<PAGE>
Registration No. 33- 83604
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM
N-8B-2
Post-Effective Amendment No. 1
ALLMERICA SELECT SEPARATE ACCOUNT II OF SMA LIFE ASSURANCE COMPANY
(Exact Name of Registrant)
SMA LIFE ASSURANCE COMPANY
440 Lincoln Street
Worcester MA 01653
(Address of Principal Executive Office)
Abigail M. Armstrong, Esq.
440 Lincoln Street
Worcester MA 01653
(Name and Address of Agent for Service of Process)
It is proposed that this filing will become effective:
___on______________pursuant to paragraph (a) of Rule 485
___60 days after filing pursuant to paragraph (a) of Rule 485
___immediately after filing pursuant to paragraph (b) of Rule 485
X on October 1, 1995 pursuant to paragraph (b) of Rule 485
---
FLEXIBLE PREMIUM VARIABLE LIFE
Pursuant to Reg. Section 270.24f-2 of the Investment Company Act of 1940,
Registrant hereby declares that an indefinite amount of its securities is being
registered under the Securities Act of 1933. The Rule 24f-2 Notice for the
issuer's fiscal year ended December 31, 1994 was not filed as the Separate
Account had not begun sales as of December 31, 1994.
<PAGE>
RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8b-2 AND THE PROSPECTUS
<TABLE>
<CAPTION>
Item No. of
Form N-8B-82 Caption in Prospectus
<S> <C>
1. . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
2. . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
3. . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
4. . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution
5. . . . . . . . . . . . . . . . . . . . . . . . . . . . SMA Life; The Variable Account
6. . . . . . . . . . . . . . . . . . . . . . . . . . . . The Variable Account
7. . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
8. . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
9. . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Proceedings
10 . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Description of the Company, The Variable
Account, the Trust, VIPF and T. Rowe; The Policy;
Policy Termination and Reinstatement; Other Policy
Provisions
11 . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; The Trust; VIPF; T. Rowe; Investment
Objectives and Policies
12 . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; The Trust; VIPF; T. Rowe
13 . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; The Trust; VIPF; T. Rowe; Investment
Advisory Services to the Trust; Investment
Advisory Services to VIPF; Investment Advisory
Services to T. Rowe; Charges and Deductions
14 . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Application for a Policy
15 . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Application for a Policy;
Payments; Allocation of Net Payments
16 . . . . . . . . . . . . . . . . . . . . . . . . . . . The Variable Account; The Trust; VIPF; T. Rowe;
Payments; Allocation of Net Payments
17 . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Surrender; Partial Withdrawal;
Charges and Deductions; Policy
Termination and Reinstatement
18 . . . . . . . . . . . . . . . . . . . . . . . . . . . The Variable Account; The Trust; VIPF; T. Rowe;
Payments
19 . . . . . . . . . . . . . . . . . . . . . . . . . . . Reports; Voting Rights
20 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
21 . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Policy Loans; Other Policy
Provisions
22 . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Policy Provisions
23 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Required
24 . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Policy Provisions
25 . . . . . . . . . . . . . . . . . . . . . . . . . . . SMA Life
26 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
27 . . . . . . . . . . . . . . . . . . . . . . . . . . . SMA Life
28 . . . . . . . . . . . . . . . . . . . . . . . . . . . Directors and Principal Officers of the Company
29 . . . . . . . . . . . . . . . . . . . . . . . . . . . SMA Life
30 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
31 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
32 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
33 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
<PAGE>
<TABLE>
<S> <C>
34 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
35 . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution
36 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
37 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
38 . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Distribution
39 . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Distribution
40 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
41 . . . . . . . . . . . . . . . . . . . . . . . . . . . SMA Life, Distribution
42 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
43 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
44 . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments; Policy Value and Cash
Surrender Value
45 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
46 . . . . . . . . . . . . . . . . . . . . . . . . . . . Policy Value and Cash Surrender Value;
Federal Tax Considerations
47 . . . . . . . . . . . . . . . . . . . . . . . . . . . SMA Life
48 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
49 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
50 . . . . . . . . . . . . . . . . . . . . . . . . . . . The Variable Account
51 . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page; Summary; Charges and
Deductions; The Policy; Policy Termination
and Reinstatement; Other Policy Provisions
52 . . . . . . . . . . . . . . . . . . . . . . . . . . . Addition, Deletion or Substitution of
Investments
53 . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal Tax Considerations
54 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
55 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
56 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
57 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
58 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
59 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
<PAGE>
PROSPECTUS SUPPLEMENT
Allmerica Select Separate Account II
(Supplement to prospectus dated May 1, 1995)
Effective October 1, 1995, the name of SMA Life Assurance Company has been
changed to ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY. The
attached prospectus is hereby amended to delete the name "SMA Life Assurance
Company" and to substitute ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY
COMPANY.
* * *
The following is inserted at the bottom of the first page of the prospectus:
THE POLICIES OFFERED BY THIS PROSPECTUS ARE OBLIGATIONS OF ALLMERICA
FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY AND ARE DISTRIBUTED BY ITS
AFFILIATE, ALLMERICA INVESTMENTS, INC. THE POLICIES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR CREDIT UNION. THE
POLICIES ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL INSURANCE
DEPOSIT CORPORATION (FDIC), OR ANY OTHER FEDERAL AGENCY. ALLOCATIONS TO THE
SUB-ACCOUNTS ARE SUBJECT TO VARIOUS RISKS, INCLUDING THE FLUCTUATION OF VALUE
AND POSSIBLE LOSS OF PRINCIPAL.
* * *
The last paragraph under the caption "PERFORMANCE INFORMATION", beginning on
page 45, is deleted and the following inserted:
The Policies were first offered to the public in 1994. However, the Company
may advertise "Total Return" and "Average Annual Total Return" performance
information based on the periods that the Underlying Funds have been in
existence. The results for any period prior to the Policies being offered
will be calculated as if the Policies had been offered during that period of
time, with all charges assumed to be those applicable to the Sub-Accounts,
the Underlying Funds, and (in Table I) under a "representative" Policy that
is surrendered at the end of the applicable period. FOR MORE INFORMATION ON
CHARGES UNDER THE POLICIES, SEE CHARGES AND DEDUCTIONS.
In each Table below, "One-Year Total Return" refers to the total of the
income generated by a sub-account, based on certain charges and assumptions
as described in the respective tables, for the one-year period ended December
31, 1994. "Average Annual Total Return" is based on the same charges and
assumptions, but reflects the hypothetical annually compounded return that
would have produced the same cumulative return if the Sub-Account's
performance had been constant over the entire period. Because average annual
total returns tend to smooth out variations in annual performance return,
they are not the same as actual year-by-year results.
TABLE I: SUB-ACCOUNT PERFORMANCE
NET OF ALL CHARGES AND ASSUMING SURRENDER OF THE POLICY
The following performance information is based on the periods that the
Underlying Funds have been in existence. The data is net of expenses of the
Underlying Funds, all Sub-Account charges, and all Policy charges (including
surrender charges) for a representative Policy. It is assumed that the
Insured is male, Age 36, standard (nonsmoker) Premium Class, that the Face
Amount of the Policy is $250,000, that an annual premium payment of $3,000
(approximately one Guideline Annual Premium) was made at the beginning of
each Policy year, that ALL premiums were
<PAGE>
allocated to EACH Sub-Account individually, and that there was a full
surrender of the Policy at the end of the applicable period.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Average Annual Total Return as of 12/31/94
Underlying One-Year 3 years 5 years Since Years
Fund Total return Inception Since
Inception*
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market -100.00% -25.86% -8.51% -0.27% 9.67
Select Aggressive Growth -100.00% N/A N/A -27.34% 2.36
Select Growth -100.00% N/A N/A -40.86% 2.36
Select Growth and Income -100.00% N/A N/A -38.57% 2.36
Select Income -100.00% N/A N/A -42.64% 2.36
Select International Equity -100.00% N/A N/A -99.35% 0.67
Select Cap. Appreciation N/A N/A N/A N/A N/A
VIPF High Income -100.00% -13.77% 1.63% 4.70% 9.28
VIPF Equity Income -100.00% -13.13% -2.28% 3.98% 8.23
VIPF Growth -100.00% -18.81% -1.87% 5.68% 8.23
T. Rowe International Stock N/A N/A N/A -98.36% 0.58
- ---------------------------------------------------------------------------------
</TABLE>
TABLE II: SUB-ACCOUNT PERFORMANCE
EXCLUDING MONTHLY POLICY CHARGES AND SURRENDER CHARGES
The following performance information is based on the periods that the
Underlying Funds have been in existence. The performance information is net
of total Underlying Fund expenses, all Sub-Account charges, and premium tax
and expense charges. THE DATA DOES NOT REFLECT MONTHLY CHARGES UNDER THE
POLICIES OR SURRENDER CHARGES. It is assumed that an annual premium payment
of $3,000 (approximately one Guideline Annual Premium) was made at the
beginning of each Policy year and that ALL premiums were allocated to EACH
Sub-Account individually.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Average Annual Total Return as of 12/31/94
Underlying One-Year 3 years 5 years Since Years
Fund Total return Inception Since
Inception*
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market 3.10% 2.74% 4.16% 5.12% 9.67
Select Aggressive Growth -3.09% N/A N/A 14.43% 2.36
Select Growth -2.28% N/A N/A 3.50% 2.36
Select Growth and Income -0.08% N/A N/A 3.72% 2.36
Select International Equity N/A N/A N/A -4.26% 0.67
Select Cap. Appreciation N/A N/A N/A N/A N/A
Select Income -5.58% N/A N/A 2.35% 2.36
VIPF High Income -2.34% 12.53% 13.12% 10.01% 9.28
VIPF Equity Income 6.21% 13.06% 9.62% 10.05% 8.23
VIPF Growth -0.82% 8.39% 9.99% 11.65% 8.23
T. Rowe International Stock N/A N/A N/A 1.48% 0.58
- ---------------------------------------------------------------------------------
</TABLE>
PERFORMANCE INFORMATION REFLECTS ONLY THE PERFORMANCE OF A HYPOTHETICAL
INVESTMENT DURING THE PARTICULAR TIME PERIOD ON WHICH THE CALCULATIONS ARE
BASED. ONE-YEAR TOTAL RETURN AND AVERAGE ANNUAL TOTAL RETURN FIGURES ARE
BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE
PERFORMANCE. PERFORMANCE INFORMATION SHOULD BE CONSIDERED IN LIGHT OF THE
INVESTMENT OBJECTIVES AND POLICIES, CHARACTERISTICS AND QUALITY OF THE
PORTFOLIO OF THE UNDERLYING FUND IN WHICH A 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.
<PAGE>
*The inception dates for the Underlying Funds are: 4/29/85 for Money
Market; 8/21/92 for Select Aggressive Growth, Select Growth, Select Income,
and Select Growth and Income; 5/01/94 for Select International Equity;
10/09/86 for VIPF Growth; 9/19/85 for VIPF High Income; and 6/01/94 for the
T. Rowe International Stock. The Select Capital Appreciation Fund of the
Trust was not in existence in 1994.
* * *
CHANGES IN DIRECTORS AND OFFICERS
Bradford K. Gallagher has resigned as Director, President and CEO of the
Company. Richard M. Reilly, who is a Director and previously was Vice
President of the Company, has been elected as President and CEO of the
Company.
James R. McAuiffe has resigned as Director and Ruben P. Moreno has resigned
as Vice President of the Company.
SELVEL.STK SUPPLEMENT DATED OCTOBER 1, 1995
<PAGE>
INDIVIDUAL FLEXIBLE PAYMENT VARIABLE LIFE INSURANCE POLICIES
FUNDED THROUGH
ALLMERICA SELECT SEPARATE ACCOUNT II
Allmerica Select Separate Account II is a separate investment account of SMA
LIFE. SMA LIFE issues the individual flexible payment variable life insurance
policies described in this prospectus ("Policies"). The Policies permit
allocations to up to seven of the following funds of Allmerica Investment
Trust ("Trust"), Variable Insurance Products Fund ("VIPF") and T. Rowe
Price International Series, Inc. ("T. Rowe"):
SELECT INTERNATIONAL EQUITY FUND
T. ROWE PRICE'S INTERNATIONAL STOCK PORTFOLIO
SELECT AGGRESSIVE GROWTH FUND
SELECT CAPITAL APPRECIATION FUND
SELECT GROWTH FUND
FIDELITY'S GROWTH PORTFOLIO
SELECT GROWTH AND INCOME FUND
FIDELITY'S EQUITY-INCOME PORTFOLIO
FIDELITY'S HIGH INCOME PORTFOLIO
SELECT INCOME FUND
MONEY MARKET FUND
T. Rowe's International Stock Portfolio is not available in all states.
POLICYOWNERS may, within limits, choose the amount of initial payment and
vary the frequency and amount of future payments. The Policy allows partial
withdrawals and full surrender of the Policy's SURRENDER VALUE, within limits.
The Policies are not suitable for short-term investment because of the
substantial nature of the surrender charge. If you think about surrendering
the Policy, consider the lower deferred sales charges that apply during the
first two years from the DATE OF ISSUE or an increase in FACE AMOUNT.
IT MAY NOT BE ADVANTAGEOUS TO REPLACE EXISTING INSURANCE WITH THE POLICY.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY CURRENT PROSPECTUSES OF
ALLMERICA INVESTMENT TRUST, VARIABLE INSURANCE PRODUCTS FUND AND T. ROWE
PRICE INTERNATIONAL SERIES, INC. FIDELITY'S HIGH INCOME PORTFOLIO INVESTS
IN HIGHER YIELDING, HIGHER RISK, LOWER RATED DEBT SECURITIES (SEE
"INVESTMENT OBJECTIVES AND POLICIES" IN THIS PROSPECTUS). INVESTORS SHOULD
RETAIN A COPY OF THIS PROSPECTUS FOR FUTURE REFERENCE.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES COMMISSIONS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED ON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Dated May 1, 1995
SMA Life Assurance Company
440 Lincoln Street
Worcester, Massachusetts 01653
1-800-366-1492
<PAGE>
SUMMARY
WHAT IS THE POLICY'S OBJECTIVE?
The objective of the Policy is to give permanent life insurance protection and
help you build assets tax-deferred. Features available through the Policy
include:
- A NET DEATH BENEFIT that can protect your family
- Payment options that can guarantee an income for life
- A personalized investment portfolio
- Experienced professional investment advisers
- Tax deferral on earnings
While the Policy is in force, it will provide:
- Life insurance coverage on the Insured
- POLICY VALUE
- Surrender rights and partial withdrawal rights
- Loan privileges
- Optional insurance benefits available by rider
The Policy combines features and benefits of traditional life insurance with the
advantages of professional money management. However, unlike the fixed
benefits of ordinary life insurance, the POLICY VALUE and the Adjustable
Option DEATH BENEFIT will increase or decrease depending on investment
results. Unlike traditional insurance policies, the Policy has no fixed
schedule for payments. Within limits, you may make payments of any amount
and frequency. While you may establish a schedule of payments ("planned
payments"), the Policy will not necessarily lapse if you fail to make
planned payments. Also, making planned payments will not guarantee that the
Policy will remain in force.
WHO ARE THE KEY PERSONS UNDER THE POLICY?
The Policy is a contract between you and us. Each Policy has a POLICYOWNER
(you), an Insured (you or another individual you select) and a BENEFICIARY.
As POLICYOWNER, you make payments, choose investment allocations and select
the Insured and BENEFICIARY. The Insured is the person covered under the
Policy. The BENEFICIARY is the person who receives the NET DEATH BENEFIT
when the Insured dies.
WHAT HAPPENS WHEN THE INSURED DIES?
We will pay the NET DEATH BENEFIT to the BENEFICIARY when the Insured dies while
the Policy is in effect. You may choose between two DEATH BENEFIT options.
Under the Level Option, the DEATH BENEFIT is the FACE AMOUNT (the insurance
applied for) or the GUIDELINE MINIMUM SUM INSURED (the minimum DEATH BENEFIT
federal tax law requires), whichever is greater. Under the Adjustable Option,
the DEATH BENEFIT is either the sum of the FACE AMOUNT and POLICY VALUE or
the GUIDELINE MINIMUM SUM INSURED, whichever is greater. The NET DEATH
BENEFIT is the DEATH BENEFIT less any OUTSTANDING LOAN and due and unpaid
partial withdrawals, partial withdrawal costs and monthly insurance protection
charges. However, after the FINAL PAYMENT DATE, the NET DEATH BENEFIT is the
POLICY VALUE less any OUTSTANDING LOAN. The BENEFICIARY may receive the NET
DEATH BENEFIT in a lump sum or under a payment option we offer.
-2-
<PAGE>
CAN I EXAMINE THE POLICY?
Yes. You have the right to examine and cancel your Policy by returning it to us
or to one of our representatives on or before the LATEST of:
- 45 days after the application or enrollment form for the Policy is
signed
- 10 days after you receive the Policy (20 days when state law so
requires for the replacement of insurance and 30 days for California
citizens age 60 and older)
- 10 days after we mail to you a notice of withdrawal right
If your Policy provides for a full refund under its "Right to Examine Policy"
provision as required in your state, your refund will be the GREATER of
- Your entire payment OR
- The POLICY VALUE PLUS deductions under the Policy or by the FUNDS for
taxes, charges or fees
If your Policy does not provide for a full refund, you will receive
- Amounts allocated to the FIXED ACCOUNT PLUS
- The POLICY VALUE in the VARIABLE ACCOUNT PLUS
- All fees, charges and taxes which have been imposed
After an increase in FACE AMOUNT, a right to cancel the increase also applies.
WHAT ARE MY INVESTMENT CHOICES?
You have a choice of eleven FUNDS:
- Select International Equity Fund
Managed by Bank of Ireland Asset Management Limited
- T. Rowe Price's International Stock Portfolio
Managed by Rowe Price-Fleming International, Inc.
- Select Aggressive Growth Fund
Managed by Nicholas-Applegate Capital Management
- Select Capital Appreciation Fund
Managed by Janus Capital Corporation
- Select Growth Fund
Managed by Provident Investment Counsel
- Fidelity's Growth Portfolio
Managed by Fidelity Management & Research Company
- Select Growth and Income Fund
Managed by John A. Levin & Co., Inc.
- Fidelity's Equity-Income Portfolio
Managed by Fidelity Management & Research Company
- Fidelity's High Income Portfolio
Managed by Fidelity Management & Research Company
-3-
<PAGE>
- Select Income Fund
Managed by Standish, Ayer & Wood, Inc.
- Money Market Fund
Managed by Allmerica Asset Management, Inc.
This range of investment choices allows you to allocate your money among the
FUNDS to meet your investment needs. If your Policy provides for a full refund
under its "Right to Examine Policy" provision as required in your state, we
will allocate all sub-account investments to the Money Market Fund for
- 14 days from ISSUANCE AND ACCEPTANCE, except as described below
- 24 days from ISSUANCE AND ACCEPTANCE for replacements in states with
a 20-day right to examine
- 34 days from ISSUANCE AND ACCEPTANCE for California citizens age 60
and older, who have a 30-day right to examine
After this, we will allocate all amounts as you have chosen.
The Policy also offers a FIXED ACCOUNT. The FIXED ACCOUNT is a guaranteed
account offering a minimum interest rate. It is part of the GENERAL ACCOUNT
of SMA LIFE.
WHO ARE THE INVESTMENT ADVISERS AND HOW ARE THEY SELECTED?
Allmerica Investment Management Company, Inc. ("Manager") is the investment
manager of the Trust. The Manager has entered agreements with experienced
investment advisers ("Sub-Advisers"), who will manage the investments of
the FUNDS. The Sub-Advisers for the FUNDS (other than the Money Market Fund)
are independent. The Manager has selected these Sub-Advisers in consultation
with Rogers, Casey & Associates, a leading pension consulting firm. Rogers,
Casey & Associates provides consulting services to pension plans with over $175
billion in total assets. In its consulting capacity, Rogers, Casey &
Associates monitors the investment performance of over 1,000 investment
advisers. The Manager selected each independent Sub-Adviser using strict
objective and qualitative criteria, with special emphasis on the Sub-Adviser's
record in managing similar portfolios. For the Money Market Fund, the
Sub-Adviser is Allmerica Asset Management, Inc.
Fidelity Management & Research Company ("Fidelity Management") is the
investment manager of VIPF. Fidelity Management, a registered investment
adviser under the Investment Advisers Act of 1940, is one of America's
largest investment management organizations and has its principal business
address at 82 Devonshire Street, Boston MA. It is composed of a number of
different companies, which provide a variety of financial services and
products. Fidelity Management is the original Fidelity company, founded
in 1946. It provides a number of mutual funds and other clients with
investment research and portfolio management services.
Rowe Price-Fleming International, Inc. ("Price-Fleming") is the investment
manager of T. Rowe. Price-Fleming, founded in 1979 as a joint venture between
T. Rowe Price Associates, Inc. and Robert Fleming Holdings, Limited, is one
of America's largest international mutual fund asset managers with
approximately $9 billion under management in its offices in Baltimore, London,
Tokyo and Hong Kong.
CAN I MAKE TRANSFERS AMONG THE FUNDS AND THE FIXED ACCOUNT?
Yes. You may transfer among the FUNDS and the FIXED ACCOUNT, subject to our
consent and then current rules. You will incur no current taxes on
transfers while your money is in the Policy.
-4-
<PAGE>
HOW MUCH CAN I INVEST AND HOW OFTEN?
The number and frequency of your payments are flexible, within limits.
WHAT IF I NEED MY MONEY?
You may borrow up to the LOAN VALUE of your Policy. You may also make partial
withdrawals and surrender the Policy for its SURRENDER VALUE.
There are two types of loans which may be available to you:
- A preferred loan option is available to you upon written request after
the first Policy year. It is available during Policy years 2-10 only
if your POLICY VALUE, minus the surrender charge, is $50,000 or more.
The option applies to up to 10% of this amount. After the 10th Policy
year, the preferred loan option is available on all loans or on all or a
part of the LOAN VALUE as you request. The guaranteed annual interest
rate credited to the POLICY VALUE securing a preferred loan will be 8%.
- A non-preferred loan option is always available to you. The
guaranteed annual interest rate credited to the POLICY VALUE securing a
non-preferred loan will be at least 6.0%. The current interest rate
credited to non-preferred loans is 7.1%.
We will allocate Policy loans among the SUB-ACCOUNTS and the FIXED ACCOUNT
according to your instructions. If you do not make an allocation, we will
make a PRO-RATA allocation. We will transfer the POLICY VALUE in each
sub-account equal to the Policy loan to the FIXED ACCOUNT.
You may surrender your Policy and receive its SURRENDER VALUE. After the first
Policy year, you may make partial withdrawals of $500 or more from policy value,
subject to partial withdrawal costs. Under the Level Option, the FACE AMOUNT
is reduced by each partial withdrawal. We will not allow a partial withdrawal
if it would reduce the FACE AMOUNT below $40,000. A surrender or PARTIAL
withdrawal may have tax consequences. See "TAXATION OF THE POLICIES."
CAN I MAKE FUTURE CHANGES UNDER MY POLICY?
Yes. There are several changes you can make after receiving your Policy, within
limits. You may
- Cancel your Policy under its right-to-examine provision
- Transfer your ownership to someone else
- Change the BENEFICIARY
- Change the allocation of payments, with no tax consequences under
current law
- Make transfers of POLICY VALUE among the FUNDS
- Adjust the DEATH BENEFIT by increasing or decreasing the FACE AMOUNT
- Change your choice of DEATH BENEFIT options between the Level Option
and Adjustable Option
- Add or remove optional insurance benefits provided by rider
-5-
<PAGE>
CAN I CONVERT MY POLICY INTO A NON-VARIABLE POLICY?
Yes. You can convert your Policy without charge during the first 24 months
after the DATE OF ISSUE or after an increase in FACE AMOUNT. On conversion,
we will transfer the POLICY VALUE in the VARIABLE ACCOUNT to the FIXED ACCOUNT.
We will allocate all future payments to the FIXED ACCOUNT, unless you instruct
us otherwise.
WHAT CHARGES WILL I INCUR UNDER MY POLICY?
The following charges will apply to your Policy under the circumstances
described. Some of these charges apply throughout the Policy's duration.
Other charges apply only if you choose options under the Policy.
- From each payment, we will deduct a payment expense charge, currently
4.0%. The payment expense charge has three parts:
PREMIUM TAX DEDUCTION - A current premium tax deduction of 2.5% of
payments represents our average expenses for state and local premium
taxes.
DEFERRED ACQUISITION COSTS ("DAC TAX") DEDUCTION - A current DAC
tax deduction of 1.0% of payments helps reimburse us for federal
taxes imposed on our deferred acquisition costs of the Policies.
The DAC tax deduction is a factor we must use when calculating the
maximum sales load we can charge under SEC rules.
FRONT-END SALES LOAD - From each payment, we will deduct a front-end
sales load of 0.5% of the payment. This charge partially compensates
us for Policy sales expenses.
- We deduct the following monthly charge from POLICY VALUE:
MONTHLY INSURANCE PROTECTION CHARGE - This charge is the cost of
insurance, including optional insurance benefits provided by rider.
- The following expenses are charged against or reflected in the VARIABLE
ACCOUNT:
ADMINISTRATIVE CHARGE - We deduct this charge during the first ten
Policy years only. It is a daily charge at an annual rate of 0.15%
of the average daily net asset value of each SUB-ACCOUNT. This
charge helps compensate us for our expenses in administering the
VARIABLE ACCOUNT and is eliminated after the tenth Policy year.
MORTALITY AND EXPENSE RISK CHARGE - We impose a daily charge at a
current annual rate of 0.65% of the average daily net asset value
of each SUB-ACCOUNT. This charge compensates us for assuming
mortality and expense risks for variable interests in the Policies.
Our Board of Directors may increase this charge, subject to state
and federal law, to an annual rate no greater than 0.80%.
FUND EXPENSES - The FUNDS incur investment advisory fees and other
expenses, which are reflected in the VARIABLE ACCOUNT. The levels
of fees and expenses vary among the FUNDS.
-6-
<PAGE>
- Charges designed to reimburse us for Policy administrative costs apply
under the following circumstances:
CHARGE FOR CHANGE IN FACE AMOUNT - For each increase or decrease
in FACE AMOUNT, we deduct a charge of $50 from POLICY VALUE. This
charge is for the underwriting and administrative costs of the
change.
TRANSFER CHARGE - Currently, the first 12 transfers of POLICY VALUE
in a Policy year are free. A current transfer charge of $10,
never to exceed $25, applies for each additional transfer in the
same Policy year. This charge is for the costs of processing the
transfer.
OTHER ADMINISTRATIVE CHARGES - We reserve the right to charge for
other administrative costs we incur. While there are no current
charges for these costs, we may impose a charge for
- Changing NET PAYMENT allocation instructions
- Changing the allocation of monthly insurance protection charges
among the various SUB-ACCOUNTS
- Providing a projection of values
- The charges below apply only if you surrender your Policy or make
partial withdrawals:
SURRENDER CHARGE- This charge applies only on a full surrender or
decrease in FACE AMOUNT within ten years of the DATE OF ISSUE or of
an increase in FACE AMOUNT. The maximum surrender charge has two
parts:
- A deferred administrative charge of $8.50 per thousand dollars of
the initial FACE AMOUNT or increase
- A deferred sales charge of 28.5% of payments received or associated
with the increase up to the GUIDELINE ANNUAL PREMIUM for the
increase
The maximum surrender charge is level for the first 24 Policy months,
then reduces by 1/96th per month, reaching zero after 10 Policy
years. During the first two years following the DATE OF ISSUE or
increase, the actual surrender charge may be less than the maximum
surrender charge calculated above.
PARTIAL WITHDRAWAL COSTS - We deduct from the POLICY VALUE the
following for partial withdrawals:
- A transaction fee of 2.0% of the amount withdrawn, not to exceed
$25, for each partial withdrawal for processing costs
- A partial withdrawal charge of 5.0% of a withdrawal exceeding
the "Free 10% Withdrawal," described below
-7-
<PAGE>
The partial withdrawal charge does not apply to:
- That part of a withdrawal equal to 10% of the POLICY VALUE in a Policy
year less prior free withdrawals made in the same Policy year ("Free
10% Withdrawal")
- Withdrawals when no surrender charge applies.
We reduce the Policy's outstanding surrender charge, if any, by partial
withdrawal charges that we previously deducted.
WHAT ARE THE LAPSE AND REINSTATEMENT PROVISIONS OF MY POLICY?
The Policy will not lapse if you fail to make payments unless:
- The SURRENDER VALUE is insufficient to cover the next monthly insurance
protection charge and loan interest accrued OR
- The OUTSTANDING LOAN exceeds POLICY VALUE less surrender charges
There is a 62-day grace period in either situation.
If you make payments at least equal to MINIMUM MONTHLY PAYMENTS, we
guarantee that your Policy will not lapse before the 49th MONTHLY
PROCESSING DATE from DATE OF ISSUE or increase in FACE AMOUNT, within
limits.
You may reinstate your Policy within three years after the grace period,
within limits.
CAN I ELECT PAID-UP INSURANCE WITH NO FURTHER PREMIUMS DUE?
Yes. The Policy provides a PAID-UP INSURANCE option. If this option is
elected, we will provide paid-up insurance coverage, usually having a
reduced face amount, for the life of the Insured with no more PREMIUMS
being due under the Policy. If you elect this option, POLICYOWNER
rights and benefits will be limited.
HOW IS MY POLICY TAXED?
The Policy is given federal income tax treatment similar to a
conventional fixed benefit life insurance policy. On a withdrawal of
POLICY VALUE, POLICYOWNERS currently are taxed only on the amount of the
withdrawal that exceeds total payments. Withdrawals greater than
payments made are treated as ordinary income. During the first 15
Policy years, however, an "interest first" rule applies to
distributions of cash required under Section 7702 of the Internal
Revenue Code because of a reduction in benefits under the Policy.
The NET DEATH BENEFIT under the Policy is excludable from the gross
income of the BENEFICIARY. However, in some circumstances federal
estate tax may apply to the NET DEATH BENEFIT or the POLICY VALUE.
A Policy may be considered a "modified endowment contract." This may
occur if total payments during the first seven Policy years exceed the
total net level payments payable, if the Policy had provided paid-up
future benefits after seven level payments. If the Policy is considered
a modified endowment contract, all distributions (including Policy
loans, partial withdrawals, surrenders and assignments) will be taxed on
an "income-first" basis. Also, a 10% penalty tax may be imposed on that
part of a distribution that is includible in income.
-8-
<PAGE>
This Summary is intended to provide only a very brief overview of the
more significant aspects of the Policy. The Prospectus and the Policy
provide further detail. The Policy provides insurance protection for
the named BENEFICIARY. We do not claim that the Policy is similar or
comparable to a systematic investment plan of a mutual fund. The Policy
and its attached application or enrollment form are the entire agreement
between you and SMA LIFE.
-9-
<PAGE>
TABLE OF CONTENTS
SPECIAL TERMS. . . . . . . . . . . . . . . . . . . . . . . . . .12
DESCRIPTION OF SMA LIFE, THE VARIABLE ACCOUNT, THE
TRUST, VIPF AND T. ROWE . . . . . . . . . . . . . . . . . . .15
SMA LIFE. . . . . . . . . . . . . . . . . . . . . . . . . . .15
THE VARIABLE ACCOUNT. . . . . . . . . . . . . . . . . . . . .15
THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . .15
VIPF. . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
T. ROWE . . . . . . . . . . . . . . . . . . . . . . . . . . .16
INVESTMENT OBJECTIVES AND POLICIES. . . . . . . . . . . . . .16
INVESTMENT ADVISORY SERVICES TO THE TRUST . . . . . . . . . .17
INVESTMENT ADVISORY SERVICES TO VIPF. . . . . . . . . . . . .18
INVESTMENT ADVISORY SERVICES TO T. ROWE . . . . . . . . . . .18
THE POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . .19
APPLICATION FOR A POLICY. . . . . . . . . . . . . . . . . . .19
FREE LOOK PERIOD. . . . . . . . . . . . . . . . . . . . . . .19
CONVERSION PRIVILEGE. . . . . . . . . . . . . . . . . . . . .20
PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .20
ALLOCATION OF NET PAYMENTS. . . . . . . . . . . . . . . . . .21
TRANSFER PRIVILEGE. . . . . . . . . . . . . . . . . . . . . .21
DEATH BENEFIT . . . . . . . . . . . . . . . . . . . . . . . .22
LEVEL OPTION AND ADJUSTABLE OPTION. . . . . . . . . . . . . .23
CHANGE TO LEVEL OR ADJUSTABLE OPTION. . . . . . . . . . . . .24
CHANGE IN FACE AMOUNT . . . . . . . . . . . . . . . . . . . .25
POLICY VALUE. . . . . . . . . . . . . . . . . . . . . . . . .25
PAYMENT OPTIONS . . . . . . . . . . . . . . . . . . . . . . .27
OPTIONAL INSURANCE BENEFITS . . . . . . . . . . . . . . . . .27
SURRENDER . . . . . . . . . . . . . . . . . . . . . . . . . .27
PARTIAL WITHDRAWAL. . . . . . . . . . . . . . . . . . . . . .27
PAID-UP INSURANCE OPTION. . . . . . . . . . . . . . . . . . .28
CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . . . . .28
PAYMENT EXPENSE CHARGE. . . . . . . . . . . . . . . . . . . .29
MONTHLY INSURANCE PROTECTION CHARGE . . . . . . . . . . . . .29
CHARGES AGAINST OR REFLECTED IN
THE ASSETS OF THE VARIABLE ACCOUNT. . . . . . . . . . . . . .31
SURRENDER CHARGE. . . . . . . . . . . . . . . . . . . . . . .32
PARTIAL WITHDRAWAL COSTS. . . . . . . . . . . . . . . . . . .32
TRANSFER CHARGES. . . . . . . . . . . . . . . . . . . . . . .33
CHARGE FOR CHANGE IN FACE AMOUNT. . . . . . . . . . . . . . .33
OTHER ADMINISTRATIVE CHARGES. . . . . . . . . . . . . . . . .33
POLICY LOANS . . . . . . . . . . . . . . . . . . . . . . . . . .34
PREFERRED LOAN OPTION. . . . . . . . . . . . . . . . . . . . . .34
LOAN INTEREST CHARGED. . . . . . . . . . . . . . . . . . . . . .34
REPAYMENT OF OUTSTANDING LOAN . . . . . . . . . . . . . . . . .34
EFFECT OF POLICY LOANS . . . . . . . . . . . . . . . . . . . . .34
POLICY TERMINATION AND REINSTATEMENT . . . . . . . . . . . . . .35
TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . .35
REINSTATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . .35
OTHER POLICY PROVISIONS. . . . . . . . . . . . . . . . . . . . .36
POLICYOWNER. . . . . . . . . . . . . . . . . . . . . . . . . . .36
BENEFICIARY. . . . . . . . . . . . . . . . . . . . . . . . . . .36
ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .36
LIMIT ON RIGHT TO CHALLENGE POLICY . . . . . . . . . . . . . . .36
SUICIDE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
MISSTATEMENT OF AGE OR SEX . . . . . . . . . . . . . . . . . . .37
-10-
<PAGE>
DELAY OF PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . .37
FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . .38
SMA LIFE AND THE VARIABLE ACCOUNT. . . . . . . . . . . . . . . .38
TAXATION OF THE POLICIES . . . . . . . . . . . . . . . . . . . .38
MODIFIED ENDOWMENT POLICIES. . . . . . . . . . . . . . . . . . .39
VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . .39
DIRECTORS AND PRINCIPAL OFFICERS OF SMA LIFE . . . . . . . . . .41
DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . .43
REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . .44
LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . .46
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS. . . . . . . .46
FURTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . .46
INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . .47
MORE INFORMATION ABOUT THE FIXED ACCOUNT . . . . . . . . . . . .47
GENERAL DESCRIPTION. . . . . . . . . . . . . . . . . . . . . . .47
FIXED ACCOUNT INTEREST . . . . . . . . . . . . . . . . . . . . .47
TRANSFERS, SURRENDERS, PARTIAL WITHDRAWALS &
POLICY LOANS. . . . . . . . . . . . . . . . . . . . . . . . . .47
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . .48
APPENDIX A - GUIDELINE MINIMUM SUM INSURED TABLE . . . . . . . .61
APPENDIX B - OPTIONAL INSURANCE BENEFITS . . . . . . . . . . . .62
APPENDIX C- PAYMENT OPTIONS. . . . . . . . . . . . . . . . . . .63
APPENDIX D - ILLUSTRATIONS OF DEATH BENEFIT, POLICY
VALUES AND ACCUMULATED PAYMENTS . . . . . . . . . . . . . . . .64
APPENDIX E - COMPUTING MAXIMUM SURRENDER CHARGES . . . . . . . .70
-11-
<PAGE>
SPECIAL TERMS
AGE: how old the Insured is on the birthday closest to a Policy anniversary.
BENEFICIARY: the person or persons you name to receive the NET DEATH
BENEFIT when the Insured dies.
DATE OF ISSUE: the date the Policy was issued, used to measure the
MONTHLY PROCESSING DATE, Policy months, Policy years and Policy
anniversaries.
DEATH BENEFIT: the amount payable when the Insured dies prior to the
FINAL PAYMENT DATE, before deductions for any OUTSTANDING LOAN and due
and unpaid partial withdrawals, partial withdrawal costs and monthly
insurance protection charges.
EVIDENCE OF INSURABILITY: information, including medical information,
used to decide the Insured's UNDERWRITING CLASS.
FACE AMOUNT: the amount of insurance coverage applied for. The initial
FACE AMOUNT is shown in your Policy.
FINAL PAYMENT DATE: the Policy anniversary nearest the Insured's 95th
birthday. After this date, no payments may be made and the net DEATH
BENEFIT is the POLICY VALUE less any OUTSTANDING LOAN.
FIXED ACCOUNT: a guaranteed account of the GENERAL ACCOUNT that
guarantees principal and a fixed interest rate.
FUNDS: the following investment portfolios of Allmerica Investment
Trust: the Select International Equity Fund, Select Aggressive Growth
Fund, Select Capital Appreciation Fund, Select Growth Fund, Select
Growth and Income Fund, Select Income Fund and Money Market Fund; the
following investment portfolios of Variable Insurance Products Fund:
Growth Portfolio, Equity-Income Portfolio and High Income Portfolio; and
the International Stock Portfolio of T. Rowe Price International Series,
Inc. We may name other investment portfolios of the Trust, VIPF and T.
Rowe as FUNDS.
GENERAL ACCOUNT: all our assets other than those held in a separate
investment account.
GUIDELINE ANNUAL PREMIUM: used to compute the maximum surrender charge
and illustrate accumulations in Appendix D. The GUIDELINE ANNUAL
PREMIUM is the annual amount that would be payable through the final
payment date for the specified Level Option death benefit. We assume
that
- The timing and amount of payments are fixed and paid at the start
of the Policy year
- Monthly insurance protection charges are based on the
Commissioners 1980 Standard Ordinary Mortality Tables, Smoker or
Non-Smoker (Mortality Table B for unisex policies)
- Net investment earnings are at an annual effective rate of 5.0%
- Fees and charges apply as set forth in the Policy and any Policy
riders
GUIDELINE MINIMUM SUM INSURED: the minimum DEATH BENEFIT required to
qualify the Policy as "life insurance" under federal tax laws. The
GUIDELINE MINIMUM SUM INSURED is the PRODUCT of
- The POLICY VALUE TIMES
- A percentage based on the Insured's AGE
INSURANCE PROTECTION AMOUNT: the DEATH BENEFIT less the POLICY VALUE.
ISSUANCE AND ACCEPTANCE: the date we mail the Policy if the application
or enrollment form is approved with no changes requiring your consent;
otherwise, the date we receive your written consent to any changes.
-12-
<PAGE>
LOAN VALUE: the maximum amount you may borrow under the Policy.
MINIMUM MONTHLY PAYMENT: a monthly amount shown in your Policy. If you
pay this amount, we guarantee that your Policy will not lapse before
the 49th MONTHLY PROCESSING DATE from the DATE OF ISSUE or increase in
FACE AMOUNT, within limits.
MONTHLY PROCESSING DATE: the date, shown in your Policy, when monthly
insurance protection charges are deducted.
NET DEATH BENEFIT:
- Before the FINAL PAYMENT DATE, the NET DEATH BENEFIT is
- The DEATH BENEFIT under either the Level Option or Adjustable
Option MINUS
- Any OUTSTANDING LOAN on the Insured's death and due and unpaid
partial withdrawals, partial withdrawal costs and monthly
insurance protection charges
After the FINAL PAYMENT DATE, the NET DEATH BENEFIT is
- The POLICY VALUE MINUS
- Any OUTSTANDING LOAN
NET PAYMENT: your payment less a payment expense charge.
OUTSTANDING LOAN: all unpaid Policy loans plus loan interest due or
accrued.
PAID-UP INSURANCE: life insurance coverage for the life of the Insured,
with no further PREMIUMS due.
POLICY CHANGE: any change in the FACE AMOUNT, the addition or deletion
of a rider, or a change in DEATH BENEFIT option (Level Option or
Adjustable Option).
POLICY VALUE: the total value of your Policy. It is the SUM of the:
- Value of the UNITS of the SUB-ACCOUNTS credited to your Policy, PLUS
- Accumulation in the FIXED ACCOUNT credited to the Policy
POLICYOWNER: the person who may exercise all rights under the Policy,
with the consent of any irrevocable BENEFICIARY. "You" and "your" refer
to the POLICYOWNER in this Prospectus.
PREMIUM: a payment you must make to us to keep the Policy in force.
PRINCIPAL OFFICE: our office at 440 Lincoln Street, Worcester,
Massachusetts 01653.
PRO-RATA ALLOCATION: an allocation among the FIXED ACCOUNT and the
SUB-ACCOUNTS in the same proportion that, on the date of allocation, the
POLICY VALUE in the FIXED ACCOUNT and the POLICY VALUE in each
SUB-ACCOUNT bear to the total POLICY VALUE.
SMA LIFE: SMA Life Assurance Company. "We," "our" and "us" refer to
SMA LIFE in this Prospectus.
SUB-ACCOUNT: a subdivision of the VARIABLE account investing
exclusively in the shares of a FUND.
-13-
<PAGE>
SURRENDER VALUE: the amount payable on a full surrender. It is the
POLICY VALUE less any OUTSTANDING LOAN and SURRENDER CHARGES.
UNDERWRITING CLASS: the insurance risk classification that we assign
the Insured based on the information in the application or enrollment
form and other EVIDENCE OF INSURABILITY we consider. The Insured's
UNDERWRITING CLASS will affect the monthly insurance protection charge
and the payment required to keep the Policy in force.
UNIT: a measure of your interest in a SUB-ACCOUNT.
VALUATION DATE: any day on which the net asset value of the shares of
any FUNDS and UNIT values of any SUB-ACCOUNTS are computed. VALUATION
DATES currently occur on
- Each day the New York Stock Exchange is open for trading
- Other days (other than a day during which no payment, partial
withdrawal or surrender of a Policy was received) when there is a
sufficient degree of trading in a FUND'S portfolio securities so
that the current net asset value of the SUB-ACCOUNTS may be
materially affected
VALUATION PERIOD: the interval between two consecutive VALUATION DATES.
VARIABLE ACCOUNT: Allmerica Select Separate Account II, one of our
separate investment accounts.
WRITTEN REQUEST: your request in writing, satisfactory to us, received
at our PRINCIPAL OFFICE.
-14-
<PAGE>
DESCRIPTION OF SMA LIFE, THE VARIABLE ACCOUNT,
THE TRUST, VIPF AND T. ROWE
SMA LIFE. SMA LIFE is a life insurance company organized under the laws
of Delaware in 1974. We are an indirect wholly owned subsidiary of
State Mutual Life Assurance Company of America ("State Mutual"). State
Mutual, organized under the laws of Massachusetts in 1844, is the fifth
oldest life insurance company in America. On December 31, 1994, State
Mutual and its subsidiaries had over $10 billion in combined assets and
over $42 billion of life insurance in force. SMA LIFE accounted for
over $4 billion in assets and over $25 billion of life insurance in
force.
Our PRINCIPAL OFFICE is 440 Lincoln Street, Worcester, Massachusetts
01653, Telephone 1-800-366-1492. We are subject to the laws of the
state of Delaware, to regulation by the Commissioner of Insurance of
Delaware, and to other laws and regulations where we are licensed to
operate.
THE VARIABLE ACCOUNT. The VARIABLE ACCOUNT is a separate investment
account with eleven SUB-ACCOUNTS. Each SUB-ACCOUNT invests in a fund of
the Trust, VIPF or T. Rowe. The assets used to fund the variable part
of the Policies are set aside in sub-accounts and are separate from our
general assets. We administer and account for each SUB-ACCOUNT as part
of our general business. However, income, capital gains and capital
losses are allocated to each SUB-ACCOUNT without regard to any of our
other income, capital gains or capital losses. Under Delaware law, the
assets of the VARIABLE ACCOUNT may not be charged with any liabilities
arising out of any other business of ours.
Our Board of Directors authorized the VARIABLE ACCOUNT by vote on
October 12, 1993. The VARIABLE ACCOUNT meets the definition of
"separate account" under federal securities laws. It is registered with
the Securities and Exchange Commission ("SEC") as a unit investment
trust under the Investment Company Act of 1940 ("1940 Act"). This
registration does not involve SEC supervision of the management or
investment practices or policies of the VARIABLE ACCOUNT or SMA LIFE.
We reserve the right, subject to law, to change the names of the
VARIABLE ACCOUNT and the SUB-ACCOUNTS.
Each SUB-ACCOUNT has two sub-divisions. One sub-division applies to
Policies during the first ten Policy years, which are subject to the
administrative charge. After the tenth Policy year, we automatically
allocate a Policy to the second sub-division to which the charge does
not apply.
THE TRUST. The Trust is an open-end, diversified management investment
company registered with the SEC under the 1940 Act. This registration
does not involve SEC supervision of the investments or investment policy
of the Trust or its separate investment portfolios.
State Mutual established the Trust as a Massachusetts business trust on
October 11, 1984. The Trust is a vehicle for the investment of assets
of various separate accounts established by SMA LIFE and affiliated
insurance companies. Shares of the Trust are not offered to the public
but solely to the separate accounts. Seven different investment
portfolios of the Trust are available under the Policies, each issuing a
series of shares: the Select International Equity Fund, Select
Aggressive Growth Fund, Select Capital Appreciation Fund, Select Growth
Fund, Select Growth and Income Fund, Select Income Fund and Money Market
Fund. The assets of each FUND are held separate from the assets of the
other FUNDS. Each FUND operates as a separate investment vehicle. The
income or losses of one FUND have no effect on the investment
performance of another FUND. The SUB-ACCOUNTS reinvest dividends and/or
capital gains distributions received from a FUND in more shares of that
FUND as retained assets.
Allmerica Investment Management Company, Inc. ("Manager") serves as
investment manager of the
-15-
<PAGE>
Trust. The Manager has entered into agreements with other investment
managers ("Sub-Advisers"), who manage the investments of the FUNDS. See
"INVESTMENT ADVISORY SERVICES TO THE TRUST."
VIPF. VIPF, managed by Fidelity Management & Research Company
("Fidelity Management"), is an open-end, diversified, management
investment company organized as a Massachusetts business trust on
November 13, 1981 and registered with the Commission under the 1940 Act.
Three of its investment portfolios are available under the Policies:
Growth Portfolio, Equity-Income Portfolio and High Income Portfolio.
T. ROWE. T. Rowe, managed by Rowe Price-Fleming International, Inc.
("Price-Fleming"), is an open-end, diversified, management investment
company organized as a Maryland corporation in 1994 and registered with
the Commission under the 1940 Act. One of its investment portfolios is
available under the Policies: the International Stock Portfolio.
INVESTMENT OBJECTIVES AND POLICIES. A summary of investment objectives
of the FUNDS is set forth below. Before investing, read carefully the
prospectuses of the Trust, VIPF and T. Rowe that accompany this
Prospectus. The prospectuses of the Trust, VIPF and T. Rowe contain
more detailed information on the FUNDS' investment objectives,
restrictions, risks and expenses. Statements of Additional Information
for the FUNDS are available on request. The investment objectives of
the FUNDS may not be achieved. POLICY VALUE may be less than the
aggregate payments made under the Policy.
SELECT INTERNATIONAL EQUITY FUND seeks maximum long-term total return
(capital appreciation and income) primarily by investing in common
stocks of established non-U.S. companies. The Sub-Adviser for the
Select International Equity Fund is Bank of Ireland Asset Management
Limited.
T. ROWE PRICE'S INTERNATIONAL STOCK PORTFOLIO seeks long-term growth of capital
through investments primarily in common stocks of established, non-U.S.
companies.
SELECT AGGRESSIVE GROWTH FUND seeks above-average capital appreciation
by investing primarily in common stocks of companies that are believed
to have significant potential for capital appreciation. The Sub-Adviser
for the Select Aggressive Growth Fund is Nicholas-Applegate Capital
Management.
SELECT CAPITAL APPRECIATION FUND seeks long-term growth of capital in a
manner consistent with the preservation of capital. Realization of income is
not a significant investment consideration and any income realized on the
Fund's investments will be incidental to its primary objective. The Fund
will invest primarily in common stock of industries and companies which are
experiencing favorable demand for their products and services, and which
operate in a favorable competitive environment and regulatory climate. The
Sub-Adviser for the Select Capital Appreciation Fund is Janus Capital
Corporation.
SELECT GROWTH FUND seeks to achieve growth of capital by investing in a
diversified portfolio consisting primarily of common stocks selected for
their long-term growth potential. The Sub-Adviser for the Select Growth
Fund is Provident Investment Counsel.
FIDELITY'S GROWTH PORTFOLIO seeks to achieve capital appreciation. The
Portfolio normally purchases common stocks, although its investments are
not restricted to any one type of security. Capital appreciation may
also be found in other types of securities, including bonds and
preferred stocks.
SELECT GROWTH AND INCOME FUND seeks a combination of long-term growth of
capital and current income. The FUND will invest primarily in dividend-
paying common stocks and securities convertible into common stocks. The
Sub-Adviser for the Select Growth and Income Fund is John A. Levin &
Co., Inc.
FIDELITY'S EQUITY-INCOME PORTFOLIO seeks reasonable income by investing
primarily in income-producing equity securities. In choosing these
securities, the Portfolio will also consider the potential for capital
appreciation. The Portfolio's goal is to achieve a yield which exceeds
the composite yield on the securities comprising the Standard & Poor's
500 Composite Stock Price Index. The Portfolio may invest in high
yielding, lower-rated securities (commonly referred to as "junk bonds")
which are subject to greater risk than investments in higher-rated
securities. For a further discussion of
-16-
<PAGE>
lower-rated securities, please see "Risks of Lower-Rated Debt
Securities" in the VIPF prospectus.
FIDELITY'S HIGH INCOME PORTFOLIO seeks to obtain a high level of current
income by investing primarily in high-yielding, lower-rated fixed-income
securities (commonly referred to as "junk bonds"), while also
considering growth of capital. These securities are often considered to
be speculative and involve greater risk of default or price changes than
securities assigned a high quality rating. For more information about
these lower-rated securities, see "Risks of Lower-Rated Debt Securities"
in the VIPF prospectus.
SELECT INCOME FUND seeks a high level of current income. The FUND will
invest primarily in investment grade, fixed-income securities. The Sub-
Adviser for the Select Income Fund is Standish, Ayer & Wood, Inc.
MONEY MARKET FUND seeks to obtain maximum current income consistent with
the preservation of capital and liquidity. Allmerica Asset Management,
Inc. is the Sub-Adviser of the Money Market Fund.
If there is a material change in the investment policy of a FUND, we
will notify you of the change. If you have POLICY VALUE allocated to
that FUND, you may without charge reallocate the POLICY VALUE to another
FUND or to the FIXED ACCOUNT. We must receive your WRITTEN REQUEST
within sixty (60) days of the LATEST of the
- Effective date of the change in the investment policy OR
- Receipt of the notice of your right to transfer
INVESTMENT ADVISORY SERVICES TO THE TRUST. The Trustees have
responsibility for the supervision of the affairs of the Trust. The
Trustees have entered into a management agreement with the Manager, an
indirectly wholly-owned subsidiary of State Mutual. The Manager,
subject to Trustee review, is responsible for the daily affairs of the
Trust and the general management of the FUNDS. The Manager performs
administrative and management services for the Trust, furnishes to the
Trust all necessary office space, facilities and equipment, and pays the
compensation, if any, of officers and Trustees who are affiliated with
the Manager.
The Trust bears all expenses incurred in its operation, other than the
expenses the Manager assumes under the management agreement. Trust
expenses include
- Costs to register and qualify the Trust's shares under the
Securities Act of 1933 ("1933 Act")
- Other fees payable to the SEC
- Independent public accountant, legal and custodian fees
- Association membership dues, taxes, interest, insurance payments
and brokerage commissions
- Fees and expenses of the Trustees who are not affiliated with the
Manager
- Expenses for proxies, prospectuses, reports to shareholders and
other expenses
Under the management agreement with the Trust, the Manager has entered
agreements under which each Sub-Adviser manages the investments of one
or more of the FUNDS. Under each agreement, the Sub-Adviser is
authorized to engage in portfolio transactions on behalf of the FUND,
subject to the Trustees' instructions. The terms of a Sub-Adviser
agreement cannot be materially changed without the approval of a
majority in interest of the shareholders of the FUND.
Allmerica Asset Management, Inc., an indirect wholly owned subsidiary of
State Mutual, is the Sub-Adviser for the Money Market Fund. The Sub-
Advisers for the other FUNDS are independent. The Manager selects the
Sub-Advisers in consultation with Rogers, Casey & Associates, a leading
pension consulting firm. Rogers, Casey & Associates provides consulting
services to pension plans with over $175 billion in total assets. In its
consulting capacity, Rogers, Casey & Associates monitors the investment
performance of over 1,000 investment advisers. The Manager bears the
cost of the
-17-
<PAGE>
consultation. The Manager selected each independent Sub-Adviser using
strict objective and qualitative criteria, with special emphasis on the
Sub-Adviser's record in managing similar portfolios. A committee that
includes members affiliated with SMA LIFE monitors and evaluates on-going
performance of the independent Sub-Advisers.
For providing its services under the management agreement, the Manager
receives a fee, computed daily at an annual rate based on the average
daily net asset value of each FUND as follows: 1.00% for the Select
International Equity Fund, the Select Capital Appreciation Fund and the
Select Aggressive Growth Fund, 0.85% for the Select Growth Fund, 0.75%
for the Select Growth and Income Fund, and 0.60% for the Select Income
Fund. For the Money Market Fund, the fee is 0.35% on net asset value up
to $50,000,000, 0.25% on the next $200,000,000, and 0.20% on the balance.
The fee computed for each FUND is paid from the assets of the FUND.
The Manager is solely responsible for the payment of all fees to Sub-
Advisers for their investment management services. Sub-Adviser fees,
described in the Trust's prospectus, in no way increase the costs that
the FUNDS, VARIABLE ACCOUNT and POLICYOWNERS bear.
INVESTMENT ADVISORY SERVICES TO VIPF. For managing investments and
business affairs, each Portfolio pays a monthly fee to Fidelity
Management. The Prospectus of VIPF contains additional information
concerning the Portfolios, including information concerning additional
expenses paid by the Portfolios, and should be read in conjunction with
this Prospectus.
The High Income Portfolio pays a monthly fee to Fidelity Management at
an annual fee rate made up of the sum of two components:
1. A group fee rate based on the monthly average net assets of all the
mutual funds advised by Fidelity Management. On an annual basis this
rate cannot rise above 0.37%, and drops as total assets in all these
funds rise.
2. An individual fund fee rate of 0.45% of the High Income Portfolio's
average net assets throughout the month. One-twelfth of the annual
management fee rate is applied to net assets averaged over the most
recent month, resulting in a dollar amount which is the management
fee for that month.
The Growth and Equity-Income Portfolios' fee rates are each made of two
components:
1. A group fee rate based on the monthly average net assets of all of
the mutual funds advised by Fidelity Management. On an annual basis,
this rate cannot rise above 0.52%, and drops as total assets in all
these mutual funds rise.
2. An individual Portfolio fee rate of 0.30% for the Growth Portfolio
and 0.20% for the Equity-Income Portfolio.
One-twelfth of the sum of these two rates is applied to the respective
Portfolio's net assets averaged over the most recent month, giving a
dollar amount which is the fee for that month.
Thus, the High Income Portfolio may have a fee as high as 0.82%. The
Growth Portfolio may have a fee of as high as 0.82% of its average net
assets. The Equity-Income Portfolio may have a fee as high as 0.72% of
its average net assets.
INVESTMENT ADVISORY SERVICES TO T. ROWE. To cover investment management
and operating expenses, the International Stock Portfolio pays Price-
Fleming a single, all-inclusive fee of 1.05% of its average daily net
assets.
-18-
<PAGE>
THE POLICY
APPLICATION FOR A POLICY - We offer Policies to applicants 80 years old
and under. After receiving a completed application or enrollment form
from a prospective POLICYOWNER, we will begin underwriting to decide the
insurability of the proposed Insured. We may require medical
examinations and other information before deciding insurability. We
issue a Policy only after underwriting has been completed. We may
reject an application or enrollment form that does not meet our
underwriting guidelines.
If a prospective POLICYOWNER makes an initial payment of at least one
MINIMUM MONTHLY PAYMENT, we will provide fixed conditional insurance
during underwriting. The fixed conditional insurance will be the
insurance applied for, up to a maximum of $500,000, depending on AGE and
UNDERWRITING CLASS. This coverage will continue for a maximum of 90
days from the date of the application or enrollment form or, if
required, the completed medical exam. If death is by suicide, we will
return only the PREMIUM paid.
If no fixed conditional insurance was in effect, on Policy delivery we
will require a sufficient payment to place the insurance in force.
If you made payments before the date of ISSUANCE AND ACCEPTANCE, we will
allocate the payments to the Money Market Fund within two business days
of receipt of the payments at our PRINCIPAL OFFICE. If the Policy is
not issued and accepted, we will return to you the GREATER of
- Your payments OR
- The value of the amount allocated to the Money Market Fund, which
will be net of mortality and expense risk charges, administrative
charges and FUND expenses.
If your application or enrollment form is approved and the Policy is
issued and accepted, we will allocate your POLICY VALUE on ISSUANCE AND
ACCEPTANCE according to your instructions. However, if your Policy
provides for a full refund of payments under its "Right to Examine
Policy" provision as required in your state (see "THE POLICY - "Free
Look Period"), we will initially allocate your sub-account investments
to the Money Market Fund. This allocation to the Money Market Fund will
be for
- 14 days from ISSUANCE AND ACCEPTANCE, except as described below
- 24 days from ISSUANCE AND ACCEPTANCE for replacements in states
with an extended right to examine
- 34 days from ISSUANCE AND ACCEPTANCE for California citizens age
60 and older, who have an extended right to examine
After this, we will allocate all amounts according to your investment choices.
FREE LOOK PERIOD - The Policy provides for a free look period. You have
the right to examine and cancel your Policy by returning it to us or to
one of our representatives on or before the LATEST of:
- 45 days after the application or enrollment form for the Policy is signed
- 10 days after you receive the Policy (20 days when the law so
requires for the replacement of insurance and 30 days for
California citizens age 60 and older) OR
- 10 days after we mail to you a notice of withdrawal right
If your Policy provides for a full refund under its "Right to Examine
Policy" provision as required
-19
<PAGE>
in your state, your refund will be the GREATER of
- Your entire payment OR
- The POLICY value PLUS deductions under the Policy or by the FUNDS
for taxes, charges or fees
If your Policy does not provide for a full refund, you will receive
- Amounts allocated to the FIXED ACCOUNT PLUS
- The POLICY VALUE in the VARIABLE ACCOUNT PLUS
- All fees, charges and taxes which have been imposed
We may delay a refund of any payment made by check until the check has
cleared your bank.
After an increase in FACE AMOUNT, we will mail or deliver a notice of a
free look for the increase. You will have the right to cancel the
increase before the LATEST of
- 45 days after the application or enrollment form for the increase is
signed
- 10 days after you receive the new Policy specification pages
issued for the increase OR
- 10 days after we mail or delivers a notice of withdrawal rights to you
On cancelling the increase, you will receive a credit to your POLICY
VALUE of charges deducted for the increase. We will refund to you the
amount to be credited if you request. We will waive any surrender
charge computed for the increase.
CONVERSION PRIVILEGE - Within 24 months of the DATE OF ISSUE or an
increase in FACE AMOUNT, you can convert your Policy into a non-variable
Policy by transferring all POLICY VALUE in the SUB-ACCOUNTS to the FIXED
ACCOUNT. The conversion will take effect at the end of the VALUATION
PERIOD in which we receive, at our PRINCIPAL OFFICE, notice of the
conversion satisfactory to us. There is no charge for this conversion.
We will allocate all future payments to the FIXED ACCOUNT, unless you
instruct us otherwise.
PAYMENTS - Payments are payable to SMA LIFE. Payments may be made by
mail to our PRINCIPAL OFFICE or through our authorized representative.
All payments after the initial payment are credited to the VARIABLE
ACCOUNT or FIXED ACCOUNT on the date of receipt at the PRINCIPAL OFFICE.
You may establish a schedule of planned payments. If you do, we will
bill you at regular intervals. Making planned payments will not
guarantee that the Policy will remain in force. The Policy will not
necessarily lapse if you fail to make planned payments. You may make
unscheduled payments before the FINAL PAYMENT DATE or skip planned
payments.
You may choose a monthly automatic payment method of making payments.
Under this method, each month we will deduct payments from your
checking account and apply them to your Policy. The minimum payment
allowed is $50.
The Policy does not limit payments as to frequency and number. However,
no payment may be less than $100 without our consent. Payments must be
sufficient to provide a positive SURRENDER VALUE at the end of each
Policy month or the Policy may lapse. See "POLICY TERMINATION AND
REINSTATEMENT." During the first 48 Policy months following the DATE OF
ISSUE or an increase in FACE AMOUNT, a guarantee may apply to prevent
the Policy from lapsing. The guarantee will apply during this period if
you make payments that, when reduced by partial withdrawals and partial
withdrawal costs, equal or exceed the required MINIMUM MONTHLY PAYMENTS.
The required MINIMUM MONTHLY PAYMENTS are based on the number of months
the Policy, increase in FACE AMOUNT or policy
-20-
<PAGE>
change that causes a change in the MINIMUM MONTHLY PAYMENT has been in force.
MAKING MONTHLY PAYMENTS EQUAL TO THE MINIMUM MONTHLY PAYMENTS DOES NOT
GUARANTEE THAT THE POLICY WILL REMAIN IN FORCE, EXCEPT AS STATED IN THIS
PARAGRAPH.
Total payments may not exceed the current maximum payment limits under
federal tax law. These limits will change with a change in FACE AMOUNT,
the addition or deletion of a rider, or a change between the Level
Option and Adjustable Option. Where total payments would exceed the
current maximum payment limits, we will only accept that part of a
payment that will make total payments equal the maximum. We will return
any part of the payments greater than that amount. However, we will
accept a payment needed to prevent Policy lapse during a Policy year.
See "POLICY TERMINATION AND REINSTATEMENT."
ALLOCATION OF NET PAYMENTS - The net payment equals the payment made
less the payment expense charge. In the application or enrollment form
for your Policy, you decide the initial allocation of the NET PAYMENT
among the FIXED ACCOUNT and the SUB-ACCOUNTS. You may allocate payments
to one or more of the sub-accounts, but may not have POLICY VALUE in
more than seven SUB-ACCOUNTS at once. The minimum amount that you may
allocate to a SUB-ACCOUNT is 1.0% of the NET PAYMENT. Allocation
percentages must be in whole numbers (for example, 33 1/3% may not be
chosen) and must total 100%.
You may change the allocation of future NET PAYMENTS by WRITTEN REQUEST
or TELEPHONE REQUEST. You have the privilege to make telephone
requests, unless you elected not to have the privilege on the
application or enrollment form. The policy of SMA LIFE and its
representatives and affiliates is that they will not be responsible for
losses resulting from acting on telephone requests reasonably believed
to be genuine. We will use reasonable methods to confirm that
instructions communicated by telephone are genuine; otherwise, SMA LIFE
may be liable for any losses from unauthorized or fraudulent
instructions. We require that callers on behalf of a POLICYOWNER
identify themselves by name and identify the POLICYOWNER by name, date
of birth and social security number. All telephone requests are tape
recorded. An allocation change will take effect on the date of receipt
of the notice at the PRINCIPAL OFFICE. No charge is currently imposed
for changing payment allocation instructions. We reserve the right to
impose a charge in the future, but guarantee that the charge will not
exceed $25.
The POLICY VALUE in the SUB-ACCOUNTS will vary with investment
experience. You bear this investment risk. Investment performance may
also affect the DEATH BENEFIT. Review your allocations of payments and
POLICY VALUE as market conditions and your financial planning needs change.
TRANSFER PRIVILEGE - Subject to our then current rules, you may transfer
amounts among the SUB-ACCOUNTS or between a SUB-ACCOUNT and the FIXED
ACCOUNT. (You may not transfer that portion of the POLICY VALUE held in
the FIXED ACCOUNT that secures a Policy loan.)
The transfer privilege is subject to our consent. We reserve the right
to impose limits on transfers including, but not limited to, the
- Minimum amount that may be transferred
- Minimum amount that may remain in a SUB-ACCOUNT following a transfer
from that SUB-ACCOUNT
- Minimum period between transfers involving the FIXED ACCOUNT
- Maximum amounts that may be transferred from the FIXED ACCOUNT
Transfers involving the FIXED ACCOUNT are currently permitted only if:
- There has been at least a ninety (90) day period since the last transfer
from the FIXED
-21-
<PAGE>
ACCOUNT; and
- The amount transferred from the FIXED ACCOUNT in each transfer does not
exceed the lesser of $100,000 or 25% of the POLICY VALUE.
These rules are subject to change by the Company.
We will make transfers at your WRITTEN REQUEST or telephone request, as
described in "THE POLICY - Allocation of Net Payments." Transfers are
effected at the value next computed after receipt of the transfer order.
You may apply for automatic transfers
- From the Money Market SUB-ACCOUNT to one or more of the other SUB-ACCOUNTS
on a monthly, quarterly or semiannual schedule
- To reallocate POLICY VALUE among the SUB-ACCOUNTS on a quarterly,
semiannual or annual schedule.
Each automatic transfer must be at least $100. We will process
automatic transfers on the 15th of each scheduled month. If the 15th is
not a business day or is the MONTHLY PROCESSING DATE, we will process
the automatic transfer on the next business day.
Currently, the first 12 transfers in a Policy year are free. After
that, we will deduct a $10 transfer charge from amounts transferred in
that Policy year. We reserve the right to increase the charge, but we
guarantee the charge will never exceed $25. We also reserve the right
to limit the number of free transfers in a Policy year to six.
The first automatic transfer counts as one transfer toward the 12 free
transfers allowed in each Policy year. Each subsequent automatic
transfer is also free, but does not reduce the remaining number of
transfers that are free in a Policy year. Any transfers made for a
conversion privilege, Policy loan or material change in investment
policy will not count toward the 12 free transfers.
DEATH BENEFIT - If the Policy is in force on the Insured's death, we
will, with due proof of death, pay the NET DEATH BENEFIT to the named
BENEFICIARY. We will normally pay the NET DEATH BENEFIT within seven
days of receiving due proof of the Insured's death, but we may delay
payment of NET DEATH BENEFITS. See "OTHER POLICY PROVISIONS - Delay of
Benefit Payments." The BENEFICIARY may receive the NET DEATH BENEFIT in
a lump sum or under a payment option. See "APPENDIX C - PAYMENT OPTIONS."
Before the FINAL PAYMENT DATE, the NET DEATH BENEFIT is
- The DEATH BENEFIT provided under the Level Option or Adjustable
Option, whichever is elected and in effect on the date of death PLUS
- Any other insurance on the Insured's life that is provided by rider MINUS
- Any OUTSTANDING LOAN and any due and unpaid partial withdrawals,
partial withdrawal costs and monthly insurance protection charges
through the Policy month in which the Insured dies
After the FINAL PAYMENT DATE, the NET DEATH BENEFIT is
- The POLICY VALUE MINUS
- Any OUTSTANDING LOAN
In most states, we will compute the NET DEATH BENEFIT on the date we receive
due proof of the
-22-
<PAGE>
Insured's death.
LEVEL OPTION AND ADJUSTABLE OPTION - The Policy provides two DEATH
BENEFIT options: the Level Option and Adjustable Option. You choose
the desired option in the application or enrollment form. You may
change the option once per Policy year by WRITTEN REQUEST. There is no
charge for a change in option.
Under the Level Option, the DEATH BENEFIT is the GREATER of the
- FACE AMOUNT OR
- GUIDELINE MINIMUM SUM INSURED
Under the Adjustable Option, the DEATH BENEFIT is the GREATER of the
- FACE AMOUNT PLUS policy value OR
- GUIDELINE MINIMUM SUM INSURED
Under both the Level Option and Adjustable Option, the DEATH BENEFIT
provides insurance protection. Under the Level Option, the DEATH
BENEFIT is level unless the GUIDELINE MINIMUM SUM INSURED exceeds the
FACE AMOUNT; then, the DEATH BENEFIT varies as the POLICY VALUE changes.
Under the Adjustable Option, the DEATH BENEFIT always varies as the
POLICY VALUE changes.
At any FACE AMOUNT, the DEATH BENEFIT will be greater under the
Adjustable Option than under the Level Option because the POLICY VALUE
is added to the FACE AMOUNT and included in the death benefit. However,
the monthly insurance protection charge will be greater. Therefore,
POLICY VALUE will accumulate at a slower rate than under the Level Option.
If you desire to have payments and investment performance reflected in
the DEATH BENEFIT, you should choose the Adjustable Option. If you
desire to have payments and investment performance reflected to the
maximum extent in the POLICY VALUE, you should select the Level Option.
GUIDELINE MINIMUM SUM INSURED - The GUIDELINE MINIMUM SUM INSURED is a
percentage of the POLICY VALUE as set forth in "APPENDIX A - GUIDELINE
MINIMUM SUM INSURED TABLE." The GUIDELINE MINIMUM SUM INSURED is
computed based on federal tax regulations to ensure that the Policy
qualifies as a life insurance contract and that the insurance proceeds
will be excluded from the gross income of the BENEFICIARY.
ILLUSTRATION OF THE LEVEL OPTION - In this illustration, assume that the
Insured is under the AGE of 40, and that there is no OUTSTANDING LOAN.
Under the Level Option, a Policy with a $100,000 FACE AMOUNT will have a
DEATH BENEFIT of $100,000. However, because the DEATH BENEFIT must be
equal to or greater than 250% of POLICY VALUE, if the POLICY VALUE
exceeds $40,000 the DEATH BENEFIT will exceed the $100,000 FACE AMOUNT.
In this example, each dollar of POLICY VALUE above $40,000 will increase
the DEATH BENEFIT by $2.50. For example, a Policy with a POLICY VALUE
of $50,000 will have a GUIDELINE MINIMUM SUM INSURED of $125,000
($50,000 x 2.50); POLICY VALUE of $60,000 will produce a GUIDELINE
MINIMUM SUM INSURED of $150,000 ($60,000 x 2.50); and POLICY VALUE of
$75,000 will produce a GUIDELINE MINIMUM SUM INSURED of $187,500
($75,000 x 2.50).
Similarly, if POLICY VALUE exceeds $40,000, each dollar taken out of
POLICY VALUE will reduce the DEATH BENEFIT by $2.50. If, for example,
the POLICY VALUE is reduced from $60,000 to $50,000 because of partial
withdrawals, charges or negative investment performance, the DEATH
BENEFIT will be reduced from $150,000 to $125,000. If, however, the
product of the POLICY VALUE times the applicable percentage from the
table in Appendix A is less than the FACE AMOUNT, the DEATH BENEFIT will
equal the FACE AMOUNT.
-23-
<PAGE>
The applicable percentage becomes lower as the Insured's AGE increases.
If the Insured's AGE in the above example were, for example, 50 (rather
than between zero and 40), the applicable percentage would be 185%. The
DEATH BENEFIT would not exceed the $100,000 FACE AMOUNT unless the POLICY
VALUE exceeded $54,054 (rather than $40,000), and each dollar then added
to or taken from POLICY VALUE would change the DEATH BENEFIT by $1.85.
ILLUSTRATION OF THE ADJUSTABLE OPTION - In this illustration, assume
that the Insured is under the AGE of 40 and that there is no OUTSTANDING LOAN.
Under the Adjustable Option, a Policy with a FACE AMOUNT of $100,000
will produce a DEATH BENEFIT of $100,000 plus POLICY VALUE. For
example, a Policy with POLICY VALUE of $10,000 will produce a DEATH
BENEFIT of $110,000 ($100,000 + $10,000); POLICY VALUE of $25,000 will
produce a DEATH BENEFIT of $125,000 ($100,000 + $25,000); POLICY VALUE
of $50,000 will produce a DEATH BENEFIT of $150,000 ($100,000 +
$50,000). However, the DEATH BENEFIT must be at least 250% of the
POLICY VALUE. Therefore, if the POLICY VALUE is greater than $66,667,
250% of that amount will be the DEATH BENEFIT, which will be greater
than the FACE AMOUNT plus POLICY VALUE. In this example, each dollar of
POLICY VALUE above $66,667 will increase the DEATH BENEFIT by $2.50.
For example, if the POLICY VALUE is $70,000, the GUIDELINE MINIMUM SUM
INSURED will be $175,000 ($70,000 x 2.50); POLICY VALUE of $80,000 will
produce a GUIDELINE MINIMUM SUM INSURED of $200,000 ($80,000 x 2.50);
and POLICY VALUE of $90,000 will produce a GUIDELINE MINIMUM SUM INSURED
of $225,000 ($90,000 x 2.50).
Similarly, if POLICY VALUE exceeds $66,667, each dollar taken out of
POLICY VALUE will reduce the DEATH BENEFIT by $2.50. If, for example,
the POLICY VALUE is reduced from $80,000 to $70,000 because of partial
withdrawals, charges or negative investment performance, the DEATH
BENEFIT will be reduced from $200,000 to $175,000. If, however, the
product of the POLICY VALUE times the applicable percentage is less
than the FACE AMOUNT plus POLICY VALUE, then the DEATH BENEFIT will be
the current FACE AMOUNT plus POLICY VALUE.
The applicable percentage becomes lower as the Insured's AGE increases.
If the Insured's AGE in the above example were 50, the DEATH BENEFIT
must be at least 1.85 times the POLICY VALUE. The DEATH BENEFIT would
be the sum of the POLICY VALUE plus $100,000 unless the POLICY VALUE
exceeded $117,647 (rather than $66,667). Each dollar added to or
subtracted from the Policy would change the DEATH BENEFIT by $1.85.
CHANGE TO LEVEL OR ADJUSTABLE OPTION - You may change the DEATH BENEFIT
option once each Policy year by WRITTEN REQUEST. Changing options will
not require EVIDENCE OF INSURABILITY. The change takes effect on the
MONTHLY PROCESSING DATE on or following the date of receipt of the WRITTEN
REQUEST. We will impose no charge for changes in DEATH BENEFIT options.
If you change the Level Option to the Adjustable Option, we will decrease
the FACE AMOUNT to equal
- The DEATH BENEFIT MINUS
- The POLICY VALUE on the date of the change
The change may not be made if the FACE AMOUNT would fall below $40,000.
After the change from the Level Option to the Adjustable Option, future
monthly insurance protection charges may be higher or lower than if no
change in option had been made. However, the INSURANCE PROTECTION
AMOUNT will always equal the FACE AMOUNT unless the GUIDELINE MINIMUM
SUM INSURED applies.
If you change the Adjustable Option to the Level Option, we will
increase the FACE AMOUNT by the POLICY VALUE on the date of the change.
The DEATH BENEFIT will be the GREATER of
- The new FACE AMOUNT OR
- The GUIDELINE MINIMUM SUM INSURED
-24-
<PAGE>
After the change from the Adjustable Option to the Level Option, an
increase in POLICY VALUE will reduce the INSURANCE PROTECTION AMOUNT and
the monthly insurance protection charge. A decrease in POLICY VALUE
will increase the INSURANCE PROTECTION AMOUNT and the monthly insurance
protection charge.
A change in DEATH BENEFIT option may result in total payments exceeding
the then current maximum payment limitation under federal tax law. If
this occurs, we will pay the excess to you.
CHANGE IN FACE AMOUNT - You may increase or decrease the FACE AMOUNT by
WRITTEN REQUEST. An increase or decrease in the FACE AMOUNT takes
effect on the LATEST of the
- The MONTHLY PROCESSING DATE on or next following date of receipt
of your WRITTEN REQUEST OR
- The date of approval of your WRITTEN REQUEST, if EVIDENCE OF
INSURABILITY is required
INCREASES - You must submit with your WRITTEN REQUEST for an increase
SATISFACTORY EVIDENCE OF INSURABILITY. The consent of the Insured is
also required whenever the FACE AMOUNT is increased. An increase in
FACE AMOUNT may not be less than $10,000. You may not increase the FACE
AMOUNT after the Insured reaches AGE 80. A WRITTEN REQUEST for an increase
must include a payment if the SURRENDER VALUE is LESS than the SUM of
- $50 PLUS
- Two MINIMUM MONTHLY PAYMENTS
On the effective date of each increase in FACE AMOUNT, we will deduct a
transaction charge of $50 from POLICY VALUE for administrative costs.
We will also compute a surrender charge for the increase. An increase
in the FACE AMOUNT will increase the INSURANCE PROTECTION AMOUNT and,
therefore, the monthly insurance protection charges.
After increasing the FACE AMOUNT, you will have the right, during a free
look period, to have the increase cancelled. See "THE POLICY - Free
Look Period." If you exercise this right, we will credit to your Policy
the charges deducted for the increase, unless you request a refund of
these charges.
DECREASES - You may decrease the FACE AMOUNT by WRITTEN REQUEST. The
minimum amount for a decrease in FACE AMOUNT is $10,000. The minimum
FACE AMOUNT in force after a decrease is $40,000. We may limit the
decrease or return POLICY VALUE to you, as you choose, if the Policy
would not comply with the maximum payment limitation under federal tax
law. A return of POLICY VALUE may result in tax liability to you.
A decrease in the FACE AMOUNT will lower the INSURANCE PROTECTION AMOUNT
and, therefore, the monthly insurance protection charge. In computing
the monthly insurance protection charge, a decrease in the FACE AMOUNT
will reduce the FACE AMOUNT in INVERSE ORDER.
On a decrease in the FACE AMOUNT, we will deduct from the POLICY VALUE a
transaction charge of $50 and, if applicable, any surrender charge.
You may allocate the deduction to one SUB-ACCOUNT. If you make no
allocation, we will make a PRO-RATA allocation. We will reduce the
surrender charge by the amount of any surrender charge deducted.
POLICY VALUE - The POLICY VALUE is the total value of your Policy. It
is the SUM of
- Your accumulation in the FIXED ACCOUNT PLUS
- The value of your units in the SUB-ACCOUNTS
There is no guaranteed minimum POLICY VALUE. POLICY VALUE on any date
depends on variables that cannot be predetermined.
-25-
<PAGE>
Your POLICY VALUE is affected by the
- Frequency and amount of your NET PAYMENTS
- Interest credited in the FIXED ACCOUNT
- Investment performance of your SUB-ACCOUNTS
- Partial withdrawals
- Loans, loan repayments and loan interest paid or credited
- Charges and deductions under the Policy
- The DEATH BENEFIT option
COMPUTING POLICY VALUE - We compute the POLICY VALUE on the DATE OF
ISSUE and on each VALUATION DATE. On the DATE OF ISSUE, the POLICY
VALUE is
- The value of the amount allocated to the Money Market Fund, net of
mortality and expense risks, administrative charges and FUND
expenses (see "THE POLICY - Application for a Policy"), MINUS
- The monthly insurance protection charge due
On each VALUATION DATE after the DATE OF ISSUE, the POLICY VALUE is the
SUM of
- Accumulations in the FIXED ACCOUNT PLUS
- The SUM of the PRODUCTS of
- The number of UNITS in each SUB-ACCOUNT TIMES
- The value of a UNIT in each SUB-ACCOUNT on the VALUATION DATE
THE UNIT - We allocate each NET PAYMENT to the SUB-ACCOUNTS you
selected. We credit allocations to the SUB-ACCOUNTS as UNITS. UNITS
are credited separately for each SUB-ACCOUNT.
The number of UNITS of each SUB-ACCOUNT credited to the Policy is the
QUOTIENT of
- That part of the NET PAYMENT allocated to the sub-account DIVIDED BY
- The dollar value of a UNIT on the VALUATION DATE the payment is
received at our PRINCIPAL OFFICE
The number of UNITS will remain fixed unless changed by a split of UNIT
value, transfer, partial withdrawal or surrender. Also, each deduction
of charges from a SUB-ACCOUNT will result in cancellation of UNITS equal
in value to the amount deducted.
The dollar value of a UNIT of a SUB-ACCOUNT varies from VALUATION DATE
to VALUATION DATE based on the investment experience of that
SUB-ACCOUNT. This investment experience reflects the investment
performance, expenses and charges of the FUND in which the SUB-ACCOUNT
invests. The value of each UNIT was set at $1.00 on the FIRST VALUATION
DATE of each SUB-ACCOUNT. The value of a UNIT on any VALUATION DATE is
the PRODUCT of
- The dollar value of the UNIT on the preceding VALUATION DATE TIMES
-26-
<PAGE>
- The net investment factor
NET INVESTMENT FACTOR - The net investment factor measures the
investment performance of a SUB-ACCOUNT during the VALUATION PERIOD just
ended. The net investment factor for each SUB-ACCOUNT is 1.0000 PLUS
the QUOTIENT of
- The investment income of that SUB-ACCOUNT for the VALUATION
PERIOD, adjusted for realized and unrealized capital gains and
losses and for taxes during the VALUATION PERIOD, DIVIDED BY
- The value of that SUB-ACCOUNT'S assets at the beginning of the VALUATION
PERIOD MINUS
- The mortality and expense risk charge for each day in the
VALUATION PERIOD currently at an annual rate of 0.65% of the daily
net asset value of that SUB-ACCOUNT AND
- The administrative charge for each day in the VALUATION PERIOD at
an annual rate of 0.15% of the daily net asset value of that
SUB-ACCOUNT (only during the first ten Policy years)
The net investment factor may be greater or less than one.
PAYMENT OPTIONS - The NET DEATH BENEFIT payable may be paid in a single
sum or under one or more of the payment options then offered by SMA
LIFE. See "APPENDIX C - PAYMENT OPTIONS." These payment options also
are available at the FINAL PAYMENT DATE or if the Policy is surrendered.
If no election is made, we will pay the NET DEATH BENEFIT in a single sum.
OPTIONAL INSURANCE BENEFITS - You may add optional insurance benefits to
the Policy by rider, as described in "APPENDIX B - OPTIONAL BENEFITS."
The cost of optional insurance benefits becomes part of the monthly
insurance protection charge.
SURRENDER - You may surrender the Policy and receive its SURRENDER
VALUE. The SURRENDER VALUE is
- The POLICY VALUE MINUS
- Any OUTSTANDING LOAN and SURRENDER CHARGES
We will compute the SURRENDER VALUE on the VALUATION DATE on which we
receive the Policy with a WRITTEN REQUEST for surrender. We will deduct
a surrender charge if you surrender the Policy within 10 full Policy
years of the DATE OF ISSUE or increase in FACE AMOUNT. See "CHARGES AND
DEDUCTIONS - Surrender Charge."
The SURRENDER VALUE may be paid in a lump sum or under a payment option
then offered by us. See "APPENDIX C - PAYMENT OPTIONS." We will
normally pay the SURRENDER VALUE within seven days following our receipt
of WRITTEN REQUEST. We may delay benefit payments under the
circumstances described in "OTHER POLICY PROVISIONS - Delay of Benefit
Payments."
For important tax consequences of a surrender, see "FEDERAL TAX
CONSIDERATIONS."
PARTIAL WITHDRAWAL - After the first Policy year, you may withdraw part
of the SURRENDER VALUE of your Policy on WRITTEN REQUEST. Your WRITTEN
REQUEST must state the dollar amount you wish to receive. You may
allocate the amount withdrawn among the SUB-ACCOUNTS and the FIXED
ACCOUNT. If you do not provide allocation instructions, we will make a
PRO-RATA allocation. Each partial withdrawal must be at least $500.
Under the Level Option, the FACE AMOUNT is reduced by the partial
withdrawal. We will not allow a partial withdrawal if it would reduce
the Level Option FACE AMOUNT below $40,000.
On a partial withdrawal from a SUB-ACCOUNT, we will cancel the number of
UNITS equal in value to the amount withdrawn. The amount withdrawn will
be the amount you requested plus the partial
-27-
<PAGE>
withdrawal costs. See "CHARGES AND DEDUCTIONS - Partial Withdrawal Costs."
We will normally pay the partial withdrawal within seven days following our
receipt of WRITTEN REQUEST. We may delay payment as described in "OTHER
POLICY PROVISIONS - Delay of Benefit Payments."
For important tax consequences of partial withdrawals, see "FEDERAL TAX
CONSIDERATIONS."
PAID-UP INSURANCE OPTION - On WRITTEN REQUEST, you may elect life
insurance coverage, usually for a reduced amount, for the life of the
Insured with no further PREMIUMS due. The PAID-UP INSURANCE will be the
amount that the SURRENDER VALUE can purchase for a net single premium at
the Insured's age and UNDERWRITING CLASS on the date this option is
elected. If the SURRENDER VALUE exceeds the net single premium, we will
pay the excess to you. The net single premium is based on the
Commissioners 1980 Standard Ordinary Mortality Tables, Smoker or Non-
Smoker (Table B for unisex policies) with increases in the tables for
non-standard risks. Interest will not be less than 4.5%.
IF THE PAID-UP INSURANCE OPTION IS ELECTED, THE FOLLOWING POLICYOWNER
RIGHTS AND BENEFITS WILL BE AFFECTED:
- As described above, the PAID-UP INSURANCE benefit will be computed
differently from the NET DEATH BENEFIT and the DEATH BENEFIT
options will not apply
- We will not allow transfers of POLICY VALUE from the FIXED ACCOUNT
back to the VARIABLE ACCOUNT
- You may not make further payments
- You may not increase or decrease the FACE AMOUNT or make partial
withdrawals
- Riders will continue only with our consent
You may, after electing PAID-UP INSURANCE, surrender the Policy for its
net cash value. The guaranteed cash value is the net single premium for
the PAID-UP INSURANCE at the Insured's attained age. The net cash value
is the cash value less any OUTSTANDING LOAN. We will transfer the
POLICY VALUE in the VARIABLE ACCOUNT to the FIXED ACCOUNT on the date we
receive WRITTEN REQUEST to elect the option.
On election of PAID-UP INSURANCE, the Policy often will become a
modified endowment contract. If a Policy becomes a modified endowment
contract, Policy loans, partial withdrawals or surrender will receive
unfavorable federal tax treatment. See "FEDERAL TAX CONSIDERATIONS -
Modified Endowment Contracts."
CHARGES AND DEDUCTIONS
The following charges will apply to your Policy under the circumstances
described. Some of these charges apply throughout the Policy's
duration. Other charges apply only if you choose options under the
Policy.
No surrender charges, partial withdrawal charges or front-end sales
loads are imposed, and no commissions are paid where the POLICYOWNER as
of the date of application is within the following class of individuals:
All employees of State Mutual and its affiliates and subsidiaries
located at State Mutual's home office (or at off-site locations if such
employees are on State Mutual's home office payroll); all employees and
registered representatives of any broker-dealer that has entered into a
sales agreement with us or Allmerica Investments, Inc. to sell the
Policies and any spouses of the above persons or any children of the
above persons.
-28-
<PAGE>
PAYMENT EXPENSE CHARGE - Currently, we deduct 4.0% of each payment as a
payment expense charge. This charge includes a
- Current premium tax deduction of 2.5%
- Current deferred acquisition costs ("DAC tax") deduction of 1.0%
- Front-end sales load of 0.5%
The 2.5% premium tax deduction approximates our average expenses for
state and local premium taxes. Premium taxes vary, ranging from zero to
more than 4.0%. The premium tax deduction is made whether or not any
premium tax applies. The deduction may be higher or lower than the
premium tax imposed. However, we do not expect to make a profit from
this deduction. The 1.0% DAC tax deduction helps reimburse us for
approximate expenses incurred from federal taxes for deferred
acquisition costs ("DAC taxes") of the Policies. We deduct the 0.5%
front-end sales load from each payment partially to compensate us for
Policy sales expenses.
We reserve the right to increase or decrease the premium tax deduction
or DAC tax deduction to reflect changes in our expenses for premium
taxes or DAC taxes. The 0.5% front-end sales load will not change, even
if sales expenses change. The DAC tax deduction and front-end sales
load are factors we must use when computing the maximum sales load we
can charge under SEC rules.
MONTHLY INSURANCE PROTECTION CHARGES - Before the FINAL PAYMENT DATE, we
will deduct a monthly insurance protection charge from your POLICY
VALUE. This charge is the cost for insurance protection under the
Policy, including optional insurance benefits provided by rider.
We deduct the monthly insurance protection charge on each MONTHLY
PROCESSING DATE starting with the DATE OF ISSUE. You may allocate
monthly insurance protection charges to one SUB-ACCOUNT. If you make no
allocation, we will make a PRO-RATA allocation. If the SUB-ACCOUNT you
chose does not have sufficient funds to cover the monthly insurance
protection charges, we will make a PRO-RATA allocation. We will deduct
no monthly insurance protection charges on or after the FINAL PAYMENT
DATE.
COMPUTING MONTHLY INSURANCE PROTECTION CHARGES - We designed the monthly
insurance protection charge to compensate us for the anticipated cost of
paying NET DEATH BENEFITs under the Policies. The charge is computed
monthly for the initial FACE AMOUNT and for each increase in FACE
AMOUNT. Monthly insurance protection charges can vary.
For the initial FACE AMOUNT under the Level Option, the monthly
insurance protection charge is the PRODUCT of
- The insurance protection rate TIMES
- The DIFFERENCE between
- The initial FACE AMOUNT AND
- The POLICY VALUE (MINUS any rider charges) at the beginning of
the Policy month
Under the Level Option, the monthly insurance protection charge
decreases as the POLICY VALUE increases if the GUIDELINE MINIMUM SUM
INSURED is not in effect.
For the initial FACE AMOUNT under the Adjustable Option, the monthly
insurance protection charge is the PRODUCT of
- The insurance protection rate TIMES
- The initial FACE AMOUNT
-29-
<PAGE>
For each increase in FACE AMOUNT under the Level Option, the monthly
insurance protection charge is the PRODUCT of
- The insurance protection rate for the increase TIMES
- The DIFFERENCE between
- The increase in FACE AMOUNT AND
- Any POLICY VALUE (MINUS any rider charges) GREATER than the
initial FACE AMOUNT at the beginning of the Policy month and
not allocated to a prior increase
For each increase in FACE AMOUNT under the Adjustable Option, the
monthly insurance protection charge is the PRODUCT of
- The insurance protection rate for the increase TIMES
- The increase in FACE AMOUNT
If the GUIDELINE MINIMUM SUM INSURED is in effect under either Option,
we will compute a monthly insurance protection charge for that part of
the DEATH BENEFIT subject to the GUIDELINE MINIMUM SUM INSURED that
exceeds the current DEATH BENEFIT not subject to the GUIDELINE MINIMUM
SUM INSURED.
This charge is the PRODUCT of
- The insurance protection rate for the initial FACE AMOUNT TIMES
- The DIFFERENCE between
- The GUIDELINE MINIMUM SUM INSURED AND
- The GREATER of
- The FACE AMOUNT OR the POLICY VALUE, if you selected the
Level Option OR
- the FACE AMOUNT PLUS the POLICY VALUE, if you selected the
Adjustable Option
We will adjust the monthly insurance protection charge for any decreases
in FACE AMOUNT. See "THE POLICY - Change In FACE AMOUNT: Decreases."
INSURANCE PROTECTION RATES - We base insurance protection rates on the
- Male, female or blended unisex rate table
- AGE and UNDERWRITING CLASS of the Insured
- Effective date of an increase or date of any rider
For unisex Policies, sex-distinct rates do not apply. For the initial
FACE AMOUNT, the insurance protection rates are based on your AGE at the
beginning of each Policy year. For an increase in FACE AMOUNT or for a
rider, the insurance protection rates are based on your AGE on each
anniversary of the effective date of the increase or rider. We base the
current insurance protection rates on our expectations as to future
mortality experience. Rates will not, however, be greater than the
guaranteed insurance protection rates set forth in the Policy. These
guaranteed rates are based on the Commissioners 1980 Standard Ordinary
Mortality Tables, Smoker or Non-Smoker (Mortality Table B for unisex
Policies) and the Insured's sex and AGE. The Tables used for this
purpose set forth different mortality estimates for males and females
and for smokers and non-smokers. Any change in the insurance protection
rates will apply to all Insureds of the same AGE, sex and
-30-
<PAGE>
UNDERWRITING CLASS whose Policies have been in force for the same period.
The UNDERWRITING CLASS of an Insured will affect the insurance
protection rates. We currently place Insureds into preferred
UNDERWRITING CLASSES, standard UNDERWRITING CLASSES and non-standard
UNDERWRITING CLASSES. The UNDERWRITING CLASSES are also divided into
two categories: smokers and non-smokers. We will place an Insured
under AGE 18 at the DATE OF ISSUE in a standard or non-standard
UNDERWRITING CLASS. We will then classify the Insured as a smoker at
AGE 18 unless we receive satisfactory evidence that the Insured is a
non-smoker. Prior to the Insured's AGE 18, we will give you notice of
how the Insured may be classified as a non-smoker.
We compute the insurance protection rate separately for the initial FACE
AMOUNT and for any increase in FACE AMOUNT. However, if the Insured's
UNDERWRITING CLASS improves on an increase, the lower insurance
protection rate will apply to the total FACE AMOUNT.
CHARGES AGAINST OR REFLECTED IN THE ASSETS OF THE VARIABLE ACCOUNT - We
assess each SUB-ACCOUNT with a charge for mortality and expense risks we
assume and, during the first ten Policy years, a charge for
administrative expenses of the VARIABLE ACCOUNT. FUND EXPENSES are also
reflected in the VARIABLE ACCOUNT.
ADMINISTRATIVE CHARGE - During the first ten Policy years, we impose a
daily charge at an annual rate of 0.15% of the average daily net asset
value in each SUB-ACCOUNT. The charge is to help reimburse us for
administrative expenses incurred in the administration of the VARIABLE
ACCOUNT and the SUB-ACCOUNTS. It is not expected to be a source of
profit. The administrative functions and expenses we assume for the
VARIABLE ACCOUNT and the SUB-ACCOUNTS include
- Clerical, accounting, actuarial and legal services
- Rent, postage, telephone, office equipment and supplies,
- The expenses of preparing and printing registration statements and
prospectuses (not allocable to sales expense)
- Regulatory filing fees and other fees
We do not assess the administrative charge after the tenth Policy year.
MORTALITY AND EXPENSE RISK CHARGE - We impose a daily charge at a
current annual rate of 0.65% of the average daily net asset value of
each SUB-ACCOUNT. This charge compensates us for assuming mortality and
expense risks for variable interests in the Policies. Our Board of
Directors may increase this charge, subject to state and federal law, to
an annual rate no greater than 0.80%.
The mortality risk we assume is that Insureds may live for a shorter
time than anticipated. If this happens, we will pay more NET DEATH
BENEFITS than anticipated. The expense risk we assume is that the
expenses incurred in issuing and administering the Policies will exceed
those compensated by the administrative charges in the Policies. If the
charge for mortality and expense risks is not sufficient to cover
mortality experience and expenses, we will absorb the losses. If the
charge turns out to be higher than mortality and expense risk expenses,
the difference will be a profit to us. If the charge provides us with a
profit, the profit will be available for our use to pay distribution,
sales and other expenses.
FUND EXPENSES - The value of the UNITS of the SUB-ACCOUNTs will reflect
the investment advisory fee and other expenses of the FUNDS whose shares
the SUB-ACCOUNTS purchase. The prospectuses and statements of
additional information of the Trust, VIPF and T. Rowe contain more
information concerning the fees and expenses.
No charges are currently made against the SUB-ACCOUNTS for federal or
state income taxes. Should income taxes be imposed, we may make
deductions from the SUB-ACCOUNTS to pay the taxes. See "FEDERAL TAX
CONSIDERATIONS."
-31-
<PAGE>
SURRENDER CHARGE - The Policy's contingent surrender charge is a
deferred administrative charge and a deferred sales charge. The
deferred administrative charge is designed to reimburse us for the
administrative costs of product research and development, underwriting,
Policy administration and surrendering the Policy. The deferred sales
charge compensates us for distribution expenses, including commissions
to our representatives, advertising and the printing of prospectuses and
sales literature.
We compute the surrender charge on DATE OF ISSUE and on any increase in
FACE AMOUNT. The surrender charge applies for ten years from DATE OF
ISSUE or increase in FACE AMOUNT. We impose the surrender charge only
if, during its duration, you request a full surrender or a decrease in
FACE AMOUNT.
The maximum surrender charge includes a
- Deferred administrative charge of $8.50 per thousand dollars of
the initial FACE AMOUNT or increase
- Deferred sales charge of 28.5% of payments received or associated
with the increase up to the GUIDELINE ANNUAL PREMIUM for the
increase
The maximum surrender charge will not exceed a specified amount per
$1,000 of initial FACE AMOUNT or increase because of state-imposed
limits. The maximum surrender charge is level for the first 24 Policy
months and then reduces by 1/96th for the next 96 Policy months,
reaching zero at the end of ten Policy years.
Payments associated with an increase equal that part of the payments
made on or after the increase that are allocated to the increase. We
allocate payments based on relative GUIDELINE ANNUAL PREMIUM payments.
For example, assume that the GUIDELINE ANNUAL PREMIUM is $1,500 before
an increase and is $2,000 with the increase. The POLICY VALUE on the
effective date of the increase would be allocated 75% ($1,500/$2,000) to
the initial FACE AMOUNT and 25% to the increase. All future payments
would also be allocated 75% to the initial FACE AMOUNT and 25% to the
increase.
If more than one surrender charge is in effect because of one or more
increases in FACE AMOUNT, we will apply the surrender charges in inverse
order. We will apply surrender and partial withdrawal charges
(described below) in this order:
- First, the most recent increase
- Second, the next most recent increases, and so on
- Third, the initial FACE AMOUNT.
A surrender charge may be deducted on a decrease in the FACE AMOUNT. On
a decrease, the surrender charge deducted is a fraction of the charge
that would apply to a full surrender. The fraction is the PRODUCT of
- The decrease DIVIDED by the current FACE AMOUNT TIMES
- the surrender charge
Where a decrease causes a partial reduction in an increase or in the
initial FACE AMOUNT, we will deduct a proportionate share of the
surrender charge for that increase or for the initial FACE AMOUNT.
See "APPENDIX E - COMPUTING MAXIMUM SURRENDER CHARGES" for examples
of how we compute the maximum surrender charge.
PARTIAL WITHDRAWAL COSTS - For each partial withdrawal, we deduct a
transaction fee of
-32-
<PAGE>
2.0% of the amount withdrawn, not to exceed $25. This fee is intended
to reimburse us for the cost of processing the withdrawal.
A partial withdrawal charge may also be deducted from POLICY VALUE.
However, in any Policy year, you may withdraw, without a partial
withdrawal charge, up to
- 10% of the POLICY VALUE MINUS
- The total of any prior free withdrawals in the same Policy year
("Free 10% Withdrawal")
The right to make the Free 10% Withdrawal is not cumulative from Policy
year to Policy year. For example, if only 8% of POLICY VALUE were
withdrawn in the second Policy year, the amount you could withdraw in
future Policy years would not be increased by the amount you did not
withdraw in the second Policy year.
We impose the partial withdrawal charge on any withdrawal greater than
the Free 10% Withdrawal. The charge is 5.0% of the excess withdrawal up
to the surrender charge. If no surrender charge applies on withdrawal,
no partial withdrawal charge will apply. We will reduce the Policy's
outstanding surrender charge by the partial withdrawal charge deducted,
proportionately reducing the deferred sales and administrative charges.
The partial withdrawal charge deducted will decrease
existing surrender charges in INVERSE ORDER.
TRANSFER CHARGES - Currently, the first 12 transfers in a Policy year
are free. We reserve the right to limit the number of free transfers in
a Policy year to six. After that, we will deduct a $10 transfer charge
from amounts transferred in that Policy year. We reserve the right to
increase the charge, but it will never exceed $25. This charge
reimburses us for the administrative costs of processing the transfer.
If you apply for automatic transfers, the first automatic transfer
counts as one transfer. Each future automatic transfer is without
charge and does not reduce the remaining number of transfers that may be
made without charge.
Each of the following transfers of POLICY VALUE from the SUB-ACCOUNTS to
the FIXED ACCOUNT is free and does not count as one of the 12 free
transfers in a Policy year:
- A conversion within the first 24 months from DATE OF ISSUE or
increase
- A transfer to the FIXED ACCOUNT to secure a loan
- A reallocation of POLICY VALUE within 20 days of the DATE OF ISSUE
CHARGE FOR CHANGE IN FACE AMOUNT - For each increase or decrease in FACE
AMOUNT, we will deduct a transaction charge of $50 from POLICY VALUE to
reimburse us for the administrative costs of the change.
OTHER ADMINISTRATIVE CHARGES - We reserve the right to charge for other
administrative costs we incur. While there are no current charges for
these costs, we may impose a charge for
- Changing NET PAYMENT allocation instructions
- Changing the allocation of monthly insurance protection
charges among the various SUB-ACCOUNTS and the FIXED ACCOUNT
- Providing a projection of values
We do not currently charge for these costs. Any future charge is
guaranteed not to exceed $25 per transaction.
-33-
<PAGE>
POLICY LOANS
You may borrow money secured by your POLICY VALUE. The total amount you
may borrow, including any OUTSTANDING LOAN, is the LOAN VALUE. In the
first Policy year, the LOAN VALUE is 75% of
- The POLICY VALUE MINUS
- Any surrender charges, unpaid monthly insurance protection charges
and OUTSTANDING LOAN interest through the end of the Policy year
After the first Policy Year, the LOAN VALUE is 90% of
- The POLICY VALUE MINUS
- Any surrender charges
There is no minimum loan. We will usually pay the loan within seven
days after we receive the WRITTEN REQUEST. We may delay the payment of
loans as stated in "OTHER POLICY PROVISIONS - Delay of Benefit
Payments."
We will allocate the loan among the SUB-ACCOUNTS and the FIXED ACCOUNT
according to your instructions. If you do not make an allocation, we
will make a PRO-RATA allocation. We will transfer POLICY VALUE in each
SUB-ACCOUNT equal to the Policy loan to the FIXED ACCOUNT. We will not
count this transfer as a transfer subject to the transfer charge.
POLICY VALUE equal to the OUTSTANDING LOAN will earn monthly interest in
the FIXED ACCOUNT at an annual rate of at least 6.0% (8.0% for preferred
loans). NO OTHER INTEREST WILL BE CREDITED.
PREFERRED LOAN OPTION - This option is available to you upon written
request after the first Policy year. It may be revoked by you at any
time.
The preferred loan option is available during Policy years 2-10 only if
your POLICY VALUE, minus the surrender charge, is $50,000 or more. The
option applies to up to 10% of this amount. After the 10th Policy
year, the preferred loan option is available on all loans or on all or a
part of the LOAN VALUE as you request. The guaranteed annual interest
rate credited to the POLICY VALUE securing a preferred loan will be 8%.
There is some uncertainty as to the tax treatment of preferred loans.
Consult a qualified tax adviser (and see "FEDERAL TAX CONSIDERATIONS").
LOAN INTEREST CHARGED - Interest accrues daily at the annual rate of
8.0%. Interest is due and payable in arrears at the end of each Policy
year or for as short a period as the loan may exist. Interest not paid
when due will be added to the loan amount and bears interest at the same
rate.
REPAYMENT OF OUTSTANDING LOAN - You may pay any loans before Policy
lapse. We will allocate that part of the POLICY VALUE in the FIXED
ACCOUNT that secured a repaid loan to the SUB-ACCOUNTS and FIXED ACCOUNT
according to your instructions. If you do not make a repayment
allocation, we will allocate POLICY VALUE according to your most recent
payment allocation instructions. However, loan repayments allocated to
the VARIABLE ACCOUNT cannot exceed POLICY VALUE previously transferred
from the VARIABLE ACCOUNT to secure the OUTSTANDING LOAN.
If the OUTSTANDING LOAN exceeds the POLICY VALUE less the surrender
charge, the Policy will terminate. We will mail a notice of termination
to the last known address of you and any assignee. If you do not make
sufficient payment within 62 days after this notice is mailed, the
Policy will terminate with no value. See "POLICY TERMINATION AND
REINSTATEMENT."
EFFECT OF POLICY LOANS - Policy loans will permanently affect the POLICY
VALUE and SURRENDER
-34-
<PAGE>
VALUE, and may permanently affect the DEATH BENEFIT.
The effect could be favorable or unfavorable, depending on whether the
investment performance of the SUB-ACCOUNTs is less than or greater than
the interest credited to the POLICY VALUE in the FIXED ACCOUNT that
secures the loan.
We will deduct any OUTSTANDING LOAN from the proceeds payable when the
Insured dies or from a surrender.
POLICY TERMINATION AND REINSTATEMENT
TERMINATION - The Policy will terminate if
- SURRENDER VALUE is insufficient to cover the next monthly
insurance protection charge plus loan interest accrued OR
- OUTSTANDING LOAN exceeds the POLICY VALUE less surrender charges
If one of these situations occurs, the Policy will be in default. You
will then have a grace period of 62 days, measured from the date of
default, to pay a PREMIUM sufficient to prevent termination. On the date
of default, we will send a notice to you and to any assignee of record.
The notice will state the PREMIUM due and the date by which it must be
paid.
Failure to pay a sufficient PREMIUM within the grace period will result
in Policy termination. If the Insured dies during the grace period, we
will deduct from the NET DEATH BENEFIT any monthly insurance protection
charges due and unpaid through the Policy month in which the Insured
dies and any other overdue charge.
During the first 48 Policy months following the DATE OF ISSUE or an
increase in the FACE AMOUNT, a guarantee may apply to prevent the Policy
from terminating because of insufficient surrender value. This
guarantee applies if, during this period, you pay PREMIUMS that, when
reduced by partial withdrawals and partial withdrawal costs, equal or
exceed specified MINIMUM MONTHLY PAYMENTS. The specified MINIMUM
MONTHLY PAYMENTS are based on the number of months the Policy, increase
in FACE AMOUNT or POLICY CHANGE that causes a change in the MINIMUM
MONTHLY PAYMENT has been in force. A POLICY CHANGE that causes a change
in the MINIMUM MONTHLY PAYMENT is a change in the FACE AMOUNT or the
addition or deletion of a rider. Except for the first 48 months after
the DATE OF ISSUE or the EFFECTIVE DATE of an increase, payments equal
to the MINIMUM MONTHLY PAYMENT do not guarantee that the Policy will
remain in force.
REINSTATEMENT - A terminated Policy may be reinstated within three years
of the date of default and before the FINAL PAYMENT DATE. The
reinstatement takes effect on the MONTHLY PROCESSING DATE following the
date you submit to us
- Written application for reinstatement
- EVIDENCE OF INSURABILITY showing that the Insured is insurable
according to our underwriting rules AND
- A payment that, after the deduction of the payment expense charge,
is large enough to cover the minimum amount payable
Policies which have been surrendered may not be reinstated.
MINIMUM AMOUNT PAYABLE - If reinstatement is requested when less than 48
monthly insurance protection charges have been paid since the DATE OF
ISSUE or increase in the FACE AMOUNT, you must pay the LESSER of:
- The MINIMUM MONTHLY PAYMENT for the three months beginning on the
date of reinstatement OR
-35-
<PAGE>
- The SUM of
- The amount by which the surrender charge on the date of
reinstatement exceeds the POLICY VALUE on the date of default
PLUS
- Monthly insurance protection charges for the three months
beginning on the date of reinstatement
If you request reinstatement more than 48 MONTHLY PROCESSING DATES from
the DATE OF ISSUE or increase in the FACE AMOUNT, you must pay the sum
shown above without regard to the three months of MINIMUM MONTHLY
PAYMENTS.
SURRENDER CHARGE - The surrender charge on the date of reinstatement is
the surrender charge that would have been in effect had the Policy
remained in force from the DATE OF ISSUE.
POLICY VALUE ON REINSTATEMENT - The POLICY VALUE on the date of
reinstatement is:
- The NET PAYMENT made to reinstate the Policy and interest earned
from the date the payment was received at our PRINCIPAL OFFICE
PLUS
- The POLICY VALUE less any OUTSTANDING LOAN on the date of default
(not to exceed the surrender charge on the date of reinstatement)
MINUS
- The monthly insurance protection charges due on the date of
reinstatement
You may reinstate any OUTSTANDING LOAN.
OTHER POLICY PROVISIONS
POLICYOWNER - The POLICYOWNER is the Insured unless another POLICYOWNER
has been named in the application or enrollment form. As POLICYOWNER,
you are entitled to exercise all rights under your Policy while the
Insured is alive, with the consent of any irrevocable BENEFICIARY. The
consent of the Insured is required whenever the FACE AMOUNT is
increased.
BENEFICIARY -The BENEFICIARY is the person or persons to whom the NET
DEATH BENEFIT is payable on the Insured's death. Unless otherwise
stated in the Policy, the BENEFICIARY has no rights in the Policy before
the Insured dies. While the Insured is alive, you may change the
BENEFICIARY, unless you have declared the BENEFICIARY to be irrevocable.
If no BENEFICIARY is alive when the Insured dies, the owner (or the
owner's estate) will be the BENEFICIARY. If more than one BENEFICIARY
is alive when the Insured dies, we will pay each BENEFICIARY in equal
shares, unless you have chosen otherwise. Where there is more than one
BENEFICIARY, the interest of a BENEFICIARY who dies before the Insured
will pass to surviving BENEFICIARIES proportionally.
ASSIGNMENT - You may assign a Policy as collateral or make an absolute
assignment. All Policy rights will be transferred as to the assignee's
interest. The Consent of the assignee may be required to make changes
in payment allocations, make transfers or to exercise other rights under
the Policy. We are not bound by an assignment or release thereof,
unless it is in writing and recorded at our PRINCIPAL OFFICE. When
recorded, the assignment will take effect on the date the WRITTEN
REQUEST was signed. Any rights the assignment creates will be subject
to any payments we made or actions we took before the assignment is
recorded. We are not responsible for determining the validity of any
assignment or release.
The following Policy provisions may vary by state.
LIMIT ON RIGHT TO CHALLENGE POLICY - We cannot challenge the validity of
your Policy if the Insured was alive after the Policy had been in force
for two years from the DATE OF ISSUE. Also, we cannot challenge the
validity of any increase in the FACE AMOUNT if the Insured was alive
after the increase was in force for two years from the effective date of
the increase.
-36-
<PAGE>
SUICIDE - The NET DEATH BENEFIT will not be paid if the Insured commits
suicide, while sane or insane, within two years from the DATE OF ISSUE.
Instead, we will pay the BENEFICIARY all payments made for the Policy,
without interest, less any OUTSTANDING LOAN and partial withdrawals. If
the Insured commits suicide, while sane or insane, within two years from
any increase in FACE AMOUNT, we will not recognize the increase. We
will pay to the BENEFICIARY the monthly insurance protection charges
paid for the increase.
MISSTATEMENT OF AGE OR SEX - If the Insured's AGE or sex is not
correctly stated in the Policy application or enrollment form, we will
adjust benefits under the Policy to reflect the correct AGE and sex.
The adjusted benefit will be the benefit that the most recent monthly
insurance protection charge would have purchased for the correct AGE and
sex. We will not reduce the DEATH BENEFIT to less than the GUIDELINE
MINIMUM SUM INSURED. For a unisex Policy, there is no adjusted benefit
for misstatement of sex.
DELAY OF PAYMENTS - Amounts payable from the VARIABLE ACCOUNT for
surrender, partial withdrawals, NET DEATH BENEFIT, Policy loans and
transfers may be postponed whenever
- The New York Stock Exchange is closed other than customary weekend
and holiday closings
- The SEC restricts trading on the New York Stock Exchange
- The SEC determines an emergency exists, so that disposal of
securities is not reasonably practicable or it is not reasonably
practicable to compute the value of the VARIABLE ACCOUNT'S net
assets
We may delay paying any amounts derived from payments you made by check
until the check has cleared your bank.
We reserve the right to defer amounts payable from the FIXED ACCOUNT.
This delay may not exceed six months.
-37-
<PAGE>
FEDERAL TAX CONSIDERATIONS
The following summary of federal tax considerations is based on our
understanding of the present federal income tax laws as they are
currently interpreted. Legislation may be proposed which, if passed,
could adversely and possibly retroactively affect the taxation of the
Policies. This summary is not exhaustive, does not purport to cover all
situations, and is not intended as tax advice. We do not address tax
provisions that may apply if the POLICYOWNER is a corporation or the
Trustee of an employee benefit plan. You should consult a qualified tax
adviser to apply the law to your circumstances.
SMA LIFE AND THE VARIABLE ACCOUNT - SMA LIFE is taxed as a life
insurance company under Subchapter L of the Internal Revenue Code. We
file a consolidated tax return with our parent and affiliates. We do
not currently charge for any income tax on the earnings or realized
capital gains in the VARIABLE ACCOUNT. We do not currently charge for
federal income taxes respecting the VARIABLE ACCOUNT. A charge may
apply in the future for any federal income taxes we incur. The charge
may become necessary, for example, if there is a change in our tax
status. Any charge would be designed to cover the federal income taxes
on the investment results of the VARIABLE ACCOUNT.
Under current laws, SMA LIFE may incur state and local taxes besides
premium taxes. These taxes are not currently significant. If there is
a material change in these taxes affecting the VARIABLE ACCOUNT, we may
charge for taxes paid or for tax reserves.
TAXATION OF THE POLICIES - We believe that the Policies described in
this prospectus are life insurance contracts under Section 7702 of the
Internal Revenue Code. Section 7702 affects the taxation of life
insurance contracts and places limits on the relationship of the POLICY
VALUE to the DEATH BENEFIT. As life insurance contracts, the NET DEATH
BENEFITS of the Policies are excludable from the gross income of the
BENEFICIARIES. Also, any increase in POLICY VALUE is not taxable until
received by you or your designee (but see "MODIFIED ENDOWMENT
POLICIES").
Federal tax law requires that the investment of each SUB-ACCOUNT funding
the Policies is adequately diversified according to Treasury
regulations. Although we do not have control over the investments of
the FUNDS, we believe that the FUNDS currently meet the Treasury's
diversification requirements. We will monitor continued compliance with
these requirements.
The Treasury Department has announced that previous regulations on
diversification do not provide guidance concerning the extent to which
policyowners may direct their investments to divisions of a separate
investment account. Regulations may provide guidance in the future.
The Policies or our administrative rules may be modified as necessary to
prevent a POLICYOWNER from being considered the owner of the assets of
the VARIABLE ACCOUNT.
We believe that non-preferred loans received under a Policy will be
treated as indebtedness of the POLICYOWNER for federal income tax
purposes. Under current law, these loans will not constitute income for
the POLICYOWNER while the Policy is in force (but see "MODIFIED
ENDOWMENT POLICIES"). However, there is a risk that a preferred loan
may be characterized by the IRS as a withdrawal and taxed accordingly.
At the present time, the IRS has not issued any guidance on whether
loans with the attributes of a preferred loan should be treated
differently than a non-preferred loan. This lack of specific guidance
makes the tax treatment of preferred loans uncertain. In the event IRS
guidelines are issued in the future, you may revoke your request for a
preferred loan. Section 264 of the Internal Revenue Code restricts the
deduction of interest on Policy loans. Consumer interest paid on Policy
loans under an individually owned Policy is not tax deductible. No tax
deduction for interest is allowed on Policy loans exceeding $50,000 in
aggregate, if the Insured is an officer or employee of, or is
financially interested in, any business carried on by the taxpayer.
A surrender, partial withdrawal, change in the DEATH BENEFIT option,
change in the FACE AMOUNT, lapse with Policy loan outstanding, or
assignment of the Policy may have tax consequences. Within the first
fifteen Policy years, a distribution of cash required under Section 7702
of the Internal Revenue Code because of a reduction of benefits under
the Policy will be taxed to the POLICYOWNER as ordinary
- 38 -
<PAGE>
income respecting any investment earnings. Federal, state and local income,
estate, inheritance, and other tax consequences of ownership or receipt of
Policy proceeds depend on the circumstances of each Insured, POLICYOWNER or
BENEFICIARY.
MODIFIED ENDOWMENT POLICIES - The Technical and Miscellaneous Revenue
Act of 1988 ("Act") adversely affects the tax treatment of distributions
under so-called "modified endowment contracts." Under the Act, a Policy
may be considered a "modified endowment contract" if
- Total payments during the first seven Policy years EXCEED
- The total net level payments payable had the Policy provided for
paid-up future benefits after making seven level payments. If the
Policy is considered a modified endowment contract, distributions
(including Policy loans, partial withdrawals, surrenders and
assignments) will be taxed on an "income-first" basis and
includible in gross income to the extent that the SURRENDER VALUE
exceeds the POLICYOWNER'S investment in the Policy. Any other
amounts will be treated as a return of capital up to the
POLICYOWNER'S basis in the Policy. A 10% tax is imposed on that
part of any distribution that is includible in income, unless the
distribution is
- Made after the taxpayer becomes disabled,
- Made after the taxpayer attains age 59 1/2, OR
- Part of a series of substantially equal periodic payments for the
taxpayer's life or life expectancy or joint life expectancies of
the taxpayer and beneficiary
All modified endowment contracts issued by the same insurance company to
the same policyowner during any 12-month period will be treated as a
single modified endowment contract in computing taxable distributions.
Currently, we review each Policy when payments are received to determine
if the payment will render the Policy a modified endowment contract. If
a payment would so render the Policy, we will notify you of the option
of requesting a refund of the excess payment. The refund process must
be completed within 60 days after the Policy anniversary or the Policy
will be permanently classified as a modified endowment contract.
VOTING RIGHTS
Where the law requires, we will vote FUND shares that each SUB-ACCOUNT
holds according to instructions received from POLICYOWNERS with POLICY
VALUE in the SUB-ACCOUNT. If, under the 1940 Act or its rules, we may
vote shares in our own right, whether or not the shares relate to the
Policies, we reserve the right to do so.
We will provide each person having a voting interest in a FUND with
proxy materials and voting instructions. We will vote shares held in
each SUB-ACCOUNT for which no timely instructions are received in
proportion to all instructions received for the SUB-ACCOUNT. We will
also vote in the same proportion our shares held in the VARIABLE ACCOUNT
that do not relate to the Policies.
We will compute the number of votes that a POLICYOWNER has the right to
instruct on the record date established for the FUND. This number is
the QUOTIENT of
- Each POLICYOWNER'S POLICY VALUE in the SUB-ACCOUNT DIVIDED BY
- The net asset value of one share in the FUND in which the assets
of the SUB-ACCOUNT are invested
We may disregard voting instructions POLICYOWNERS or the Trustees
initiate in favor of any change in the investment policies or in any
investment adviser or principal underwriter. Our disapproval
- 39-
<PAGE>
of any change must be reasonable. A change in investment policies or investment
adviser must be based on a good faith determination that the change
would be contrary to state law or otherwise is improper under the
objectives and purposes of the FUNDS. If we do disregard voting
instructions, we will include a summary of and reasons for that action
in the next report to POLICYOWNERS.
- 40 -
<PAGE>
DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
Name and Position Principal Occupation(s) During Past Five Years
- -------------------------------- ----------------------------------------------
<S> <C>
Barry Z. Aframe Vice President and Counsel, State Mutual
Vice President and Counsel
Abigail M. Armstrong Counsel, State Mutual
Secretary and Counsel
Richard J. Baker Vice President and Secretary, State Mutual
Director and Vice President
Whitworth F. Bird, Jr., M.D. Vice President and Medical Director, State
Vice President and Mutual, since 1990; Vice President and Medical
Medical Director Director, Phoenix Mutual Life Insurance
Company, 1988 to 1990
Alan R. Boyer Vice President, State Mutual, since 1991;
Vice President Second Vice President 1989 to 1991
Mark R. Colborn Vice President and Controller, State Mutual
Vice President and Controller
Lisa M. Coleman Vice President, State Mutual, since 1994;
Vice President Deputy Manager, Brown Brothers Harriman and
Company, 1989 to 1994
Dix F. Davis Vice President, State Mutual
Vice President
Bruce A. Emond Vice President, State Mutual, since 1994; Second
Vice President Vice President, State Mutual 1984 to 1993
Edward W. Ford Vice President, State Mutual, since 1993; Senior
Vice President Vice President, Plymouth Rock Assurance
Corporation, 1990 to 1993
Bruce H. Freedman Vice President, State Mutual, since 1992; Principal,
Vice President Aldrich, Eastman and Waltch, L.P., 1985 to 1991
</TABLE>
- 41 -
<PAGE>
<TABLE>
<CAPTION>
Name and Position Principal Occupation(s) During Past Five Years
- -------------------------------- ----------------------------------------------
<S> <C>
Bradford K. Gallagher Director and President SMA Life, since 1990;
Director, President and CEO Vice President, State Mutual, since 1990;
Managing Director, FMR Corp., 1986 to 1990;
Director, Fidelity Investments Brokerage Services,
Ltd., 1986 to 1990; Director, Fidelity Brokerage
Services, Inc., 1986 to 1990; President, Plymouth
Investments, 1986 to 1990; Exec. Committee
Member, Fidelity Investments Southwest Co., 1986
to 1990; President, Fidelity Investments
Institutional Services Co., 1985 to 1990
Brian L. Hirst Vice President and Actuary, State Mutual
Vice President and Actuary
Kruno Huitzingh Vice President & Chief Information Officer, State
Vice President and Mutual, since 1993; Executive Vice President,
Chief Information Officer Chicago Board Options Exchange, 1985 to 1993
John P. Kavanaugh Vice President, State Mutual
Vice President
John F. Kelly Senior Vice President, General Counsel and
Director Assistant Secretary, State Mutual
Richard H. Kremer Vice President, State Mutual, since 1994; Senior
Vice President Vice President, Union Central Life Insurance
Company 1991 to 1994; Senior Vice President,
Cigna Individual Financial Service Company 1988
to 1991
Jeffrey P. Lagarce Vice President, State Mutual, since 1994; National
Vice President Sales Director, Metropolitan Life Insurance
Company 1976 to 1994
Joseph W. MacDougall, Jr. Vice President, Associate General Counsel and
Vice President, Associate General Assistant Secretary, State Mutual
Counsel and Assistant Secretary
William H. Mawdsley Vice President and Actuary, State Mutual
Vice President and Actuary
James R. McAuliffe President and CEO, Citizens Insurance Company
Director of America since 1995; Vice President and Chief
Investment Officer, State Mutual 1986 to 1994
Roderick A. McGarry, II Vice President, State Mutual
Vice President
</TABLE>
- 42 -
<PAGE>
<TABLE>
<CAPTION>
Name and Position Principal Occupation(s) During Past Five Years
- -------------------------------- ----------------------------------------------
<S> <C>
Ruben P. Moreno Vice President, State Mutual
Vice President
John W. Nunley Vice President, State Mutual
Vice President
John F. O'Brien Director, President and Chief Executive Officer
Director and Chairman of the Board of State Mutual, since 1989; Director and
Chairman of the Board, SMA Life since 1989
Edward J. Parry, III Vice President and Treasurer, State Mutual
Vice President and Treasurer since 1993; Asst. Vice President to 1992 to 1993;
Manager, Price Waterhouse, 1987 to 1992
Richard M. Reilly Vice President, State Mutual, since 1990;
Director and Vice President Director and President, Allmerica Investments,
Inc., since 1990; Director and President Allmerica
Investment Management Company, Inc., since
1990; Director, President and CEO, Allmerica
Investment Services, Inc., since 1992; Director and
Executive Vice President, 1990 to 1992; Senior
Vice President, Oppenheimer Capital, 1987 to 1990
Henry P. St. Cyr Vice President and Asst. Treasurer, State
Vice President and Asst. Treasurer Mutual, since 1993; Vice President and
Treasurer, 1988 to 1993
Eric Simonsen Vice President and Chief Financial Officer,
Director, Vice President and Chief State Mutual, since 1990; Partner, The Lincoln
Financial Officer Group, 1987 to 1990
Ann K. Tripp Vice President, State Mutual, since 1994;
Vice President Assistance Vice President, 1991 to 1994; Senior
Investment Officer and Asst. Treasurer, 1989
to 1991
Jerome F. Weihs Vice President, State Mutual, since 1991;
Vice President Second Vice President, 1988 to 1991
Diane E. Wood Vice President, State Mutual, since 1991;
Vice President Second Vice President, 1989 to 1991
</TABLE>
DISTRIBUTION
Allmerica Investments, Inc., an indirect wholly owned subsidiary of State
Mutual, acts as the principal underwriter and general distributor of the
Policies. Allmerica Investments, Inc. is registered with the SEC as a
broker-dealer and is a member of the National Association of Securities
Dealers. Broker-dealers sell the Policies through their registered
representatives who are appointed by us.
We pay to broker-dealers who sell the Policy commissions based on a
commission schedule. After the DATE OF ISSUE or an increase in FACE AMOUNT,
commissions will be 90 percent of the first-year payments up to a payment
amount we established and 4 percent of any excess. Commissions will
- 43 -
<PAGE>
be 2 percent for subsequent payments, plus 0.25% of unloaned POLICY VALUE.
To the extent permitted by NASD rules, promotional incentives or payments may
also be provided to broker-dealers based on sales volumes, the assumption of
wholesaling functions or other sales-related criteria. Other payments may be
made for other services that do not directly involve the sale of the
Policies. These services may include the recruitment and training of
personnel, production of promotional literature, and similar services.
We intend to recoup commissions and other sales expenses through
- The front-end sales load
- The deferred sales charge
- Investment earnings on amounts allocated under the Policies to
the FIXED ACCOUNT
Commissions paid on the Policies, including other incentives or
payments, are not charged to POLICYOWNERS or to the Separate Account.
REPORTS
We will maintain the records for the VARIABLE ACCOUNT. We will
promptly send you statements of transactions under your Policy,
including
- Payments
- Changes in FACE AMOUNT
- Changes in DEATH BENEFIT option
- Transfers among SUB-ACCOUNTS and the FIXED ACCOUNT
- Partial withdrawals
- Increases in loan amount or loan repayments,
- Lapse or termination for any reason
- Reinstatement
We will send an annual statement to you that will summarize all of the
above transactions and deductions of charges during the Policy year.
It will also set forth the status of the DEATH BENEFIT, POLICY VALUE,
SURRENDER VALUE, amounts in the SUB-ACCOUNTS and FIXED ACCOUNT, and
any Policy loans. We will send you reports containing financial
statements and other information for the VARIABLE ACCOUNT, the Trust,
VIPF and T. Rowe as the 1940 Act requires.
PERFORMANCE INFORMATION
We may advertise "total return" and "average annual total return."
TOTAL RETURN AND AVERAGE ANNUAL TOTAL RETURN ARE BASED ON THE
HYPOTHETICAL PROFILE OF A REPRESENTATIVE POLICYOWNER AND HISTORICAL
EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE.
"Total return" is the total income generated net of certain expenses
and charges. "Average annual total return" is net of the same
expenses and charges, but reflects the hypothetical return compounded
annually. This hypothetical return is equal to cumulative return had
performance been constant over the entire period. Average annual
total returns are not the same as yearly results and tend to smooth
out variations in the FUND'S return.
Performance information under the Policies is net of FUND expenses,
mortality and expense risk
- 44 -
<PAGE>
charges, administrative charges, monthly
insurance protection charges and surrender charges.
We take a representative Policyowner and assume that
- The Insured is a male Age 36, standard (non-smoker) UNDERWRITING CLASS
- The Policyowner had allocations in each of the SUB-ACCOUNTS for
the FUND durations shown, and
- There was a full surrender at the end of the applicable period
We may compare performance information for a SUB-ACCOUNT in reports
and promotional literature to
- Standard & Poor's 500 Stock Index ("S & P 500")
- Dow Jones Industrial Average ("DJIA")
- Shearson Lehman Aggregate Bond Index
- Other unmanaged indices of unmanaged securities widely regarded
by investors as representative of the securities markets
- Other groups of variable life separate accounts or other
investment products tracked by Lipper Analytical Services
- Other services, companies, publications, or persons such as
Morningstar, Inc., who rank the investment products on
performance or other criteria
- The Consumer Price Index
Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions for insurance and administrative
charges, separate account charges and fund management costs and
expenses.
Performance information for any SUB-ACCOUNT reflects only the
performance of a hypothetical investment in the SUB-ACCOUNT during a
period. It is not representative of what may be achieved in the
future. However, performance information may be helpful in reviewing
market conditions during a period and in considering a FUND'S success
in meeting its investment objectives.
In advertising, sales literature, publications or other materials, we
may give information on various topics of interest to POLICYOWNERS and
prospective POLICYOWNERS. These topics may include
- The relationship between sectors of the economy and the economy as a whole
and its effect on various securities markets, investment strategies and
techniques (such as value investing, market timing, dollar cost averaging,
asset allocation and automatic account rebalancing)
- The advantages and disadvantages of investing in tax-deferred
and taxable investments
- Customer profiles and hypothetical payment and investment scenarios
- Financial management and tax and retirement planning
- Investment alternatives to certificates of deposit and other financial
instruments, including comparisons between the Policies and the
characteristics of and market for the financial instruments
We first offered the Policies to the public in 1994. However, we may
advertise total return data based on the period that the FUNDS have been in
existence. We will compute the results for any
- 45 -
<PAGE>
period before the Policies were offered as if the Policies had been offered
during that period. We will assume that Policy charges apply.
LEGAL PROCEEDINGS
There are no pending legal proceedings involving the variable account
or its assets. SMA LIFE is not involved in any litigation that is
materially important to its total assets.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to law, to make additions to, deletions
from, or substitutions for the shares that are held in the
sub-accounts. We may redeem the shares of a FUND and substitute
shares of another registered open-end management company, if
- The shares of the FUND are no longer available for investment OR
- In our judgment further investment in the FUND would be improper
based on the purposes of the VARIABLE ACCOUNT or the affected
SUB-ACCOUNT
Where the 1940 Act or other law requires, we will not substitute any
shares respecting a Policy interest in a SUB-ACCOUNT without notice to
POLICYOWNERS and prior approval of the SEC and state insurance
authorities. The VARIABLE ACCOUNT may, as the law allows, purchase
other securities for other policies or allow a conversion between
policies on a POLICYOWNER'S request.
We reserve the right to establish additional sub-accounts funded by a
new FUND or by another investment company. Subject to law, we may, in
our sole discretion, establish new SUB-ACCOUNTS or eliminate one or
more sub-accounts.
Shares of the FUNDS are issued to other separate accounts of SMA LIFE
and its affiliates that fund variable annuity contracts ("mixed
funding"). Shares of the Portfolios of VIPF and T. Rowe are also
issued to other unaffiliated insurance companies ("shared funding").
It is conceivable that in the future such mixed funding or shared
funding may be disadvantageous for variable life Policyowners or
variable annuity Policyowners. SMA LIFE, the Trust, VIPF and T. Rowe
do not believe that mixed funding is currently disadvantageous to
either variable life insurance policyowners or variable annuity
policyowners. SMA LIFE and the respective Trustees will monitor
events to identify any material conflicts among policyowners because
of mixed funding. If the Trustees conclude that separate funds should
be established for variable life and variable annuity separate
accounts, we will bear the expenses.
We may change the Policy to reflect a substitution or other change and
will notify POLICYOWNERS of the change. Subject to any approvals the
law may require, the VARIABLE ACCOUNT or any SUB-ACCOUNTS may be
- Operated as a management company under the 1940 Act
- Deregistered under the 1940 Act if registration is no longer
required OR
- Combined with other SUB-ACCOUNTS or our other separate accounts
FURTHER INFORMATION
We have filed a 1933 Act registration statement for this offering with
the SEC. Under SEC rules and regulations, we have omitted from this
prospectus parts of the registration statement and amendments.
Statements contained in this prospectus are summaries of the Policy
and other legal documents. The complete documents and omitted
information may be obtained from the SEC's principal office in
Washington, D.C., on payment of the SEC's prescribed fees.
- 46 -
<PAGE>
INDEPENDENT ACCOUNTANTS
The financial statements of SMA LIFE as of December 31, 1994 and 1993
and for each of the three years in the period ended December 31, 1994
included in this Prospectus constituting part of the Registration
Statement, have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements of SMA LIFE included herein should be
considered only as bearing on the ability of SMA LIFE to meet its
obligations under the Policies.
MORE INFORMATION ABOUT THE FIXED ACCOUNT
This prospectus serves as a disclosure document only for the aspects
of the Policy relating to the VARIABLE ACCOUNT. For complete details
on the FIXED ACCOUNT, read the Policy itself. The FIXED ACCOUNT and
other interests in the GENERAL ACCOUNT are not regulated under the
1933 Act or the 1940 Act because of exemption and exclusionary
provisions. 1933 Act provisions on the accuracy and completeness of
statements made in prospectuses may apply to information on the fixed
part of the Policy and the FIXED ACCOUNT. The SEC has not reviewed
the disclosures in this section of the Prospectus.
GENERAL DESCRIPTION - You may allocate part or all of your NET
PAYMENTS to accumulate at a fixed rate of interest in the FIXED
ACCOUNT. The FIXED ACCOUNT is a part of our GENERAL ACCOUNT. The
GENERAL ACCOUNT is made up of all of our general assets other than
those allocated to any separate account. Allocations to the FIXED
ACCOUNT become part of our GENERAL ACCOUNT assets and are used to
support insurance and annuity obligations.
FIXED ACCOUNT INTEREST - We guarantee amounts allocated to the FIXED
ACCOUNT as to principal and a minimum rate of interest. The minimum
interest we will credit on amounts allocated to the FIXED ACCOUNT is
4.0% compounded annually. "Excess interest" may or may not be
credited at our sole discretion. We will guarantee initial rates on
amounts allocated to the FIXED ACCOUNT, either as payments or
transfers, to the next Policy anniversary. At each Policy
anniversary, we will credit the then current interest rate to money
remaining in the FIXED ACCOUNT. We will guarantee this rate for one
year.
TRANSFERS, SURRENDERS, PARTIAL WITHDRAWALS AND POLICY LOANS - If a
Policy is surrendered or if a partial withdrawal is made, a surrender
charge or partial withdrawal charge may be imposed. On a decrease in
FACE AMOUNT, the surrender charge deducted is a fraction of the charge
that would apply to a full surrender. We deduct partial withdrawals
from POLICY VALUE allocated to the FIXED ACCOUNT on a last-in/first
out basis.
The first 12 transfers in a Policy year currently are free. After
that, we will deduct a $10 transfer charge for each transfer in that
Policy year. The transfer privilege is subject to our consent and to
our then current rules.
Policy loans may also be made from the POLICY VALUE in the FIXED
ACCOUNT. We will credit that part of the POLICY VALUE that is equal
to any OUTSTANDING LOAN with interest at an effective annual yield of
at least 6.0% (8.0% for preferred loans).
We may delay transfers, surrenders, partial withdrawals, NET DEATH
BENEFITS and Policy loans up to six months. However, if payment is
delayed for 30 days or more, we will pay interest at least equal to an
effective annual yield of 3.0% per year for the deferment. Amounts
from the FIXED ACCOUNT used to make payments on policies that we or
our affiliates issue will not be delayed.
- 47 -
<PAGE>
FINANCIAL STATEMENTS
Financial Statements for SMA LIFE are included in this prospectus,
starting on the next page. The financial statements of SMA LIFE
should be considered only as bearing on our ability to meet our
obligations under the Policy. They should not be considered as
bearing on the investment performance of the assets held in the
VARIABLE ACCOUNT.
- 48 -
<PAGE>
SMA LIFE ASSURANCE COMPANY
FINANCIAL STATEMENTS
DECEMBER 31, 1994 and 1993
<PAGE>
SMA LIFE ASSURANCE COMPANY
December 31, 1994
Financial Statements
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . . . 1
Statement of Financial Position. . . . . . . . . . . . . . . . . . . . . . . . 2
Statement of Operations and Changes in Stockholder's Equity. . . . . . . . . . 3
Statement of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . 5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
February 13, 1995
To the Board of Directors and Stockholder of
SMA Life Assurance Company
In our opinion, the accompanying statement of financial position and the related
statements of operations and changes in stockholder's equity and of cash flows
present fairly, in all material respects, the financial position of SMA Life
Assurance Company at December 31, 1994 and 1993, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1 to the financial statements, the Company may adopt
Statement of Financial Accounting Standards No. 120, "Accounting and Reporting
by Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain
Long-Duration Participating Contracts", and Financial Accounting Standards Board
Interpretation No. 40, "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises", in 1996. If these
pronouncements are adopted, the financial statements for the year ended December
31, 1994 will be retroactively restated for the effects of these changes in
accounting principles.
Price Waterhouse LLP
Boston, Massachusetts
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A Wholly Owned Subsidiary of State Mutual Life Assurance Company of America)
STATEMENT OF FINANCIAL POSITION
as of December 31
(in thousands)
<TABLE>
<CAPTION>
ASSETS 1994 1993
---- ----
<S> <C> <C>
Cash $ 7,248 $ 10,172
Investments:
Bonds 1,595,275 1,567,658
Stocks 12,283 23,478
Mortgage loans 295,532 383,059
Policy loans 116,600 109,014
Real estate 51,288 40,904
Short term investments 45,239 4,999
Other investment assets 27,443 314
----------- -----------
Total cash and investments 2,150,908 2,148,598
Premiums deferred and uncollected 5,452 6,953
Investment income due and accrued 39,442 39,993
Other assets 6,548 12,560
Assets held in separate accounts 1,869,695 1,296,620
----------- -----------
$ 4,072,045 $ 3,504,724
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policy liabilities:
Life reserves $ 890,880 $ 905,813
Annuity and other fund reserves 928,325 925,098
Accident and health reserves 121,580 115,081
Claims payable 11,720 10,476
----------- -----------
Total policy liabilities 1,952,505 1,956,468
Expenses and taxes payable 17,484 43,123
Other liabilities 32,445 26,069
Asset valuation reserve 20,786 10,964
Obligations related to separate account business 1,859,502 1,285,884
----------- -----------
Total liabilities 3,882,722 3,322,508
----------- -----------
Stockholder's equity:
Common stock, $1,000 par value
Authorized - 10,000 shares
Issued and outstanding - 2,517 shares 2,517 2,517
Additional paid-in capital 199,307 199,307
Unassigned deficit (13,621) (20,744)
Special contingency reserves 1,120 1,136
----------- -----------
Total stockholder's equity 189,323 182,216
----------- -----------
$ 4,072,045 $ 3,504,724
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA)
STATEMENT OF OPERATIONS AND
CHANGES IN STOCKHOLDER'S EQUITY
for the year ended December 31
(In thousands)
<TABLE>
<CAPTION>
REVENUE 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Premiums and other considerations:
Life $ 195,633 $ 189,285 $ 181,992
Annuities 707,172 660,143 365,443
Accident and health 31,927 35,718 35,612
Reinsurance commissions and reserve adjustments 4,195 2,309 2,372
---------- ---------- ----------
Total premiums and other considerations 938,927 887,455 585,419
Net investment income 170,430 177,612 183,159
Realized capital gains (losses), net of tax (17,172) (7,225) 576
Other revenue 26,065 19,055 13,224
---------- ---------- ----------
Total revenue 1,118,250 1,076,897 782,378
---------- ---------- ----------
POLICY BENEFITS AND OPERATING EXPENSES
Policy benefits:
Claims, surrenders and other benefits 331,418 275,290 250,317
Increase in policy reserves 40,113 15,292 159,127
---------- ---------- ----------
Total policy benefits 371,531 290,582 409,444
Operating and selling expenses 164,175 160,928 134,482
Taxes, except capital gains tax 22,846 19,066 29,540
Net transfers to separate accounts 553,295 586,539 199,164
---------- ---------- ----------
Total policy benefits and operating expenses 1,111,847 1,057,115 772,630
---------- ---------- ----------
NET INCOME 6,403 19,782 9,748
STOCKHOLDER'S EQUITY AT BEGINNING OF YEAR 182,216 171,941 177,809
Unrealized capital gains (losses) on investments 12,170 (9,052) (20,770)
Transfer from (to) asset valuation reserve (9,822) 1,974 2,883
Other adjustments (1,644) (2,429) 2,271
---------- ---------- ----------
STOCKHOLDER'S EQUITY AT END OF YEAR $ 189,323 $ 182,216 $ 171,941
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA)
STATEMENT OF CASH FLOWS
for the year ended December 31
(In thousands)
<TABLE>
<CAPTION>
CASH FLOW FROM OPERATING ACTIVITIES 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Premiums, deposits and other income $ 962,147 $ 902,725 $ 602,253
Allowances and reserve adjustments on
reinsurance ceded 3,279 22,185 18,918
Net investment income 173,294 182,843 182,531
Net increase in policy loans (7,585) (7,812) (8,777)
Benefits to policyholders and beneficiaries (330,900) (298,612) (257,274)
Operating and selling expenses and taxes (213,399) (176,361) (126,421)
Net transfers to separate accounts (600,760) (634,021) (221,492)
Other sources (applications) 19,868 7,757 (43,869)
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 5,944 (1,296) 145,869
---------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Sales and maturities of long term investments:
Bonds 478,512 386,414 400,636
Stocks 63 64 80
Real estate and other invested assets 3,008 11,094 4,350
Repayment of mortgage principal 65,334 79,844 95,972
Capital gains tax (968) (3,296) --
Acquisition of long term investments:
Bonds (508,603) (466,086) (710,371)
Stocks -- -- (2,617)
Real estate and other invested assets (24,544) (2,392) (1,910)
Mortgage loans (364) (2,266) (852)
Other investing activities 18,934 (27,254) (3,001)
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 31,372 (23,878) (217,713)
---------- ---------- ----------
Net change in cash and short term investments 37,316 (25,174) (71,844)
CASH AND SHORT TERM INVESTMENTS
Beginning of the year 15,171 40,345 112,189
---------- ---------- ----------
End of the year $ 52,487 $ 15,171 $ 40,345
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION - SMA Life Assurance Company (SMA Life or
the "Company") is a wholly owned subsidiary of SMA Financial Corp., which is
wholly owned by State Mutual Life Assurance Company of America (State Mutual), a
mutual life insurance company. The stockholder's equity of the Company is being
maintained at a minimum level of 5% of general account assets by State Mutual in
accordance with a policy established by vote of State Mutual's Board of
Directors.
The Company's financial statements have been prepared on the basis of accounting
practices prescribed or permitted by the Insurance Department of the State of
Delaware and in conformity with practices prescribed by the National Association
of Insurance Commissioners (NAIC), which are generally accepted accounting
principles for mutual life insurance companies and their stock life insurance
subsidiaries.
Certain reclassifications have been made to prior year amounts to conform with
the current year presentation.
VALUATION OF INVESTMENTS - Investments in bonds are carried principally at
amortized cost, in accordance with NAIC guidelines. Preferred stocks are
carried generally at cost and common stocks are carried at market value. Policy
loans are carried principally at unpaid principal balances.
Mortgage loans on real estate are stated at unpaid principal balances, net of
unamortized discounts. Mortgage loans are reduced for losses expected by
management to be realized on transfers of mortgage loans to real estate (upon
foreclosure), on the disposition or settlement of mortgage loans and on mortgage
loans which management believes may not be collectible in full. In determining
the amount of the loss, management considers, among other things, the estimated
fair value of the underlying collateral. Investment real estate and real estate
acquired through foreclosure are carried at the lower of depreciated cost or
market value.
An asset valuation reserve (AVR) for bonds, mortgage loans, stocks, real estate,
and other invested assets is maintained by appropriations from surplus in
accordance with a formula specified by the NAIC and is classified as a
liability.
FINANCIAL INSTRUMENTS - In the normal course of business, the Company enters
into transactions involving various types of financial instruments including
investments such as bonds and stocks and investment and loan commitments. These
instruments involve credit risk and also may be subject to risk of loss due to
interest rate fluctuations. The Company evaluates and monitors each financial
instrument individually and, when appropriate, obtains collateral or other
security to minimize losses.
RECOGNITION OF PREMIUM INCOME AND ACQUISITION COSTS - In general, premiums are
recognized as revenue over the premium paying period of the policies;
commissions and other costs of acquiring the policies are charged to operations
when incurred.
SEPARATE ACCOUNTS - Separate account assets and liabilities represent segregated
funds administered and invested by the Company for the benefit of certain
variable annuity and variable life contractholders. Assets consist principally
of bonds, common stocks, and short term obligations at market value. The
investment income, gains, and losses of these accounts generally accrue to the
contractholders and therefore, are not included in the Company's net income.
Appreciation and depreciation of the Company's interest in the separate
accounts, including undistributed net investment income, is reflected in
stockholder's equity.
INSURANCE RESERVES AND ANNUITY AND OTHER FUND RESERVES - Reserves for life
insurance, annuities, and accident and health insurance are established in
amounts adequate to meet the estimated future obligations of policies in force.
These liabilities are computed based upon mortality, morbidity and interest rate
assumptions applicable to these coverages, including provision for adverse
deviation. Interest rates range from 3% to 6% for life insurance and 3 1/2% to
9 1/2% for annuities, and mortality and morbidity assumptions reflect the
Company's experience and industry standards. The assumptions vary by plan, age
at issue, year of issue and duration. Claims reserves are computed based on
historical experience modified for expected trends in frequency and severity.
Withdrawal characteristics of annuity and other fund reserves vary by contract.
5
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA)
At December 31, 1994 and 1993, approximately 77% and 70%, respectively, of the
contracts (included in both the general account and separate accounts of the
Company) were not subject to discretionary withdrawal or were subject to
withdrawal at book value less surrender charge.
FEDERAL INCOME TAXES - State Mutual, its non-insurance domestic subsidiaries and
SMA Life file a consolidated United States Federal income tax return. Entities
included within the consolidated group are segregated into either a life
insurance or non-life insurance company subgroup. The consolidation of these
subgroups is subject to certain statutory restrictions on the percentage of
eligible non-life taxable operating losses that can be applied to offset life
company taxable income. Allmerica P&C and its subsidiaries file a separate
United States Federal income tax return.
The Federal income tax for the non-life insurance subsidiaries is calculated on
a separate return basis. Any current tax liability (benefit) is paid to
(reimbursed by) State Mutual. Tax benefits resulting from taxable operating
losses of the non-life subsidiaries are not reimbursed currently by State
Mutual. However, to the extent such losses are utilized by the consolidated
group, they are reflected as a liability of State Mutual.
The Federal income tax for the life companies is calculated on a line of
business basis, excluding the operating results of the non-insurance
subsidiaries and Allmerica P&C. The tax is allocated to each life company based
on its contribution to the taxable income or loss of each line of business.
CAPITAL GAINS AND LOSSES - Realized capital gains and losses, net of applicable
capital gains tax or benefit, exclusive of those transferred to the interest
maintenance reserve (IMR), are included in the statement of operations.
Unrealized capital gains and losses are reflected as direct credits or charges
to stockholder's equity. The IMR, which is included in other liabilities,
establishes a reserve for realized gains and losses, net of tax, resulting from
changes in interest rates on short and long term fixed income investments. Net
realized gains and losses charged to the IMR are amortized into net investment
income over the remaining life of the investment sold.
PENDING ACCOUNTING PRONOUNCEMENT - In April 1993, the Financial Accounting
Standards Board (FASB) issued Interpretation No. 40, "Applicability of Generally
Accepted Accounting Principles to Mutual Life Insurance and Other Enterprises"
(FIN 40), which establishes a different definition of generally accepted
accounting principles for mutual life insurance companies (and their stock life
insurance subsidiaries). Under the Interpretation, financial statements of
mutual life insurance companies (and their stock life insurance subsidiaries)
which are prepared on the basis of statutory accounting, will no longer be
characterized as in conformity with generally accepted accounting principles.
In January 1995, the FASB issued Statement of Financial Accounting Standards No.
120, "Accounting and Reporting by Mutual Life Insurance Enterprises and by
Insurance Enterprises for Certain Long-Duration Participating Contracts" (SFAS
No. 120), and the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position No. 95-1, "Accounting for Certain Insurance
Activities of Mutual Life Insurance Enterprises" (SOP 95-1). SFAS No. 120
extends the requirements of SFAS No. 60, "Accounting and Reporting by Insurance
Enterprises," No. 97, "Accounting and Reporting by Insurance Enterprises for
Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale
of Investments," and No. 113, "Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts," to mutual life insurance
enterprises. SOP 95-1 establishes accounting for certain participating life
insurance contracts for mutual life insurance enterprises. SFAS No. 120
requires mutual life insurance enterprises (and permits stock life insurance
enterprises) to apply the provisions of SOP 95-1 to those contracts which meet
the conditions in SFAS No. 120.
FIN 40, SFAS No. 120 and SOP 95-1 are all effective for financial statements
issued for fiscal years beginning after December 15, 1995.
Management of the Company has not yet determined the effect on its financial
statements of applying the new pronouncements nor whether it will continue to
present its general purpose financial statements in conformity with the
statutory basis of accounting or adopt the accounting changes required in order
to continue to present its financial statements in conformity with generally
accepted accounting principles. If the Company chooses to adopt the accounting
changes required, the effect of the changes would be reported retroactively
through restatement of all previously issued financial statements beginning with
the earliest year presented. The cumulative effect of adopting these changes
would be included in the earliest year presented.
6
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA)
NOTE 2 - INVESTMENTS
BONDS - The carrying value and fair value of investments in bonds,are as
follows:
<TABLE>
<CAPTION>
December 31, 1994
-----------------
Gross Gross
Carrying Unrealized Unrealized Fair
(In thousands) Value Appreciation Depreciation Value
----- ------------ ------------ -----
<S> <C> <C> <C> <C>
Federal government bonds $ 17,651 $ 8 $ 762 $ 16,897
State, local and government agency bonds 1,110 54 -- 1,164
Foreign government bonds 31,863 83 3,735 28,211
Corporate securities 1,462,871 8,145 56,011 1,415,005
Mortgage-backed securities 81,780 268 1,737 80,311
----------- ----------- ----------- -----------
$ 1,595,275 $ 8,558 $ 62,245 $ 1,541,588
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
-----------------
Gross Gross
Carrying Unrealized Unrealized Fair
(In thousands) Value Appreciation Depreciation Value
----- ------------ ------------ -----
<S> <C> <C> <C> <C>
Federal government bonds $ 7,969 $ 356 $ -- $ 8,325
State, local and government agency bonds 15,212 678 -- 15,890
Foreign government bonds 24,152 720 9 24,863
Corporate securities 1,519,050 74,777 4,430 1,589,397
Mortgage-backed securities 1,275 92 -- 1,367
----------- ----------- ----------- -----------
Total $ 1,567,658 $ 76,623 $ 4,439 $ 1,639,842
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The carrying value and fair value by contractual maturity at December 31, 1994,
are shown below. Actual maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties or the Company may have the right to put or
sell the obligation back to the issuer. Mortgage-backed securities are
classified based on expected maturities.
<TABLE>
<CAPTION>
Carrying Fair
(In thousands) Value Value
----- -----
<S> <C> <C>
Due in one year or less $ 225,814 $ 224,695
Due after one year through five years 774,918 751,778
Due after five years through ten years 428,080 404,377
Due after ten years 166,463 160,738
----------- -----------
Total $ 1,595,275 $ 1,541,588
----------- -----------
----------- -----------
</TABLE>
MORTGAGE LOANS AND REAL ESTATE - Mortgage loans and real estate investments, are
diversified by property type and location. Real estate investments have been
obtained primarily through foreclosure. Mortgage loans are collateralized by
the related properties and are generally no more than 75% of the property value
at the time the original loan is made. At December 31, 1994 and 1993, mortgage
loan and real estate investments were distributed by the following types and
geographic regions:
7
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA)
<TABLE>
<CAPTION>
(In thousands)
Property Type 1994 1993
- ------------- ---- ----
<S> <C> <C>
Office buildings $ 140,292 $ 172,694
Residential 57,061 74,514
Retail 72,787 72,756
Industrial/Warehouse 39,424 62,572
Other 37,256 41,427
--------- ---------
Total $ 346,820 $ 423,963
--------- ---------
--------- ---------
<CAPTION>
Geographic Region 1994 1993
- ----------------- ---- ----
<S> <C> <C>
South Atlantic $ 92,934 $ 118,434
East North Central 72,704 78,343
Middle Atlantic 48,688 58,291
Pacific 39,892 45,666
West North Central 27,377 33,325
Mountain 12,211 31,116
New England 26,613 28,759
East South Central 6,224 8,250
West South Central 20,177 21,779
--------- ---------
Total $ 346,820 $ 423,963
--------- ---------
--------- ---------
</TABLE>
NET INVESTMENT INCOME - The components of net investment income for the year
ended December 31 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Bonds $ 123,495 $ 126,729 $ 119,777
Stocks 1,799 953 692
Mortgage loans 31,945 40,823 52,406
Real estate 8,425 9,493 8,412
Policy loans 8,797 8,215 7,701
Other investments 1,651 674 344
Short term investments 1,378 840 1,848
--------- --------- ---------
177,490 187,727 191,180
Less investment expenses 9,138 11,026 8,035
--------- --------- ---------
Net investment income, before IMR amortization 168,352 176,701 183,145
IMR amortization 2,078 911 14
--------- --------- ---------
Net investment income $ 170,430 $ 177,612 $ 183,159
--------- --------- ---------
--------- --------- ---------
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES - Realized capital gains (losses) on
investments for the years ended December 31 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Bonds $ 645 $ 10,133 $ 3,302
Stocks (62) 16 33
Mortgage loans (17,142) (83) 162
Real Estate 605 (2,044) 1,985
--------- --------- ---------
(15,954) 8,022 5,482
Less income tax 968 3,296 4,623
--------- --------- ---------
Net realized capital gains (losses) before transfer to IMR (16,922) 4,726 859
Net realized capital gains transferred to IMR (250) (11,951) (283)
--------- --------- ---------
Net realized capital gains (losses) $ (17,172) $ (7,225) $ 576
--------- --------- ---------
--------- --------- ---------
</TABLE>
8
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA)
Proceeds from voluntary sales of investments in bonds during 1994, 1993 and 1992
were $178,640 thousand, $131,783 thousand and $153,218 thousand, respectively.
Gross gains of $3,010 thousand, $4,523 thousand and $3,043 thousand and gross
losses of $4,553 thousand, $450 thousand and $139 thousand, respectively, were
realized on those sales.
NOTE 3 - FAIR VALUE DISCLOSURES OF FINANCIAL INFORMATION
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" requires disclosure of fair value information
about certain financial instruments (insurance contracts, real estate, goodwill
and taxes are excluded) for which it is practicable to estimate such values,
whether or not these instruments are included in the balance sheet. The fair
values presented for certain financial instruments are estimates which, in many
cases, may differ significantly from the amounts which could be recognized upon
immediate liquidation. In cases where market prices are not available,
estimates of fair value are based on discounted cash flow analyses which utilize
current interest rates for similar financial instruments which have comparable
terms and credit quality.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
FINANCIAL ASSETS:
CASH AND SHORT TERM INVESTMENTS - The carrying amounts reported in the statement
of financial position approximate fair value.
BONDS - Fair values are based on quoted market prices, if available. If a
quoted market price is not available, fair values are estimated using
independent pricing sources or internally developed pricing models using
discounted cash flow analyses.
STOCKS - Fair values are based on quoted market prices, if available. If a
quoted market price is not available, fair values are estimated using
independent pricing sources or internally developed pricing models.
MORTGAGE LOANS - Fair values are estimated by discounting the future contractual
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings. The fair value of below investment grade
mortgage loans is limited to the lesser of the present value of the cash flows
or book value.
POLICY LOANS - The carrying amount reported in the statement of financial
position approximates fair value since policy loans have no defined maturity
dates and are inseparable from the insurance contracts.
FINANCIAL LIABILITIES:
ANNUITY AND OTHER FUND RESERVES (WITHOUT MORTALITY/MORBIDITY FEATURES) - Fair
values for the Company's liabilities under individual annuity contracts are
estimated based on current surrender values.
9
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA)
The estimated fair values of the financial instruments as of December 31 were as
follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
Carrying Fair Carrying Fair
(In thousands) Value Value Value Value
----- ----- ----- -----
<S> <C> <C> <C> <C>
Financial Assets:
Cash $ 7,248 $ 7,248 $ 10,172 $ 10,172
Short term investments 45,239 45,239 4,999 4,999
Bonds 1,595,275 1,541,588 1,567,658 1,639,842
Stocks 12,283 12,283 32,478 32,478
Mortgage loans 295,532 291,704 383,059 395,327
Policy loans 116,600 116,600 109,014 109,014
Financial Liabilities:
Individual annuity contracts 869,230 862,662 870,112 865,668
Supplemental contracts without life
contingencies 16,673 16,673 14,842 14,842
Other contract deposit funds 1,105 1,105 1,317 1,317
</TABLE>
NOTE 4 - FEDERAL INCOME TAXES
The federal income tax provisions for 1994, 1993 and 1992 were $13,109 thousand,
$8,551 thousand and $18,108 thousand, respectively, which include taxes
applicable to realized capital gains of $968 thousand, $3,296 thousand and
$4,623 thousand.
The effective federal income tax rates were 67%, 30% and 65% in 1994, 1993 and
1992, respectively. The differences between the federal statutory rate and the
Company's effective tax rates are primarily related to decreases in taxable
income for the write-offs of mortgage loans; and increases in taxable income for
differences in policyholder liabilities for federal income tax purposes and
financial reporting purposes and the deferral of policy acquisition costs for
federal tax purposes. The Company paid to State Mutual $14,353 thousand,
$8,100 thousand and $30,000 thousand in 1994, 1993 and 1992, respectively, for
its federal income taxes.
The consolidated federal income tax returns are routinely audited by the
Internal Revenue Service (IRS) and provisions are routinely made in the
financial statements in anticipation of the results of these audits. The
Internal Revenue Service (IRS) has completed its examination of all of the
consolidated federal income tax returns through 1988. Deficiencies asserted
with respect to tax years 1977 through 1981 have been paid and recorded and the
consolidated group has filed a recomputation of such years with appeals claiming
a refund with respect to certain agreed upon issues, but has not recognized any
benefit in its financial statements. The consolidated group is currently
considering its response to certain adjustments proposed by the IRS with respect
to the consolidated federal income tax returns for 1982 and 1983. If upheld,
these proposed adjustments would result in additional payments; however, the
consolidated group will vigorously defend its position with respect to these
adjustments. In management's opinion, adequate tax liabilities have been
established for all years.
NOTE 5 - REINSURANCE
The Company participates in reinsurance to reduce overall risks, including
exposure to large losses and to permit recovery of a portion of direct losses.
Reinsurance contracts do not relieve the Company from its obligation to its
policyholders. Reinsurance financial data for the years ended December 31, is as
follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Reinsurance premiums assumed $ 3,788 $ 4,190 $ 4,614
Reinsurance premiums ceded 17,430 14,798 15,570
Deduction from insurance liability including
reinsurance recoverable on unpaid claims 46,734 42,805 48,191
</TABLE>
10
<PAGE>
SMA LIFE ASSURANCE COMPANY
(A Wholly Owned Subsidiary of State Mutual Life Assurance Company of America)
The Company cedes to State Mutual approximately 10% of its individual life
business. Premiums ceded to State Mutual aggregated $7,771 thousand, $9,000
thousand and $9,586 thousand in 1994, 1993 and 1992, respectively. The Company
has also entered into various reinsurance agreements with State Mutual under
which certain insurance risks related to individual accident and health
business, premium income and related expenses are assumed by the Company from
State Mutual. Premiums assumed pursuant to these agreements aggregated $3,788
thousand, $4,190 thousand and $4,614 thousand in 1994, 1993 and 1992,
respectively .
NOTE 6 - DIVIDEND RESTRICTIONS
Delaware has enacted laws governing the payment of dividends by insurers. These
laws affect the dividend paying ability of the Company. Pursuant to Delaware's
statute, the maximum amount of dividends and other distributions that an insurer
may pay in any twelve month period, without the prior approval of the Delaware
Commissioner of Insurance, is limited to the greater of (i) 10% of its statutory
policyholder surplus as of the preceding December 31 or (ii) the individual
company's statutory net gain from operations for the preceding calendar year (if
such insurer is a life company) or its net income (not including realized
capital gains) for the preceding calendar year (if such insurer is not a life
company). Any dividends to be paid by an insurer, whether or not in excess of
the aforementioned threshold, from a source other than earned surplus would also
require the prior approval of the Delaware Commissioner of Insurance. While the
Company is currently operating on a profitable basis, it has a negative earned
surplus position and accordingly is precluded from paying dividends to State
Mutual without the approval of the Commissioner of Insurance.
NOTE 7 - RELATED PARTY TRANSACTIONS
State Mutual provides management, operating personnel and facilities on a cost
reimbursement basis to the Company. Expenses for services received from State
Mutual were $102,461 thousand, $98,676 thousand and $88,273 thousand in 1994,
1993 and 1992, respectively. The net amounts payable to State Mutual and
affiliates for accrued expenses and various other liabilities and receivables
were $8,344 thousand and $12,182 thousand at December 31, 1994 and 1993,
respectively.
During 1992, the Company sold a building to an affiliated company at its
estimated fair value of $4,350 thousand. The Company recognized a capital gain
on the sale, net of tax, in the amount of $1,310 thousand.
NOTE 8 - FUNDS ON DEPOSIT
In March 1994, the Company voluntarily withdrew from being licensed in New York.
In connection with the withdrawal State Mutual, which is licensed in New York,
became qualified to sell the products previously sold by SMA Life in New York.
The Company agreed with the New York Department of Insurance to maintain,
through a custodial account in New York, a security deposit, the market value of
which will at all times equal 102% of all outstanding general account
liabilities of the Company for New York policyholders, claimants and creditors.
As of December 31, 1994, the carrying value and fair value of the assets on
deposit was $327,899 thousand and $323,474 thousand, respectively, which is in
excess of the required amount.
Additional securities with a carrying value of $3,855 thousand and $3,353
thousand were on deposit with various other state and governmental authorities
as of December 31, 1994 and 1993, respectively.
NOTE 9 - LITIGATION
The Company has been named a defendant in various legal proceedings arising in
the normal course of business. In the opinion of management, based on the
advice of legal counsel, the ultimate resolution of these proceedings will not
have a material effect on the Company's financial statements.
11
<PAGE>
APPENDIX A - GUIDELINE MINIMUM SUM INSURED TABLE
The GUIDELINE MINIMUM SUM INSURED is a percentage of the POLICY VALUE as set
forth below, according to federal tax regulations:
GUIDELINE MINIMUM SUM INSURED
<TABLE>
<CAPTION>
Age of Insured
on Date of Percentage of
Death POLICY VALUE
<S> <C>
40 and under . . . . . . . . . . . . . . 250%
45. . . . . . . . . . . . . . . . . . . . 215%
50. . . . . . . . . . . . . . . . . . . . 185%
55. . . . . . . . . . . . . . . . . . . . 150%
60. . . . . . . . . . . . . . . . . . . . 130%
65. . . . . . . . . . . . . . . . . . . . 120%
70. . . . . . . . . . . . . . . . . . . . 115%
75. . . . . . . . . . . . . . . . . . . . 105%
80. . . . . . . . . . . . . . . . . . . . 105%
85. . . . . . . . . . . . . . . . . . . . 105%
90. . . . . . . . . . . . . . . . . . . . 105%
95 and above. . . . . . . . . . . . . . . 100%
</TABLE>
For the AGES not listed, the progression between the listed AGES is linear.
- 61 -
<PAGE>
APPENDIX B - OPTIONAL INSURANCE BENEFITS
This Appendix provides only a summary of other insurance benefits available by
rider for an additional charge. For more information, contact your
representative.
WAIVER OF PREMIUM RIDER
This rider provides that, during periods of total disability continuing
more than four months, we will add to the POLICY VALUE each month an amount
you selected or the amount needed to pay the monthly insurance protection
charges, whichever is greater. This amount will keep the Policy in force.
This benefit is subject to our maximum issue benefits. Its cost will
change yearly.
GUARANTEED INSURABILITY RIDER
This rider guarantees that insurance may be added at various option dates
without Evidence of Insurability. This benefit may be exercised on the
option dates even if the Insured is disabled.
OTHER INSURED RIDER
This rider provides a term insurance benefit for up to five Insureds. At
present this benefit is only available for the spouse and children of the
primary Insured. The rider includes a feature that allows the "other
Insured" to convert the coverage to a flexible premium adjustable life
insurance policy.
OPTION TO ACCELERATE BENEFITS ENDORSEMENT
This endorsement allows part of the Policy proceeds to be available before
death if the Insured becomes terminally ill or is permanently confined to a
nursing home.
EXCHANGE OPTION RIDER
This rider allows you to use the Policy to insure a different person,
subject to Company guidelines.
- 62 -
<PAGE>
APPENDIX C - PAYMENT OPTIONS
PAYMENT OPTIONS - On WRITTEN REQUEST, the SURRENDER VALUE or all or part of any
payable NET DEATH BENEFIT may be paid under one or more payment options then
offered by SMA LIFE. If you do not make an election, we will pay the benefits
in a single sum. If a payment option is selected, the BENEFICIARY may pay to us
any amount that would otherwise be deducted from the DEATH BENEFIT. A
certificate will be provided to the payee describing the payment option
selected.
The amounts payable under a payment option are paid from the GENERAL ACCOUNT.
These amounts are not based on the investment experience of the VARIABLE
ACCOUNT.
SELECTION OF PAYMENT OPTIONS - The amount applied under any one option for any
one payee must be at least $5,000. The periodic payment for any one payee must
be at least $50. Subject to the POLICYOWNER and BENEFICIARY provisions, any
option selection may be changed before the NET DEATH BENEFIT become payable. If
you make no selection, the BENEFICIARY may select an option when the NET DEATH
BENEFIT becomes payable.
- 63 -
<PAGE>
APPENDIX D - ILLUSTRATIONS OF DEATH BENEFIT, POLICY VALUES
AND ACCUMULATED PAYMENTS
The tables on pages 66-69 illustrate the way in which a Policy's DEATH BENEFIT
and POLICY VALUE could vary over an extended period. The tables assume that all
payments are allocated to and remain in the VARIABLE ACCOUNT for the entire
period shown. They are based on hypothetical gross investment rates of return
for the FUND (i.e., investment income and capital gains and losses, realized or
unrealized) equal to constant gross (after tax) annual rates of 0%, 6%, and 12%.
The tables on pages 66 and 67 illustrate a Policy issued to a male, AGE 30,
under a standard UNDERWRITING CLASS and qualifying for the non-smoker discount.
The tables on pages 68 and 69 illustrate a Policy issued to a male, AGE 45,
under a standard UNDERWRITING CLASS and qualifying for the non-smoker discount.
The columns on pages 67 and 69 are based on the guaranteed insurance protection
rates; columns on pages 66 and 68 are based on the current insurance protection
rates as presently in effect.
The POLICY VALUES and DEATH BENEFIT would be different from those shown if the
gross annual investment rates of return averaged 0%, 6%, and 12% over a period
of years, but fluctuated above or below the averages for individual Policy
years. The values would also be different depending on the allocation of a
Policy's total POLICY VALUE among the SUB-ACCOUNTS, if the rates of return
averaged 0%, 6% or 12, but the rates of each FUND varied above and below the
averages.
The amounts shown for the DEATH BENEFIT and POLICY VALUES take into account the
deduction from payments for the payment expense charges, the deduction from
POLICY VALUE for the monthly insurance protection charges, and the daily
mortality and expense risk charge and administrative charge. The amounts shown
in the tables also take into account FUND advisory fees and operating expenses,
which averaged an annual rate of 1.0% of the average daily net assets of the
FUNDS. The fees and expenses of each FUND vary, and in 1994 ranged from an
annual rate of 0.45% to an annual rate of 1.50% of average daily net assets.
The fees and expenses of your Policy may be more or less than 1.0% in the
aggregate, depending on how you make allocations of POLICY VALUE among the
SUB-ACCOUNTS. Under its management agreement with the Trust, Allmerica
Investment has declared a voluntary expense limitation of 1.50% of average net
assets for the Select International Equity Fund, 1.35% for the Select Capital
Appreciation Fund and the Select Aggressive Growth Fund, 1.20% for the Select
Growth Fund, 1.10% for the Select Growth and Income Fund, 1.00% for the Select
Income Fund, and 0.60% for the Money Market Fund. Without the effect of the
expense limitation, in 1994 the total operation expenses of the Select
International Equity Fund would have been 1.78% of average net assets. Fidelity
Management has voluntarily agreed to temporarily limit the total operating
expenses (excluding interest, taxes, brokerage commissions and extraordinary
expenses) of the Equity-Income and Growth Portfolios to an annual rate of 1.50%,
and of the High Income Portfolio to an annual rate of 1.00% of each Portfolio's
average net assets. The total operating expenses of the Portfolios of VIPF were
less than their respective caps in 1994. Price-Fleming has voluntarily agreed
to limit the total operating expenses (except interest, taxes, brokerage
commissions, directors' fees and expenses and extraordinary expenses) of the
International Stock Portfolio to 1.05% of its average daily net assets.
Applying the mortality and expense risk charge, the administrative charge, and
the average FUND advisory fees and operating expenses of 1.0% of average net
assets, the gross annual rates of investment return of 0%, 6% and 12% would
produce net annual rates of -1.80%, 4.20% and 10.20%, respectively, during the
first 10 Policy years and -1.65%, 4.35% and 10.35%, respectively, after that.
The hypothetical returns shown in the table do not reflect any charges for
income taxes against the VARIABLE ACCOUNT since no charges are currently made.
However, if in the future the charges are made, to produce illustrated DEATH
BENEFITS and cash values, the gross annual investment rate of return would have
to exceed 0%, 6% or 12% by a sufficient amount to cover the tax charges.
The second column of the tables show the amount that would accumulate if the
GUIDELINE ANNUAL
- 64 -
<PAGE>
PREMIUM were invested to earn interest, (after taxes) at 5% compounded annually.
The tables illustrate POLICY VALUES based on the assumptions that no Policy
loans have been made, that you have not requested an increase or decrease in the
initial FACE AMOUNT, that no partial withdrawals have been made, and that no
more than 12 transfers have been made in any Policy year (so that no transaction
or transfer charges have been incurred).
On request, we will provide a comparable illustration based on the proposed
Insured's AGE, sex, and UNDERWRITING CLASS, and the requested FACE AMOUNT, DEATH
BENEFIT option and riders.
TO CHOOSE THE SUB-ACCOUNTS THAT WILL BEST MEET YOUR NEEDS AND OBJECTIVES,
CAREFULLY READ THE PROSPECTUSES OF THE TRUST, VIPF AND T. ROWE.
- 65 -
<PAGE>
SMA LIFE ASSURANCE COMPANY
SELECT VARIABLE LIFE POLICY
Male Non-Smoker AGE 30
FACE AMOUNT = $75,000
Adjustable Option
BASED ON CURRENT MONTHLY INSURANCE PROTECTION CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PAYMENTS HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
MADE PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,470 333 1,213 76,213 410 1,290 76,290 487 1,367 76,367
2 3,014 1,396 2,402 77,402 1,626 2,632 77,632 1,866 2,872 77,872
3 4,634 2,020 3,569 78,569 2,481 4,030 79,030 2,980 4,530 79,530
4 6,336 4,056 4,716 79,716 4,827 5,487 80,487 5,696 6,356 81,356
5 8,123 5,283 5,833 80,833 6,446 6,996 81,996 7,810 8,360 83,360
6 9,999 6,482 6,922 81,922 8,121 8,561 83,561 10,120 10,560 85,560
7 11,969 7,660 7,990 82,990 9,860 10,190 85,190 12,653 12,983 87,983
8 14,037 8,810 9,030 84,030 11,657 11,877 86,877 15,423 15,643 90,643
9 16,209 9,931 10,041 85,041 13,516 13,626 88,626 18,455 18,565 93,565
10 18,490 11,026 11,026 86,026 15,440 15,440 90,440 21,775 21,775 96,775
11 20,884 12,001 12,001 87,001 17,344 17,344 92,344 25,337 25,337 100,337
12 23,398 12,947 12,947 87,947 19,317 19,317 94,317 29,253 29,253 104,253
13 26,038 13,865 13,865 88,865 21,363 21,363 96,363 33,561 33,561 108,561
14 28,810 14,752 14,752 89,752 23,482 23,482 98,482 38,299 38,299 113,299
15 31,720 15,610 15,610 90,610 25,678 25,678 100,678 43,510 43,510 118,510
16 34,777 16,441 16,441 91,441 27,957 27,957 102,957 49,248 49,248 124,248
17 37,985 17,239 17,239 92,239 30,314 30,314 105,314 55,560 55,560 130,560
18 41,355 18,009 18,009 93,009 32,760 32,760 107,760 62,509 62,509 137,509
19 44,892 18,752 18,752 93,752 35,297 35,297 110,297 70,162 70,162 145,162
20 48,607 19,467 19,467 94,467 37,927 37,927 112,927 78,590 78,590 153,590
Age 60 97,665 24,725 24,725 99,725 69,873 69,873 144,873 227,418 227,418 302,418
Age 65 132,771 25,769 25,769 100,769 90,199 90,199 165,199 376,741 376,741 451,741
Age 70 177,576 25,480 25,480 100,480 113,899 113,899 188,899 619,398 619,398 694,398
Age 75 226,637 16,672 16,672 91,672 133,134 133,134 208,134 1,004,572 1,004,572 1,079,572
<FN>
(1) Assumes a $1,400 payment is made at the beginning of each Policy Year. Values will be different if payments are made with a
different frequency or in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals may cause this Policy to lapse because of
insufficient POLICY VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY. THEY ARE NOT
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. INVESTMENT RESULTS WILL DEPEND ON
INVESTMENT ALLOCATIONS AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE
FUNDS. THESE HYPOTHETICAL INVESTMENT RATES OF RETURN MAY NOT BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD.
- 66 -
<PAGE>
SMA LIFE ASSURANCE COMPANY
SELECT VARIABLE LIFE POLICY
Male Non-Smoker age 30
Face Amount = $75,000
Adjustable Option
BASED ON GUARANTEED MONTHLY INSURANCE PROTECTION CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PAYMENTS HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
MADE PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,470 331 1,211 76,211 408 1,288 76,288 485 1,365 76,365
2 3,014 1,392 2,398 77,398 1,622 2,628 77,628 1,862 2,868 77,868
3 4,634 2,013 3,562 78,562 2,473 4,023 79,023 2,972 4,521 79,521
4 6,336 4,044 4,704 79,704 4,814 5,474 80,474 5,681 6,341 81,341
5 8,123 5,264 5,814 80,814 6,424 6,974 81,974 7,784 8,334 83,334
6 9,999 6,454 6,894 81,894 8,087 8,527 83,527 10,078 10,518 85,518
7 11,969 7,623 7,953 82,953 9,812 10,142 85,142 12,591 12,921 87,921
8 14,037 8,762 8,982 83,982 11,593 11,813 86,813 15,337 15,557 90,557
9 16,209 9,872 9,982 84,982 13,433 13,543 88,543 18,337 18,447 93,447
10 18,490 10,954 10,954 85,954 15,333 15,333 90,333 21,619 21,619 96,619
11 20,884 11,907 11,907 86,907 17,203 17,203 92,203 25,125 25,125 100,125
12 23,398 12,834 12,834 87,834 19,142 19,142 94,142 28,979 28,979 103,979
13 26,038 13,727 13,727 88,727 21,143 21,143 96,143 33,207 33,207 108,207
14 28,810 14,595 14,595 89,595 23,220 23,220 98,220 37,857 37,857 112,857
15 31,720 15,429 15,429 90,429 25,366 25,366 100,366 42,963 42,963 117,963
16 34,777 16,231 16,231 91,231 27,583 27,583 102,583 48,570 48,570 123,570
17 37,985 17,000 17,000 92,000 29,875 29,875 104,875 54,730 54,730 129,730
18 41,355 17,728 17,728 92,728 32,236 32,236 107,236 61,490 61,490 136,490
19 44,892 18,426 18,426 93,426 34,677 34,677 109,677 68,920 68,920 143,920
20 48,607 19,084 19,084 94,084 37,194 37,194 112,194 77,080 77,080 152,080
Age 60 97,665 22,721 22,721 97,721 66,142 66,142 141,142 218,316 218,316 293,316
Age 65 132,771 21,463 21,463 96,463 82,363 82,363 157,363 356,417 356,417 431,417
Age 70 177,576 16,474 16,474 91,474 97,870 97,870 172,870 575,779 575,779 650,779
Age 75 234,759 5,469 5,469 80,469 109,513 109,513 184,513 923,791 923,791 998,791
<FN>
(1) Assumes a $1,400 payment is made at the beginning of each Policy Year. Values will be different
if payments are made with a different frequency or in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals may cause this Policy
to lapse because of insufficient POLICY VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY. THEY ARE NOT
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. INVESTMENT RESULTS WILL DEPEND ON
INVESTMENT ALLOCATIONS AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE
FUNDS. THESE HYPOTHETICAL INVESTMENT RATES OF RETURN MAY NOT BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD.
- 67 -
<PAGE>
SMA LIFE ASSURANCE COMPANY
SELECT VARIABLE LIFE POLICY
Male Non-Smoker AGE 45
FACE AMOUNT = $250,000
Level Option
BASED ON CURRENT MONTHLY INSURANCE PROTECTION CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PAYMENTS HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
MADE PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,410 0 3,169 250,000 63 3,385 250,000 280 3,602 250,000
2 9,041 2,530 6,233 250,000 3,161 6,865 250,000 3,820 7,523 250,000
3 13,903 4,010 9,175 250,000 5,258 10,423 250,000 6,613 11,778 250,000
4 19,008 9,519 12,010 250,000 11,587 14,791 250,000 13,924 16,416 250,000
5 24,368 12,646 14,722 250,000 15,742 17,818 250,000 19,385 21,461 250,000
6 29,996 15,649 17,310 250,000 19,982 21,643 250,000 25,295 26,956 250,000
7 35,906 18,519 19,765 250,000 24,303 25,548 250,000 31,695 32,941 250,000
8 42,112 21,245 22,076 250,000 28,695 29,526 250,000 38,628 39,458 250,000
9 48,627 23,817 24,232 250,000 33,154 33,569 250,000 46,145 46,560 250,000
10 55,469 26,219 26,219 250,000 37,668 37,668 250,000 54,300 54,300 250,000
11 62,652 28,489 28,489 250,000 42,283 42,283 250,000 63,214 63,214 250,000
12 70,195 30,644 30,644 250,000 47,040 47,040 250,000 73,027 73,027 250,000
13 78,114 32,686 32,686 250,000 51,950 51,950 250,000 83,848 83,848 250,000
14 86,430 34,616 34,616 250,000 57,022 56,022 250,000 95,797 95,797 250,000
15 95,161 36,429 36,429 250,000 62,261 62,261 250,000 109,002 109,002 250,000
16 104,330 38,120 37,120 250,000 67,674 67,674 250,000 123,614 123,614 250,000
17 113,956 39,686 39,686 250,000 73,272 73,272 250,000 139,802 139,802 250,000
18 124,064 41,119 41,119 250,000 79,060 79,060 250,000 157,757 157,757 250,000
19 134,677 42,409 42,409 250,000 85,046 84,046 250,000 177,697 177,697 250,000
20 145,821 43,549 43,549 250,000 91,239 91,239 250,000 199,872 199,872 250,000
Age 60 95,161 36,429 36,429 250,000 62,261 62,261 250,000 109,002 109,002 250,000
Age 65 145,821 43,549 43,549 250,000 91,239 91,239 250,000 199,872 199,872 250,000
Age 70 210,477 47,032 47,032 250,000 126,052 126,052 250,000 350,530 350,530 406,615
Age 75 292,995 44,636 44,636 250,000 168,683 168,683 250,000 595,205 595,205 636,869
<FN>
(1) Assumes a $4,200 payment is made at the beginning of each Policy Year. Values will be different
if payments are made with a different frequency or in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals may cause this Policy
to lapse because of insufficient POLICY VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY. THEY ARE NOT
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. INVESTMENT RESULTS WILL DEPEND ON
INVESTMENT ALLOCATIONS AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE
FUNDS. THESE HYPOTHETICAL INVESTMENT RATES OF RETURN MAY NOT BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD.
- 68 -
<PAGE>
SMA LIFE ASSURANCE COMPANY
SELECT VARIABLE LIFE POLICY
Male Non-Smoker AGE 45
face amount = $250,000
Level Option
BASED ON GUARANTEED MONTHLY INSURANCE PROTECTION CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PAYMENTS HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
MADE PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,410 0 3,164 250,000 58 3,380 250,000 275 3,597 250,000
2 9,041 2,514 6,218 250,000 3,145 6,849 250,000 3,803 7,507 250,000
3 13,903 3,972 9,137 250,000 5,218 10,382 250,000 6,569 11,734 250,000
4 19,008 9,462 11,954 250,000 11,524 14,015 250,000 13,853 16,344 250,000
5 24,368 12,567 14,643 250,000 15,649 17,725 250,000 19,276 21,352 250,000
6 29,996 15,521 17,182 250,000 19,829 21,490 250,000 25,113 26,774 250,000
7 35,906 18,355 19,601 250,000 24,099 25,344 250,000 31,441 32,687 250,000
8 42,112 21,047 21,878 250,000 28,437 29,267 250,000 38,291 39,122 250,000
9 48,627 23,573 23,989 250,000 32,824 33,239 250,000 45,698 46,113 250,000
10 55,469 25,913 25,913 250,000 37,242 37,242 250,000 53,706 53,706 250,000
11 62,652 27,698 27,698 250,000 41,343 41,343 250,000 62,061 62,061 250,000
12 70,195 29,282 29,282 250,000 45,473 45,473 250,000 71,180 71,180 250,000
13 78,114 30,668 30,668 250,000 49,641 49,641 250,000 81,163 81,163 250,000
14 86,430 31,836 31,836 250,000 53,832 53,832 250,000 92,104 92,104 250,000
15 95,161 32,764 32,764 250,000 58,032 58,032 250,000 104,115 104,115 250,000
16 104,330 33,429 33,429 250,000 62,227 62,227 250,000 117,330 117,330 250,000
17 113,956 33,808 33,808 250,000 66,405 66,405 250,000 131,906 131,906 250,000
18 124,064 33,879 33,879 250,000 70,553 70,553 250,000 148,028 148,028 250,000
19 134,677 33,591 33,591 250,000 74,640 74,640 250,000 165,909 165,909 250,000
20 145,821 32,866 32,866 250,000 78,612 78,612 250,000 185,796 185,796 250,000
Age 60 95,161 32,764 32,764 250,000 58,032 58,032 250,000 104,115 104,115 250,000
Age 65 142,821 32,866 32,866 250,000 78,612 78,612 250,000 185,796 185,796 250,000
Age 70 210,477 21,270 21,270 250,000 96,148 96,148 250,000 321,352 321,352 372,768
Age 75 292,995 0 (13,006) 250,000 105,323 105,323 250,000 537,013 537,013 574,604
<FN>
(1) Assumes a $4,200 payment is made at the beginning of each Policy Year. Values will be different
if payments are made with a different frequency or in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals may cause this Policy
to lapse because of insufficient POLICY VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY. THEY ARE NOT
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. INVESTMENT RESULTS WILL DEPEND ON
INVESTMENT ALLOCATIONS AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE
FUNDS. THESE HYPOTHETICAL INVESTMENT RATES OF RETURN MAY NOT BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD.
- 69 -
<PAGE>
APPENDIX E - COMPUTING MAXIMUM SURRENDER CHARGES
A separate surrender charge is computed on the DATE OF ISSUE and on each
increase in FACE AMOUNT. The maximum surrender charge is a
- Deferred administrative charge of $8.50 per $1,000 of
initial FACE AMOUNT (or FACE AMOUNT increase) AND
- Deferred sales charge of 28.5% of payments received up to
the GUIDELINE ANNUAL PREMIUM (GAP)
A further limitation is imposed based on the Standard Non-Forfeiture Law
of each state. The maximum surrender charges at the DATE OF ISSUE and
on each increase in FACE AMOUNT are shown in the table below. During
the first two Policy years following the DATE OF ISSUE or an increase in
FACE AMOUNT, the surrender charge may be less than the maximum. See
"CHARGES AND DEDUCTIONS - Surrender Charge."
The maximum surrender charge is level for the first 24 Policy months,
reduces by 1/96th for the next 96 Policy months, reaching zero at the
end of ten Policy years.
The Factors used to compute the maximum surrender charges vary with the
issue AGE and UNDERWRITING CLASS (Smoker) as indicated in the table
below.
- 70 -
<PAGE>
MAXIMUM SURRENDER CHARGE PER $1,000 FACE AMOUNT
<TABLE>
<CAPTION>
Age at
issue or Male Male Female Female Unisex Unisex
increase Nonsmoker Smoker Nonsmoker Smoker Nonsmoker Smoker
- -------- --------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
0 N/A 9.44 N/A 9.21 N/A 9.39
1 N/A 9.43 N/A 9.20 N/A 9.38
2 N/A 9.46 N/A 9.23 N/A 9.41
3 N/A 9.49 N/A 9.25 N/A 9.45
4 N/A 9.53 N/A 9.28 N/A 9.48
5 N/A 9.57 N/A 9.31 N/A 9.52
6 N/A 9.62 N/A 9.34 N/A 9.56
7 N/A 9.66 N/A 9.38 N/A 9.61
8 N/A 9.72 N/A 9.41 N/A 9.65
9 N/A 9.77 N/A 9.45 N/A 9.71
10 N/A 9.83 N/A 9.49 N/A 9.76
11 N/A 9.89 N/A 9.53 N/A 9.82
12 N/A 9.95 N/A 9.58 N/A 9.88
13 N/A 10.02 N/A 9.62 N/A 9.94
14 N/A 10.09 N/A 9.67 N/A 10.01
15 N/A 10.16 N/A 9.72 N/A 10.07
16 N/A 10.22 N/A 9.78 N/A 10.13
17 N/A 10.29 N/A 9.83 N/A 10.20
18 9.90 10.36 9.67 9.89 9.85 10.26
19 9.95 10.43 9.72 9.95 9.90 10.33
20 10.00 10.50 9.77 10.01 9.96 10.40
21 10.06 10.58 9.82 10.07 10.01 10.48
22 10.12 10.66 9.88 10.14 10.07 10.55
23 10.19 10.75 9.94 10.21 10.13 10.64
24 10.25 10.84 10.00 10.29 10.20 10.73
25 10.33 10.94 10.06 10.37 10.27 10.82
26 10.41 11.04 10.13 10.46 10.35 10.92
27 10.49 11.16 10.21 10.54 10.43 11.03
28 10.58 11.28 10.28 10.64 10.52 11.15
29 10.68 11.42 10.37 10.74 10.61 11.28
30 10.78 11.56 10.45 10.84 10.71 11.41
31 10.89 11.71 10.54 10.96 10.82 11.55
32 11.00 11.87 10.64 11.07 10.93 11.70
33 11.12 12.03 10.74 11.20 11.05 11.86
34 11.25 12.21 10.85 11.33 11.17 12.03
35 11.39 12.41 10.96 11.47 11.30 12.21
36 11.54 12.61 11.08 11.61 11.44 12.40
37 11.69 12.82 11.21 11.77 11.59 12.60
38 11.85 13.05 11.34 11.93 11.75 12.82
39 12.03 13.29 11.48 12.10 11.92 13.04
40 12.21 13.54 11.63 12.28 12.09 13.28
</TABLE>
- 71 -
<PAGE>
MAXIMUM SURRENDER CHARGE PER $1,000 FACE AMOUNT (continued)
<TABLE>
<CAPTION>
Age at
issue or Male Male Female Female Unisex Unisex
increase Nonsmoker Smoker Nonsmoker Smoker Nonsmoker Smoker
- -------- --------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
41 12.40 13.81 11.79 12.46 12.28 13.53
42 12.61 14.09 11.95 12.66 12.47 13.79
43 12.83 14.39 12.12 12.86 12.68 14.07
44 13.06 14.71 12.30 13.07 12.90 14.36
45 13.30 15.04 12.50 13.29 13.14 14.67
46 13.56 15.39 12.70 13.53 13.38 14.99
47 13.84 15.76 12.91 13.78 13.65 15.33
48 14.13 16.16 13.14 14.04 13.93 15.69
49 14.45 16.57 13.38 14.31 14.22 16.08
50 14.78 17.02 13.64 14.60 14.54 16.48
51 15.14 17.49 13.91 14.91 14.88 16.91
52 15.52 17.99 14.20 15.23 15.24 17.37
53 15.92 18.52 14.50 15.57 15.62 17.85
54 16.35 19.08 14.82 15.93 16.03 18.36
55 16.82 19.67 15.17 16.31 16.46 18.90
56 17.31 20.29 15.53 16.71 16.93 19.47
57 17.83 20.96 15.92 17.14 17.42 20.07
58 18.39 21.66 16.34 17.60 17.95 20.70
59 18.99 22.41 16.79 18.09 18.51 21.38
60 19.63 23.20 17.28 18.62 19.11 22.10
61 20.32 24.05 17.80 19.20 19.76 22.87
62 21.06 24.96 18.37 19.81 20.46 23.68
63 21.85 25.92 18.98 20.48 21.20 24.55
64 22.69 26.94 19.63 21.18 22.00 25.47
65 23.60 28.01 20.33 21.94 22.85 26.44
66 24.57 29.15 21.08 22.74 23.77 27.46
67 25.61 30.35 21.88 23.60 24.74 28.54
68 26.73 31.63 22.75 24.52 25.80 29.69
69 27.93 33.00 23.70 25.53 26.93 30.92
70 29.23 34.46 24.74 26.63 28.16 32.24
71 30.64 36.02 25.88 27.83 29.48 33.65
72 32.13 37.70 27.13 29.15 30.90 35.17
73 33.75 39.48 28.48 30.59 32.44 36.79
74 35.49 41.35 29.96 32.13 34.09 38.50
75 37.33 43.32 31.56 33.79 35.85 40.30
76 39.30 45.37 33.29 35.57 37.73 42.18
77 41.40 47.52 35.16 37.48 39.74 44.16
78 43.65 49.76 37.21 39.54 41.91 46.26
79 46.08 52.15 39.45 41.79 44.25 48.51
80 48.73 54.71 41.92 44.25 46.82 50.93
</TABLE>
- 72 -
<PAGE>
EXAMPLES
For the purposes of these examples, assume that a male, AGE 35,
non-smoker purchases a $100,000 Policy. In this example the GUIDELINE
ANNUAL PREMIUM ("GAP") equals $1,014.21. His maximum surrender charge
is calculated as follows:
(1) Deferred Administrative Charge $850.00
($8.50/$1,000 of FACE AMOUNT)
(2) Deferred Sales Charge $491.89
(48.5% x 1 x GAP)
---------
TOTAL $1,341.89
Maximum Surrender Charge per Table (11.39 x 100) $1,139.00
During the first two Policy years after the DATE OF ISSUE, the actual
surrender charge is the smaller of the maximum surrender charge and the
following sum:
(1) Deferred Administrative Charge $850.00
($8.50/$1,000 of FACE AMOUNT)
(2) Deferred Sales Charge Varies
(not to exceed 28.5% of payments received,
up to one GAP)
---------
Sum of (1) and (2)
The maximum surrender charge is $1,139.00. All payments are associated
with the initial FACE AMOUNT unless the FACE AMOUNT is increased.
Example 1:
- ----------
Assume the POLICYOWNER surrenders the Policy in the 10th Policy month,
having paid total payments of $900. The surrender charge would be
$1,106.50.
Example 2:
- ----------
Assume the POLICYOWNER surrenders the Policy in the 60th month. Also
assume that after the 24th Policy month, the maximum surrender charge
decreases by 1/96 per month thereby reaching zero at the end of the 10th
Policy year. In this example, the maximum surrender charge would be
$711.88.
<PAGE>
Part II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
RULE 484 UNDERTAKING
Article VIII of Registrant's Bylaws provides: Each Director and each Officer of
the Corporation, whether or not in office, (and his executors or
administrators), shall be indemnified or reimbursed by the Corporation against
all expenses actually and necessarily incurred by him in the defense or
reasonable settlement of any action, suit, or proceeding in which he is made a
party by reason of his being or having been a Director or Officer of the
Corporation, including any sums paid in settlement or to discharge judgment,
except in relation to matters as to which he shall be finally adjudged in such
action, suit, or proceeding to be liable for negligence or misconduct in the
performance of his duties as such Director or Officer; and the foregoing right
of indemnification or reimbursement shall not affect any other rights to which
he may be entitled under the Articles of Incorporation, any statute, bylaw,
agreement, vote of stockholders, or otherwise.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
RULE 6e-3(T) REPRESENTATIONS, DESCRIPTIONS AND UNDERTAKINGS
Registrant makes the following representations pursuant to the requirements of
Rule 6e-3(T) under the Investment Company Act of 1940:
A. Risk Charge
Pursuant to Rule 6e-3(T)(b)(13)(iii)(F)(1), Registrant represents that Rule 6e-
3(T)(b)(13)(iii)(F) has been relied upon in deducting charges for mortality
expense and risks assumed by SMA Life Assurance Company (the "Company").
Pursuant to Rule 6e-3(T)(b)(13)(iii)(F)(2), Registrant represents that the
mortality and expense risk charge is within the range of industry practice for
comparable flexible premium variable life insurance contracts. The methodology
used to support this representation is based upon an analysis of the mortality
and expense risk charges adopted under other flexible premium variable life
insurance contracts. Registrant undertakes to keep and make available to the
Commission on request the documents used to support the foregoing
representation.
<PAGE>
B. Distribution Costs
Pursuant to Rule 6e-3(T)(b)(13)(iii)(F)(4)(ii)(A), Registrant represents that
the Company has concluded that there is a reasonable likelihood that the
distribution financing arrangement of the Registrant will benefit the Registrant
and contract holders and will keep and make available to the Commission on
request a memorandum setting forth the basis for this representation. Pursuant
to Section 6e-3(T)(b)(13)(iii)(F)(4)(ii)(B)(2), Registrant also represents that
it will invest only in management investment companies which have undertaken to
have a board of directors, a majority of whom are not interested persons of the
company, formulate and approve any plan under Rule 12b-1 under the Investment
Company Act of 1940 to finance distribution expenses.
CONTENTS OF THE REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consists of ____ pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484 under the Securities Act of 1933.
Representatives, descriptions and undertaking pursuant to Rule
6e-3(T)(b)(13)(iii)(F) under the Investment Company Act of 1940 (the
"1940 Act").
The signatures.
<PAGE>
Written consents of the following persons:
1. Price Waterhouse
2. Opinion of Counsel
The following exhibits:
1. Exhibit 1
(Exhibits required by paragraph A of the instructions to Form N-8B-2)
(1) Certified copy of Resolutions of the Board of Directors of the
Company of October 12, 1993 establishing the Allmerica Select
Separate Account II was previously filed with Registrant's initial
Registration Statement and are herein incorporated by reference.
(2) Not Applicable.
(3) (a) Form of Sales and Administrative Services
Agreement between the Company and Allmerica
Investments, Inc. was previously filed on
February 1, 1993 and is herein incorporated by
reference.
(b) Registered Representative Agreement and Resident
Sponsor Agreement of Allmerica Investment Inc.
(formerly "SMA Equities, Inc.") were previously
filed by the Company on June 3, 1987,
Registration No. 33-14672, and are incorporated
herein by reference.
(4) Not Applicable.
(5) Forms of Policy and Policy riders were previously filed
with Registrant's initial Registration Statement and are
herein incorporated by reference.
(6) Organizational documents of the Company as amended
(7) Not Applicable.
(8) (a) Form of Participation Agreement with Allmerica
Investment Trust was previously filed by the
Company on June 3, 1987 in Registration
Statement No. 33-14672, and is incorporated
herein by reference.
(b) Form of Participation Agreement with T. Rowe
Price International Series, Inc. was previously
filed with Registrant's pre-effective amendment
No. 1 and is herein incorporated by reference.
<PAGE>
(c) Form of Participation Agreement with Variable
Insurance Products Fund.
(9) Not Applicable.
(10) Form of Application was previously filed with
Registrant's initial registration statement and
is herein incorporated by reference.
2. Form of Policy and Policy riders are included in Exhibit 1 above.
3. Opinion of Counsel.
4. Not Applicable.
5. Not Applicable.
6. Actuarial consent was previously filed on May 1, 1995 and is
incorporated haerein by reference.
7. Procedures Memorandum pursuant to Rule 6e-3(T)(b)(12)(iii) under
the 1940 Act which includes conversion procedures pursuant to Rule
6e-3(T)(b)(13)(v)(B) was previously filed with Registrant's initial
Registration Statement and is herein incorporated by reference.
8. Consent of Independent Accountants.
9. AUV Calculation Services Agreement with The Shareholder Services Group
dated March 31, 1995 was previously filed on May 1, 1995 and is
incorporated haerein by reference.
<PAGE>
FORM S-6 EXHIBIT TABLE
Exhibit 1(6) Articles of organization and Bylaws, as amended Page_______
Exhibit 3 Opinion of Counsel Page_______
Exhibit 8 Consent of Independent Accountants Page_______
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this pre-effective amendment
to the Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Worcester, and Commonwealth of Massachusetts, on the 25th day of
September, 1995. Registrant certifies that it meets the requirement of
Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment
to its Registration Statement.
SMA LIFE ASSURANCE COMPANY
ALLMERICA SELECT
SEPARATE ACCOUNT II
Attest: /s/ Joseph W. MacDougall, Jr.
---------------------------------
Joseph W. MacDougall, Jr.
Vice President, Associate General Counsel
and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ Richard M. Reilly Director, President and September, 1995
- ---------------------- Chief Executive Officer ----------------
Richard M. Reilly
/s/ John F. O'Brien Director and Chairman of the
- ---------------------- Board
John F. O'Brien
/s/ Eric A. Simonsen Director, Vice President and
- ---------------------- Chief Financial Officer
Eric A. Simonsen
/s/ Mark R. Colborn Vice President and
- ---------------------- Controller
Mark R. Colborn
/s/ Richard J. Baker Director and Vice President
- ----------------------
Richard J. Baker
/s/ John F. Kelly Director
- ----------------------
John F. Kelly
<PAGE>
Exhibit 1(6)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
SMA LIFE ASSURANCE COMPANY, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That at a meeting of the Board of Directors of SMA Life Assurance
Company resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is
as follows:
RESOLVED: That the Certificate of Incorporation of this corporation be amended
by changing the Article thereof numbered "First" so that as amended said Article
shall be and read as follows: "THE NAME OF THE CORPORATION IS ALLMERICA
FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY."
SECOND: That at a meeting of the Board of Directors of SMA Life Assurance
Company resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is
as follows:
RESOLVED: That effective October 1, 1995, and subject to the approval of the
Stockholder of the Company, the Certificate of Incorporation of SMA Life
Assurance Company, a Delaware corporation, shall be amended to add the following
as Article Tenth:
"A director or officer of this corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director or officer, except to the extent that exculpation from
liability is not permitted under the General Corporation Law of the State of
Delaware as in effect at the time such liability is determined. No amendment or
repeal of this paragraph shall apply to or have any effect on the liability of
alleged liability of any director or officer of the corporation for or with
respect to any acts or omissions of such director or officer occurring prior to
such amendment or repeal.
THIRD: That thereafter, pursuant to resolution of its Board of Directors, a
special meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware, at which meeting the necessary number of shares as
required by statue were voted in favor of the amendments.
<PAGE>
FOURTH: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FIFTH: That the capital of said corporation shall not be reduced or increased
by reason of said amendment.
SIXTH: That the effective date of said amendments shall be October 1, 1995.
In Witness Whereof, said SMA Life Assurance Company has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Bradford K.
Gallagher, its President, and Abigail M. Armstrong, its Secretary, this 29th day
of June 1995.
By: /s/ Bradford K. Gallagher
------------------------------------
President
(Corporate Seal)
By: /s/ Abigail M. Armstrong
------------------------------------
Secretary
Attest:
/s/ Randi B. Setterlund
- --------------------------
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
***
American Variable Annuity Life Assurance Company, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of American Variable
Annuity Life Assurance Company resolutions were duly adopted setting forth a
proposed amendment of the Certificate of Incorporation of said corporation,
declaring said amendment to be advisable and calling a meeting of the
stockholders of said corporation for consideration thereof. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "FIRST" so that, as amended
said Article shall be and read as follows:
"The name of the corporation is SMA Life Assurance Company"
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or
by reason of said amendment.
FIFTH: That the effective date of said amendment shall be January 1,
1982.
IN WITNESS WHEREOF, said American Variable Annuity Life Assurance Company
has caused its corporate seal to be hereunto affixed and this certificate to be
signed by John M. Quinlan, its President, and Sheila B. St. Hilaire, its
Secretary, this 28th day of September, 1981.
/s/ John M. Quinlen
----------------------------------
By: John M. Quinlan
President
/s/ Sheila B. St. Hilaire
---------------------------------
(CORPORATE SEAL) By: Sheila B. St. Hilaire
Secretary
ATTEST: Ralph L. Diller, Asst. Secretary
<PAGE>
CERTIFICATE OF INCORPORATION
OF
AMERICAN VARIABLE ANNUITY LIFE ASSURANCE COMPANY, INC.
KNOW ALL MEN BY THESE PRESENTS: EXHIBIT A
That the following Certificate of Incorporation of AMERICAN VARIABLE ANNUITY
LIFE ASSURANCE COMPANY, INC. shall henceforth be, and constitute the Certificate
of Incorporation of said Corporation as follows:
First: The name of the Corporation is American Variable Annuity Life
Assurance Company, Inc.
Second: Its registered office in the State of Delaware is located at No. 229
South State Street, Dover, County of Kent. The registered agent in
charge thereof at such address is The Prentice-Hall Corporation
System, Inc.
Third: The nature of the business or objects or purposes to be transacted,
promoted, or carried on by the Corporation are as follows:
(a) The insuring of lives of persons and every insurance pertaining
thereto or connected therewith, including accident and health
insurance and the granting or disposing of annuities and the
transacting of disability insurance, whether on a group,
individual, franchise or reinsurance basis, and any other type of
insurance or other business which may be or hereafter be lawfully
conducted by legal reserve life insurance companies organized
under the laws of the State of Delaware. Any such business may be
transacted on a variable basis stated in terms of units or
otherwise but payable in lawful currency, or on a fixed basis
stated in terms of predetermined amounts of lawful currency; the
Corporation may transact any such business in Delaware or
elsewhere.
(b) The Directors of the Corporation shall have the power to segregate
and hold separate from the other funds and assets of the
Corporation premiums or other funds received from the sale of
various types and classes of policies and annuity contracts; the
amount held may be invested in such proportions and in such manner
as determined by the Board of Directors of the Corporation or by a
committee thereof; except as may otherwise by required under
Subsection (c) hereof. The assets held in such separate account
or accounts shall not be chargeable with liabilities arising out
of any other business the Corporation may conduct, but shall be
held and applied exclusively for the benefit of the holders or
beneficiaries of those variable annuity contracts or life
insurance policies with respect to which the account or accounts
have been established;
(c) If a separate account is registered with an Agency of the Federal
Government having jurisdiction over such separate account or
contracts issued in connection therewith, provisions may be made
in the rules and regulations for such separate account for voting
by
<PAGE>
owners of a separate account contracts with respect to the
election of a board of managers for such account, ratification of
the selection of auditors for such account by such board, approval
of investment advisory service contracts for such account, and
such other matters as may be required by applicable law.
Fourth: The authorized capital stock of the Corporation shall be 10,000 shares
of $1,000 par value per share. Stock authorized but not issued may be
issued for such consideration as shall be fixed from time to time by
the Board of Directors, but the consideration shall at all times be
not less than the par value of said shares. When shares of stock
shall be issued, and paid for in cash at the rate determined by the
Board of Directors, such shares shall thereafter be nonassessable.
Fifth: The names and places of residence of the incorporators are as follows:
Ralph L. Diller, 11 Notre Dame Street, Leominster, Massachusetts
01543;
Gaynelle G. Jones, 8 Wabon Street, Dorchester, Massachusetts 02121;
Marilyn G. Quattrocchi, Harris Avenue, Lincoln, Rhode Island 02865
Sixth: The powers of the incorporators shall terminate upon the filing of
this Certificate of Incorporation, and the initial Board of Directors
of the Corporation shall be composed of:
Harold E. Ahlquist 75 Birchwood Drive
Holden, Massachusetts 01520
W. Douglas Bell 50 Wyndhurst Drive
Holden, Massachusetts 01520
Norman C. Cross 35 Leominster Road
Lunenburg, Massachusetts 01420
Roland A. Erickson 20 Church Street
Greenwich, Connecticut 06830
Frederick Fedeli 22 High Street
Southboro, Massachusetts 01772
John H. Freese 85 Wyndhurst Drive
Holden, Massachusetts 01520
Ralph F. Gow 14 Monmouth Road
Worcester, Massachusetts 01609
Paul R. O'Connell 34 Drury Lane
Worcester, Massachusetts 01609
and they shall serve until the Annual Meeting of the Corporation to be
held on the second Wednesday of April, 1975 and until their successors
shall have been elected and qualified.
Seventh: The following additional provisions not inconsistent with law are
hereby established for the management, conduct, and regulation of the
business and officers of the Corporation, and for creating, limiting,
defining, and
<PAGE>
regulating the powers of the Corporation and of its directors and
stockholders:
(a) The affairs and business of the Corporation shall be managed and
controlled by a Board of Directors consisting of not less than
three (3).
(b) The Directors shall be elected in such number, for such terms, and
in such manner as shall be provided in the By-laws and any
Director of the Corporation may be removed at any annual or
special meeting of stockholders by the same vote as that required
to elect a Director.
(c) Meetings of stockholders may be held outside the State of Delaware
if the By-laws so provide, in such place as shall be designated in
the notice of meeting. Except as otherwise required by law, the
presence in person or by proxy of the holders of a majority of the
shares of stock entitled to vote shall constitute a quorum at any
meeting of stockholders.
Eighth: The Corporation shall have perpetual existence unless sooner
terminated by the affirmative vote of the holders of two-thirds (2/3)
of the issued and outstanding stock.
Ninth: These Articles of Incorporation may be amended by written
authorization of the holders of a majority of the shares of stock
outstanding and entitled to vote or by affirmative vote of such a
majority voting at a lawful meeting of such stockholders provided
notice given for such meeting includes due notice of the proposal to
amend.
We, the undersigned, for the purpose of forming a corporation under the laws of
the State of Delaware, do make, file, and record this Certificate, and do
certify that the facts herein stated are true; and we have accordingly hereunto
set our respective hands.
Dated at July 26, 1974.
Ralph L. Diller
Gaynelle G. Jones
Marilyn G. Quattrocchi
<PAGE>
Commonwealth of Massachusetts )
)ss
County of Worcester )
Be it remembered, that on this 26th day of July, 1974, there personally appeared
before me, the undersigned, a notary public, Ralph L. Diller, Gaynelle G. Jones,
Marilyn G. Quattrocchi, parties to the foregoing Certificate of Incorporation,
known to me personally to be such, and I having first made known to them and
each of them the contents of said Certificate, they did each severally
acknowledge that they signed, sealed, and delivered the same as their voluntary
act and deed, and each deposed that the facts therein stated were truly set
forth.
Given under my hand and seal of office the day of the year aforesaid.
Robert G. Juneau
Notary Public
My Commission Expires: May 30, 1980
<PAGE>
AGREEMENT OF MERGER
AMERICAN VARIABLE ANNUITY LIFE ASSURANCE COMPANY
(AN ARKANSAS COMPANY)
AND
AMERICAN VARIABLE ANNUITY LIFE ASSURANCE COMPANY, INC.
(A DELAWARE COMPANY)
This Agreement and Plan of Merger (hereinafter referred to as "Agreement")
made as of this 23rd day of September, 1974, between American Variable Annuity
Life Assurance Company (hereinafter referred to as AVA Co.), a stock insurance
company incorporated and existing under the laws of the State of Arkansas and
having its principal place of business in Little Rock, Arkansas, and American
Variable Annuity Life Assurance Company, Inc. (hereinafter referred to as AVA,
Inc.), a stock insurance company incorporated and existing under the laws of the
State of Delaware and having its registered office in Dover, Delaware and its
principal place of business in Worcester, Massachusetts. (Said companies being
sometimes hereinafter called "Constituent Companies").
Whereas, the purpose of this Agreement is to accomplish the transfer of the
domicile of AVA Co. from the State of Arkansas to the State of Delaware through
the utilization of the merger statutes of the respective states, and
Whereas, after full consideration, the Boards of Directors of the
Constituent Companies have deemed it is in the best interests of the Companies
and their shareholders that the Constituent Companies be merged as a single
company and the Surviving Company of said merger comprise the same business
enterprise as AVA Co.
WITNESSETH:
IN CONSIDERATION of the terms and of the mutual agreements, covenants, and
provisions herein contained, and pursuant to the laws of Arkansas and of
Delaware, this Agreement of Merger is made and entered into by and between the
Board of Directors of the said AVA Co. and the Board of Directors of the said
AVA, Inc., do hereby agree as follows:
(1) At the effective date and time set forth herein, AVA Co. is hereby
merged into and with AVA, Inc. with AVA, Inc. the surviving and continuing
company under the laws of the State of Delaware. At the effective date of
merger AVA, Inc. shall assume the name of American Variable Annuity Life
Assurance Company (hereinafter referred to as the "Surviving Company").
(2) The Surviving Company shall continue as a stock insurance company,
and shall have the objects and purposes stated in its Certificate of
Incorporation, Exhibit A annexed, and in general terms have the power and
authority to transact any business which AVA Co. is empowered and authorized to
transact, and shall have the authority to transact any business which domestic
life and health insurance companies are now or hereafter may be authorized to
transact under the laws of the State of Delaware.
(3) At the said effective date and time, and by operation of the
applicable
<PAGE>
laws and statutes of the State of Arkansas and the State of Delaware relating to
the merger of stock insurance corporations, all of the rights and assets of AVA
Co. including without limitation assets tangible and intangible, real and
personal, of whatsoever kind and character and wheresoever located, including
all separate accounts of AVA Co., shall become the assets of the Surviving
Company.
(4) At the effective date and time and by operation of the applicable
laws and statutes of the State of Arkansas and the State of Delaware, the
Surviving Company shall assume and shall be liable and responsible for any and
all of the legal liabilities and legal obligations of AVA Co. then outstanding,
including without limitation, all liabilities for taxes, all liabilities under
insurance contracts theretofore issued or then on binder, and all other legal
liabilities and obligations of AVA Co.
(5) Prior to the merger, the Board of Directors of AVA, Inc. shall
adopt a resolution to be effective at the time of the merger providing that such
separate account or accounts as may be established and maintained by AVA Co. at
the time of the merger shall be deemed to be separate accounts of the Surviving
Company pursuant to the provisions of Delaware law and that the existence of
such separate account or accounts shall continue uninterrupted.
(6) The Surviving Company, through its appropriate officers and
directors, is hereby authorized in the name of either of the Constituent
Companies or in its own name, to execute, acknowledge, and deliver all
instruments of further assurance and to do all other such acts or things as it
may, at any time, deem necessary or desirable to vest in the Surviving Company
any property or rights of any of the merged corporations, or to carry out any of
the purposes expressed in this Agreement.
(7) The registered office of the Surviving Company in Delaware shall be
in Dover, County of Kent, Delaware. The principal office of the Surviving
Company shall be in the City of Worcester, in the County of Worcester,
Massachusetts.
(8) The present By-Laws of AVA, Inc. set forth in Exhibit 3, shall be
the By-Laws of the Surviving Company unless and until altered, amended or
repealed in the manner therein provided.
(9) All shares if authorized and outstanding capital stock of AVA,
Inc., such stock being owned in its entirety AVA Co., shall be cancelled on the
effective date of the merger.
(10) All shares of authorized and outstanding capital stock of AVA Co.
owned in its entirety by State Mutual Life Assurance Company of America, shall
be cancelled effective the date of the merger and stock of the Surviving Company
shall be issued to State Mutual in amounts equivalent to the stock owned in AVA
Co. prior to the merger.
(11) The Constituent Companies agree to do and perform each and every
act required by the laws of Delaware and Arkansas to effectuate such merger.
(12) The proper officers of the respective companies hereto are
authorized and directed from time to time, as the occasion may arise, to do all
acts and to execute and acknowledge all affidavits, deeds, contracts,
assurances, assignments and instruments in writing, and to sign and deliver all
checks on the bank accounts of the respective parties hereto, and do anything
else deemed necessary or proper to
<PAGE>
carry out the provisions of this Agreement, and to affix the corporate seals of
the respective parties to any such instrument in writing.
(13) The merger shall become effective at the close of business December
31, 1974.
(14) In order to clarify the intention of the parties hereto or to
effect or facilitate the filing, recording or official approval of this
Agreement and Plan of Merger and the consummation hereof in accordance with the
purpose and intent of this Agreement, any of the terms or conditions of this
Agreement may be, at any time prior to the merger, amended by mutual agreement
of the Constituent Companies by action duly taken by the respective Boards of
Directors.
(15) This Agreement shall be contingent upon approval by the
shareholders of the Constituent Companies and upon approval by a majority of the
variable annuity contract owners of AVA Co. as the term majority is defined in
the By-Laws and Regulations of its separate account American Variable Annuity
Fund.
(16) This Agreement shall be and become void and of no effect and the
merger contemplated hereby shall be deemed to be abandoned if a majority of the
Board of Directors of either Constituent Companies, at a meeting thereof duly
called and held, shall be resolution deem that it is inadvisable to consummate
the merger.
(17) This Agreement shall further be contingent upon obtaining necessary
approval from the Commissioners of Insurance in the States of Arkansas and
Delaware and the approval of the appropriate governmental regulatory agencies.
(18) No director or officer of either of the Constituent Companies or of
any parent corporation or subsidiary insurer, shall receive any fee, commission,
other compensation or valuable consideration whatever other than regular salary
directly or indirectly, for in any manner aiding, promoting or assisting in the
merger.
(19) Without further action of the shareholders of AVA Co. or AVA, Inc.
or the Boards of Directors of the Constituent Companies, the officers of the
Surviving Company shall be the officers of AVA, Inc. immediately prior to the
merger and there shall be eight initial directors of the Surviving Company whose
names and addresses are as follows:
Harold E. Ahlquist, Jr. Member
75 Birchwood Drive
Holden MA 01520
W. Douglas Bell Chairman
50 Wyndhurst Drive
Holden MA 01520
Norman C. Cross Member
38 Dusty Miller Road
Falmouth MA 02540
Roland A. Erickson Member
101 M Lewis Street
Greenwich CT 06830
<PAGE>
Frederick Fedeli Member
22 High Street
Southboro MA 01772
John H. Freese Member
85 Wyndhurst Drive
Holden MA 01520
Ralph F. Gow Member
14 Monmouth Road
Worcester MA 01609
Paul R. O'Connell Member
34 Drury Lane
Worcester MA 01609
IN WITNESS WHEREOF, American Variable Annuity Life Assurance Company and
American Variable Annuity Life Assurance Company, Inc. have caused this
Agreement to be executed in their corporate names by their respective officers
and who by majorities of their Boards of Directors on this 23rd day of
September, 1974.
AMERICAN VARIABLE ANNUITY LIFE
ASSURANCE COMPANY
(Corporate Seal) By: John H. Freese, President
Attest: Ralph L. Diller, Secretary
Directors of American Variable Annuity Life Assurance Company:
Harold E. Ahlquist, Jr. Frederick Fedeli
W. Douglas Bell John H. Freese
Norman C. Cross Ralph G. Gow
Roland A. Erickson Paul R. O'Connell
AMERICAN VARIABLE ANNUITY LIFE
ASSURANCE COMPANY, INC.
/s/ John H. Freese
--------------------------------
(Corporate Seal) By: John H. Freese, President
Attest: Ralph L. Diller, Secretary
<PAGE>
Directors of American Variable Annuity Life Assurance Company, Inc.:
Harold E. Ahlquist, Jr. Frederick Fedeli
W. Douglas Bell John H. Freese
Norman C. Cross Ralph F. Gow
Roland A. Erickson Paul R. O'Connell
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
AMERICAN VARIABLE ANNUITY LIFE ASSURANCE COMPANY
INTO
AMERICAN VARIABLE ANNUITY LIFE ASSURANCE COMPANY, INC.
American Variable Annuity Life Assurance Company, a corporation organized under
the laws of the State of Arkansas does hereby certify:
FIRST: That it was organized pursuant to the provisions of the Arkansas
Insurance Laws on the 23rd day of January, 1967.
SECOND: That it owns all of the outstanding shares of capital stock of
American Variable Annuity Life Assurance Company, Inc., a corporation organized
pursuant to the provisions of the General Corporation Laws of the State of
Delaware on the 26th day of July, 1974.
THIRD: That its Board of Directors at a meeting held on the 30th day of July,
1974 determined to merge the Corporation into said American Variable Annuity
Life Assurance company, Inc. and did adopt the following resolution:
"RESOLVED: That subject to the approval of State Mutual Life
Assurance Company of America as the sole shareholder of the
company and the approval of the company's variable annuity
contract owners, the company enter into a merger agreement with
its wholly owned subsidiary, American Variable Annuity Life
Assurance Company, Inc. effective with the close of business,
December 31, 1974. The appropriate officers of the company are
hereby authorized to execute the merger agreement substantially
in the form attached hereto and take whatever action may be
necessary to carry out the terms of said merger agreement."
FOURTH: That the attached copy of the Agreement of Merger is the same as that
approved and authorized by resolution of the Board of Directors of the Company
on July 30,1974.
FIFTH: That the sole stockholder of the Company, State Mutual Life Assurance
Company of America, at a stockholder meeting duly called and held on August 16,
1974 for the purpose of approving the merger voted to approve the merger of the
Company into its wholly owned subsidiary, American Variable Annuity Life
Assurance Company, Inc. pursuant to the Agreement of Merger as authorized by the
Board of Directors of the Company on July 30, 1974.
SIXTH: That pursuant to the Agreement of Merger approved and authorized by
the Company's Board of Directors, the merger of American Variable Annuity Life
Assurance Company into American Variable Annuity Life Assurance Company, Inc.
shall be effective at the close of business December 31, 1974.
SEVENTH: That pursuant to the Agreement of Merger approved and authorized by
the Company's Board of Directors, the surviving company shall, effective with
the
<PAGE>
merger, assume the name American Variable Annuity Life Assurance Company.
IN WITNESS WHEREOF, said American Variable Annuity Life Assurance Company, has
caused this Certificate of Ownership and Merger to be signed by John H. Freese,
its President, and Ralph L. Diller, its Secretary, and its corporate seal to be
affixed thereto this 5th day of December, A.D. 1974.
AMERICAN VARIABLE ANNUITY LIFE
ASSURANCE COMPANY
By: /s/ John H. Freese
--------------------------------
President
By: /s/ Ralph L. Diller
--------------------------------
Secretary
(CORPORATE SEAL)
<PAGE>
STATE OF MASSACHUSETTS
COUNTY OF WORCESTER
BE IT REMEMBERED that on this 5th day of December, 1974, personally came
before me, a Notary Public in and for the County and State aforesaid, John H.
Freese, President and Ralph L. Diller, Secretary of American Variable Annuity
Life Assurance Company, a corporation of the State of Arkansas, and they duly
executed said certificate before me and severally acknowledged the said
certificate to be their act and deed and the act and deed of said corporation
and the facts stated therein are true; that the signatures of the said officers
are in the handwriting of each of said officers respectively; and that the seal
affixed to said certificate is the common or corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day
and year aforesaid.
Ethel Demark
Notary Public
(SEAL)
<PAGE>
BYLAWS
of
Allmerica Financial Life Insurance and Annuity Company
(Effective October 1, 1995)
ARTICLE I
Meetings of Stockholders
1. The Annual Meeting shall be held on the second Wednesday of April of each
year but if that day is a legal holiday at the place of meeting, the meeting
shall be held on the next following business day not a holiday. If more than
fifteen months are allowed to elapse without an annual stockholders' meeting
being held, any stockholder may call such a meeting to be held. The place of
any Annual Meeting may be outside of the State of Delaware and shall be fixed
from time to time by the Board of Directors.
2. The business to be transacted at the Annual Meeting shall be the election
of Directors, to receive and consider reports of the Corporation's Officers, and
such other business as shall properly be brought before the meeting.
3. At least ten days notice of each Annual Meeting, unless waived in writing,
stating the place, day, and hour thereof shall be given by the Secretary to each
stockholder by mailing postage prepaid to his address as it appears on the
Corporation's books; and no amendments to the Corporation's Articles of
Incorporation may be made at any meeting of the stockholders unless the proposal
to so amend is included in the notice of the meeting.
4. At any time upon written request of the President, any Director, or
stockholders holding in the aggregate one-third of the voting rights of all
stock outstanding, it shall be the duty of the Secretary to call a special
meeting of stockholders to be held at any such time as the Secretary may fix in
the written notice thereof, not less than five nor more than sixty days after
the receipt of request. If the Secretary fails to issue such call, the Director
or stockholders making the request may do so. The notice shall state the
purpose of the meeting and no business of which notice is not so given shall be
transacted at such meeting.
5. The presence in person or by proxy of the holders of the majority of the
shares of stock outstanding and entitled to vote shall constitute a quorum. The
stockholders present at a duly organized meeting can continue to do business
until adjournment notwithstanding the withdrawal of stockholders leaving less
than a quorum.
<PAGE>
6. If a meeting cannot be organized because a quorum has not attended, those
present may adjourn the meeting to such time as they may determine, but in the
case of any meeting called for the election of any Director, the adjournment
must be to the next day and those who attend the adjourned meeting although less
than a quorum as otherwise provided herein shall nevertheless constitute a
quorum for the purpose of electing a Director.
7. If any necessary Officer fails to attend a stockholders' meeting any
stockholder present may be elected to act temporarily in lieu of such absent
Officer.
8. An annual or special meeting of stockholders may be adjourned to another
date without new notice being given.
9. Any action required or permitted to be taken at any annual meeting or
special meeting of the stockholders may be taken without a meeting, without
prior notice, if a consent in writing setting forth the actions so taken is
signed by the holders of all of the outstanding stock of the Company.
ARTICLE II
Stockholders Voting and Other Rights
1. At each meeting of stockholders and upon each proposal presented at each
meeting each stockholder of record shall be entitled to one vote for each share
of stock standing in his name on the books of the Corporation on the record date
as hereafter established.
2. A stockholder may vote or be represented at any stockholders' meeting in
person or by written proxy, which may be revoked at will. The revocation of a
proxy shall not be effective until written notice thereof has been filed with
the Secretary of the Corporation.
3. Unless otherwise provided by law, the Articles of Incorporation, or these
Bylaws, all questions shall be determined by the holders of a majority of the
capital stock voting thereon.
4. The following shall be referred to as a record event:
(a) a meeting of stockholders,
(b) the payment of any dividend,
(c) the allotment of rights,
(d) a change, conversion, or exchange of capital stock.
-2-
<PAGE>
ARTICLE III
Directors
1. The number of Directors which shall constitute the whole Board shall be not
less than three nor more than fifteen. The Directors shall be elected at the
Annual Meeting of Stockholders except as hereinafter provided, and each Director
elected shall hold office for one year or until his successor is elected and
qualified. The Directors need not be stockholders or residents of the State of
Delaware.
2. Vacancies in the Board of Directors may be filled by the remaining members
of the Board, and each person so elected shall be a Director until his successor
is elected by the stockholders at the next Annual Meeting of Stockholders or at
any special meeting of stockholders called for that purpose and held prior to
such Annual Meeting.
3. The Board of Directors may establish the position of Chairman of the Board
and Vice Chairman of the Board and shall choose from among its members for such
positions. The Chairman of the Board as so chosen shall preside at meetings of
the Board and perform such other duties as are assigned to him by the Board. If
the Chairman is absent or unable to discharge the duties of his office, the Vice
Chairman may act in his stead.
4. The Board of Directors shall determine the amount of any expense
reimbursement or remuneration to be paid to its members for attendance at
meetings.
ARTICLE IV
Meetings of the Board of Directors
1. The Board of Directors may hold meetings, both regular and special, either
within or without the State of Delaware.
2. The Board of Directors shall hold an organizational meeting immediately
after the Annual Meeting of Stockholders or at such time as may be fixed by
written consent of a majority of all Directors or by notice given by the
President or Secretary.
3. Regular meetings of the Board of Directors may be held without notice at
such time and at such place as shall from time to time be determined by
resolution of the Board of Directors.
4. Special meetings of the Board may be called by the President on five days
notice to each Director. Special meetings shall be called by the President or
Secretary on like notice on the written request of a majority of the entire
Board of Directors. The notice shall indicate the purpose, time, and place of
the special meeting.
-3-
<PAGE>
5. At the meeting of the Board, a majority or five of the Directors, whichever
is less, shall constitute a quorum for the transaction of business. The
concurrence of a majority of Directors present at any meeting at which there is
a quorum shall constitute the act of the Board of Directors except as may be
otherwise provided by law.
6. Any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting, if written
consent thereto is signed by all members of the Board or such Committee, as the
case may be, and such written consent is filed with the minutes of the
proceedings of the Board or Committee.
ARTICLE V
Committees
1. The Board of Directors may elect, from its membership, a Finance Committee
of not less than five Directors, who shall have charge of the investment, sale,
loan, or deposit of funds under the ownership, direction, or control of the
Corporation.
2. The Board may also appoint from its own members, and where permitted by
law, from the Officers and/or employees, other standing committees and temporary
committees, vesting such committees with such powers and prescribing such duties
as the Board shall determine.
3. Each Committee shall keep regular minutes of its meetings and cause them to
be recorded in books to be kept for that purpose and shall report to the Board
from time to time as the Board may request.
ARTICLE VI
Officers
1. The Board of Directors shall choose a President, who shall be a Director, a
Secretary, and a Treasurer. The Directors may also choose one or more Vice
Presidents, Assistant Secretaries, and Assistant Treasurers and such other
Officers as may be deemed necessary. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
2. Any person may hold two (2) or more offices, except that the President
shall not be also the Secretary or Assistant Secretary.
3. The Officers shall hold office for one year and until their successors are
elected and qualified but the Board may remove any officer at will.
-4-
<PAGE>
ARTICLE VII
Duties of Officers
1. The Chief Executive Officer of the Corporation shall be the Chairman of the
Board, or the President, as determined by the Directors, and shall, subject to
the Board of Directors, direct and manage the affairs of the Corporation. If
the Chairman of the Board and Vice Chairman of the Board are both absent or
unable to discharge their duties, the President may fulfill the duties of the
Chairman of the Board.
2. If the President is absent or unable to discharge the duties of his office,
a Vice President may act in his stead. The Chairman of the Board, if he is the
Chief Executive Officer, the President, or any one of the Vice Presidents shall
have the authority to transfer securities, execute releases, extensions, partial
releases, or assignments without recourse of mortgages, to execute deeds and
other instruments or documents, including contracts or insurance and annuities,
on the part of the Company and whenever necessary to affix the Seal of the
Company to the same. The Chairman of the Board, the President, or any Vice
President may, whenever necessary, delegate this authority to perform any of the
acts referred to in this paragraph to any person pursuant to a special power-of-
attorney.
3. The Secretary shall keep a list of stockholders and of the number of shares
standing in the name of each and a record of the transfers thereof. He shall
keep a record of the votes and all other proceedings of all meetings of the
Directors and stockholders; and such other books and records as the Chief
Executive Officer or Directors may require. He shall give, or cause to be
given, notice of all meetings of stockholders and special meetings of the Board
of Directors. He shall have custody of the corporate records and Corporate Seal
and shall have the authority to affix the same to any instrument requiring it;
and when so affixed, it may be attested by his signature or the signature of an
Assistant Secretary; he shall also perform all acts usually incident to the
office of Secretary.
4. If the Secretary is absent or unable to discharge the duties of his office,
an Assistant Secretary may act.
5. The Treasurer shall have charge of all monies and securities of the
Company; and he shall collect all profits from investments which the Company
records establish to be due.
6. The Treasurer shall have authority to transfer securities, to execute
releases, extensions, partial releases, and assignments without recourse of
mortgages, to execute deeds and other instruments or documents on behalf of the
Company, and whenever necessary, to affix the Seal of the Company to the same.
He shall have the power to vote on behalf of the Company in any case where
-5-
<PAGE>
the Company as the holder of any securities had the authority to vote.
7. If the Treasurer is absent or unable to discharge the duties of his office,
an Assistant Treasurer may act.
ARTICLE VIII
Indemnification of Directors and Officers
Each Director and each Officer of the Corporation, whether or not in
office, (and his executors or administrators), shall be indemnified or
reimbursed by the Corporation against all expenses actually and necessarily
incurred by him in the defense or reasonable settlement of any action, suit, or
proceeding in which he is made a party by reason of his being or having been a
Director or Officer of the Corporation, including any sums paid in settlement or
to discharge judgment, except in relation to matters as to which he shall be
finally adjudged in such action, suit, or proceeding to be liable for negligence
or misconduct in the performance of his duties as such Director or Officer; and
the foregoing right of indemnification or reimbursement shall not affect any
other rights to which he may be entitled under the Articles of Incorporation,
any statute, bylaw, agreement, vote of stockholders, or otherwise.
ARTICLE IX
Notice
Whenever any notice is required to be given under the provisions of
statutes, the Articles of Incorporation, or these Bylaws, a waiver thereof, in
writing signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. Attendance at any meeting shall constitute a waiver of notice
unless attendance is for the purpose of objecting to the transaction of
business.
ARTICLE X
Corporate Seal
The Corporation's Corporate Seal shall contain the words, "Allmerica
Financial Life Insurance and Annuity Company," surrounding the words, "Corporate
Seal," and the same may be altered by the Board of Directors.
-6-
<PAGE>
ARTICLE XI
Amendment
These Bylaws may be amended or repealed by the Directors or by majority
vote of the shares of stock outstanding and entitled to vote.
-7-
<PAGE>
EXHIBIT 9
September 25, 1995
SMA Life Assurance Company
440 Lincoln Street
Worcester MA 01653
Gentlemen:
In my capacity as Counsel of SMA Life Assurance Company (the "Company"), I
have participated in the preparation of the Post-Effective Amendment to the
Registration Statement for Allmerica Select Separate Account II on Form S-6
under the Securities Act of 1933 with respect to the Company's individual
flexible premium variable life insurance policies.
I am of the following opinion:
1. Allmerica Select Separate Account II is a separate account of the Company
validly existing pursuant to the Delaware Insurance Code and the
regulations issued thereunder.
2. The assets held in Allmerica Select Separate Account II equal to the
reserves and other policy liabilities of the Policies which are supported
by Allmerica Select Separate Account II are not chargeable with
liabilities arising out of any other business the Company may conduct.
3. The individual flexible premium variable life insurance policies, when
issued in accordance with the Prospectus contained in the Registration
Statement and upon compliance with applicable local law, will be legal
and binding obligations of the Company in accordance with their terms and
when sold will be legally issued, fully paid and non-assessable.
In arriving at the foregoing opinion, I have made such examination of law
and examined such records and other documents as in my judgment are
necessary or appropriate.
I hereby consent to the filing of this opinion as an exhibit to the
Post-Effective Amendment to the Registration Statement of Allmerica Select
Separate Account II on Form S-6 filed under the Securities Act of 1933.
Very truly yours,
/s/ Sheila B. St. Hilaire
Sheila B. St. Hilaire
Counsel
SELVEL.OPN
<PAGE>
Exhibit 10
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 1 to the Registration Statement on Form S-6 of
our report dated February 13, 1995, relating to the financial statements of
SMA Life Assurance Company which appears in such Prospectus. We also consent
to the reference to us under the heading "Independent Accountants" in such
Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
September 25, 1995
