<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.2
ALLMERICA SELECT SEPARATE ACCOUNT II OF ALLMERICA FINANCIAL LIFE
INSURANCE AND ANNUITY COMPANY
(Exact Name of Registrant)
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY 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:
Immediately upon filing pursuant to Paragraph (b)
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X On April 30, 1996 pursuant to Paragraph (b)
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60 days after filing pursuant to Paragraph (a)(1)
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On (date) pursuant to Paragraph (a)(1)
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On (date) pursuant to Paragraph (a)(2) of Rule 485.
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The registrant has elected to register an indefinite number of its
securities under the Securities Act of 1933 pursant to Rule 24f-2 under the
Investment Company Act of 1940. A Rule 24f-2 notice for registrant's last
fiscal year was filed February 29, 1996.
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RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8b-2 AND THE PROSPECTUS
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<CAPTION>
Item No. of
Form N-8B-82 Caption in Prospectus
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1. . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
2. . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
3. . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
4. . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution
5. . . . . . . . . . . . . . . . . . . . . . . . . . . . Allmerica Financial; 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, VIP and T. Rowe Price; The
Policy; Policy Termination and Reinstatement;
Other Policy Provisions
11 . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; The Trust; VIP; T. Rowe Price;
Investment Objectives and Policies
12 . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; The Trust; VIP; T. Rowe Price
13 . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; The Trust; VIP; T. Rowe Price;
Investment Advisory Services to the Trust;
Investment Advisory Services to VIP; Investment
Advisory Services to T. Rowe Price; 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; VIP; T. Rowe
Price ; Payments; Allocation of Net Payments
17 . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Surrender; Partial Withdrawal;
Charges and Deductions; Policy
Termination and Reinstatement
18 . . . . . . . . . . . . . . . . . . . . . . . . . . . The Variable Account; The Trust; VIP; T. Rowe
Price; 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . Allmerica Financial
26 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
27 . . . . . . . . . . . . . . . . . . . . . . . . . . . Allmerica Financial
28 . . . . . . . . . . . . . . . . . . . . . . . . . . . Directors and Principal Officers of the Company
29 . . . . . . . . . . . . . . . . . . . . . . . . . . . Allmerica Financial
30 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
31 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
32 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
33 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
34 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
35 . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution
36 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
37 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
38 . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Distribution
39 . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Distribution
40 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
41 . . . . . . . . . . . . . . . . . . . . . . . . . . . Allmerica Financial, Distribution
42 . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
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<S> <C>
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . Allmerica Financial
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>
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
Allmerica Financial Life Insurance and Annuity Company (formerly named SMA
Life). Allmerica Financial 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 ("VIP") and T. Rowe Price
International Series, Inc. ("T. Rowe Price"):
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 Price's International Stock Portfolio is not available in all states.
Policy owners 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.
THE POLICIES ARE OBLIGATIONS OF ALLMERICA FINANCIAL LIFE INSURANCE AND
ANNUITY COMPANY AND ARE DISTRIBUTED BY 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 DEPOSIT INSURANCE CORPORATION (FDIC), OR ANY OTHER
FEDERAL AGENCY. INVESTMENTS IN THE POLICIES ARE SUBJECT TO VARIOUS RISKS,
INCLUDING THE FLUCTUATION OF VALUE AND POSSIBLE LOSS OF PRINCIPAL.
Dated April 30, 1996
Allmerica Financial Life Insurance and Annuity Company,
440 Lincoln Street
Worcester, Massachusetts 01653
1-800-366-1492
<PAGE>
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 Deposit Insurance
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
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 policy owner
(you), an Insured (you or another individual you select) and a beneficiary. As
policy owner, 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
- Select Income Fund
Managed by Standish, Ayer & Wood, Inc.
- 3 -
<PAGE>
- 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 Allmerica Financial.
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
$300 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 VIP. 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 $20 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.
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%.
- 4 -
<PAGE>
- 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
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.
- 5 -
<PAGE>
- 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.
- 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
- 6 -
<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, policy owner 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, Policy owners
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.
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
Allmerica Financial.
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TABLE OF CONTENTS
SPECIAL TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
DESCRIPTION OF ALLMERICA FINANCIAL, THE VARIABLE ACCOUNT, THE TRUST,
VIP AND T. ROWE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
INVESTMENT OBJECTIVES AND POLICIES. . . . . . . . . . . . . . . . . . . 16
INVESTMENT ADVISORY SERVICES. . . . . . . . . . . . . . . . . . . . . . .
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 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
POLICY TERMINATION AND REINSTATEMENT . . . . . . . . . . . . . . . . . . . . 35
OTHER POLICY PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 38
ALLMERICA FINANCIAL AND THE VARIABLE ACCOUNT. . . . . . . . . . . . . . 38
TAXATION OF THE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . 38
MODIFIED ENDOWMENT POLICIES . . . . . . . . . . . . . . . . . . . . . . 39
VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
DIRECTORS AND PRINCIPAL OFFICERS OF ALLMERICA FINANCIAL. . . . . . . . . . . 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
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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, VIP and T.Rowe Price 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.
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.
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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
POLICY OWNER: the person who may exercise all rights under the Policy, with the
consent of any irrevocable beneficiary. "You" and "your" refer to the policy
owner 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.
ALLMERICA FINANCIAL: Allmerica Financial Life Insurance and Annuity Company.
"We," "our" and "us" refer to Allmerica Financial in this Prospectus.
SUB-ACCOUNT: a subdivision of the variable account investing exclusively in the
shares of a fund.
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
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<PAGE>
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.
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DESCRIPTION OF ALLMERICA FINANCIAL, THE VARIABLE ACCOUNT,
THE TRUST, VIP AND T.ROWE PRICE
ALLMERICA FINANCIAL. Allmerica Financial is a life insurance company
organized under the laws of Delaware in 1974. We are an indirect wholly
owned subsidiary of First Allmerica Financial Life Insurance Company
formerly named State Mutual Life Assurance Company of America ("First
Allmerica"). First Allmerica was organized under the laws of Massachusetts in
1844, and is the fifth oldest life insurance company in America. On
December 31, 1995, First Allmerica and its subsidiaries had over $11 billion
in combined assets and over $35.2 billion of life insurance in force. Allmerica
Financial accounted for over $5 billion in assets and over $18 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,
VIP or T.Rowe Price. 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.
First Allmerica 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 Allmerica Financial 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 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."
VIP. VIP, 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 PRICE. T. Rowe Price, 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 T. Rowe Price International Stock Portfolio.
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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, VIP AND T.ROWE PRICE THAT ACCOMPANY THIS
PROSPECTUS. THE PROSPECTUSES OF THE TRUST, VIP AND T. ROWE PRICE 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 lower-rated securities, please see "Risks of
Lower-Rated Debt Securities" in the VIP 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 VIP 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
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- 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 First Allmerica. 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
First Allmerica, 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 $ 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 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 Allmerica Financial 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 Policy owners bear.
INVESTMENT ADVISORY SERVICES TO VIP. For managing investments and business
affairs, each Portfolio pays a monthly fee to Fidelity Management. The
Prospectus of VIP 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.
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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 PRICE. 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.
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 policy owner, 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 policy owner 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
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- 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 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 canceling 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 Allmerica Financial. 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
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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 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 Allmerica Financial 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, Allmerica Financial may be liable for any losses from
unauthorized or fraudulent instructions. We require that callers on behalf
of a policy owner identify themselves by name and identify the policy owner
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
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- 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 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
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- Any outstanding loan
In most states, we will compute the net death benefit on the date we receive
due proof of the 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.
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
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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
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.
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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 canceled. 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.
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
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- 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
- 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.
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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 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
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- 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 First Allmerica and its affiliates and subsidiaries located
at First Allmerica's home office (or at off-site locations if such employees
are on First Allmerica'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.
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.
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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
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."
- 25 -
<PAGE>
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 Insured of the same age, sex and
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
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<PAGE>
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, VIP and T.Rowe Price 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."
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.
- 27 -
<PAGE>
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 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.
POLICY LOANS
You may borrow money secured by your policy value. The total amount you may
borrow, including any outstanding
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<PAGE>
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 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
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<PAGE>
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
- 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
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<PAGE>
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
POLICY OWNER - The policy owner is the Insured unless another policy owner
has been named in the application or enrollment form. As policy owner, 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.
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
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<PAGE>
. 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.
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 policy owner 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.
ALLMERICA FINANCIAL AND THE VARIABLE ACCOUNT - Allmerica Financial 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, Allmerica Financial 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 Policy
owners 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 policy
owner 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 policy owner for federal income tax purposes. Under
current law, these loans will not constitute income for the policy owner
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
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<PAGE>
will be taxed to the policy owner as ordinary 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, policy owner 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
policy owner's investment in the Policy. Any other amounts will be
treated as a return of capital up to the policy owner'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 policy owner 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 Policy owners 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 policy owner has the right to
instruct on the record date established for the fund. This number is the
QUOTIENT of
- Each policy owner'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 Policy owners or the Trustees initiate
in favor of any change in the investment policies or in any investment
adviser or principal underwriter. Our disapproval 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 Policy owners.
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<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE DEPOSITOR.
The principal business address of all the following Directors and
Officers is:
440 Lincoln Street
Worcester, Massachusetts 01653
<TABLE>
<CAPTION>
Name and Position Principal Occupations During the Past 5 Years
- ----------------- ----------------------------------------------
<S> <C>
Bruce C. Anderson Director of First Allmerica since 1996; Vice
Director and Vice President President, First Allmerica
Abigail M. Armstrong Secretary of First Allmerica since 1996;
Secretary and Counsel Counsel, First Allmerica
Mark R. Colborn Vice President and Controller, First Allmerica
Vice President and Controller
Kruno Huitzingh Director of First Allmerica since 1996;
Director, Vice President and Vice President and Chief Information Officer,
and Chief Information First Allmerica since 1993; Executive Vice
Officer President, Chicago Board Options Exchange,
1985 to 1993
James R. McAuliffe Director of First Allmerica since 1996;
Director President and CEO, Citizens Insurance
Company of America since 1995; Vice
President and Chief Investment Officer,
First Allmerica, 1986 to 1994
John F. Kelly Director of First Allmerica since 1996;
Director Senior Vice President, General Counsel and
Assistant Secretary, First Allmerica
John F. O'Brien Director, Chairman of the Board, President
Director and Chairman of the and Chief Executive Officer of First Allmerica
Board
Edward J. Parry, III Vice President and Treasurer, First Allmerica
Vice President and Treasurer since 1993; Assistant Vice President to 1992
to 1993; Manager, Price Waterhouse 1987 to
1992
Richard M. Reilly Director of First Allmerica since 1996;
Director and Vice President Vice President, First Allmerica; Director
and President, Allmerica Investments, Inc.;
Director and President Allmerica Investment
Management Company, Inc. since 1992.
Director and Executive Vice President,
1990 to 1992.
Larry C. Renfro Director of First Allmerica since 1996;
Vice President, First Allmerica
Theodore J. Rupley Director of First Allmerica since 1996;
Director President, The Hanover Insurance Company
since 1992; President, Fountain Powerboats,
1992: President; Metropolitan Property &
Casualty Company, 1986-1992
Phillip E. Soule Director of First Allmerica since 1996;
Director Vice President, First Allmerica
Eric Simonsen Director of First Allmerica since 1996;
Director, Vice President and Vice President and Chief Financial Officer,
Chief Financial Officer First Allmerica
Diane E. Wood Director of First Allmerica since 1996;
Director and Vice President Vice President First Allmerica
</TABLE>
DISTRIBUTION
Allmerica Investments, Inc., an indirect wholly owned subsidiary of First
Allmerica, 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.
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<PAGE>
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 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 Policy owners 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, VIP and T.Rowe Price 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 Policy owner 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 charges, administrative
- 35 -
<PAGE>
charges, monthly insurance protection charges and surrender charges. We take
a representative Policy owner and assume that
- The Insured is a male Age 36, standard (non-smoker) underwriting class
- The Policy owner 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 Policy owners and
prospective Policy owners. 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.
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 1) 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.
- 36 -
<PAGE>
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, 1995. "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 1: 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-Accounts 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 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 12/31/95
------------------------------------------
Underlying One-Year Since Years Since
Fund Total return 3 years 5 years Inception Inception*
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market -100.00% -23.22% -7.62% 1.04% 10.00
Select Aggressive Growth -84.79% -9.56% N/A -0.86% 3.36
Select Growth -91.59% -19.40% N/A -12.62% 3.36
Select Growth and Income -86.52% -12.42% N/A -10.68% 3.36
Select Income -98.33% -19.49% N/A -16.57% 3.36
Select International Equity -95.97% N/A N/A -61.27% 1.67
Select Cap. Appreciation N/A N/A N/A -27.03% 0.67
VIP High Income -95.01% -13.03% 8.26% 5.13% 10.28
VIP Equity Income -82.29% -4.89% 10.83% 8.30% 9.23
VIP Growth -82.05% -7.52% 10.25% 9.85% 9.23
T. Rowe Price International Stock -100.00% N/A N/A -67.45% 1.58
- ------------------------------------------------------------------------------------------
</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 12/31/95
------------------------------------------
Underlying One-Year Since Years Since
Fund Total return 3 years 5 years Inception Inception*
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
- 37 -
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market 4.99% 3.42% 3.71% 5.11% 10.00
Select Aggressive Growth 31.22% 14.67% N/A 19.20% 3.36
Select Growth 23.59% 6.50% N/A 9.13% 3.36
Select Growth and Income 29.28% 12.26% N/A 10.77% 3.36
Select Income 16.02% 6.43% N/A 5.85% 3.36
Select International Equity 18.67% N/A N/A 8.14% 1.67
Select Cap. Appreciation N/A N/A N/A 38.81% .067
VIP High Income 19.75% 11.75% 17.97% 10.91% 10.28
VIP Equity Income 34.01% 18.64% 20.35% 12.42% 9.23
VIP Growth 34.28% 16.40% 19.81% 13.91% 9.23
T. Rowe International Stock 10.29% N/A N/A 6.45% 1.58
- ------------------------------------------------------------------------------------------
</TABLE>
*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 VIP Growth; 9/19/85 for VIP High Income; 3/31/94 for the T. Rowe
Price International Stock, 4/28/95 for the Select Capital Appreciation Fund.
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.
LEGAL PROCEEDINGS
There are no pending legal proceedings involving the variable account or its
assets. Allmerica Financial 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 Policy owners
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 policy owner'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 Allmerica
Financial and its affiliates that fund variable annuity contracts ("mixed
funding"). Shares of the Portfolios of VIP and T.Rowe Price 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 Policy owners or variable annuity Policy
owners. Allmerica Financial, the Trust, VIP and T.Rowe Price do not believe
that mixed funding is currently disadvantageous to either variable life
insurance Policy owners or variable annuity Policy owners. Allmerica
Financial Trustees will monitor events to identify any material conflicts
among Policy owners 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.
- 38 -
<PAGE>
We may change the Policy to reflect a substitution or other change and will
notify Policy owners 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.
INDEPENDENT ACCOUNTANTS
The financial statements of Allmerica Financial 1995 and 1994 and for each of
the three years in the period ended December 31, 1995 and of the Select
Separate Account II as of December 31, 1995 and for the periods indicated,
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 Allmerica Financial included herein should be
considered only as bearing on the ability of Allmerica Financial 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).
- 39 -
<PAGE>
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.
FINANCIAL STATEMENTS
Financial Statements for Allmerica Financial are included in this prospectus,
starting on the next page. The financial statements of Allmerica Financial
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.
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
Age of Insured
on Date of Percentage of
Death Policy Value
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%
For the ages not listed, the progression between the listed ages is linear.
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
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<PAGE>
This rider provides a term insurance benefit for up to five Insured. 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.
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 Allmerica Financial. 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 policy owner 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.
APPENDIX D - ILLUSTRATIONS OF DEATH BENEFIT, POLICY VALUES
AND ACCUMULATED PAYMENTS
The following tables 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 illustrate a Policy issued to a male, age 30, under a standard
underwriting class and qualifying for the non-smoker discount, and a Policy
issued to a male, age 45, under a standard underwriting class and qualifying
for the non-smoker discount.
The tables illustrate the guaranteed insurance protection rates; and 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 1995
ranged from an annual rate of 0.36% to an annual rate of 1.35% 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
- 62 -
<PAGE>
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
1995 the total operation expenses of the Select Capital Appreciation Fund
would have been 1.42% of its average daily 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 VIP
were less than their respective caps in 1995. Except as noted, in 1995 the
operating expenses of the underlying Funds did not exceed the expense
limitations.
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 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 underlying Investment Companies.
- 63 -
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SELECT VARIABLE LIFE POLICY
<TABLE>
<CAPTION>
Male Non-Smoker age 30
Face Amount = $75,000
Adjustable Option
BASED ON CURRENT MONTHLY INSURANCE PROTECTION CHARGES WITHOUT RIDERS
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
</TABLE>
(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.
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.
- 64 -
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SELECT VARIABLE LIFE POLICY
<TABLE>
<CAPTION>
Male Non-Smoker age 30
Face Amount = $75,000
Adjustable Option
BASED ON GUARANTEED MONTHLY INSURANCE PROTECTION CHARGES WITHOUT RIDERS
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 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
</TABLE>
(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.
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.
- 65 -
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SELECT VARIABLE LIFE POLICY
<TABLE>
<CAPTION>
Male Non-Smoker age 45
Face Amount = $250,000
Level Option
BASED ON CURRENT MONTHLY INSURANCE PROTECTION CHARGES WITHOUT RIDERS
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
</TABLE>
(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.
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>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SELECT VARIABLE LIFE POLICY
<TABLE>
<CAPTION>
Male Non-Smoker age 45
Face Amount = $250,000
Level Option
BASED ON GUARANTEED MONTHLY INSURANCE PROTECTION CHARGES WITHOUT RIDERS
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
</TABLE>
(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.
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>
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.
- 68 -
<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>
- 69 -
<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>
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
- 70 -
<PAGE>
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 policy owner 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 policy owner 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.
- 71 -
<PAGE>
ALLMERICA FINANCIAL
LIFE INSURANCE AND
ANNUITY COMPANY
(formerly SMA Life Assurance Company)
STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1995
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
December 31, 1995
Statutory Financial Statements
Report of Independent Accountants . . . . . . . . . . . . . . . . . 1
Statement of Assets, Liabilities, Surplus and Other Funds . . . . . 3
Statement of Operations and Changes in Capital and Surplus. . . . . 4
Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Statutory Financial Statements . . . . . . . . . . . . . . 6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Allmerica Financial Life Insurance and Annuity Company
(formerly known as SMA Life Assurance Company)
We have audited the accompanying statutory basis statement of assets,
liabilities, surplus and other funds of Allmerica Financial Life Insurance and
Annuity Company as of December 31, 1995 and 1994, and the related statutory
basis statements of operations and changes in capital and surplus, and of cash
flows for each of the three years ended December 31, 1995. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described more fully in Note 1 to the financial statements, the Company
prepared these financial statements using accounting practices prescribed or
permitted by the Insurance Department of the State of Delaware, which practices
differ from generally accepted accounting principles. The effects on the
financial statements of the variances between the statutory basis of accounting
and generally accepted accounting principles, although not reasonably
determinable, are presumed to be material.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Allmerica Financial Life Insurance and Annuity Company as of December 31,
1995 and 1994, or the results of its operations or its cash flows for each of
the three years ended December 31, 1995.
<PAGE>
To the Board of Directors and Stockholder of
Allmerica Financial Life Insurance and Annuity Company
(formerly known as SMA Life Assurance Company)
Page 2
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets, liabilities, surplus and other funds of
Allmerica Financial Life Insurance and Annuity Company as of December 31, 1995
and 1994, and the results of its operations and its cash flows for each of the
three years ended December 31, 1995, on the basis of accounting described in
Note 1.
As discussed in Note 1 to the financial statements, the Company's parent, State
Mutual Life Assurance Company of America, converted from a Massachusetts mutual
life insurance company to a Massachusetts stock life insurance company on
October 16, 1995. In connection with this transaction, the Company changed its
name to Allmerica Financial Life Insurance and Annuity Company and its parent
became a wholly-owned subsidiary of Allmerica Financial Corporation.
/s/Price Waterhouse LLP
- ------------------------
Price Waterhouse LLP
Boston, MA
February 5, 1996
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
STATEMENT OF ASSETS, LIABILITIES, SURPLUS AND
OTHER FUNDS
as of December 31,
(In thousands)
<TABLE>
<CAPTION>
ASSETS 1995 1994
---- ----
<S> <C> <C>
Cash $ 7,791 $ 7,248
Investments:
Bonds 1,659,575 1,595,275
Stocks 18,132 12,283
Mortgage loans 239,522 295,532
Policy loans 122,696 116,600
Real estate 40,967 51,288
Short term investments 3,500 45,239
Other invested assets 40,196 27,443
----------- -----------
Total cash and investments 2,132,379 2,150,908
Premiums deferred and uncollected (1,231) 5,452
Investment income due and accrued 38,413 39,442
Other assets 6,060 10,569
Assets held in separate accounts 2,978,409 1,869,695
----------- -----------
$ 5,154,030 $ 4,076,066
----------- -----------
----------- -----------
LIABILITIES, SURPLUS AND OTHER FUNDS
Liabilities:
Policy liabilities:
Life reserves $ 856,239 $ 890,880
Annuity and other fund reserves 865,216 928,325
Accident and health reserves 167,246 121,580
Claims payable 11,047 11,720
----------- -----------
Total policy liabilities 1,899,748 1,952,505
Expenses and taxes payable 20,824 17,484
Other liabilities 27,499 36,466
Asset valuation reserve 31,556 20,786
Obligations related to separate account business 2,967,547 1,859,502
----------- -----------
Total liabilities 4,947,174 3,886,743
----------- -----------
Surplus and Other Funds:
Common stock, $1,000 par value
Authorized - 10,000 shares
Issued and outstanding - 2,517 shares 2,517 2,517
Paid-in surplus 199,307 199,307
Unassigned surplus (deficit) 4,282 (13,621)
Special contingency reserves 750 1,120
----------- -----------
Total surplus and other funds 206,856 189,323
----------- -----------
$ 5,154,030 $ 4,076,066
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
STATEMENT OF OPERATIONS AND
CHANGES IN CAPITAL AND SURPLUS
for the year ended December 31,
(In thousands)
<TABLE>
<CAPTION>
REVENUE 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Premiums and other considerations:
Life $ 156,864 $ 195,633 $ 189,285
Annuities 729,222 707,172 660,143
Accident and health 31,790 31,927 35,718
Reinsurance commissions and reserve adjustments 20,198 4,195 2,309
---------- ---------- ----------
Total premiums and other considerations 938,074 938,927 887,455
Net investment income 167,470 170,430 177,612
Realized capital losses, net of tax (2,295) (17,172) (7,225)
Other revenue 37,466 26,065 19,055
---------- ---------- ----------
Total revenue 1,140,715 1,118,250 1,076,897
---------- ---------- ----------
POLICY BENEFITS AND OPERATING EXPENSES
Policy benefits:
Claims, surrenders and other benefits 391,254 331,418 275,290
Increase (decrease) in policy reserves (22,669) 40,113 15,292
---------- ---------- ----------
Total policy benefits 368,585 371,531 290,582
Operating and selling expenses 150,215 164,175 160,928
Taxes, except capital gains tax 26,536 22,846 19,066
Net transfers to separate accounts 556,856 553,295 586,539
---------- ---------- ----------
Total policy benefits and operating expenses 1,102,192 1,111,847 1,057,115
---------- ---------- ----------
NET INCOME 38,523 6,403 19,782
CAPITAL AND SURPLUS, BEGINNING OF YEAR 189,323 182,216 171,941
Unrealized capital gains (losses) on investments 8,279 12,170 (9,052)
Transfer from (to) asset valuation reserve (10,770) (9,822) 1,974
Other adjustments (18,499) (1,644) (2,429)
---------- ---------- ----------
CAPITAL AND SURPLUS, END OF YEAR $ 206,856 $ 189,323 $ 182,216
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
STATEMENT OF CASH FLOWS
for the year ended December 31,
(In thousands)
<TABLE>
<CAPTION>
CASH FLOW FROM OPERATING ACTIVITIES 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Premiums, deposits and other income $ 964,129 $ 962,147 $ 902,725
Allowances and reserve adjustments on
reinsurance ceded 20,693 3,279 22,185
Net investment income 170,949 173,294 182,843
Net increase in policy loans (6,096) (7,585) (7,812)
Benefits to policyholders and beneficiaries (393,472) (330,900) (298,612)
Operating and selling expenses and taxes (153,504) (193,796) (171,533)
Net transfers to separate accounts (608,480) (600,760) (634,021)
Federal income tax (excluding tax on capital gains) (6,771) (19,603) (4828)
Other sources (applications) (13,642) 19,868 7,757
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (26,194) 5,944 (1,296)
---------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Sales and maturities of long term investments:
Bonds 572,640 478,512 386,414
Stocks 481 63 64
Real estate and other invested assets 13,008 3,008 11,094
Repayment of mortgage principal 55,202 65,334 79,844
Capital gains tax (400) (968) (3,296)
Acquisition of long term investments:
Bonds (640,339) (508,603) (466,086)
Stocks (44) - -
Real estate and other invested assets (11,929) (24,544) (2,392)
Mortgage loans (415) (364) (2,266)
Other investing activities (3,206) 18,934 (27,254)
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (15,002) 31,372 (23,878)
---------- ---------- ----------
Net change in cash and short term investments (41,196) 37,316 (25,174)
CASH AND SHORT TERM INVESTMENTS
Beginning of the year 52,487 15,171 40,345
---------- ---------- ----------
End of the year $ 11,291 $ 52,487 $ 15,171
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
NOTES TO STATUTORY FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION - Allmerica Financial Life Insurance and
Annuity Company ("Allmerica Financial" or the "Company", formerly SMA Life
Assurance Company) is a wholly owned subsidiary of SMA Financial Corp., which is
wholly owned by First Allmerica Financial Life Insurance Company ("First
Allmerica", formerly, State Mutual Life Assurance Company of America), a stock
life insurance company. On October 16, 1995, First Allmerica converted from a
mutual life insurance company to a stock life insurance company. Concurrent
with this transaction, First Allmerica became a wholly owned subsidiary of
Allmerica Financial Corporation ("AFC").
The stockholder's equity of the Company is being maintained at a minimum level
of 5% of general account assets by First Allmerica in accordance with a policy
established by vote of First Allmerica'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 while common in the industry, vary in
some respects from generally accepted accounting principles. Significant
differences include:
- Bonds considered to be "available-for-sale" or "trading" are not
carried at fair value and changes in fair value are not recognized
through surplus or the statement of operations, respectively;
- The Asset Valuation Reserve, represents a reserve against possible
losses on investments and is recorded as a liability through a charge
to surplus. The Interest Maintenance Reserve is designed to include
deferred realized gains and losses (net of applicable federal income
taxes) due to interest rate changes and is also recorded as a
liability, however, the deferred net realized investment gains and
losses are amortized into future income generally over the original
period to maturity of the assets sold. These liabilities are not
required under generally accepted accounting principles;
- Total premiums, deposits and benefits on certain investment-type
contracts are reflected in the statement of operations, instead of
using the deposit method of accounting;
- Policy acquisition costs, such as commissions, premium taxes and other
items, are not deferred and amortized in relation to the revenue/gross
profit streams from the related contracts;
- Benefit reserves are determined using statutorily prescribed interest,
morbidity and mortality assumptions instead of using more realistic
expense, interest, morbidity, mortality and voluntary withdrawal
assumptions with provision made for adverse deviation;
- Amounts recoverable from reinsurers for unpaid losses are not recorded
as assets, but as offsets against the respective liabilities;
- Deferred federal income taxes are not provided for temporary
differences between amounts reported in the financial statements and
those included in the tax returns;
- Certain adjustments related to prior years are recorded as direct
charges or credits to surplus;
- Certain assets, designated as "non-admitted" assets (principally
agents' balances), are not recorded as assets, but are charged to
surplus; and,
- Costs related to other postretirement benefits are recognized only for
employees that are fully vested.
6
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
The preparation of financial statements in accordance with practices prescribed
or permitted by the Insurance Department of the State of Delaware and in
conformity with practices prescribed by the NAIC requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
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. Depreciation is generally calculated using the straight-line
method.
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, stocks and mortgage loans 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 contract holders. Assets consist principally
of bonds, common stocks, mutual funds, and short term obligations at market
value. The investment income, gains, and losses of these accounts generally
accrue to the contract holders 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 capital and surplus.
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. Reserves are computed using interest rates ranging
from 3% to 6% for individual life insurance policies, 3% to 5 1/2% for
accident and health policies and 3 1/2% to 9 1/2% for annuity contracts.
Mortality, morbidity and withdrawal assumptions for all policies are based on
the Company's own 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. At December 31, 1995 and 1994, approximately 84% and 77%,
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.
All policy liabilities and accruals are based on the various estimates discussed
above. Although the adequacy of these amounts cannot be assured, management
believes that it is more likely than not that policy liabilities and accruals
will be sufficient to meet future obligations of policies in force. The amount
of liabilities and accruals, however, could be revised in the near term if the
estimates discussed above are revised.
7
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
FEDERAL INCOME TAXES - AFC, its life insurance subsidiaries, First Allmerica and
Allmerica Financial and its non-insurance domestic subsidiaries file a
life-nonlife 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 allocation policies and procedures are subject to written
agreement between the companies. The federal income tax for all subsidiaries in
the consolidated return of AFC is calculated on a separate return basis. Any
current tax liability is paid to AFC. Tax benefits resulting from taxable
operating losses or credits of AFC's subsidiaries are not reimbursed to the
subsidiary until such losses or credits can be utilized by the subsidiary on a
separate return basis.
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 capital and surplus. 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. The Company uses the
seriatim method of amortization for interest related gains and losses arising
from the sale of mortgages, and uses the group method to amortize interest
related gains and losses arising from all other fixed income investments.
NOTE 2 - INVESTMENTS
BONDS - The carrying value and fair value of investments in bonds are as
follows:
<TABLE>
<CAPTION>
December 31, 1995
Gross Gross
Carrying Unrealized Unrealized Fair
(In thousands) Value Appreciation Depreciation Value
----- ------------ ------------ -----
<S> <C> <C> <C> <C>
Federal government bonds $ 67,039 $ 3,063 $ - $ 70,102
State, local and government agency bonds 13,607 2,290 23 15,874
Foreign government bonds 12,121 772 249 12,644
Corporate securities 1,471,422 55,836 6,275 1,520,983
Mortgage-backed securities 95,385 951 - 96,336
---------- ---------- ---------- ----------
Total $1,659,574 $ 62,912 $ 6,457 $1,715,939
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
December 31, 1995
Gross Gross
Carrying Unrealized Unrealized Fair
(In thousands) Value Appreciation Depreciation Value
----- ------------ ------------ -----
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
---------- ---------- ---------- ----------
Total $1,595,275 $ 8,558 $ 62,245 $1,541,588
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
8
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
The carrying value and fair value by contractual maturity at December 31, 1995,
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 $ 250,578 $ 258,436
Due after one year through five years 736,003 763,179
Due after five years through ten years 538,897 558,445
Due after ten years 134,097 135,880
---------- ----------
Total $1,659,575 $1,715,940
---------- ----------
---------- ----------
</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, 1995 and 1994, mortgage
loan and real estate investments were distributed by the following types and
geographic regions:
<TABLE>
<CAPTION>
(In thousands)
Property Type 1995 1994
- ------------- ---- ----
<S> <C> <C>
Office buildings $ 127,149 $ 140,292
Residential 59,934 57,061
Retail 29,578 72,787
Industrial/Warehouse 38,192 39,424
Other 25,636 37,256
----------- -----------
Total $ 280,489 $ 346,820
----------- -----------
----------- -----------
Geographic Region 1995 1994
- ----------------- ---- ----
South Atlantic $ 86,410 $ 92,934
East North Central 55,991 72,704
Middle Atlantic 38,666 48,688
Pacific 32,803 39,892
West North Central 21,486 27,377
Mountain 9,939 12,211
New England 24,886 26,613
East South Central 5,487 6,224
West South Central 4,821 20,177
---------- ----------
Total $ 280,489 $ 346,820
---------- ----------
---------- ----------
</TABLE>
Reserves for mortgage loans and real estate reflected in the above amounts were
$18.9 million and $21.0 million at December 31, 1995 and 1994, respectively.
9
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
NET INVESTMENT INCOME - The components of net investment income for the year
ended December 31 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Bonds $ 122,318 $ 123,495 $ 126,729
Stocks 1,653 1,799 953
Mortgage loans 26,356 31,945 40,823
Real estate 9,139 8,425 9,493
Policy loans 9,486 8,797 8,215
Other investments 3,951 1,651 674
Short term investments 2,252 1,378 840
---------- ---------- ----------
175,155 177,490 187,727
Less investment expenses 9,703 9,138 11,026
---------- ---------- ----------
Net investment income, before IMR amortization 165,452 168,352 176,701
IMR amortization 2,018 2,078 911
---------- ---------- ----------
Net investment income $ 167,470 $ 170,430 $ 177,612
---------- ---------- ----------
---------- ---------- ----------
</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) 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Bonds $ 727 $ 645 $ 10,133
Stocks (263) (62) 16
Mortgage loans (1,083) (17,142) (83)
Real estate (1,892) 605 (2,044)
--------- --------- ---------
(2,511) (15,954) 8,022
Less income tax 400 968 3,296
--------- --------- ---------
Net realized capital gains (losses) before transfer to IMR (2,911) (16,922) 4,726
Net realized capital gains transferred to IMR 616 (250) (11,951)
--------- --------- ---------
Net realized capital gains (losses) $ (2,295) $(17,172) $ (7,225)
--------- --------- ---------
--------- --------- ---------
</TABLE>
Proceeds from voluntary sales of investments in bonds during 1995, 1994 and 1993
were $22.4 million, $17.9 million, and $13.2 million, respectively. Gross gains
of $4.3 million, $3.0 million, and $4.5 million and gross losses of $5.2
million, $4.6 million, and $ .5 million, 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.
10
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
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 assets, liabilities, surplus and other funds 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 assets,
liabilities, surplus and other funds 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.
The estimated fair values of the financial instruments as of December 31 were as
follows:
<TABLE>
<CAPTION>
1995 1996
---- ----
Carrying Fair Carrying Fair
(In thousands) Value Value Value Value
----- ----- ----- -----
<S> <C> <C> <C> <C>
Financial Assets:
Cash $ 7,791 $ 7,791 $ 7,248 $ 7,248
Short term investments 3,500 3,500 45,239 45,239
Bonds 1,659,575 1,715,940 1,595,275 1,541,588
Stocks 18,132 18,414 12,283 12,590
Mortgage loans 239,522 250,196 295,532 291,704
Policy loans 122,696 122,696 116,600 116,600
Financial Liabilities:
Individual annuity contracts 803,099 797,024 869,230 862,662
Supplemental contracts without life
contingencies 16,796 16,796 16,673 16,673
Other contract deposit funds 632 632 1,105 1,105
</TABLE>
11
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
NOTE 4 - FEDERAL INCOME TAXES
The federal income tax provisions for 1995, 1994 and 1993 were $17.4 million,
$13.1 million and $8.6 million, respectively, which include taxes applicable to
realized capital gains of $.4 million, $1.0 million and $3.3 million.
The effective federal income tax rates were 27%, 67% and 30% in 1995, 1994 and
1993, 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 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 IRS
has completed its examination of all of the consolidated federal income tax
returns through 1988. In management's opinion, adequate tax liabilities have
been established for all years. However, the amount of these liabilities could
be revised in the near term if estimates of the Company's ultimate liability are
revised.
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) 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Reinsurance premiums assumed $ 3,442 $ 3,788 $ 4,190
Reinsurance premiums ceded
42,914 17,430 14,798
Deduction from insurance
liability including
reinsurance recoverable on
unpaid claims 82,227 46,734 42,805
</TABLE>
Individual life premiums ceded to First Allmerica aggregated $6.8 million, $7.8
million and $9.0 million in 1995, 1994 and 1993, respectively. The Company has
also entered into various reinsurance agreements with First Allmerica under
which certain insurance risks related to individual accident and health
business, premium income and related expenses are assumed by the Company from
First Allmerica. Premiums assumed pursuant to these agreements aggregated $3.4
million, $3.8 million and $4.2 million in 1995, 1994 and 1993, respectively .
During the year Allmerica Financial entered into a coinsurance agreement to
reinsure substantially all of its yearly renewable term life insurance.
Premiums ceded and reinsurance credits taken under this agreement amounted to
$25.4 million and $20.7 million, respectively. At December 31, 1995, the
deduction from insurance liability, including reinsurance recoverable on unpaid
claims under this agreement was $12.7 million.
NOTE 6 - ACCIDENT AND HEALTH POLICY AND CLAIM LIABILITIES
The Company regularly updates its estimates of policy and claims liabilities as
new information becomes available and further events occur which may impact the
resolution of unsettled claims for its accident and health line of business.
Changes in prior estimates are generally reflected in results of operations in
the year such changes are determined to be needed and recorded.
The policy and claims liabilities related to the Company's accident and health
business were $169.7 million and $123.5 million at December 31, 1995 and 1994,
respectively. Accident and health policy and claims liabilities have been
re-estimated for all prior years and were increased by $42.5 million, $10.9
million and $13.2 million, in 1995, 1994 and 1993, respectively, including $21.9
million and $2.8 million recorded as an adjustment to surplus in 1995 and 1993,
respectively. The unfavorable development is primarily due to reserve
strengthening and adverse experience in the Company's individual accident and
health line of business.
12
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(a wholly owned subsidiary of First Allmerica Financial Life Insurance Company)
NOTE 7 - DIVIDEND RESTRICTIONS
Delaware has enacted laws governing the payment of dividends to stockholders 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 statutory earned surplus would also require the prior approval of the
Delaware Commissioner of Insurance. At January 1, 1996, the Company could pay
dividends of $4.3 million to First Allmerica, without prior approval.
NOTE 8 - OTHER RELATED PARTY TRANSACTIONS
First Allmerica provides management, operating personnel and facilities on a
cost reimbursement basis to the Company. Expenses for services received from
First Allmerica were $ 85.8 million, $102.5 million and $98.9 million in 1995,
1994 and 1993, respectively. The net amounts payable to First Allmerica and
affiliates for accrued expenses and various other liabilities and receivables
were $12.6 million and $8.3 million at December 31, 1995 and 1994, respectively.
NOTE 9 - FUNDS ON DEPOSIT
In March 1994, the Company voluntarily withdrew from being licensed in New York.
In connection with the withdrawal First Allmerica, which is licensed in New
York, became qualified to sell the products previously sold by Allmerica
Financial 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, 1995, the carrying
value and fair value of the assets or deposit was $295.0 million and $303.6
million, respectively, which is in excess of the required amount.
Additional securities with a carrying value of $4.2 million and $3.9 million
were on deposit with various other state and governmental authorities as of
December 31, 1995 and 1994, respectively.
NOTE 10 - 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.
13
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES -- December 31, 1995
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
SELECT SELECT
AGGRESSIVE GROWTH GROWTH
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investment in shares of Allmerica Investment Trust . . . . . . . . . . $ 3,109,345 $ 2,740,451
Receivable from First Allmerica Financial Life Insurance
Company (Sponsor) . . . . . . . . . . . . . . . . . . . . . . . . . . 14,434 21,964
----------- -----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,123,779 2,762,415
LIABILITIES:
Payable to First Allmerica Financial Life Insurance
Company (Sponsor) . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
----------- -----------
Net assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,123,779 $ 2,762,415
----------- -----------
----------- -----------
Net asset distribution by category:
Qualified variable annuity policies . . . . . . . . . . . . . . . . . $ 957,957 $ 1,135,786
Non-qualified variable annuity policies . . . . . . . . . . . . . . . 2,165,822 1,626,629
Value of investment by First Allmerica Financial Life Insurance
Company (Sponsor). . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Value of annuitant mortality fluctuation reserve. . . . . . . . . . . -- --
----------- -----------
$ 3,123,779 $ 2,762,415
----------- -----------
----------- -----------
Qualified units outstanding, December 31, 1995 . . . . . . . . . . . . 733,842 894,909
Net asset value per qualified unit, December 31, 1995. . . . . . . . . $ 1.305399 $ 1.269163
Non-qualified units outstanding, December 31, 1995 . . . . . . . . . . 1,659,126 1,281,655
Net asset value per non-qualified unit, December 31, 1995. . . . . . . $ 1.305399 $ 1.269163
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SELECT
SELECT SELECT MONEY INTERNATIONAL
GROWTH & INCOME INCOME MARKET EQUITY
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of Allmerica Investment Trust . . . . . . . . . . $ 4,858,200 $ 4,694,539 $ 4,396,732 $ 2,143,676
Receivable from First Allmerica Financial Life Insurance
Company (Sponsor) . . . . . . . . . . . . . . . . . . . . . . . . . . 6,357 22,301 -- --
----------- ----------- ----------- -----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,864,557 4,716,840 4,396,732 2,143,676
LIABILITIES:
Payable to First Allmerica Financial Life Insurance
Company (Sponsor) . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 106,723 1,892
----------- ----------- ----------- -----------
Net assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,864,557 $ 4,716,840 $ 4,290,009 $ 2,141,784
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net asset distribution by category:
Qualified variable annuity policies . . . . . . . . . . . . . . . . . $ 2,273,431 $ 2,385,743 $ 1,921,257 $ 673,728
Non-qualified variable annuity policies . . . . . . . . . . . . . . . 2,581,126 2,322,166 2,359,404 1,467,943
Value of investment by First Allmerica Financial Life Insurance
Company (Sponsor). . . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- 113
Value of annuitant mortality fluctuation reserve. . . . . . . . . . . 10,000 8,931 9,348 --
----------- ----------- ----------- -----------
$ 4,864,557 $ 4,716,840 $ 4,290,009 $ 2,141,784
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Qualified units outstanding, December 31, 1995 . . . . . . . . . . . . 1,716,566 2,080,909 1,803,629 597,214
Net asset value per qualified unit, December 31, 1995. . . . . . . . . $ 1.324407 $ 1.146491 $ 1.065217 $ 1.128120
Non-qualified units outstanding, December 31, 1995 . . . . . . . . . . 1,956,442 2,033,245 2,223,727 1,301,329
Net asset value per non-qualified unit, December 31, 1995. . . . . . . $ 1.324407 $ 1.146491 $ 1.065217 $ 1.128120
</TABLE>
55
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
SELECT VIPF
CAPITAL APPRECIATION HIGH INCOME
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investment in shares of Allmerica Investment Trust . . . . . . . . . . $ 521,164 --
Investment in shares of Fidelity Variable Insurance
Products Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- $ 290,435
Investment in shares of T. Rowe Price International Series, Inc. . . . -- --
Receivable from First Allmerica Financial Life Insurance
Company (Sponsor) . . . . . . . . . . . . . . . . . . . . . . . . . . 20,188 8,993
---------- ----------
Net assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 541,352 $ 299,428
---------- ----------
---------- ----------
Net asset distribution by category:
Qualified variable annuity policies . . . . . . . . . . . . . . . . . $ 171,086 $ 136,071
Non-qualified variable annuity policies . . . . . . . . . . . . . . . 369,989 163,138
Value of investment by First Allmerica Financial Life Insurance
Company (Sponsor). . . . . . . . . . . . . . . . . . . . . . . . . . 277 219
---------- ----------
$ 541,352 $ 299,428
---------- ----------
---------- ----------
Qualified units outstanding, December 31, 1995 . . . . . . . . . . . . 123,708 124,118
Net asset value per qualified unit, December 31, 1995. . . . . . . . . $ 1.382983 $ 1.096305
Non-qualified units outstanding, December 31, 1995 . . . . . . . . . . 267,730 149,007
Net asset value per non-qualified unit, December 31, 1995. . . . . . . $ 1.382983 $ 1.096305
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
VIPF VIPF T. ROWE
EQUITY INCOME GROWTH INTERNATIONAL STOCK
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of Allmerica Investment Trust . . . . . . . . . . -- -- --
Investment in shares of Fidelity Variable Insurance
Products Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 509,423 $ 321,102 --
Investment in shares of T. Rowe Price International Series, Inc. . . . -- -- $ 255,141
Receivable from First Allmerica Financial Life Insurance
Company (Sponsor) . . . . . . . . . . . . . . . . . . . . . . . . . . 2,096 2,311 27,082
---------- ---------- ----------
Net assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 511,519 $ 323,413 $ 282,223
---------- ---------- ----------
---------- ---------- ----------
Net asset distribution by category:
Qualified variable annuity policies . . . . . . . . . . . . . . . . . $ 201,457 $ 135,480 $ 139,944
Non-qualified variable annuity policies . . . . . . . . . . . . . . . 309,824 187,686 142,066
Value of investment by First Allmerica Financial Life Insurance
Company (Sponsor). . . . . . . . . . . . . . . . . . . . . . . . . . 238 247 213
---------- ---------- ----------
$ 511,519 $ 323,413 $ 282,223
---------- ---------- ----------
---------- ---------- ----------
Qualified units outstanding, December 31, 1995 . . . . . . . . . . . . 169,144 109,704 131,459
Net asset value per qualified unit, December 31, 1995. . . . . . . . . $ 1.191039 $ 1.234960 $ 1.064543
Non-qualified units outstanding, December 31, 1995 . . . . . . . . . . 260,329 152,178 133,653
Net asset value per non-qualified unit, December 31, 1995. . . . . . . $ 1.191039 $ 1.234960 $ 1.064543
</TABLE>
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
<TABLE>
<CAPTION>
ALLMERICA SELECT SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
SELECT SELECT SELECT
AGGRESSIVE GROWTH GROWTH GROWTH AND INCOME
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
12/31/95 12/31/95 12/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . -- $ 400 $ 236,018
EXPENSES:
Mortality and expense risk fees. . . . . . . . . . . . . . $ 23,477 20,936 38,187
Administrative expense charges . . . . . . . . . . . . . . 2,817 2,512 4,582
--------- --------- ---------
Total expenses . . . . . . . . . . . . . . . . . 26,294 23,448 42,769
--------- --------- ---------
Net investment income (loss) . . . . . . . . . . . . . . . . (26,294) (23,048) 193,249
--------- --------- ---------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain . . . . . . . . . . . . . . . . . . . . 16,936 11,771 10,683
Net unrealized gain . . . . . . . . . . . . . . . . . . . 493,437 274,119 568,163
--------- --------- ---------
Net realized and unrealized gain on investments. . . . . . 510,373 285,890 578,846
--------- --------- ---------
Net increase in net assets from operations . . . . . . . . $ 484,079 $ 262,842 $ 772,095
--------- --------- ---------
--------- --------- ---------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SELECT MONEY SELECT
INCOME MARKET INTERNATIONAL EQUITY
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
12/31/95 12/31/95 12/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . $ 203,753 $ 177,979 $ 28,766
EXPENSES:
Mortality and expense risk fees. . . . . . . . . . . . . . 37,213 38,949 16,550
Administrative expense charges . . . . . . . . . . . . . . 4,466 4,674 1,986
--------- --------- ---------
Total expenses . . . . . . . . . . . . . . . . . 41,679 43,623 18,536
--------- --------- ---------
Net investment income (loss) . . . . . . . . . . . . . . . . 162,074 134,356 10,230
--------- --------- ---------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain . . . . . . . . . . . . . . . . . . . . 8,732 -- 10,175
Net unrealized gain . . . . . . . . . . . . . . . . . . . 242,639 -- 199,163
--------- --------- ---------
Net realized and unrealized gain on investments. . . . . . 251,371 -- 209,338
--------- --------- ---------
Net increase in net assets from operations . . . . . . . . $ 413,445 $ 134,356 $ 219,568
--------- --------- ---------
--------- --------- ---------
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
ALLMERICA SELECT SEPARATE ACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
SELECT VIPF VIPF
CAPITAL APPRECIATION HIGH INCOME EQUITY INCOME
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
4/28/95* TO 12/31/95 5/1/95* TO 12/31/95 5/1/95* TO 12/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,933 -- $ 4,111
EXPENSES:
Mortality and expense risk fees. . . . . . . . . . . . . . . 1,130 $ 726 1,837
Administrative expense charges . . . . . . . . . . . . . . . 135 87 220
-------- -------- --------
Total expenses . . . . . . . . . . . . . . . . . . 1,265 813 2,057
-------- -------- --------
Net investment income (loss) . . . . . . . . . . . . . . . . 8,668 (813) 2,054
-------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain. . . . . . . . . . . . . . . . . . . . . . 354 619 874
Net unrealized gain (loss) . . . . . . . . . . . . . . . . . 27,053 6,246 35,367
-------- -------- --------
Net realized and unrealized gain (loss) on investments . . . 27,407 6,865 36,241
-------- -------- --------
Net increase (decrease) in net assets from operations. . . . $ 36,075 $ 6,052 $ 38,295
-------- -------- --------
-------- -------- --------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
VIPF T. ROWE
GROWTH INTERNATIONAL STOCK
FOR THE PERIOD FOR THE PERIOD
5/1/95* TO 12/31/95 5/1/95* TO 12/31/95
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . -- --
EXPENSES:
Mortality and expense risk fees. . . . . . . . . . . . . . . $ 779 $ 576
Administrative expense charges . . . . . . . . . . . . . . . 93 69
------- -------
Total expenses . . . . . . . . . . . . . . . . . . 872 645
------- -------
Net investment income (loss) . . . . . . . . . . . . . . . . (872) (645)
------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain. . . . . . . . . . . . . . . . . . . . . . 892 16
Net unrealized gain (loss) . . . . . . . . . . . . . . . . . (6,028) 8,398
------- -------
Net realized and unrealized gain (loss) on investments . . . (5,136) 8,414
------- -------
Net increase (decrease) in net assets from operations. . . . $(6,008) $ 7,769
------- -------
------- -------
</TABLE>
*Date of initial investment
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SELECT AGGRESSIVE GROWTH SELECT GROWTH SELECT GROWTH & INCOME
PERIOD FROM PERIOD FROM PERIOD FROM
YEAR ENDED 4/28/94* YEAR ENDED 4/28/94* YEAR ENDED 4/19/94*
12/31/95 TO 12/31/94 12/31/95 TO 12/31/94 12/31/95 TO 12/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . . .$ (26,294) $ (3,115) $ (23,048) $ (2,611) $ 193,249 $ 53,049
Net realized gain (loss) from security transactions. . . . 16,936 101 11,771 1,654 10,683 2,358
Net unrealized gain (loss) on investments. . . . . . . . . 493,437 10,676 274,119 (1,748) 568,163 (70,428)
---------- -------- ---------- -------- ---------- ----------
Net increase (decrease) in net assets from operations. . . 484,079 7,662 262,842 (2,705) 772,095 (15,021)
---------- -------- ---------- -------- ---------- ----------
FROM CAPITAL TRANSACTIONS:
Net purchase payments. . . . . . . . . . . . . . . . . . . 271,631 23,204 247,421 16,647 381,309 100,298
Terminations . . . . . . . . . . . . . . . . . . . . . . . (22,871) (1,482) (12,655) (1,544) (32,802) (6,891)
Annuity benefits . . . . . . . . . . . . . . . . . . . . . (13,460) -- (9,608) -- (15,579) --
Other transfers from (to) the General Account of First
Allmerica Financial Life Insurance Company (Sponsor). . . 1,446,202 928,814 1,493,444 768,573 1,983,301 1,697,847
Net increase in investment by First Allmerica Financial
Life Insurance Company (Sponsor). . . . . . . . . . . . . -- -- -- -- -- --
---------- -------- ---------- -------- ---------- ----------
Net increase in net assets from capital transactions . . . 1,681,502 950,536 1,718,602 783,676 2,316,229 1,791,254
---------- -------- ---------- -------- ---------- ----------
Net increase in net assets . . . . . . . . . . . . . . . . 2,165,581 958,198 1,981,444 780,971 3,088,324 1,776,233
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . 958,198 -- 780,971 -- 1,776,233 --
---------- -------- ---------- -------- ---------- ----------
End of period. . . . . . . . . . . . . . . . . . . . . . .$3,123,779 $958,198 $2,762,415 $780,971 $4,864,557 $1,776,233
---------- -------- ---------- -------- ---------- ----------
---------- -------- ---------- -------- ---------- ----------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SELECT
SELECT INCOME MONEY MARKET INTERNATIONAL EQUITY
PERIOD FROM PERIOD FROM PERIOD FROM
YEAR ENDED 4/19/94* YEAR ENDED 4/28/94* YEAR ENDED 5/27/94*
12/31/95 TO 12/31/94 12/31/95 TO 12/31/94 12/31/95 TO 12/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . . . $ 162,074 $ 54,490 $ 134,356 $ 39,757 $ 10,230 $ (477)
Net realized gain (loss) from security transactions. . . . 8,732 (513) -- -- 10,175 1,992
Net unrealized gain (loss) on investments. . . . . . . . . 242,639 (65,115) -- -- 199,163 (13,999)
---------- ---------- ---------- ---------- ---------- --------
Net increase (decrease) in net assets from operations. . . 413,445 (11,138) 134,356 39,757 219,568 (12,484)
---------- ---------- ---------- ---------- ---------- --------
FROM CAPITAL TRANSACTIONS:
Net purchase payments. . . . . . . . . . . . . . . . . . 498,807 174,228 11,468,186 7,935,472 214,178 18,216
Terminations . . . . . . . . . . . . . . . . . . . . . . . (46,136) (15,373) (60,708) (53,224) (30,670) (60)
Annuity benefits . . . . . . . . . . . . . . . . . . . . . (5,600) -- -- -- (17,277) 659,181
Other transfers from (to) the General Account of First
Allmerica Financial Life Insurance Company (Sponsor). . . 1,951,842 1,756,765 (9,379,959) (5,793,871) 1,091,032
Net increase in investment by First Allmerica Financial
Life Insurance Company (Sponsor). . . . . . . . . . . . . -- -- -- -- -- 100
---------- ---------- ---------- ---------- ---------- --------
Net increase in net assets from capital transactions . . . 2,398,913 1,915,620 2,027,519 2,088,377 1,257,263 677,437
---------- ---------- ---------- ---------- ---------- --------
Net increase in net assets . . . . . . . . . . . . . . . . 2,812,358 1,904,482 2,161,875 2,128,134 1,476,831 664,953
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . 1,904,482 -- 2,128,134 -- 664,953 --
---------- ---------- ---------- ---------- ---------- --------
End of period . . . . . . . . . . . . . . . . . . . . . . . $4,716,840 $1,904,482 $4,290,009 $2,128,134 $2,141,784 $664,953
---------- ---------- ---------- ---------- ---------- --------
---------- ---------- ---------- ---------- ---------- --------
</TABLE>
59
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SELECT CAPITAL
APPRECIATION VIPF HIGH INCOME VIPF EQUITY INCOME
PERIOD FROM PERIOD FROM PERIOD FROM
4/28/95* TO 12/31/95 5/1/95* TO 12/31/95 5/1/95* TO 12/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . . . . . $ 8,668 $ (813) $ 2,054
Net realized gain from security transactions . . . . . . . . . 354 619 874
Net unrealized gain (loss) on investments. . . . . . . . . . . 27,053 6,246 35,367
--------- --------- ---------
Net increase (decrease) in net assets from operations. . . . . 36,075 6,052 38,295
--------- --------- ---------
FROM CAPITAL TRANSACTIONS:
Net purchase payments. . . . . . . . . . . . . . . . . . . . . 74,004 24,172 40,532
Terminations . . . . . . . . . . . . . . . . . . . . . . . . . -- (5,093) (4,994)
Other transfers from the General Account of First
Allmerica Financial Life Insurance Company (Sponsor). . . . . 431,073 274,097 437,486
Net increase in investment by First Allmerica Financial Life
Insurance Company (Sponsor) . . . . . . . . . . . . . . . . . 200 200 200
--------- --------- ---------
Net increase in net assets from capital transactions . . . . . 505,277 293,376 473,224
--------- --------- ---------
Net increase in net assets . . . . . . . . . . . . . . . . . . 541,352 299,428 511,519
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . -- -- --
--------- --------- ---------
End of period . . . . . . . . . . . . . . . . . . . . . . . . $ 541,352 $ 299,428 $ 511,519
--------- --------- ---------
--------- --------- ---------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
VIPF GROWTH T. ROWE INTERNATIONAL STOCK
PERIOD FROM PERIOD FROM
5/1/95* TO 12/31/95 5/1/95* TO 12/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . . . $ (872) $ (645)
Net realized gain from security transactions . . . . . . . 892 16
Net unrealized gain (loss) on investments. . . . . . . . . (6,028) 8,398
--------- ---------
Net increase (decrease) in net assets from operations. . . (6,008) 7,769
--------- ---------
FROM CAPITAL TRANSACTIONS:
Net purchase payments. . . . . . . . . . . . . . . . . . . 17,133 11,459
Terminations . . . . . . . . . . . . . . . . . . . . . . . -- --
Other transfers from the General Account of First
Allmerica Financial Life Insurance Company (Sponsor). . . 312,088 262,795
Net increase in investment by First Allmerica Financial
Life Insurance Company (Sponsor). . . . . . . . . . . . . 200 200
--------- ---------
Net increase in net assets from capital transactions . . . 329,421 274,454
--------- ---------
Net increase in net assets . . . . . . . . . . . . . . . . 323,413 282,223
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . -- --
--------- ---------
End of period . . . . . . . . . . . . . . . . . . . . . . $ 323,413 $ 282,223
--------- ---------
--------- ---------
</TABLE>
* Date of initial investment.
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
NOTE 1 - ORGANIZATION
Allmerica select Separate Account (Allmerica Select) is a separate
investment account of First Allmerica Financial Life Insurance Company (the
Company), established on April 1, 1994 for the purpose of separating from the
general assets of the Company those assets used to fund certain variable
annuity policies issued by the Company. Effective October 16, 1995,
concurrent with the demutualization, the Company's name was changed from
State Mutual Life Assurance Company of America. Under applicable insurance
law, the assets and liabilities of Allmerica Select are clearly identified
and distinguished from the other assets and liabilities of the Company.
Allmerica Select cannot be charged with liabilities arising out of any other
business of the Company.
Allmerica Select is registered as a unit investment trust under the
Investment Company Act of 1940, as amended (the 1940 Act). Allmerica Select
currently offers eleven Sub-Accounts. Each Sub-Account invests exclusively in
a corresponding investment portfolio of the Allmerica Investment Trust (the
Trust) managed by Allmerica Investment Management Company, Inc., a
wholly-owned subsidiary of the Company or of the Variable Insurance Products
Fund (VIPF) managed by Fidelity Management and Research Company (Fidelity
Management), or of T. Rowe Price International Series, Inc. (T. Rowe)
managed by Price-Fleming. The Trust, VIPF, and T. Rowe (the Funds) are
open-end, diversified series management investment companies registered under
the 1940 Act.
Allmerica Select has two types of variable annuity policies, "qualified"
policies and "non-qualified" policies. A qualified policy is one that is
purchased in connection with a retirement plan which meets the requirements
of Section 401, 403, 408, or 457 of the Internal Revenue Code, while a
non-qualified policy is one that is not purchased in connection with one of
the indicated retirement plans. The tax treatment for certain partial
redemptions or surrenders will vary according to whether they are made from a
qualified policy or a non-qualified policy.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Investments - Security transactions are recorded on the trade date.
Investments held by the Sub-Accounts are stated at the net asset value per
share of the respective investment portfolio of the Trust, VIPF, and T. Rowe.
Net realized gains and losses on securities sold are determined on the
average cost method. Dividends and capital gain distributions are recorded on
the ex-dividend date and are reinvested in additional shares of the
respective investment portfolio of the Trust, VIPF, and T. Rowe at net asset
value.
Federal Income Taxes -The Company is taxed as a "life insurance company"
under Subchapter L of the Internal Revenue Code and files a consolidated
federal income tax return with the Company. The Company anticipates no tax
liability resulting from the operations of Allmerica Select. Therefore, no
provision for income taxes has been charged against Allmerica Select.
Annuitant Mortality Fluctuation Reserve - A strengthening reserve required
for doing business in the state of New York. The purpose of the reserve is
to provide for future mortality experience which is less favorable than that
assumed in pricing the annuity. This reserve is funded by the Company.
61
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995, CONTINUED
NOTE 3 - INVESTMENTS
The number of shares owned, aggregate cost, and net asset value per share
of each Sub-Account's investment in the Trust, VIPF, and T. Rowe at December
31, 1995 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO INFORMATION
INVESTMENT NUMBER OF AGGREGATE NET ASSET VALUE
PORTFOLIO SHARES COST PER SHARE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Allmerica Investment Trust:
Select Aggressive Growth . . . . . . . . 1,682,546 $ 2,605,231 $ 1.848
Select Growth. . . . . . . . . . . . . . 2,001,790 2,468,079 1.369
Select Growth and Income . . . . . . . . 3,831,388 4,360,465 1.268
Select Income. . . . . . . . . . . . . . 4,584,511 4,517,015 1.024
Money Market . . . . . . . . . . . . . . 4,396,732 4,396,732 1.000
Select International Equity. . . . . . . 1,887,039 1,958,511 1.136
Select Capital Appreciation. . . . . . . 380,690 494,111 1.369
Fidelity Variable Insurance Products Fund:
High Income. . . . . . . . . . . . . . . 24,103 284,189 12.050
Equity Income. . . . . . . . . . . . . . 26,436 474,057 19.270
Growth . . . . . . . . . . . . . . . . . 10,997 327,130 29.200
T. Rowe Price International Series, Inc.:
International Stock. . . . . . . . . . . 22,659 246,744 11.260
</TABLE>
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company makes a charge of 1.25% per annum based on the average daily
net assets of each Sub-Account at each valuation date for mortality and
expense risks. The Company also charges each Sub-Account .15% per annum based
on the average daily net assets of each Sub-Account for administrative
expenses. These charges are deducted from the daily value of each Sub-Account
but are paid to the Company on a monthly basis.
A contract fee is currently deducted on the policy anniversary date and
upon full surrender of the policy. The contract fee is $30. For the year
ended December 31, 1995, contract fees deducted from accumulated value in
Allmerica Select amounted to $4,901.
Allmerica Investments, Inc., (Allmerica Investments), a wholly-owned
subsidiary of the Company, is the principal underwriter and general
distributor of Allmerica Select, and does not receive any compensation for
sales of the Allmerica Select policies. Commissions are paid by the Company
to registered representatives of broker-dealers who are registered under the
Securities Exchange Act of 1934 and are members of the National Association
of Securities Dealers. As the current series of policies have a contingent
deferred sales charge, no deduction is made for sales charges at the time of
the sale. For the year ended December 31, 1995, the Company received $1,246
for contingent deferred sales charges applicable to Allmerica Select.
62
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995, CONTINUED
NOTE 5 - POLICYOWNERS AND SPONSOR TRANSACTIONS
Transactions from policyowners and sponsor were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994
---- ----
UNITS AMOUNT UNITS AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECT AGGRESSIVE GROWTH
ISSUANCE OF UNITS. . . . . . . . . . . . . . . . . 1,562,355 $ 1,835,864 959,605 $ 952,354
REDEMPTION OF UNITS. . . . . . . . . . . . . . . . (127,181) (154,362) (1,811) (1,818)
------------ ------------ ------------ ------------
NET INCREASE.. . . . . . . . . . . . . . . . . . 1,435,174 $ 1,681,502 957,794 $ 950,536
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SELECT GROWTH
ISSUANCE OF UNITS. . . . . . . . . . . . . . . . . 1,476,227 $ 1,789,220 758,002 $ 785,560
REDEMPTION OF UNITS. . . . . . . . . . . . . . . . (55,816) (68,871) (1,849) (1,884)
------------ ------------ ------------ ------------
NET INCREASE . . . . . . . . . . . . . . . . . . . 1,420,411 $ 1,720,349 756,153 $ 783,676
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SELECT GROWTH AND INCOME
ISSUANCE OF UNITS. . . . . . . . . . . . . . . . 2,022,590 $ 2,427,395 1,730,638 $ 1,798,192
REDEMPTION OF UNITS. . . . . . . . . . . . . . . (73,628) (111,166) (6,592) (6,938)
------------ ------------ ------------ ------------
NET INCREASE . . . . . . . . . . . . . . . . . . . 1,948,962 $ 2,316,229 1,724,046 $ 1,791,254
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SELECT INCOME
ISSUANCE OF UNITS. . . . . . . . . . . . . . . . . 2,406,756 $ 2,616,226 1,931,971 $ 1,931,241
REDEMPTION OF UNITS . . . . . . . . . . . . . . . (208,889) (217,313) (15,684) (15,621)
------------ ------------ ------------ ------------
NET INCREASE . . . . . . . . . . . . . . . . . . . 2,197,867 $ 2,398,913 1,916,287 $ 1,915,620
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
MONEY MARKET
ISSUANCE OF UNITS. . . . . . . . . . . . . . . . . 11,475,182 $ 12,005,362 7,881,195 $ 7,940,059
REDEMPTION OF UNITS. . . . . . . . . . . . . . . . (9,533,159) (9,977,843) (5,795,862) (5,851,682)
------------ ------------ ------------ ------------
NET INCREASE . . . . . . . . . . . . . . . . . . . 1,942,023 $ 2,027,519 2,085,333 $ 2,088,377
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SELECT INTERNATIONAL EQUITY
ISSUANCE OF UNITS. . . . . . . . . . . . . . . . . 1,299,084 $ 1,377,879 700,918 $ 682,730
REDEMPTION OF UNITS. . . . . . . . . . . . . . . . (96,005) (120,616) (5,454) (5,293)
------------ ------------ ------------ ------------
NET INCREASE . . . . . . . . . . . . . . . . . . . 1,203,079 $ 1,257,263 695,464 $ 677,437
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SELECT CAPITAL APPRECIATION
ISSUANCE OF UNITS. . . . . . . . . . . . . . . . . 394,750 $ 509,562 -- --
REDEMPTION OF UNITS. . . . . . . . . . . . . . . . (3,312) (4,285) -- --
------------ ------------ ------------ ------------
NET INCREASE . . . . . . . . . . . . . . . . . . . 391,438 $ 505,277 -- --
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
VIPF HIGH INCOME
ISSUANCE OF UNITS. . . . . . . . . . . . . . . . . 284,162 $ 306,219 -- --
REDEMPTION OF UNITS. . . . . . . . . . . . . . . . (12,037) (12,843) -- --
------------ ------------ ------------ ------------
NET INCREASE . . . . . . . . . . . . . . . . . . . 273,125 $ 293,376 -- --
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
VIPF EQUITY INCOME
ISSUANCE OF UNITS. . . . . . . . . . . . . . . . . 443,027 $ 486,952 -- --
REDEMPTION OF UNITS. . . . . . . . . . . . . . . . (13,554) (13,728) -- --
------------ ------------ ------------ ------------
NET INCREASE.. . . . . . . . . . . . . . . . . . . 429,473 $ 473,224 -- --
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
VIPF GROWTH
ISSUANCE OF UNITS. . . . . . . . . . . . . . . . . 267,887 $ 329,470 -- --
REDEMPTION OF UNITS. . . . . . . . . . . . . . . . (5) (49) -- --
------------ ------------ ------------ ------------
NET INCREASE . . . . . . . . . . . . . . . . . . . 267,882 $ 329,421 -- --
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
T. ROWE INTERNATIONAL STOCK
ISSUANCE OF UNITS. . . . . . . . . . . . . . . . . 268,735 $ 278,037 --
REDEMPTION OF UNITS. . . . . . . . . . . . . . . . (3,623) (3,583) -- --
------------ ------------ ------------ ------------
NET INCREASE . . . . . . . . . . . . . . . . . . . 265,112 $ 274,454 -- --
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
63
<PAGE>
ALLMERICA SELECT SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995, CONTINUED
NOTE 6 - DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code, a
variable annuity contract, other than a contract issued in connection with
certain types of employee benefit plans, will not be treated as an annuity
contract for federal income tax purposes for any period for which the
investments of the segregated asset account on which the contract is based
are not adequately diversified. The Code provides that the "adequately
diversified" requirement may be met if the underlying investments satisfy
either a statutory safe harbor test or diversification requirements set forth
in regulations issued by the Secretary of Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of
the Code. The Company believes that Allmerica Select satisfies the current
requirements of the regulations, and it intends that Allmerica Select will
continue to meet such requirements.
NOTE 7 - PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of the Trust, VIPF, and T. Rowe
shares by Allmerica Select during the year ended december 31, 1995 were as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
SUB-ACCOUNTS PURCHASES SALES
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Allmerica Investment Trust:
Select Aggressive Growth $ 1,768,354 $ 128,502
Select Growth 1,766,629 93,815
Select Growth and Income 2,616,672 111,369
Select Income 2,796,603 258,005
Money Market 8,860,563 6,591,260
Select International Equity 1,394,551 125,792
Select Capital Appreciation 503,182 9,424
Fidelity Variable Insurance Products Fund:
High Income 303,345 19,774
Equity Income 499,022 25,839
Growth 341,595 15,357
T. Rowe Price International Series, Inc.:
International Stock 261,597 14,870
------------ ------------
Totals $ 21,112,113 $ 7,394,007
------------ ------------
------------ ------------
</TABLE>
64
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of First Allmerica Financial Life Insurance
Company and Policyowners of Allmerica Select Separate
Account of First Allmerica Financial Life Insurance Company
In our opinion, the accompanying statements of assets and liabilities and
the related statements of operations and of changes in net assets present
fairly, in all material respects, the financial position of each of the
Sub-Accounts (Select Aggressive Growth, Select Growth, Select Growth &
Income, Select Income, Money Market, Select International Equity, Select
Capital Appreciation, VIPF High Income, VIPF Equity Income, VIPF Growth, and
T. Rowe International Stock) constituting the Allmerica Select Separate
Account of First Allmerica Financial Life Insurance Company at December 31,
1995, the results of each of their operations and the changes in each of
their net assets for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of First Allmerica Financial Life Insurance Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits,
which included confirmation of investments owned at December 31, 1995 by
correspondence with the Funds provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 23, 1996
65
<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 Allmerica Financial Life Insurance and Annuity
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. Opinion of Counsel
2. Price Waterhouse
3. Actuarial Consent
4. Consent of Newly Elected Directors
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 were previously
filed on October 1, 1995 and are incorporated herein by reference
(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.
(c) Form of Participation Agreement with Variable Insurance
Products Fund. was previously filed on May 1, 1995 and is
incorporated by reference.
(d) Fidelity Services Agreement filed herewith
(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.
<PAGE>
4. Not Applicable.
5. Not Applicable.
6. Actuarial consent
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 by reference..
10. Consent of Newly Elected Directors
27. Financial Data Schedules
<PAGE>
FORM S-6 EXHIBIT TABLE
Exhibit 1(8d) Fidelity Services Agreement
Exhibit 3 Opinion of Counsel
Exhibit 6 Actuarial Consent
Exhibit 8 Consent of Independent Accountants
Exhibit 10 Consent of Newly Elected Directors
Exhibit 27 Financial Date Schedules
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Worcester, and Commonwealth of Massachusetts on the
26th. day of April, 1996.
Allmerica Financial Life Insurance and
Annuity Company
Allmerica Select
Separate Account II
(Registrant)
By: /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 April 26, 1996
- --------------------- Chief Executive Officer
Richard M. Reilly
/s/ John F. O'Brien Director and Chairman April 26, 1996
- ------------------- of the Board
John F. O'Brien
/s/ Eric A. Simonsen Director, Vice President and April 26, 1996
- -------------------- Chief Financial Officer
Eric A. Simonsen
/s/ Mark R. Colborn Vice President and April 26, 1996
- ------------------- Controller
Mark R. Colborn
/s/ Richard J. Baker Director and Vice President April 26, 1996
- --------------------
Richard J. Baker
<PAGE>
SERVICE AGREEMENT
This Agreement is entered into and effective as of the 1st day of
November, 1995, by and between FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS
COMPANY ("FIIOC") and ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
("Company").
WHEREAS, FIIOC provides transfer agency and other services to
Fidelity's Variable Insurance Products Fund and Variable Insurance Products Fund
II (collectively "Funds"); and
WHEREAS, the services provided by FIIOC on behalf of the Funds
include responding to inquiries about the Funds, including the provision of
information about the Funds' investment objectives, investment policies,
portfolio holdings, etc.; and
WHEREAS, Company holds shares of the Funds in order to fund certain
variable annuity contracts, group annuity contracts, and/or variable life
insurance policies, the beneficial interests in which are held by individuals,
plan trustees, or others who look to Company to provide information about the
Funds similar to the information provided by FIIOC; and
WHEREAS, the Company and one or both of the Funds have entered into one
or more Participation Agreements, under which the Company agrees not to provide
information about the Funds except for information provided by the Funds or
their designees; and
WHEREAS, FIIOC and Company desire that Company be able to respond to
inquiries about the Funds from individual variable annuity owners, participants
in group annuity contracts issued by the Company, and owners and participants
under variable life insurance policies issued by the Company, and prospective
customers for any of the above; and
WHEREAS, FIIOC and Company recognize that Company's efforts in
responding to customer inquiries will reduce the burden that such inquiries
would place on FIIOC should such inquiries be directed to FIIOC.
NOW THEREFORE, the parties do agree as follows:
1. INFORMATION TO BE PROVIDED TO COMPANY. FIIOC agrees to provide
to Company, on a periodic basis, directly or through a designee, information
about the Funds' investment objectives, investment policies, portfolio
holdings, performance, etc. The content and format of such information shall
be as FIIOC, in its sole discretion, shall choose. FIIOC may change the
format and/or content of such informational reports, and the frequency with
which such information is provided. For purposes of Section 4.2 of each of
the Company's Participation Agreement(s) with the Funds, FIIOC represents
that it is the designee of the Funds, and Company may therefore use the
information provided by FIIOC without seeking additional permission from the
Funds.
2. USE OF INFORMATION BY COMPANY. Company may use the information
provided by FIIOC in communications to individuals, plan trustees, or others who
have legal title or beneficial interest in the annuity or life insurance
products issued by Company, and to prospective purchasers of such products or
beneficial interests thereunder. If such information is contained as part of
larger pieces of sales literature, advertising, etc., such pieces shall be
furnished for review to the Funds in accordance with the terms of the Company's
Participation Agreements with the Funds. Nothing herein shall give the Company
the right to expand upon, reformat or otherwise alter the information provided
by FIIOC. Company acknowledges that the information provided it by FIIOC may
need to be supplemented with additional qualifying information, regulatory
disclaimers, or other information before it may be conveyed to persons outside
the Company.
1
<PAGE>
3. COMPENSATION TO COMPANY. In recognition of the fact that Company
will respond to inquiries that otherwise would be handled by FIIOC, FIIOC agrees
to pay Company a quarterly fee computed as follows:
At the close of each calendar quarter, FIIOC will determine the Average
Daily Assets held in the Funds by the Company. Average Daily Assets shall be
the sum of the daily assets for each calendar day in the quarter divided by the
number of calendar days in the quarter. The Average Daily Assets shall be
multiplied by 0.0002 (2 basis points) and that sum shall be divided by four.
The resulting number shall be the quarterly fee for that quarter, which shall be
paid to Company during the following month.
Should the Participation Agreement(s) between Company and the Fund(s)
be terminated effective before the last day of a quarter, Company shall be
entitled to a fee for that portion of the quarter during which the
Participation Agreement was still in effect, unless such termination is due
to misconduct on the part of the Company. For such a stub quarter, Average
Daily Assets shall be the sum of the daily assets for each calendar day in
the quarter through and including the date of termination of the
Participation Agreement(s), divided by the number of calendar days in that
quarter for which the Participation Agreement was in effect. Such Average
Daily Assets shall be multiplied by 0.0002 (2 basis points) and that number
shall be multiplied by the number of days in such quarter that the
Participation Agreement was in effect, then divided by three hundred
sixty-five. The resulting number shall be the quarterly fee for the stub
quarter, which shall be paid to Company during the following month.
4. TERMINATION. This Agreement may be terminated by Company at any
time upon written notice to FIIOC. FIIOC may terminate this Agreement at any
time upon ninety (90) days' written notice to Company. FIIOC may terminate
this Agreement immediately upon written notice to Company (1) if required by
any applicable law or regulation, (2) if so required by action of the Fund(s)
Board of Trustees, or (3) if Company engages in any material breach of this
Agreement. This Agreement shall terminate immediately and automatically upon
the termination of Company's Participation Agreement(s) with the Funds, and
in such event no notice need be given hereunder.
5. INDEMNIFICATION. Company agrees to indemnify and hold harmless
FIIOC for any misuse by Company, its affiliates, its agents, its brokers, and
any persons controlling Company, under common control with Company, or
controlled by Company, of the information provided by FIIOC under this
Agreement.
6. APPLICABLE LAW. This Agreement shall be construed and the
provisions hereof interpreted under and in accordance with the laws of the
Commonwealth of Massachusetts.
7. ASSIGNMENT. This Agreement may not be assigned, except that it
shall be assigned automatically to any successor to FIIOC as the Funds' transfer
agent, and any such successor shall be bound by the terms of this Agreement.
IN WITNESS WHEREOF, the parties have set their hands as of the date
first written above.
FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY
By: /s/ Virginia Meany
--------------------------
Virginia Meany
Senior Vice President
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
By: /s/ Richard M. Reilly
--------------------------
Name: Richard M. Reilly
--------------------------
Title: President
--------------------------
2
<PAGE>
April 21, 1996
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester MA 01653
Gentlemen:
In my capacity as Counsel of Allmerica Financial Life Insurance and Annuity
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
<PAGE>
April 22, 1996
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester MA 01653
Gentlemen:
This opinion is furnished in connection with the filing by Allmerica Financial
Life Insurance and Annuity Company of the Post-Effective Amendment to the
Registration Statement on Form S-6 of its flexible premium variable life
insurance policies ("Policies") allocated to Allmerica Select Separate Account
II under the Securities Act of 1933. The prospectus included in the Post-
Effective Amendment to the Registration Statement on Form S-6 describes the
Policies. I am familiar with and have provided actuarial advice concerning the
preparation of the amendment to the Registration Statement, including exhibits.
In my professional opinion, the illustration of death benefits and cash values
included in Appendix C of the prospectus, based on the assumptions stated in the
illustrations, are consistent with the provisions of the Policy. The rate
structure of the Policies has not been designed so as to make the relationship
between premiums and benefits, as shown in the illustrations, appear more
favorable to a prospective purchaser of a Policy for a person age 30 or a person
age 45 than to prospective purchasers of Policies for people at other ages or
underwriting classes.
I hereby consent to the use of this opinion as an exhibit to the amendment to
the Registration Statement.
Sincerely,
/s/ William H. Mawdsley
William H. Mawdsley, FSA, MAAA
Vice President and Actuary
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 2 to the Registration Statement on Form S-6 of
our report dated February 5, 1996, relating to the financial statements of
Allmerica Financial Life Insurance and Annuity Company and our report dated
February 23, 1996, relating to the financial statements of the Allmerica
Select Separate Account II of Allmerica Financial Life Insurance and Annuity
Company, both of which appear in such Prospectus. We also consent to the
reference to us under the heading "Independent Accountants" in such
Prospectus.
Price Waterhouse LLP
Boston, Massachusetts
April 25, 1996
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
Consent of Newly Elected Director
Having been duly elected as a Director of Allmerica Financial Life Insurance and
Annuity Company ("Company"), effective April 30, 1996, each of the undersigned
hereby consents to being named as a Director of the Company in such
post-effective amendments to Registration Statements for the Company's variable
annuity and variable life contracts as will be filed with the Securities and
Exchange Commission on or before April 30, 1996, with an effective date on or
after April 30, 1996, pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940.
Signed this_____ day of April, 1996
/s/ Bruce C. Anderson /s/ Theodore J. Rupley
- ----------------------------------- ------------------------------
Bruce C. Anderson Theodore J. Rupley
/s/ Kruno Huitzingh /s/ Phillip E. Soule
- ----------------------------------- ------------------------------
Kruno Huitzingh Phillip E. Soule
/s/ Larry C. Renfro /s/ Diane E. Wood
- ----------------------------------- ------------------------------
Larry C. Renfro Diane E. Wood
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