTY ON DISTRIBUTION. 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 on withdrawals taken on or after age 59 1/2, or if the
withdrawal follows the death of the Owner (or, if the Owner is not an
individual, the death of the primary Annuitant, as defined in the Code) or, in
the case of the Owner's "total disability" (as defined in the Code).
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 Owner elects to have
distributions made over the Owner's life expectancy, or over the joint life
expectancy of the Owner and beneficiary. The requirement that the amount be paid
out as one of a series of "substantially equal" periodic payments is met when
the number of units withdrawn to make each distribution is substantially the
same. Any modification,
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<PAGE>
other than by reason of death or disability, of distributions which are part of
a series of substantially equal periodic payments that occurs before the Owner's
age 59 1/2 or five years, will subject the Owner to the 10% penalty tax on the
prior distributions.
In a Private Letter Ruling, the IRS took the position that where distributions
from a variable annuity policy were determined by amortizing the accumulated
value of the policy over the taxpayer's remaining life expectancy (such as under
the Policy's LED option), and the option 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,
therefore, were subject to the 10% federal penalty tax. This Private Letter
Ruling may be applicable to an Owner who receives distributions under any
LED-type option 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.
ASSIGNMENTS OR TRANSFERS. If the Owner transfers (assigns) the Policy to
another individual as a gift prior to the Annuity Date, the Code provides that
the Owner will incur taxable income at the time of the transfer. An exception is
provided for certain transfers between spouses. The amount of taxable income
upon such taxable transfer is equal to any investment gain in value over the
Owner's cost basis at the time of the transfer. The transfer also is subject to
federal gift tax provisions. Where the Owner and Annuitant are different
persons, the change of ownership of the Policy to the Annuitant on the Annuity
Date, as required under the Policy, is a gift and will be taxable to the Owner
as such; however, the Owner will not incur taxable income. Instead, the
Annuitant will incur taxable income upon receipt of annuity benefit payments as
discussed above.
NONNATURAL OWNERS. As a general rule, deferred annuity policies owned by
"nonnatural persons" (e.g., a corporation) are not treated as annuity policies
for federal tax purposes, and the investment income attributable to
contributions made after February 28, 1986 is taxed as ordinary income that is
received or accrued by the owner during the taxable year. This rule does not
apply to annuity policies purchased with a single payment when the annuity date
is no later than a year from the issue date or to deferred annuities owned by
qualified employer plans, estates, employers with respect to a terminated
pension plan, and entities other than employers, such as a trust, holding an
annuity as an agent for a natural person. This exception, however, will not
apply in cases of any employer who is the owner of an annuity policy under a
non-qualified deferred compensation plan.
DEFERRED COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT
ORGANIZATIONS. Under Section 457 of the Code, deferred compensation plans
established by governmental and certain other tax-exempt employers for their
employees may invest in annuity policies. Contributions and investment earnings
are not taxable to employees until distributed. With respect to payments made
after February 28, 1986, however, a policy owned by a state or local government
or a tax-exempt organization will not be treated as an annuity under Section 72.
In addition, plan assets are treated as property of the employer, and are
subject to the claims of the employer's general creditors.
D. TAX WITHHOLDING
The Code requires withholding with respect to payments or distributions from
non-qualified policies and IRAs, unless a taxpayer elects not to have
withholding. A 20% withholding requirement applies to distributions from most
other qualified policies. In addition, the Code requires reporting to the IRS of
the amount of income received with respect to payment or distributions from
annuities.
The tax treatment of certain withdrawals or surrenders of the non-qualified
Policies offered by this Prospectus will vary according to whether or not the
amount withdrawn or surrendered is allocable to an investment in the Policy made
before or after certain dates.
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E. PROVISIONS APPLICABLE TO QUALIFIED EMPLOYER PLANS
Federal income taxation of assets held inside a qualified retirement plan and of
earnings on those assets is deferred until distribution of plan benefits begins.
As such, it is not necessary to purchase a variable annuity policy solely to
obtain its tax deferral feature. However, other features offered under this
Policy and described in this Prospectus -- such as the minimum guaranteed death
benefit, the guaranteed fixed annuity rates and the wide variety of investment
options -- may make this Policy a suitable investment for a qualified retirement
plan.
The tax rules applicable to qualified retirement plans, as defined by the Code,
are complex and vary according to the type of plan. Benefits under a qualified
plan may be subject to that plan's terms and conditions irrespective of the
terms and conditions of any annuity policy used to fund such benefits. As such,
the following is simply a general description of various types of qualified
plans that may use the Policy. Before purchasing any annuity policy for use in
funding a qualified plan, more specific information should be obtained.
A qualified Policy may include special provisions (endorsements) changing or
restricting rights and benefits otherwise available to an Owner of a
non-qualified Policy. Individuals purchasing a qualified Policy should review
carefully any such changes or limitations which may include restrictions to
ownership, transferability, assignability, contributions, and distributions.
CORPORATE AND SELF-EMPLOYED ("H.R. 10" AND "KEOGH") PENSION AND PROFIT SHARING
PLANS. Sections 401(a), 401(k) and 403(a) of the Code permit business employers
and certain associations to establish various types of tax-favored retirement
plans for employees. The Self-Employed Individuals' Tax Retirement Act of 1962,
as amended, permits self-employed individuals to establish similar plans for
themselves and their employees. Employers intending to use qualified Policies in
connection with such plans should seek competent advice as to the suitability of
the Policy to their specific needs and as to applicable Code limitations and tax
consequences.
The Company can provide prototype plans for certain pension or profit sharing
plans for review by the plan's legal counsel. For information, ask your
financial representative.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity ("IRA"). IRAs are subject to limits on the amounts
that may be contributed, the persons who may be eligible, and on the time when
distributions may commence. In addition, certain distributions from other types
of retirement plans may be "rolled over," on a tax-deferred basis, to an IRA.
Purchasers of an IRA Policy will be provided with supplementary information as
may be required by the IRS or other appropriate agency, and will have the right
to cancel the Policy as described in this Prospectus. See "Right to Cancel All
Other Policies."
Eligible employers that meet specified criteria may establish simplified
employee pension plans (SEP-IRAs) or Simple IRA plans for their employees using
the employees IRAs. Employer contributions that may be made to such plans are
larger than the amounts that may be contributed to regular IRAs and may be
deductible to the employer.
TAX-SHELTERED ANNUITIES ("TSAS"). Under the provisions of Section 403(b) of the
Code, payments made to annuity Policies purchased for employees under annuity
plans adopted by public school systems and certain organizations which are tax
exempt under Section 501(c)(3) of the Code are excludable from the gross income
of such employees to the extent that total annual payments do not exceed the
maximum contribution permitted under the Code. Purchasers of TSA policies should
seek competent advice as to eligibility, limitations on permissible payments and
other tax consequences associated with the policies.
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Withdrawals or other distributions attributable to salary reduction
contributions (including earnings thereon) made to a TSA policy after
December 31, 1988, may not begin before the employee attains age 59, separates
from service, dies or becomes disabled. In the case of hardship, an Owner may
withdraw amounts contributed by salary reduction, but not the earnings on such
amounts. Even though a distribution may be permitted under these rules (e.g.,
for hardship or after separation from service), it may be subject to a 10%
penalty tax as a premature distribution, in addition to income tax.
TEXAS OPTIONAL RETIREMENT PROGRAM. Distributions under a TSA policy issued to
participants in the Texas Optional Retirement Program may not be received except
in the case of the participant's death, retirement or termination of employment
in the Texas public institutions of higher education. These additional
restrictions are imposed under the Texas Government Code and a prior opinion of
the Texas Attorney General.
The Company intends to make a charge for any effect which the income, assets, or
existence of the Policy, the Variable Account or the Sub-Accounts may have upon
its tax. The Variable Account presently is not subject to tax, but the Company
reserves the right to assess a charge for taxes should the Variable 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 Owners and with
respect to each separate account as though that separate account were a separate
taxable entity.
LOANS (QUALIFIED POLICIES ONLY)
Loans will be permitted only for TSAs and Policies issued to a plan qualified
under Section 401(a) and 401(k) of the Code. Loans are made from the Policy's
value on a pro-rata basis from all accounts. The maximum loan amount is the
amount determined under the Company's maximum loan formula for qualified plans.
The minimum loan amount is $1,000. Loans will be secured by a security interest
in the Policy. Loans are subject to applicable retirement legislation and their
taxation is determined under the federal income tax laws. The amount borrowed
will be transferred to a fixed, minimum guarantee loan assets account in the
Company's General Account, where it will accrue interest at a specified rate
below the then current loan interest rate. Generally, loans must be repaid
within five years and must be made at least quarterly in substantially equal
amounts. When repayments are received, they will be allocated pro-rata in
accordance with the Owner's most recent allocation instructions. The amount of
the death benefit, the amount payable on a full surrender and the amount applied
to provide an annuity on the Annuity Date will be reduced to reflect any
outstanding loan balance (plus accrued interest thereon). Partial withdrawals
may be restricted by the maximum loan limitation.
STATEMENTS AND REPORTS
An Owner is sent a report semi-annually which provides certain financial
information about the Underlying Funds. At least annually, but possibly as
frequent as quarterly, the Company will furnish a statement to the Owner
containing information about his or her Policy, including Accumulation Unit
Values and other information as required by applicable law, rules and
regulations. The Company will also send a confirmation statement to Owners each
time a transaction is made affecting Policy Value. (Certain transactions made
under recurring payment plans such as Dollar Cost Averaging may in the future be
confirmed quarterly rather than by immediate confirmations.) The Owner should
review the information in all statements carefully. All errors or corrections
must be reported to the Company immediately to assure proper crediting to the
Policy. The Company will assume that all transactions are accurately reported on
confirmation statements and quarterly/ annual statements unless the Owner
notifies the Principal Office in writing within 30 days after receipt of the
statement.
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
Sub-Accounts or that the 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
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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 Underlying Fund and substitute shares of another
registered open-end management company. The Company will not substitute any
shares attributable to a Policy interest in a Sub-Account without notice to the
Owner and prior approval of the SEC 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
policies or permit a conversion between policies upon request by an Owner.
The Company also reserves the right to establish additional Sub-Accounts of the
Separate Account, 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 SEC 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
Owners on a basis to be determined by the Company.
Shares of the Underlying Funds are sold to separate accounts of unaffiliated
insurance companies ("shared funding") which issue variable annuity and variable
life policies ("mixed funding"). It is conceivable that in the future such
shared funding or mixed funding may be disadvantageous for variable life
insurance Owners or variable annuity Owners. Although the Company and the
underlying investment companies do not currently foresee any such disadvantages
to either variable life insurance owners or variable annuity owners, the Company
and the respective trustees of the underlying investment companies 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 any of these substitutions or changes is made, the Company may, by
appropriate endorsement, change the Policy to reflect the substitution or change
and will notify Owners of all such changes. If the Company deems it to be in the
best interest of Owners, and subject to any approvals that may be required under
applicable law, the Separate Account or any 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.
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 Sub-Account 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,
(4) to substitute the shares of any other registered investment company for the
Underlying Fund shares held by a 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,
(5) to change the methodology for determining the net investment factor,
(6) to change the names of the Separate Account or of the Sub-Accounts, and
(7) to combine with other Sub-Accounts or other separate accounts of the
Company.
If any of these substitutions or changes are made, the Company may endorse the
Policy to reflect the substitution or change, and will notify Owners of all such
changes. In no event will the changes described above be made without notice to
Owners in accordance with the 1940 Act.
47
<PAGE>
VOTING RIGHTS
The Company will vote Underlying Fund shares held by each Sub-Account in
accordance with instructions received from Owners and, after the Annuity Date,
from the Annuitants. Each person having a voting interest in a Sub-Account will
be provided with proxy materials of the Underlying Funds, 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 also will vote shares in a Sub-Account that it
owns and which are not attributable to the Policies 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 an Owner or Annuitant may cast will be determined by
the Company as of the record date established by the Underlying Funds.
During the accumulation period, the number of Underlying Fund shares
attributable to each Owner will be determined by dividing the dollar value of
the Accumulation Units of the Sub-Account credited to the Policy by the net
asset value of one Underlying Fund share.
During the annuity period, the number of Underlying Fund shares attributable to
each Annuitant will be determined by dividing the reserve held in each
Sub-Account for the Annuitant's variable annuity by the net asset value of one
Underlying Fund share. Ordinarily, the Annuitant's voting interest in the
Underlying Fund will decrease as the reserve for the variable annuity is
depleted.
CHANGES TO COMPLY WITH LAW AND AMENDMENTS
The Company reserves the right, without the consent of Owners, to suspend sales
of the Policies as presently offered and to make any change to provisions of the
Policies to comply with, or give Owners the benefit of, any federal or state
statute, rule or regulation. Including but not limited to requirements for
annuity contracts and retirement plans under the Code and pertinent regulations
or any state statute or regulation.
LEGAL MATTERS
There are no legal proceedings pending to which the Separate Account is a party
or to which the assets of the Separate Account are subject. The Company and the
Principal Underwriter are not involved in any litigation that is of material
importance in relation to their total assets or that relates to the Separate
Account.
FURTHER INFORMATION
A Registration Statement under the Securities Act of 1933 relating to this
offering has been filed with the SEC. Certain portions of the Registration
Statement and amendments have been omitted from this Prospectus pursuant to the
rules and regulations of the SEC. The omitted information may be obtained from
the SEC's principal office in Washington, DC, upon payment of the SEC's
prescribed fees.
48
<PAGE>
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 annuity Policy and the
General Account may be subject to the provisions of the Securities Act of 1933
concerning the accuracy and completeness of statements made in the Prospectus.
The disclosures in this APPENDIX A have not been reviewed by the SEC.
ALLOCATIONS TO AND TRANSFERS TO AND FROM THE GENERAL ACCOUNT OF THE COMPANY 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, where available, become part of the assets of the Company
and are used to support insurance and annuity obligations.
A portion or all of net purchase payments may be allocated to accumulate at a
fixed rate of interest in the General Account, where available. Such net amounts
are guaranteed by the Company as to principal and a minimum rate of interest.
Under the Policies, the minimum interest which may be credited on amounts
allocated to the General Account is 3% compounded annually. Additional "Excess
Interest" may or may not be credited at the sole discretion of the Company.
If the Policy is surrendered, or if an Excess Amount is redeemed, while the
Policy is in force and before the Annuity Date, a surrender charge is imposed if
such event occurs before the payments attributable to the surrender or
withdrawal have been credited to the Policy less than seven full Policy years.
If the Policy was issued in Maryland on Form No. A3022-93 (Delaware Medallion
II), the following surrender charge table applies to monies in the General
Account, rather than the surrender charge table shown in CHARGES AND DEDUCTION,
"A. Surrender Charge" (which applies to monies in the Separate Account):
<TABLE>
<CAPTION>
YEARS FROM CHARGE AS PERCENTAGE OF
DATE OF PAYMENT NEW PAYMENTS WITHDRAWN
- --------------- -----------------------
<S> <C>
0-3 7%
4 6%
5 5%
6 4%
7 3%
8 2%
9 1%
More Than 9 No Charge
</TABLE>
A-1
<PAGE>
APPENDIX B
INFORMATION APPLICABLE ONLY TO OWNERS OF
DELAWARE MEDALLION I
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(POLICY FORM A3019-92)
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(POLICY FORM A3019-94GRC)
Delaware Medallion I policies issued on Form No. A3019-92 were issued solely by
Allmerica Financial Life Insurance and Annuity Company (Allmerica Financial)
until March 31, 1994. On and after April 1, 1994, all Delaware Medallion I
policies sold in New York were issued on Form No. A3019-94GRC by First Allmerica
Financial Life Insurance Company ("First Allmerica"). Delaware Medallion I
policies are no longer available for sale in any jurisdiction.
The Delaware Medallion I policies are substantially similar to the Policies
described in the body of this Prospectus except for the addition/substitution of
the following:
1. (For Owners of A3019-94GRC the following is added to THE DESCRIPTION OF THE
COMPANY, THE SEPARATE ACCOUNT, AND THE UNDERLYING INVESTMENT COMPANIES). The
issuer of the policy is First Allmerica rather than Allmerica Financial. First
Allmerica, organized under the laws of Massachusetts in 1844, is among the five
oldest life insurance companies in America. As of December 31, 1999, First
Allmerica and its subsidiaries had over $25 billion in combined assets and over
$43 billion of life insurance in force. Effective October 16, 1995, First
Allmerica converted from a mutual life insurance company known as State Mutual
Life Assurance Company of America to a stock life insurance company and adopted
its present name. First Allmerica is a wholly owned subsidiary of Allmerica
Financial Corporation ("AFC"). First Allmerica's principal office ("Principal
Office") is located at 440 Lincoln Street, Worcester, MA 01653, telephone
508-855-1000.
First Allmerica 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, First Allmerica is subject to the insurance laws
and regulations of other states and jurisdictions in which it is licensed to
operate.
First Allmerica is a charter member of the Insurance Marketplace Standards
Association ("IMSA"). Companies that belong to IMSA subscribe to a rigorous set
of standards that cover the various aspects of sales and service for
individually sold life insurance and annuities. IMSA members have adopted
policies and procedures that demonstrate a commitment to honesty, fairness and
integrity in all customer contacts involving sales and service of individual
life insurance and annuity products.
2. (Substitute the following provision under "Free Withdrawal Amounts") Under
all Delaware Medallion I policies, the Free Withdrawal Amount is the greater of
(1) 10% of the Accumulated Value as of December 31 of the previous calendar year
or (2) the Company's life expectancy distribution, if applicable. The Free
Withdrawal Amount is deducted from Old Payments first, then from the earliest
New Payments and so on until all New Payments have been exhausted pursuant to
the first-in-first out ("FIFO") method of Accounting (LIFO or last-in-last-out
method in New Jersey.)
3. Add "and New York" after the word "Texas" in the second and fourth line of
the third paragraph under "B. Transfer Privilege."
4. Add the following sentence as the second sentence in the second paragraph
under "Life Expectancy Distributions": For policies issued in New York, the LED
option will terminate automatically on the maximum Annuity Date permitted under
the policy, at which time an Annuity Option must be selected.
B-1
<PAGE>
5. The guaranteed death benefit under Delaware Medallion II policies is reduced
proportionately to reflect a withdrawal (in the same proportion that the
Accumulated Value was reduced by the withdrawal). Under all Delaware Medallion I
policies, the guaranteed death benefit is simply reduced by subsequent
withdrawals by subtracting the amount of the withdrawal from the guaranteed
death benefit. Additionally, the stepped-up death benefit applies to the most
recent fifth year policy anniversary under Delaware Medallion II and applies to
the most recent seventh year policy anniversary under Delaware Medallion I. As
such, the description of the death benefit is revised as follows:
Upon death of the Annuitant (including an Owner who is also the
Annuitant), the death benefit is equal to the greatest of (1) the
Accumulated Value under the Policy next determined following receipt of
due proof of death at the Principal Office; or (2) the total amount of
gross payments made under the Policy less the amount of all prior partial
withdrawals; or (3) the death benefit that would have been payable on the
most recent seventh year Policy anniversary.
6. For Owners of First Allmerica Delaware Medallion I Form A3019-94GRC the
minimum interest rate credited to amounts allocated to the General Account is 3%
compounded annually. For Owners of Allmerica Financial Delaware Medallion I Form
A3019-92 the minimum interest rate credited to amounts allocated to the General
Account is 5% for the first five policy years, 4% for the next five policy years
and 3.5% thereafter.
7. If you surrender the Policy or annuitize under a period certain option at the
end of one, three, five or ten years, the expenses you would pay on a $1,000
investment, assuming 5% annual return on assets are the same in years one and
ten as shown in the expense example (1)(a) and if you surrender the Policy or
annuitize under a period certain option at the end of one, three, five or ten
years, the expenses you would pay on a $1,000 investment, assuming 5% annual
return on assets and election of a Minimum Guaranteed Annuity Payout Rider are
the same in years one and ten as shown in the expense example (1)(b) under
SUMMARY OF FEES AND EXPENSES but Delaware I may be one to two dollars higher in
years three and five under examples (1)(a) and (1)(b) than Delaware Medallion II
due to differences in the Free Withdrawal calculation. The expense numbers for
years three and five under Delaware Medallion I are as follows:
B-2
<PAGE>
(1)(a)
<TABLE>
<CAPTION>
3 YEARS 5 YEARS
-------- --------
<S> <C> <C>
DGPF Growth and Income Series............................... $130 $159
DGPF Devon Series........................................... $131 $162
DGPF Growth Opportunities Series............................ $133 $165
DGPF U.S. Growth Series..................................... $131 $161
DGPF Select Growth Series................................... $132 $164
DGPF Social Awareness Series................................ $134 $166
DGPF REIT Series............................................ $134 $166
DGPF Small Cap Value Series................................. $134 $166
DGPF Trend Series........................................... $133 $165
DGPF International Equity Series............................ $137 $171
DGPF Emerging Markets Series................................ $152 $197
DGPF Balanced Series........................................ $131 $162
DGPF Convertible Securities Series.......................... $133 $165
DGPF High Yield Series...................................... $131 $161
DGPF Capital Reserves Series................................ $131 $162
DGPF Strategic Income Series................................ $132 $164
DGPF Cash Reserve Series.................................... $125 $151
DGPF Global Bond Series..................................... $134 $166
AIM V.I. Growth Fund........................................ $130 $160
AIM V.I. High Yield Fund.................................... $143 $181
AIM V.I. International Equity Fund.......................... $137 $173
AIM V.I. Value Fund......................................... $131 $162
Alger American Leveraged AllCap Portfolio................... $136 $170
Alger American MidCap Growth Portfolio...................... $134 $166
Alger American Small Capitalization Portfolio............... $135 $169
Alliance Growth Portfolio................................... $142 $180
Alliance Growth and Income Portfolio........................ $137 $173
Alliance Premier Growth Portfolio........................... $147 $188
Alliance Technology Portfolio............................... $154 $200
Franklin Small Cap Fund..................................... $140 $178
Mutual Shares Securities Fund............................... $140 $176
Templeton Growth Securities Fund............................ $142 $181
Templeton International Securities Fund..................... $142 $181
Pioneer Emerging Markets VCT Portfolio...................... $172 $229
Pioneer Mid-Cap Value VCT Portfolio......................... $139 $175
</TABLE>
B-3
<PAGE>
(1)(b)
<TABLE>
<CAPTION>
3 YEARS 5 YEARS
-------- --------
<S> <C> <C>
DGPF Growth and Income Series............................... $137 $172
DGPF Devon Series........................................... $139 $175
DGPF Growth Opportunities Series............................ $140 $178
DGPF U.S. Growth Series..................................... $138 $174
DGPF Select Growth Series................................... $140 $177
DGPF Social Awareness Series................................ $141 $179
DGPF REIT Series............................................ $141 $179
DGPF Small Cap Value Series................................. $141 $179
DGPF Trend Series........................................... $140 $178
DGPF International Equity Series............................ $144 $184
DGPF Emerging Markets Series................................ $160 $210
DGPF Balanced Series........................................ $139 $175
DGPF Convertible Securities Series.......................... $141 $178
DGPF High Yield Series...................................... $138 $174
DGPF Capital Reserves Series................................ $139 $175
DGPF Strategic Income Series................................ $140 $177
DGPF Cash Reserve Series.................................... $132 $164
DGPF Global Bond Series..................................... $141 $179
AIM V.I. Growth Fund........................................ $138 $173
AIM V.I. High Yield Fund.................................... $150 $193
AIM V.I. International Equity Fund.......................... $145 $185
AIM V.I. Value Fund......................................... $139 $175
Alger American Leveraged AllCap Portfolio................... $144 $183
Alger American MidCap Growth Portfolio...................... $141 $179
Alger American Small Capitalization Portfolio............... $143 $182
Alliance Growth Portfolio................................... $149 $192
Alliance Growth and Income Portfolio........................ $145 $185
Alliance Premier Growth Portfolio........................... $155 $201
Alliance Technology Portfolio............................... $161 $212
Franklin Small Cap Fund..................................... $148 $190
Mutual Shares Securities Fund............................... $147 $188
Templeton Growth Securities Fund............................ $150 $193
Templeton International Securities Fund..................... $150 $193
Pioneer Emerging Markets VCT Portfolio...................... $179 $241
Pioneer Mid-Cap Value VCT Portfolio......................... $146 $187
</TABLE>
Expense examples (2)(a) and (2)(b) on pages 12 and 13 are the same for both
Delaware Medallion I and Delaware Medallion II.
B-4
<PAGE>
APPENDIX C
CONDENSED FINANCIAL INFORMATION
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SEPARATE ACCOUNT VA-K
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
SUB-ACCOUNT 1999 1998 1997 1996 1995 1994 1993 1992
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DGPF GROWTH & INCOME SERIES
Unit Value:
Beginning of Period............. 2.672 2.433 1.883 1.582 1.178 1.197 1.051 1.000
End of Period................... 2.556 2.672 2.433 1.883 1.582 1.178 1.197 1.051
Number of Units Outstanding at End
of Period (in thousands)......... 136,760 146,009 113,507 65,991 48,305 38,591 25,086 4,208
DGPF DEVON SERIES
Unit Value:
Beginning of Period............. 1.543 1.261 1.000 N/A N/A N/A N/A N/A
End of Period................... 1.367 1.543 1.261 N/A N/A N/A N/A N/A
Number of Units Outstanding at End
of Period (in thousands)......... 48,519 42,690 11,585 N/A N/A N/A N/A N/A
DGPF GROWTH OPPORTUNITIES SERIES
Unit Value:
Beginning of Period............. 2.145 1.831 1.616 1.432 1.121 1.178 1.070 1.000
End of Period................... 3.447 2.145 1.831 1.616 1.432 1.121 1.178 1.070
Number of Units Outstanding at End
of Period (in thousands)......... 60,264 58,454 57,025 44,667 35,204 29,100 20,802 4,534
DGPF U.S. GROWTH SERIES
Unit Value:
Beginning of Period............. 1.000 N/A N/A N/A N/A N/A N/A N/A
End of Period................... 1.057 N/A N/A N/A N/A N/A N/A N/A
Number of Units Outstanding at End
of Period (in thousands)......... 5,522 N/A N/A N/A N/A N/A N/A N/A
DGPF SELECT GROWTH SERIES
Unit Value:
Beginning of Period............. 1.000 N/A N/A N/A N/A N/A N/A N/A
End of Period................... 1.416 N/A N/A N/A N/A N/A N/A N/A
Number of Units Outstanding at End
of Period (in thousands)......... 36,671 N/A N/A N/A N/A N/A N/A N/A
DGPF SOCIAL AWARENESS SERIES
Unit Value:
Beginning of Period............. 1.448 1.272 1.000 N/A N/A N/A N/A N/A
End of Period................... 1.613 1.448 1.272 N/A N/A N/A N/A N/A
Number of Units Outstanding at End
of Period (in thousands)......... 17,918 17,819 4,515 N/A N/A N/A N/A N/A
DGPF REIT SERIES
Unit Value:
Beginning of Period............. 0.901 1.000 N/A N/A N/A N/A N/A N/A
End of Period................... 0.865 0.901 N/A N/A N/A N/A N/A N/A
Number of Units Outstanding at End
of Period (in thousands)......... 2,775 1,235 N/A N/A N/A N/A N/A N/A
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
SUB-ACCOUNT 1999 1998 1997 1996 1995 1994 1993 1992
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DGPF SMALL CAP VALUE SERIES
Unit Value:
Beginning of Period............. 1.806 1.923 1.467 1.214 0.994 1.000 1.000 N/A
End of Period................... 1.694 1.806 1.923 1.467 1.214 0.994 1.000 N/A
Number of Units Outstanding at End
of Period (in thousands)......... 47,718 55,136 43,269 15,725 9,467 6,040 6 N/A
DGPF TREND SERIES
Unit Value:
Beginning of Period............. 2.036 1.779 1.486 1.358 0.989 1.007 1.000 N/A
End of Period................... 3.422 2.036 1.779 1.486 1.358 0.989 1.007 N/A
Number of Units Outstanding at End
of Period (in thousands)......... 42,570 36,571 33,256 21,711 13,410 6,197 50 N/A
DGPF INTERNATIONAL EQUITY SERIES
Unit Value:
Beginning of Period............. 1.762 1.619 1.540 1.301 1.159 1.144 1.000 1.000
End of Period................... 2.011 1.762 1.619 1.540 1.301 1.159 1.144 1.000
Number of Units Outstanding at End
of Period (in thousands)......... 49,478 51,715 48,813 30,888 21,612 18,761 6,139 182
DGPF EMERGING MARKETS SERIES
Unit Value:
Beginning of Period............. 0.586 0.880 1.000 N/A N/A N/A N/A N/A
End of Period................... 0.856 0.586 0.880 N/A N/A N/A N/A N/A
Number of Units Outstanding at End
of Period (in thousands)......... 10,078 6,662 4,545 N/A N/A N/A N/A N/A
DGPF BALANCED SERIES
Unit Value:
Beginning of Period............. 2.357 2.015 1.616 1.414 1.133 1.150 1.078 1.000
End of Period................... 2.142 2.357 2.015 1.616 1.414 1.133 1.150 1.078
Number of Units Outstanding at End
of Period (in thousands)......... 76,644 81,359 58,759 40,855 37,203 33,332 22,046 3,145
DGPF CONVERTIBLE SECURITIES SERIES
Unit Value:
Beginning of Period............. 1.127 1.156 1.000 N/A N/A N/A N/A N/A
End of Period................... 1.189 1.127 1.156 0 N/A N/A N/A N/A
Number of Units Outstanding at End
of Period (in thousands)......... 5,601 4,793 1,291 N/A N/A N/A N/A N/A
DGPF HIGH YIELD SERIES
Unit Value:
Beginning of Period............. 1.599 1.652 1.474 1.326 1.164 1.214 1.058 1.000
End of Period................... 1.536 1.599 1.652 1.474 1.326 1.164 1.214 1.058
Number of Units Outstanding at End
of Period (in thousands)......... 59,311 70,679 56,733 44,760 37,818 31,735 22,281 4,571
DGPF CAPITAL RESERVES SERIES
Unit Value:
Beginning of Period............. 1.386 1.317 1.241 1.209 1.075 1.120 1.053 1.000
End of Period................... 1.371 1.386 1.317 1.241 1.209 1.075 1.120 1.053
Number of Units Outstanding at End
of Period (in thousands)......... 25,020 28,066 20,234 20,226 19,818 20,476 16,752 3,828
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
SUB-ACCOUNT 1999 1998 1997 1996 1995 1994 1993 1992
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DGPF STRATEGIC INCOME SERIES
Unit Value:
Beginning of Period............. 1.065 1.052 1.000 N/A N/A N/A N/A N/A
End of Period................... 1.015 1.065 1.052 N/A N/A N/A N/A N/A
Number of Units Outstanding at End
of Period (in thousands)......... 17,658 17,524 5,381 N/A N/A N/A N/A N/A
DGPF CASH RESERVE SERIES
Unit Value:
Beginning of Period............. 1.207 1.165 1.124 1.087 1.044 1.021 1.010 1.000
End of Period................... 1.248 1.207 1.165 1.124 1.087 1.044 1.021 1.010
Number of Units Outstanding at End
of Period (in thousands)......... 42,241 32,501 24,014 21,519 11,568 13,998 5,483 1,387
DGPF GLOBAL BOND SERIES
Unit Value:
Beginning of Period............. 1.172 1.102 1.107 1.000 1.000 N/A N/A N/A
End of Period................... 1.114 1.172 1.102 1.107 1.000 N/A N/A N/A
Number of Units Outstanding at End
of Period (in thousands)......... 5,052 4,991 3,950 886 0 N/A N/A N/A
</TABLE>
No information is shown above for Sub-Accounts that commenced operations after
December 31, 1999.
C-3
<PAGE>
CONDENSED FINANCIAL INFORMATION
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VA-K
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
SUB-ACCOUNT 1999 1998 1997 1996 1995 1994
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
DGPF GROWTH & INCOME SERIES
Unit Value:
Beginning of Period................................ 2.282 2.078 1.608 1.351 1.006 1.000
End of Period...................................... 2.183 2.282 2.078 1.608 1.351 1.006
Number of Units Outstanding at End of Period (in
thousands).......................................... 3,250 3,440 1,311 1,044 670 455
DGPF DEVON SERIES
Unit Value:
Beginning of Period................................ 1.543 1.261 1.000 N/A N/A N/A
End of Period...................................... 1.367 1.543 1.261 N/A N/A N/A
Number of Units Outstanding at End of Period (in
thousands).......................................... 1,871 1,558 106 N/A N/A N/A
DGPF GROWTH OPPORTUNITIES SERIES
Unit Value:
Beginning of Period................................ 1.929 1.646 1.453 1.287 1.008 1.000
End of Period...................................... 3.099 1.929 1.646 1.453 1.287 1.008
Number of Units Outstanding at End of Period (in
thousands).......................................... 1,120 637 355 493 300 149
DGPF U.S. GROWTH SERIES
Unit Value:
Beginning of Period................................ 1.000 N/A N/A N/A N/A N/A
End of Period...................................... 1.057 N/A N/A N/A N/A N/A
Number of Units Outstanding at End of Period (in
thousands).......................................... 241 N/A N/A N/A N/A N/A
DGPF SELECT GROWTH SERIES
Unit Value:
Beginning of Period................................ 1.000 N/A N/A N/A N/A N/A
End of Period...................................... 1.416 N/A N/A N/A N/A N/A
Number of Units Outstanding at End of Period (in
thousands).......................................... 1,118 N/A N/A N/A N/A N/A
DGPF SOCIAL AWARENESS SERIES
Unit Value:
Beginning of Period................................ 1.448 1.272 1.000 N/A N/A N/A
End of Period...................................... 1.612 1.448 1.272 N/A N/A N/A
Number of Units Outstanding at End of Period (in
thousands).......................................... 369 394 101 N/A N/A N/A
DGPF REIT SERIES
Unit Value:
Beginning of Period................................ 1.000 1.000 N/A N/A N/A N/A
End of Period...................................... 0.955 1.000 N/A N/A N/A N/A
Number of Units Outstanding at End of Period (in
thousands).......................................... 59 0 N/A N/A N/A N/A
DGPF SMALL CAP VALUE SERIES
Unit Value:
Beginning of Period................................ 1.820 1.938 1.478 1.223 1.002 1.000
End of Period...................................... 1.707 1.820 1.938 1.478 1.223 1.002
Number of Units Outstanding at End of Period (in
thousands).......................................... 823 731 235 204 146 82
DGPF TREND SERIES
Unit Value:
Beginning of Period................................ 2.104 1.839 1.536 1.404 1.022 1.000
End of Period...................................... 3.537 2.104 1.839 1.536 1.404 1.022
Number of Units Outstanding at End of Period (in
thousands).......................................... 1,269 1,099 1,579 285 1,486 790
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
SUB-ACCOUNT 1999 1998 1997 1996 1995 1994
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
DGPF INTERNATIONAL EQUITY SERIES
Unit Value:
Beginning of Period................................ 1.527 1.403 1.335 1.128 1.004 1.000
End of Period...................................... 1.743 1.527 1.403 1.335 1.128 1.004
Number of Units Outstanding at End of Period (in
thousands).......................................... 888 652 554 2,244 358 193
DGPF EMERGING MARKETS SERIES
Unit Value:
Beginning of Period................................ 0.502 0.754 1.000 N/A N/A N/A
End of Period...................................... 0.734 0.502 0.754 N/A N/A N/A
Number of Units Outstanding at End of Period (in
thousands).......................................... 756 184 1 N/A N/A N/A
DGPF BALANCED SERIES
Unit Value:
Beginning of Period................................ 2.063 1.764 1.415 1.238 0.991 1.000
End of Period...................................... 1.875 2.063 1.764 1.415 1.238 0.991
Number of Units Outstanding at End of Period (in
thousands).......................................... 1,290 1,070 420 405 304 173
DGPF CONVERTIBLE SECURITIES SERIES
Unit Value:
Beginning of Period................................ 1.127 1.156 1.000 N/A N/A N/A
End of Period...................................... 1.188 1.127 1.156 N/A N/A N/A
Number of Units Outstanding at End of Period (in
thousands).......................................... 432 375 84 N/A N/A N/A
DGPF HIGH YIELD SERIES
Unit Value:
Beginning of Period................................ 1.346 1.391 1.240 1.116 0.980 1.000
End of Period...................................... 1.293 1.346 1.391 1.240 0.116 0.098
Number of Units Outstanding at End of Period (in
thousands).......................................... 3,190 3,962 1,388 1,003 670 287
DGPF CAPITAL RESERVES SERIES
Unit Value:
Beginning of Period................................ 1.278 1.214 1.144 1.115 0.991 1.000
End of Period...................................... 1.264 1.278 1.214 1.144 1.115 0.991
Number of Units Outstanding at End of Period (in
thousands).......................................... 937 1,069 287 208 195 181
DGPF STRATEGIC INCOME SERIES
Unit Value:
Beginning of Period................................ 1.065 1.052 1.000 N/A N/A N/A
End of Period...................................... 1.016 1.065 1.052 N/A N/A N/A
Number of Units Outstanding at End of Period (in
thousands).......................................... 1,882 1,799 276 N/A N/A N/A
DGPF CASH RESERVE SERIES
Unit Value:
Beginning of Period................................ 1.179 1.138 1.096 1.059 1.018 1.000
End of Period...................................... 1.219 1.179 1.138 1.096 1.059 1.018
Number of Units Outstanding at End of Period (in
thousands).......................................... 2,558 1,603 401 125 126 302
DGPF GLOBAL BOND SERIES
Unit Value:
Beginning of Period................................ 1.171 1.102 1.107 1.000 1.000 N/A
End of Period...................................... 1.113 1.171 1.102 1.107 1.000 N/A
Number of Units Outstanding at End of Period (in
thousands).......................................... 63 31 7 0 N/A N/A
</TABLE>
No information is shown above for Sub-Accounts that commenced operations after
December 31, 1999.
9. First Allmerica Financial Life Insurance Company first offered the Delaware
Medallion I policy to the public in 1994.
C-5
