<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. 8
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) of Rule (485)
---
on (date) pursuant to paragraph (b) of Rule (485)
---
60 days after filing pursuant to paragraph (a)(1)
---
X on May 1, 2000 pursuant to paragraph (a)(1) of Rule (485)
---
this post-effective amendment designates a new effective
--- date for a previously filed post-effective amendment.
FLEXIBLE PREMIUM VARIABLE LIFE
Pursuant to Reg. Section 270.24f-2 of the Investment Company Act of 1940 ("1940
Act"), Registrant hereby declares that an indefinite amount of its securities is
being registered under the Securities Act of 1933 ("1933 Act"). The Rule 24f-2
Notice for the issuer's fiscal year ended December 31, 1999 will be filed on or
before March 30, 2000.
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RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8B-2 AND THE PROSPECTUS
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ITEM NO. OF
FORM N-8B-2 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 and the
Underlying Funds; The Policy; Policy Termination and
Reinstatement; Other Policy Provisions
11...........................Summary; The Trust; Fidelity VIP; T. Rowe Price; Investment
Objectives and Policies
12...........................Summary; The Trust; Fidelity VIP; T. Rowe Price
13...........................Summary; The Trust; Fidelity VIP; T. Rowe Price; Investment
Advisory Services to the Trust; Investment Advisory Services to
Fidelity VIP; Investment Advisory Services to T. Rowe Price;
Charges and Deductions
14...........................Summary; Applying for a Policy
15...........................Summary; Applying for a Policy; Payments; Allocation of Net
Payments
16...........................The Variable Account; The Trust; Fidelity 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; Fidelity 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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
35...........................Distribution
36...........................Not Applicable
37...........................Not Applicable
38...........................Summary; Distribution
39...........................Summary; Distribution
40...........................Not Applicable
41...........................Allmerica Financial, Distribution
42...........................Not Applicable
43...........................Not Applicable
44...........................Payments; Policy Value
45...........................Not Applicable
46...........................Policy 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>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
Worcester, Massachusetts
Individual Flexible Payment Variable Life Insurance Policies
ALLMERICA SELECT LIFE
<TABLE>
<C> <S>
This Prospectus provides important information about
Please read this Allmerica Select Life, an individual flexible payment
Prospectus carefully variable life insurance policy issued by Allmerica Financial
before investing and Life Insurance and Annuity Company. The Policies are funded
keep it for future through the Allmerica Select Separate Account II, a separate
reference. investment account of the Company that is referred to as the
Variable Account.
The Variable Account is subdivided into Sub-Accounts. Each
Variable Life Policies Sub-Account invests exclusively in shares of one of the
involve risks including following Funds of Allmerica Investment Trust, Variable
possible loss of Insurance Products Fund, and T. Rowe Price International
principal. Series, Inc.:
</TABLE>
<TABLE>
<CAPTION>
Fund Manager
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<C> <S> <C>
This Prospectus Must be Select Emerging Markets Fund Schroder Investment Management North America Inc.
Accompanied by Select International Equity Fund Bank of Ireland Asset Management (U.S.) Limited
Prospectuses of the T. Rowe Price International Stock Portfolio Rowe Price-Fleming International, Inc.
Funds. Select Aggressive Growth Fund Nicholas-Applegate Capital Management, L.P.
Select Capital Appreciation Fund T. Rowe Price Associates, Inc.
Select Value Opportunity Fund Cramer Rosenthal McGlynn, LLC
Select Growth Fund Putnam Investment Management, Inc.
Select Strategic Growth Fund Cambiar Investors, Inc.
Fidelity VIP Growth Portfolio Fidelity Management & Research Company
Select Growth and Income Fund J. P. Morgan Investment Management Inc.
Fidelity VIP Equity-Income Portfolio Fidelity Management & Research Company
Fidelity VIP High Income Portfolio Fidelity Management & Research Company
Select Income Fund* Standish, Ayer & Wood, Inc.
Money Market Fund Allmerica Asset Management, Inc.
</TABLE>
<TABLE>
<C> <S>
* The Company has requested the necessary regulatory
approvals to substitute shares of the Select Investment
Grade Income Fund of the Allmerica Investment Trust for
shares of the currently offered Select Income Fund. Subject
to receiving the necessary approvals, this substitution will
take place on or about July 1, 2000.
Policy owners may, within limits, choose the amount of
initial payment and vary the frequency and amount of future
This Life Policy is payments. The Policy allows partial withdrawals and full
NOT: surrender of the Policy's surrender value, within limits.
- - a bank deposit or The Policies are not suitable for short-term investment
obligation; because of the substantial nature of the surrender charge.
- - federally insured; If you think about surrendering the Policy, consider the
- - endorsed by any lower deferred sales charges that apply during the first two
bank or years from the date of issue or an increase in face amount.
governmental This Prospectus can also be obtained from the Securities and
agency. Exchange Commission's website (http://www.sec.gov).
It may not be advantageous to replace existing insurance
with the policy.
The Securities and Exchange Commission has not approved or
disapproved these securities or determined that the
information is truthful or complete. Any representation to
the contrary is a criminal offense.
</TABLE>
<TABLE>
<C> <S> <C>
Correspondence may be mailed to Dated May 1, 2000
Allmerica Select 440 Lincoln Street
P.O. Box 8179 Worcester, Massachusetts 01653
Boston, MA 02266-8179 (508) 855-1000
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SPECIAL TERMS............................................... 4
SUMMARY OF FEES AND CHARGES................................. 7
SUMMARY OF POLICY FEATURES.................................. 11
DESCRIPTION OF THE COMPANY, THE VARIABLE ACCOUNT, AND THE
UNDERLYING FUNDS............................................ 18
INVESTMENT OBJECTIVES AND POLICIES.......................... 19
SUBSTITUTION OF SHARES OF THE SELECT INCOME FUND............ 21
INVESTMENT ADVISORY SERVICES................................ 22
THE POLICY.................................................. 24
Applying for a Policy..................................... 24
Free-Look Period.......................................... 24
Conversion Privilege...................................... 25
Payments.................................................. 25
Allocation of Net Payments................................ 26
Transfer Privilege........................................ 27
Death Benefit............................................. 28
Special Transfer Privilege under Proposed Substitution.... 28
Guaranteed Death Benefit Rider............................ 28
Level Option and Adjustable Option........................ 30
Change to Level Option or Adjustable Option............... 31
Change in Face Amount..................................... 32
Policy Value.............................................. 33
Payment Options........................................... 34
Optional Insurance Benefits............................... 34
Surrender................................................. 34
Partial Withdrawal........................................ 35
Paid-up Insurance Option.................................. 35
CHARGES AND DEDUCTIONS...................................... 37
Payment Expense Charge.................................... 37
Monthly Insurance Protection Charges...................... 37
Charges Against or Reflected in the Assets of the Variable
Account.................................................. 39
Surrender Charge.......................................... 40
Partial Withdrawal Costs.................................. 41
Transfer Charges.......................................... 41
Charge for Change in Face Amount.......................... 42
Other Administrative Charges.............................. 42
POLICY LOANS................................................ 42
Preferred Loan Option..................................... 43
Loan Interest Charged..................................... 43
Repayment of Outstanding Loan............................. 43
Effect of Policy Loans.................................... 43
Policies Issued in Connection with TSA Plans.............. 44
POLICY TERMINATION AND REINSTATEMENT........................ 45
Termination............................................... 45
Reinstatement............................................. 45
OTHER POLICY PROVISIONS..................................... 47
Policy Owner.............................................. 47
Beneficiary............................................... 47
Assignment................................................ 47
Limit on Right to Challenge Policy........................ 47
Suicide................................................... 47
Misstatement of Age or Sex................................ 47
</TABLE>
2
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<TABLE>
<S> <C>
Delay of Payments......................................... 48
FEDERAL TAX CONSIDERATIONS.................................. 48
The Company and the Variable Account...................... 48
Taxation of the Policies.................................. 48
Policy Loans.............................................. 49
Policies Issued in Connection with TSA Plans.............. 49
Modified Endowment Policies............................... 50
VOTING RIGHTS............................................... 51
DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY............. 52
DISTRIBUTION................................................ 53
REPORTS..................................................... 53
LEGAL PROCEEDINGS........................................... 54
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS........... 54
FURTHER INFORMATION......................................... 55
MORE INFORMATION ABOUT THE FIXED ACCOUNT.................... 55
General Description....................................... 55
Fixed Account Interest.................................... 55
Transfers, Surrenders, Partial Withdrawals and Policy
Loans.................................................... 55
INDEPENDENT ACCOUNTANTS..................................... 56
FINANCIAL STATEMENTS........................................ 56
APPENDIX A -- GUIDELINE MINIMUM SUM INSURED TABLE........... A-1
APPENDIX B -- OPTIONAL INSURANCE BENEFITS................... B-1
APPENDIX C -- PAYMENT OPTIONS............................... C-1
APPENDIX D -- ILLUSTRATIONS................................. D-1
APPENDIX E -- CALCULATION OF MAXIMUM SURRENDER CHARGES...... E-1
APPENDIX F -- PERFORMANCE INFORMATION....................... F-1
FINANCIAL STATEMENTS........................................ FIN-1
</TABLE>
3
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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.
Company: Allmerica Financial Life Insurance and Annuity Company. "We," "our,"
"us," and "the Company" refer to Allmerica Financial Life Insurance and Annuity
Company in this Prospectus.
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 partial
withdrawals, partial withdrawal costs, and due and unpaid 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. The Net Death Benefit may be different
before and after the Final Payment Date. See Net Death Benefit.
Fixed Account: a guaranteed account of the general account that guarantees
principal and a fixed interest rate.
Funds (Underlying Funds): the following investment portfolios of Allmerica
Investment Trust ("Trust"): Select Emerging Markets Fund, Select International
Equity Fund, Select Aggressive Growth Fund, Select Capital Appreciation Fund,
Select Value Opportunity Fund, Select Growth Fund, Select Strategic Growth Fund,
Select Growth and Income Fund, Select Income Fund and Money Market Fund; the
following investment portfolios of Variable Insurance Products Fund ("Fidelity
VIP"): Fidelity VIP Growth Portfolio, Fidelity VIP Equity-Income Portfolio and
Fidelity VIP High Income Portfolio; and the T. Rowe Price International Stock
Portfolio of T. Rowe Price International Series, Inc. ("T. Rowe Price").
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
4
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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
The percentage factor is a percentage that, when multiplied by the Policy Value,
determines the minimum death benefit required under federal tax laws. For both
the Level Option and the Adjustable Option, the percentage factor is based on
the Insured's attained age, as set forth in APPENDIX A -- GUIDELINE MINIMUM SUM
INSURED TABLE.
Insurance Protection Amount: the death benefit less the policy value.
Loan Value: the maximum amount you may borrow under the Policy.
Minimum Monthly Payment: a monthly amount shown in your Policy. If you pay this
amount, we guarantee that your Policy will not lapse before the 49th monthly
processing date from the Date of Issue or increase in Face Amount, within
limits.
Monthly Processing Date: the date, shown in your Policy, when monthly insurance
protection charges are deducted.
Net Death Benefit: Before the Final Payment Date, the net death benefit is:
- The death benefit under either the Level Option or Adjustable Option minus
- Any outstanding loan on the Insured's death and partial withdrawals,
partial withdrawal costs, and due and unpaid monthly insurance protection
charges.
Where permitted by state law, we will compute the Net Death Benefit on the date
we receive due proof of the Insured's death under the Adjustable Option and on
the date of death for the Level Option. If required by state law, we will
compute the Net Death Benefit on the date of death for the Adjustable Option.
After the final payment date, the net death benefit generally is:
- The policy value minus
- Any outstanding loan.
If the Guaranteed Death Benefit Rider is in effect, after the Final Payment
Date, the death benefit is the greater of:
- the Face Amount as of the Final Payment Date; or
- the Policy Value as of the date due proof of death is received by the
Company.
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.
5
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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 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.
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
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.
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 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.
6
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SUMMARY OF FEES AND EXPENSES
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.
Front-End Sales Load -- From each payment, we will deduct a front-end
sales load of 0.5% of the payment. This charge partially compensates us
for Policy sales expenses.
- We deduct the following monthly charge from policy value:
Monthly Insurance Protection Charge -- This charge is the cost of
insurance, including optional insurance benefits provided by Rider.
- The following expenses are charged against or reflected in the variable
account:
Administrative Charge -- We deduct this charge during the first ten
Policy years only. It is a daily charge at an annual rate of 0.15% of the
average daily net asset value of each sub-account. This charge helps
compensate us for our expenses in administering the variable account and
is eliminated after the tenth Policy year.
Mortality and Expense Risk Charge -- We impose a daily charge at a
current annual rate of 0.65% of the average daily net asset value of each
sub-account. This charge compensates us for assuming mortality and
expense risks for variable interests in the Policies. Our Board of
Directors may increase this charge, subject to state and federal law, to
an annual rate no greater than 0.80%.
Fund Expenses -- The funds incur investment advisory fees and other
expenses, which are reflected in the variable account. The levels of fees
and expenses vary among the funds.
- 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.
Charge for Optional Guaranteed Death Benefit Rider -- A one time
administrative charge of $25 will be deducted from Policy Value when the
Rider is elected.
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
7
<PAGE>
- 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. For more information, see APPENDIX E -- CALCULATION OF
MAXIMUM SURRENDER CHARGES.
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
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. The transaction fee
applies to all partial withdrawals, including a Withdrawal without a
surrender charge.
8
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WHAT ARE THE EXPENSES AND FEES OF THE FUNDS?
In addition to the charges described above, certain fees and expenses are
deducted from the assets of the Underlying Funds. The levels of fees and
expenses vary among the Underlying Funds. The following table shows the expenses
of the Underlying Funds for 1999.
<TABLE>
<CAPTION>
Total Fund
Management Fee Other Expenses Expenses
(after (after (after waivers/
Underlying Fund voluntary waivers) reimbursements) reimbursements)
- --------------- ------------------ --------------- ---------------
<S> <C> <C> <C>
Select Emerging Markets Fund (@)...............
Select International Equity Fund...............
T. Rowe Price International Stock Portfolio....
Select Aggressive Growth Fund..................
Select Capital Appreciation Fund...............
Select Value Opportunity Fund..................
Select Growth Fund.............................
Select Strategic Growth Fund (@)...............
Fidelity VIP Growth Portfolio..................
Select Growth and Income Fund..................
Fidelity VIP Equity-Income Portfolio...........
Fidelity VIP High Income Portfolio.............
Select Income Fund.............................
Money Market Fund..............................
</TABLE>
(@) Select Emerging Markets Fund and Select Strategic Growth Fund commenced
operations on February 20, 1998. Expenses shown are annualized.
* Amount has been adjusted to reflect a voluntary expense limitation currently
in effect for Select Emerging Markets Fund, Select Value Opportunity Fund,
and Select Strategic Growth Fund. Without these adjustments, the Management
Fees and Total Fund Expenses would have been x.xx% and x.xx% respectively
for Select Emerging Markets Fund, x.xx% and x.xx% respectively, for Select
Value Opportunity Fund, and x.xx% and x.xx% respectively for the Select
Strategic Growth Fund.
(1) Until further notice, Allmerica Financial Investment Management
Services, Inc. ("AFIMS") has declared a voluntary expense limitation of
1.35% of average net assets for Select Aggressive Growth Fund and Select
Capital Appreciation Fund, 1.25% for Select Value Opportunity Fund, 1.50%
for Select International Equity Fund, 1.20% for Select Growth Fund, 1.10%
for Select Growth and Income Fund, 1.00% for Select Income Fund, and 0.60%
for Money Market Fund. The total operating expenses of these Funds of the
Trust were less than their respective expense limitations throughout 1998.
Until further notice, AFIMS has declared a voluntary expense limitation of
1.20% of average daily net assets for the Select Strategic Growth Fund. In
addition, AFIMS has agreed to voluntarily waive its management fee to the
extent that expenses of the Select Emerging Markets Fund exceed 2.00% of the
Fund's average daily net assets, except that such waiver shall not exceed
the net amount of management fees earned by AFIMS from the Fund after
subtracting fees paid by AFIMS to a sub-adviser.
Until further notice, the Select Value Opportunity Fund's management fee
rate has been voluntarily limited to an annual rate of 0.90% of average
daily net assets, and total expenses are limited to 1.25% of average daily
net assets.
The declaration of a voluntary management fee or expense limitation in any
year does not bind AFIMS to declare future expense limitations with respect
to these Funds. These limitations may be terminated at any time.
(2) These funds have entered into agreements with brokers whereby brokers
rebate a portion of commissions. Had these amounts been treated as
reductions of expenses, the total annual fund operating expense ratios would
have been x.xx% for Select Emerging Market Fund, x.xx% for Select Aggressive
Growth
9
<PAGE>
Fund, x.xx% for Select Capital Appreciation Fund, x.xx% for Select Value
Opportunity Fund, x.xx% for Select International Equity Fund, x.xx% for
Select Growth Fund, x.xx% for Select Strategic Growth Fund, and x.xx% for
Select Growth and Income Fund.
(3) A portion of the brokerage commissions that certain funds paid were used to
reduce Fund expenses. In addition, certain funds, or Fidelity
Management & Research Company on behalf of certain funds, have entered into
arrangements with their custodian whereby credits realized as a result of
uninvested cash balances were used to reduce custodian expenses. Including
these reductions, the total operating expenses presented in the table would
have been x.xx% for Fidelity VIP Equity-Income Portfolio, and x.xx% for
Fidelity VIP Growth Portfolio.
The Underlying Fund information above was provided by the Underlying Funds
and was not independently verified by the Company.
10
<PAGE>
SUMMARY OF POLICY FEATURES
This Summary is intended to provide only a very brief overview of the more
significant aspects of the Policy. If you are considering the purchase of this
product, you should read the remainder of this Prospectus carefully before
making a decision. It offers a more complete presentation of the topics
presented here, and will help you better understand the product. However, the
Policy, together with its attached application, constitutes the entire agreement
between you and the Company.
There is no guaranteed minimum Policy Value. The value of a Policy will vary up
or down to reflect the investment experience of allocations to the Sub-Accounts
and the fixed rates of interest earned by allocations to the General Account.
The Policy Value will also be adjusted for other factors, including the amount
of charges imposed. The Policy will terminate if Policy Value is insufficient to
cover certain monthly charges plus loan interest accrued or if Outstanding Loans
exceed the Policy Value. The Policy Value may decrease to the point where the
Policy will lapse and provide no further death benefit without additional
premium payments, unless the optional Guaranteed Death Benefit Rider is in
effect. This Rider may not be available in all states.
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.
11
<PAGE>
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 partial
withdrawals, partial withdrawal costs, and due and unpaid 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.
An optional Guaranteed Death Benefit Rider is available ONLY AT ISSUE OF THE
POLICY. (The Guaranteed Death Benefit Rider may not be available in all states).
If this Rider is in effect, the Company:
- guarantees that your Policy will not lapse regardless of the investment
performance of the Variable Account; and
- provides a guaranteed net death benefit.
In order to maintain the Guaranteed Death Benefit Rider, certain minimum premium
payment tests must be met on each policy anniversary and within 48 months
following the Date of Issue and/or the date of any increase in Face Amount, as
described below. In addition, a one-time administrative charge of $25 will be
deducted from Policy Value when the Rider is elected. Certain transactions,
including policy loans, partial withdrawals, and changes in Sum Insured Options,
can result in the termination of the Rider. IF THIS RIDER IS TERMINATED, IT
CANNOT BE REINSTATED. FOR MORE INFORMATION, SEE "Guaranteed Death Benefit
Rider."
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, the Company will mail a refund to you within seven days. We may delay
a refund of any payment made by check until the check has cleared the bank.
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Where required by state law, 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 fourteen funds:
Select Emerging Markets Fund
Managed by Schroder Investment Management North America Inc.
Select International Equity Fund
Managed by Bank of Ireland Asset Management (U.S.) Limited
T. Rowe Price International Stock Portfolio
Managed by Rowe Price-Fleming International, Inc.
Select Aggressive Growth Fund
Managed by Nicholas-Applegate Capital Management, L.P.
Select Capital Appreciation Fund
Managed by T. Rowe Price Associates, Inc.
Select Value Opportunity Fund
Managed by Cramer Rosenthal McGlynn, LLC
Select Growth Fund
Managed by Putnam Investment Management, Inc.
Select Strategic Growth Fund
Managed by Cambiar Investors, Inc.
Fidelity VIP Growth Portfolio
Managed by Fidelity Management & Research Company
Select Growth and Income Fund
Managed by J. P. Morgan Investment Management Inc.
Fidelity VIP Equity-Income Portfolio
Managed by Fidelity Management & Research Company
Fidelity VIP High Income Portfolio
Managed by Fidelity Management & Research Company
Select Income Fund
Managed by Standish, Ayer & Wood, Inc.
Money Market Fund
Managed by Allmerica Asset Management, Inc.
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In some states, insurance regulations may restrict the availability of
particular Underlying Funds. The Policy also offers a Fixed Account that is part
of the general account of the Company. The Fixed Account is a guaranteed account
offering a minimum interest rate. This range of investment choices allows you to
allocate your money among the Sub-Accounts and the Fixed Account 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 until the fourth day after the expiration
of the "Right to Examine" provision of your Policy. After this, we will allocate
all amounts as you have chosen.
WHO ARE THE INVESTMENT ADVISERS AND HOW ARE THEY SELECTED?
BARRA RogersCasey, Inc. ("BARRA RogersCasey"), a pension consulting firm,
assists the Company in the selection of the Policy's Funds. In addition, BARRA
RogersCasey assists the Trust in the selection of investment advisers for the
Funds of the Trust. BARRA RogersCasey provides consulting services to pension
plans representing hundreds of billions of dollars in total assets and, in its
consulting capacity, monitors the investment performance of over 1000 investment
advisers. BARRA RogersCasey is wholly-controlled by BARRA, Inc. As a consultant,
BARRA RogersCasey has no decision-making authority with respect to the Funds,
and is not responsible for any advice provided by Allmerica Financial Investment
Management Services, Inc. ("AFIMS") or the investment advisers.
AFIMS, an affiliate of the Company, is the investment manager of the Trust.
AFIMS has entered into agreements with investment advisers ("Sub-Advisers")
selected by AFIMS and the Trustees in consultation with BARRA RogersCasey. Each
investment adviser is selected by using strict objective, quantitative, and
qualitative criteria, with special emphasis on the investment adviser's record
in managing similar portfolios. In consultation with BARRA RogersCasey, a
committee monitors and evaluates the ongoing performance of all of the Funds.
The committee may recommend the replacement of an investment adviser of one of
the Funds of the Trust, or the addition or deletion of Funds. The committee
includes members who may be affiliated or unaffiliated with the Company and the
Trust. The Sub-Advisers (other than Allmerica Asset Management, Inc.) are not
affiliated with the Company or the Trust.
Fidelity Management & Research Company ("FMR") is the investment adviser of
Fidelity VIP. FMR 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. FMR 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
adviser of T. Rowe Price. Price-Fleming, founded in 1979 as a joint venture
between T. Rowe Price Associates, Inc. and Robert Fleming Holdings, Limited, is
one of the largest no-load international mutual fund asset managers with
approximately $32 billion (as of December 31, 1998) under management in its
offices in Baltimore, London, Tokyo, Hong Kong, Singapore and Buenos Aires.
For a listing of the Funds and their managers, see "What Are My Investment
Choices?", above.
CAN I MAKE TRANSFERS AMONG THE FUNDS AND THE FIXED ACCOUNT?
Yes. The Policy permits you to transfer Policy Value among the available
Sub-Accounts and between the Sub-Accounts and the General Account of the
Company, subject to certain limitations described under THE POLICY -- "Transfer
Privilege." Under present law, you will incur no current taxes on transfers
while your money is in the Policy.
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HOW MUCH CAN I INVEST AND HOW OFTEN?
The number and frequency of your payments are flexible, within limits. As long
as a payment does not increase the death benefit by more than the amount of the
payment, additional payments may be made at any time before the Final Payment
Date. However, you must provide evidence of insurability as a condition to our
accepting any payment that would increase the Insurance Protection Amount (the
death benefit less the Policy Value). If a payment would increase the Insurance
Amount, the Company will return the payment to you. The Company will not accept
any additional payments which would increase the Insurance Protection Amount and
shall not provide any additional death benefit until (1) evidence of
insurability for the Insured has been received by the Company and (2) the
Company has notified you that the Insured is in a satisfactory underwriting
class. You may then make payments that increase the Insurance Amount for 60 days
(but not later than the Final Payment Date) following the date of such
notification by the Company.
You may choose an automatic payment method of making payments. Under this
method, each month we will deduct monthly payments from your checking account
and apply them to your Policy. Payments must be sufficient to provide a positive
Policy Value less outstanding loan at the end of each Policy month or the Policy
may lapse. See POLICY TERMINATION AND REINSTATEMENT.
WHAT IF I NEED MY MONEY?
You may borrow up to the loan value of your Policy. You may also make partial
withdrawals and surrender the Policy for its surrender value. There are two
types of loans which may be available to you:
- A preferred loan option is available to you upon written request after the
first Policy year. It is available during Policy years 2-10 only if your
policy value, minus the surrender charge, is $50,000 or more. The option
applies to up to 10% of this amount. After the 10th Policy year, the
preferred loan option is available on all loans or on all or a part of the
loan value as you request. The guaranteed annual interest rate credited to
the policy value securing a preferred loan will be 8%.
- A non-preferred loan option is always available to you. The guaranteed
annual interest rate credited to the policy value securing a non-preferred
loan will be at least 6.0%. The current interest rate credited to
non-preferred loans is 7.2%.
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.
A request for a preferred loan after the Final Payment Date or partial
withdrawal after the Final Payment Date or the foreclosure of an outstanding
loan will terminate a Guaranteed Death Benefit Rider. See "Guaranteed Death
Benefit Rider." There is some uncertainty as to the tax treatment of a preferred
loan, which may be treated as a taxable withdrawal from the Policy. See FEDERAL
TAX CONSIDERATIONS, "Policy Loans."
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
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- 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 FIXED 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 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. If the Guaranteed Death
Benefit Rider is in effect, the Policy will not lapse regardless of the
investment performance of the Variable Account (excluding loan foreclosure). For
more information, see "Guaranteed Death Benefit Rider."
If the Insured has not died, you may reinstate your Policy within three years
after the grace period. The Insured must provide evidence of insurability
subject to our then current underwriting standards. In addition, you must either
repay or reinstate any outstanding loans and make payments sufficient to keep
the Policy in force for three months. See POLICY TERMINATION AND REINSTATEMENT.
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.
CAN THE POLICIES BE ISSUED IN CONNECTION WITH TSA PLANS?
The Policies may be issued in connection with Code Section 403(b) tax-sheltered
annuity plans ("TSA Plans") of certain public school systems and organizations
that are tax exempt under Section 501(c)(3) of the Code. A Policy issued in
connection with a TSA Plan will be endorsed to reflect the restrictions imposed
on
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assignment, premium payments, withdrawals, and surrender under Code Section
403(b). The Policyowner may terminate the endorsement at any time. However, the
termination of the endorsement may cause the Policy to fail to qualify under
Code Section 403(b). See FEDERAL TAX CONSIDERATIONS -- "Policies Issued in
Connection with TSA Plans." A Policy issued in connection with a TSA Plan may
also have limitations on Policy loans. See POLICY LOANS -- "Policies Issued in
Connection with TSA Plans."
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
("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 (or within seven years of a
material change in the Policy) exceed the total net level payments payable, if
the Policy had provided paid-up future benefits after seven level annual
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. The
Policy and its attached application or enrollment form are the entire agreement
between you and the Company.
------------------------
It may not be advantageous to purchase flexible premium variable life insurance
as a replacement for your current life insurance, or if you already own a
flexible premium variable life insurance policy.
The purpose of the Policy is to provide insurance protection for the
beneficiary. No claim is made that the Policy is in any way similar or
comparable to a systematic investment plan of a mutual fund. The Policy,
together with its attached application, constitutes the entire agreement between
you and the Company.
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DESCRIPTION OF THE COMPANY, THE VARIABLE ACCOUNT,
AND THE UNDERLYING FUNDS
THE COMPANY
The Company is a life insurance company organized under the laws of Delaware in
1974. As of December 31, 1998, the Company had over $17 billion in assets and
over $XX billion of life insurance in force. 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"), which in
turn is a wholly-owned subsidiary of Allmerica Financial Corporation. First
Allmerica was organized under the laws of Massachusetts in 1844 and is the fifth
oldest life insurance company in America. 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 Company is a charter member of the Insurance Marketplace Standards
Association ("IMSA"). Companies that belong to IMSA subscribe to a rigorous set
of standards that cover the various aspects of sales and service for
individually sold life insurance and annuities. IMSA members have adopted
policies and procedures that demonstrate a commitment to honesty, fairness and
integrity in all customer contacts involving sales and service of individual
life insurance and annuity products.
THE VARIABLE ACCOUNT
The variable account is a separate investment account with fourteen
sub-accounts. Each sub-account invests in a fund of the Trust, Fidelity 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 of the
Company. 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 the Company, or other insurance companies.
Shares of the Trust are not offered to the public but solely to the separate
accounts. Ten different investment portfolios of the Trust are available under
the Policies, each issuing a series of shares: the Select Emerging Markets Fund,
Select International Equity Fund, Select Aggressive Growth Fund, Select Capital
Appreciation Fund, Select Value Opportunity Fund, Select Growth Fund, Select
Strategic Growth
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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.
AFIMS serves as investment manager of the Trust. AFIMS, which is a wholly-owned
subsidiary of Allmerica Financial, has entered into agreements with other
investment managers ("Sub-Advisers"), who manage the investments of the funds.
See "Investment Advisory Services to the Trust."
FIDELITY VIP
Fidelity VIP, managed by Fidelity Management & Research Company ("FMR"), is an
open-end, diversified, management investment company organized as a
Massachusetts business trust on November 13, 1981 and registered with the SEC
under the 1940 Act. Three of its investment portfolios are available under the
Policies: Fidelity VIP Growth Portfolio, Fidelity VIP Equity-Income Portfolio
and Fidelity VIP 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 SEC under
the 1940 Act. One of its investment portfolios is available under the Policies:
the T. Rowe Price International Stock Portfolio. T. Rowe Price
Associates, Inc., an affiliate of Price-Fleming, serves as sub-adviser to the
Select Capital Appreciation Fund of the Trust.
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, FIDELITY VIP AND T.
ROWE PRICE THAT ACCOMPANY THIS PROSPECTUS. THE PROSPECTUSES OF THE TRUST,
FIDELITY 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 EMERGING MARKETS FUND -- seeks long-term growth of capital by investing
in the world's emerging markets. The Sub-Adviser for the Select Emerging Markets
Fund is Schroder Investment Management North America Inc.
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 (U.S.) Limited.
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO -- seeks long-term growth of capital
through investments primarily in common stocks of established, non-U.S.
companies. The Manager of the Portfolio is Rowe Price-Fleming
International, Inc.
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, L.P.
SELECT CAPITAL APPRECIATION FUND -- seeks long-term growth 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
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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 T. Rowe Price Associates, Inc.
SELECT VALUE OPPORTUNITY FUND -- seeks long-term growth of capital by investing
primarily in a diversified portfolio of common stocks of small and mid-size
companies, whose securities at the time of purchase are considered by the
Sub-Adviser to be undervalued. The Sub-Adviser for the Select Value Opportunity
Fund is Cramer Rosenthal McGlynn, LLC.
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 Putnam
Investment Management, Inc.
SELECT STRATEGIC GROWTH FUND -- seeks long-term growth of capital by investing
primarily in common stocks of established companies. The Sub-Adviser for the
Select Strategic Growth Fund is Cambiar Investors, Inc.
FIDELITY VIP 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 J. P. Morgan Investment Management Inc.
FIDELITY VIP 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 S&P 500.
FIDELITY VIP 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 the
Fidelity 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 60 days of the latest of
the:
- Effective date of the change in the investment policy or
- Receipt of the notice of your right to transfer.
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SUBSTITUTION OF SHARES OF THE SELECT INCOME FUND
On January 31, 2000, the Company, First Allmerica (collectively, the
"Companies") and several other applicants filed an application with the
Securities and Exchange Commission in part seeking an order approving the
substitution of shares of the Investment Grade Income Fund of Allmerica
Investment Trust for shares of the Select Income Fund. To the extent required by
law, approvals of such substitutions will also be obtained from the state
insurance regulators in certain jurisdictions. The Companies will bear any
expenses in connection with the proposed substitution. Although subject to
change and obtaining necessary regulatory approvals, the Companies are currently
planning to effect the substitution on or about July 1, 2000.
The Select Investment Grade Income Fund seeks as high a level of total return,
which includes capital appreciation as well as income, as is consistent with
prudent investment management. Allmerica Asset Management, Inc. is the
Sub-Adviser of the Select Investment Grade Income Fund. For more information
about the Select Investment Grade Income Fund, see the prospectus of the Trust.
Under the proposed substitution, during the period from February 14, 2000 until
the date the Select Income Fund is replaced by the Select Investment Grade
Income Fund, a Policy Owner with value in the Sub-Account investing in the
Select Income Fund may make one transfer of all amounts in that Sub-Account to
and among any of the other Sub-Accounts and the Fixed Account. This transfer of
all amounts from the Sub-Account investing in the Select Income Fund prior to
the substitution date will be free of any transfer charge and will not count as
one of the twelve transfers guaranteed to be free of the transfer charge in each
Policy year. In addition, on the date the proposed substitution is completed, a
Policy Owner that has amounts invested in the Select Investment Grade Income
Fund as a result of substitution will have a period of 60 days to make one
transfer of all amounts allocated to the Sub-Account investing in the Select
Investment Grade Income Fund to any one or more of the investment options
available under the Policy. This transfer will be free of any transfer charge
and will not count as one of the twelve transfers guaranteed to be free of the
transfer charge in that Policy year. All Policy Owners with value in the
affected Sub-Account on the date the substitution is made will receive written
notice that the substitution has been completed.
The terms and conditions of the proposed substitution are subject to change. In
particular, the terms and conditions of any SEC exemption order, if and when
granted, may require changes in the proposed substitution.
INVESTMENT ADVISORY SERVICES
Each Underlying Fund pays a management fee to an investment manager or adviser
for managing and providing services to the Underlying Fund. However, management
fee waivers and/or reimbursements may be in effect for certain or all of the
Underlying Funds. For specific information regarding the existence and effect of
any waivers/reimbursements see "Annual Underlying Fund Expenses" under the
SUMMARY OF FEES AND EXPENSES section. The prospectuses of the Underlying Funds
also contain information regarding fees for advisory services and should be read
in conjunction with this Prospectus.
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 AFIMS , an
indirectly wholly owned subsidiary of First Allmerica. AFIMS, subject to Trustee
review, is responsible for the daily affairs of the Trust and the general
management of the funds. AFIMS 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 AFIMS.
The Trust bears all expenses incurred in its operation, other than the expenses
AFIMS assumes under the management agreement. Trust expenses include:
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- 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 AFIMS
- Expenses for proxies, prospectuses, reports to shareholders and other
expenses
Under the management agreement with the Trust, AFIMS has entered into agreements
with investment advisers ("Sub-Advisers") selected by AFIMS and Trustees in
consultation with BARRA RogersCasey, Inc. ("BARRA RogersCasey"), a pension
consulting firm. The cost of such consultation services is borne by AFIMS. As a
consultant, BARRA RogersCasey has no decision-making authority with respect to
the Funds, and is not responsible for any advice provided by AFIMS or the
Sub-Advisers. The Sub-Advisers (other than Allmerica Asset Management, Inc.) are
not affiliated with the Company or the Trust.
For providing its services under the management agreement, AFIMS receives a fee,
computed daily at an annual rate based on the average daily net asset value of
each fund as follows:
<TABLE>
<S> <C> <C>
Select Emerging Markets Fund * 1.35%
Select International Equity Fund First $100
million 1.00%
Next $150 million 0.90%
Over $250 million 0.85%
Select Aggressive Growth Fund First $100
million 1.00%
Next $150 million 0.90%
Next $250 million 0.80%
Next $500 million 0.70%
Over $1 billion 0.65%
Select Capital Appreciation Fund First $100
million 1.00%
Next $150 million 0.90%
Next $250 million 0.80%
Next $500 million 0.70%
Over $1 billion 0.65%
Select Value Opportunity Fund First $100
million 1.00%
Next $150 million 0.85%
Next $250 million 0.80%
Next $250 million 0.75%
Over $750 million 0.70%
Select Growth Fund First $250
million 0.85%
Next $250 million 0.80%
Next $250 million 0.75%
Over $750 million 0.70%
Select Strategic Growth Fund * 0.85%
Select Growth and Income Fund First $100
million 0.75%
Next $150 million 0.70%
Over $250 million 0.65%
</TABLE>
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<TABLE>
<S> <C> <C>
Select Income Fund First $50 million 0.60%
Next $50 million 0.55%
Over $100 million 0.45%
Money Market Fund First $50 million 0.35%
Next $200 million 0.25%
Over $250 million 0.20%
</TABLE>
* For the Select Emerging Markets Fund and the Select Strategic Growth Fund, the
investment management fee does not vary according to the level of assets in the
Fund.
Pursuant to the Management Agreement with the Trust, AFIMS has entered into
agreements ("Sub-Adviser Agreements") with other investment advisers
("Sub-Advisers") under which each Sub-Adviser manages the investments of one or
more of the Funds. Under the Sub-Adviser Agreements, the Sub-Advisers are
authorized to engage in portfolio transactions on behalf of the applicable Fund,
subject to such general or specific instructions as may be given by the
Trustees. AFIMS is solely responsible for the payment of all fees for investment
management services to the Sub-Advisers. 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 FIDELITY VIP
For managing investments and business affairs, each Portfolio pays a monthly
management fee to FMR. 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 fee for each fund is calculated by adding a group fee rate to an individual
fund fee rate, multiplying the result by the fund's monthly average net assets,
and dividing by twelve.
The Fidelity VIP High Income Portfolio's annual fee rate is made up of the sum
of two components:
1. A group fee rate based on the average net assets of all the mutual funds
advised by FMR. On an annual basis, this rate cannot rise above 0.37%, and
drops as total assets under management increase.
2. An individual fund fee rate of 0.45% for the Fidelity VIP High Income
Portfolio.
The Fidelity VIP Growth and the Fidelity VIP Equity-Income Portfolios' annual
fee rates are each made up of two components:
1. A group fee rate based on the average net assets of all the mutual funds
advised by FMR. On an annual basis, this rate cannot rise above 0.52%, and
drops as total assets under management increase.
2. An individual fund fee rate 0.30% for the Fidelity VIP Growth Portfolio and
0.20% for the Fidelity VIP Equity-Income Portfolio.
Thus, the Fidelity VIP High Income Portfolio may have a fee as high as 0.82%.
The Fidelity VIP Growth Portfolio may have a fee of as high as 0.82% of its
average net assets. The Fidelity VIP Equity-Income Portfolio may have a fee as
high as 0.72% of its average net assets.
INVESTMENT ADVISORY SERVICES TO T. ROWE PRICE
The Investment Adviser for the T. Rowe Price International Stock Portfolio is
Rowe Price-Fleming International, Inc. ("Price-Fleming"). Price-Fleming, founded
in 1979 as a joint venture between T. Rowe Price Associates, Inc. and Robert
Fleming Holdings, Limited, is one of the largest no-load international mutual
fund asset managers, with approximately $32 billion (as of December 31, 1998)
under management in its offices in Baltimore, London, Tokyo, Hong Kong,
Singapore and Buenos Aires.
To cover investment management and operating expenses, the T. Rowe Price
International Stock Portfolio pays Price-Fleming a single, all-inclusive fee of
1.05% of its average daily net assets.
23
<PAGE>
THE POLICY
APPLYING FOR A POLICY
We offer Policies to applicants 85 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 issue and acceptance, we will allocate
the payments to the Money Market Fund within two business days of receipt of the
payments at our principal office. If the Policy is not issued and accepted, we
will return to you the greater of:
- Your payments or
- The value of the amount allocated to the Money Market Fund, which will be
net of mortality and expense risk charges, administrative charges and fund
expenses.
If your application or enrollment form is approved and the Policy is issued and
accepted, we will allocate your policy value on issuance and acceptance
according to your instructions. However, if your Policy provides for a full
refund of payments under its "Right to Examine Policy" provision as required in
your state (see THE POLICY -- "Free-Look Period"), we will initially allocate
your sub-account investments to the Money Market Fund. This allocation to the
Money Market Fund will be for:
- 14 days from issuance and acceptance, except as described below
- 24 days from issuance and acceptance for replacements in states with an
extended right to examine
- 34 days from issuance and acceptance for California citizens age 60 and
older, who have an extended right to examine.
After this, we will allocate all amounts according to your investment choices.
FREE-LOOK PERIOD
The Policy provides for a free look period. You have the right to examine and
cancel your Policy by returning it to us or to one of our representatives on or
before the latest of:
- 45 days after the application or enrollment form for the Policy is signed
- 10 days after you receive the Policy (20 days when the law so requires for
the replacement of insurance and 30 days for California citizens age 60
and older) or
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<PAGE>
- 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, the Company will mail a refund to you within seven days. We may delay
a refund of any payment made by check until the check has cleared your bank.
Where required by state law, 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, 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 deliver 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 Fixed 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 the Company. Payments may be made by mail to our
principal office or through our authorized representative. All payments after
the initial payment are credited to the variable account or fixed account on the
date of receipt at the principal office.
You may establish a schedule of planned payments. If you do, we will bill you at
regular intervals. Making planned payments will not guarantee that the Policy
will remain in force. The Policy will not necessarily lapse if you fail to make
planned payments. You may make unscheduled payments before the final payment
date or skip planned payments. If the Guaranteed Death Benefit Rider is in
effect, there are certain minimum payment requirements.
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<PAGE>
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. As long as a
payment does not increase the death benefit by more than the amount of the
payment, additional payments may be made at any time before the Final Payment
Date. However, you must provide evidence of insurability as a condition to our
accepting any payment that would increase the Insurance Protection Amount (the
death benefit less the Policy Value). If a payment would increase the Insurance
Amount, the Company will return the payment to you. The Company will not accept
any additional payments which would increase the Insurance Protection Amount and
shall not provide any additional death benefit until (1) evidence of
insurability for the Insured has been received by the Company and (2) the
Company has notified you that the Insured is in a satisfactory underwriting
class. You may then make payments that increase the Insurance Amount for 60 days
(but not later than the Final Payment Date) following the date of such
notification by the Company.
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 policy
loans, 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 1.00% 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 the Company 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, the Company
may be liable for any losses from unauthorized or fraudulent instructions. We
may 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
or PIN 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.
26
<PAGE>
The policy value in the sub-accounts will vary with investment experience. You
bear this investment risk. Investment performance may also affect the death
benefit. Review your allocations of payments and policy value as market
conditions and your financial planning needs change.
TRANSFER PRIVILEGE
Subject to our then current rules, you may transfer amounts among the
sub-accounts or between a sub-account and the fixed account. (You may not
transfer that portion of the policy value held in the fixed account that secures
a Policy loan.)
The transfer privilege is subject to our consent. We reserve the right to impose
limits on transfers including, but not limited to, the:
Minimum amount that may be transferred
- Minimum amount that may remain in a sub-account following a transfer from
that sub-account
- Minimum period between transfers involving the fixed account
- Maximum amounts that may be transferred from the fixed account
Transfers to and from 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 in the Fixed
Account.
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 may
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
27
<PAGE>
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.
SPECIAL TRANSFER PRIVILEGE UNDER PROPOSED SUBSTITUTION
The Company has requested the necessary regulatory approvals to substitute
shares of the Select Investment Grade Income Fund of the Allmerica Investment
Trust for shares of the currently offered Select Income Fund. Subject to
receiving the necessary approvals, this substitution will take place on or about
July 1, 2000. Policy Owners who have amounts invested in the Sub-Account
investing in the Select Income Fund have certain rights before and after the
proposed substitution is completed. For more information, see INVESTMENT
OBJECTIVES AND POLICIES -- Substitution of Shares of the Select Income Fund.
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 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 partial withdrawals, partial withdrawal costs
and due and unpaid monthly insurance protection charges through the Policy
month in which the Insured dies
After the final payment date, if the Guaranteed Death Benefit Rider is not in
effect, the net death benefit is:
- The policy value minus
- Any outstanding loan
Where permitted by state law, we will compute the Net Death Benefit on
- The date we receive due proof of the Insured's death under the Adjustable
Option or
- The date of death for the Level Options 1.
If required by state law, we will compute the Net Death Benefit on the date of
death for the Adjustable Option 2 as well as for the Level Option.
GUARANTEED DEATH BENEFIT RIDER (NOT AVAILABLE IN ALL STATES)
An optional Guaranteed Death Benefit Rider is available only at issue of the
Policy. If this Rider is in effect, the Company:
- guarantees that your Policy will not lapse regardless of the investment
performance of the Variable Account and
28
<PAGE>
- provides a guaranteed net death benefit.
In order to maintain the Guaranteed Death Benefit Rider, certain minimum premium
payment tests must be met on each Policy anniversary and within 48 months
following the Date of Issue and/or the date of any increase in Face Amount, as
described below. In addition, a one-time administrative charge of $25 will be
deducted from Policy Value when the Rider is elected. Certain transactions,
including policy loans, partial withdrawals, and changes in Sum Insured Options,
can result in the termination of the Rider. If this Rider is terminated, it
cannot be reinstated.
GUARANTEED DEATH BENEFIT TESTS
While the Guaranteed Death Benefit Rider is in effect, the Policy will not lapse
if the following two tests are met:
1. Within 48 months following the Date of Issue of the Policy or of any
increase in the Face Amount, the sum of the premiums paid, less any Debt,
partial withdrawals and withdrawal charges, must be greater than the minimum
monthly payment multiplied by the number of months which have elapsed since
the relevant Date of Issue; and
2. On each Policy anniversary, (a) must exceed (b), where, since the Date of
Issue:
(a) is the sum of your premiums, less any withdrawals, partial withdrawal
charges and Debt which is classified as a preferred loan; and
(b) is the sum of the minimum Guaranteed Death Benefit premiums, as shown on
the specifications page of the Policy.
GUARANTEED DEATH BENEFIT
If the Guaranteed Death Benefit Rider is in effect on the Final Premium Payment
Date, a guaranteed Death Benefit will be provided as long as the Rider is in
force. The Death Benefit will be the greater of:
- the Face Amount as of the Final Premium Payment Date; or
- the Policy Value as of the date due proof of death is received by the
Company.
TERMINATION OF THE GUARANTEED DEATH BENEFIT RIDER
The Guaranteed Death Benefit Rider will end and may not be reinstated on the
first to occur of the following:
- foreclosure of an outstanding loan; or
- the date on which the sum of your payments does not meet or exceed the
applicable Guaranteed Death Benefit test (above); or
- any Policy change that results in a negative guideline level premium; or
- the effective date of a change from the Adjustable Death Benefit Option to
the Level Death Benefit Option, if such changes occur within 5 policy
years of the Final Payment Date; or
- a request for a partial withdrawal or preferred loan is made after the
Final Premium Payment Date.
It is possible that the Policy Value will not be sufficient to keep the Policy
in force on the first Monthly Payment Date following the date the Rider
terminates.
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<PAGE>
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.
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<PAGE>
The applicable percentage becomes lower as the Insured's age increases. If the
Insured's age in the above example were, for example, 50 (rather than between
zero and 40), the applicable percentage would be 185%. The death benefit would
not exceed the $100,000 face amount unless the policy value exceeded $54,054
(rather than $40,000), and each dollar then added to or taken from policy value
would change the death benefit by $1.85.
Illustration of the Adjustable Option -- In this illustration, assume that the
Insured is under the age of 40 and that there is no outstanding loan.
Under the Adjustable Option, a Policy with a face amount of $100,000 will
produce a death benefit of $100,000 plus policy value. For example, a Policy
with policy value of $10,000 will produce a death benefit of $110,000 ($100,000
+ $10,000); policy value of $25,000 will produce a death benefit of $125,000
($100,000 +$25,000); policy value of $50,000 will produce a death benefit of
$150,000 ($100,000 + $50,000). However, the death benefit must be at least 250%
of the policy value. Therefore, if the policy value is greater than $66,667,
250% of that amount will be the death benefit, which will be greater than the
face amount plus policy value. In this example, each dollar of policy value
above $66,667 will increase the death benefit by $2.50. For example, if the
policy value is $70,000, the guideline minimum sum insured will be $175,000
($70,000 X 2.50); policy value of $80,000 will produce a guideline minimum sum
insured of $200,000 ($80,000 X 2.50); and policy value of $90,000 will produce a
guideline minimum sum insured of $225,000 ($90,000 X 2.50).
Similarly, if policy value exceeds $66,667, each dollar taken out of policy
value will reduce the death benefit by $2.50. If, for example, the policy value
is reduced from $80,000 to $70,000 because of partial withdrawals, charges or
negative investment performance, the death benefit will be reduced from $200,000
to $175,000. If, however, the product of the policy value times the applicable
percentage is less than the face amount plus policy value, then the death
benefit will be the current face amount plus policy value.
The applicable percentage becomes lower as the Insured's age increases. If the
Insured's age in the above example were 50, the death benefit must be at least
1.85 times the policy value. The death benefit would be the sum of the policy
value plus $100,000 unless the policy value exceeded $117,647 (rather than
$66,667). Each dollar added to or subtracted from the Policy would change the
death benefit by $1.85.
CHANGE TO LEVEL OR ADJUSTABLE OPTION
You may change the death benefit option once each Policy year by written
request. Changing options will not require evidence of insurability. The change
takes effect on the monthly processing date on or following the date of receipt
of the written request. We will impose no charge for changes in death benefit
options.
If you change the Level Option to the Adjustable Option, we will decrease the
face amount to equal:
- The death benefit minus
- The policy value on the date of the change
The change may not be made if the face amount would fall below $40,000. After
the change from the Level Option to the Adjustable Option, future monthly
insurance protection charges may be higher or lower than if no change in option
had been made. However, the insurance protection amount will always equal the
face amount unless the guideline minimum sum insured applies.
If you change the Adjustable Option to the Level Option, we will increase the
face amount by the policy value on the date of the change. The death benefit
will be the greater of:
- The new face amount or
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<PAGE>
- 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.
A change from the Adjustable Death Benefit option to the Level Benefit option
within five policy years of the Final Payment Date will terminate a Guaranteed
Death Benefit Rider.
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 the following order:
- the Face Amount provided by the most recent increase;
- the next most recent increases successively; and
- the initial Face Amount
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<PAGE>
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
- 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 risk charges, administrative charges and fund
expenses (see THE POLICY -- "Applying 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.
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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.
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 the Company. 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 INSURANCE BENEFITS. The cost of certain 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:
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- 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 Payments."
For important tax consequences of a surrender, see FEDERAL TAX CONSIDERATIONS.
If the Policy is issued in connection with a Section 403(b) Plan, your surrender
rights may be restricted. See FEDERAL TAX CONSIDERATIONS -- "Policies Issued in
Connection with TSA Plans."
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 Payments."
For important tax consequences of partial withdrawals, see FEDERAL TAX
CONSIDERATIONS. If the Policy is issued in connection with a Section
403(b) Plan, your withdrawal rights may be restricted. See FEDERAL TAX
CONSIDERATIONS -- "Policies Issued in Connection with TSA Plans."
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, up to the face amount of the Policy, 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 POLICY OWNER 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
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- You may not make further payments
- You may not increase or decrease the face amount or make partial
withdrawals
- Riders will continue only with our consent
You may, after electing paid-up insurance, surrender the Policy for its net cash
value. The guaranteed cash value is the net single premium for the paid-up
insurance at the Insured's attained age. The net cash value is the cash value
less any outstanding loan. We will transfer the policy value in the variable
account to the fixed account on the date we receive written request to elect the
option.
On election of paid-up insurance, the Policy often will become a modified
endowment contract. If a Policy becomes a modified endowment contract, Policy
loans or surrender will receive unfavorable federal tax treatment. See FEDERAL
TAX CONSIDERATIONS -- "Modified Endowment Policies."
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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 Policy owner 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); directors of First Allmerica and its
affiliates and subsidiaries; 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.
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
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- The face amount plus the policy value, if you selected the Adjustable
Option
We will adjust the monthly insurance protection charge for any decreases in face
amount. See THE POLICY -- "Change in Face Amount: Decreases."
Insurance Protection Rates -- We base insurance protection rates on the:
- Male, female or blended unisex rate table
- Age and underwriting class of the Insured
- Effective date of an increase or date of any Rider
For unisex Policies, sex-distinct rates do not apply. For the initial face
amount, the insurance protection rates are based on your age at the beginning of
each Policy year. For an increase in face amount or for a Rider, the insurance
protection rates are based on your age on each anniversary of the effective date
of the increase or Rider. We base the current insurance protection rates on our
expectations as to future mortality experience. Rates will not, however, be
greater than the guaranteed insurance protection rates set forth in the Policy.
These guaranteed rates are based on the Commissioners 1980 Standard Ordinary
Mortality Tables, Smoker or Non-Smoker (Mortality Table B for unisex Policies)
and the Insured's sex and age. The Tables used for this purpose set forth
different mortality estimates for males and females and for smokers and
non-smokers. Any change in the insurance protection rates will apply to all
Insureds of the same age, sex and 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)
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- 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. The Company may increase this charge, subject to
state and federal law, to an annual rate no greater than 0.80%.
The mortality risk we assume is that Insureds may live for a shorter time than
anticipated. If this happens, we will pay more net death benefits than
anticipated. The expense risk we assume is that the expenses incurred in issuing
and administering the Policies will exceed those compensated by the
administrative charges in the Policies. If the charge for mortality and expense
risks is not sufficient to cover mortality experience and expenses, we will
absorb the losses. If the charge turns out to be higher than mortality and
expense risk expenses, the difference will be a profit to us. If the charge
provides us with a profit, the profit will be available for our use to pay
distribution, sales and other expenses.
Fund Expenses -- The value of the units of the sub-accounts will reflect the
investment advisory fee and other expenses of the funds whose shares the
sub-accounts purchase. The prospectuses and statements of additional information
of the Trust, Fidelity 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
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initial face amount and 25% to the increase. All future payments would also be
allocated 75% to the initial face amount and 25% to the increase.
If more than one surrender charge is in effect because of one or more increases
in face amount, we will apply the surrender charges in inverse order. We will
apply surrender and partial withdrawal charges (described below) in this order:
- First, the most recent increase
- Second, the next most recent increases, and so on
- Third, the initial face amount.
A surrender charge may be deducted on a decrease in the face amount. On a
decrease, the surrender charge deducted is a fraction of the charge that would
apply to a full surrender. The fraction is the product of:
- The decrease divided by the current face amount times
- the surrender charge
Where a decrease causes a partial reduction in an increase or in the initial
face amount, we will deduct a proportionate share of the surrender charge for
that increase or for the initial face amount.
See APPENDIX E -- CALCULATION OF 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. The transaction fee applies to all partial
withdrawals, including a Withdrawal without a surrender charge (described
below).
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
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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 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 Payments."
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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% (currently 8.0% for preferred
loans). NO OTHER INTEREST WILL BE CREDITED.
If you are a participant under a Section 403(b) TSA plan and purchased the
Policy in connection with the plan, your Policy loan rights are limited. See
"Policies Issued in Connection with TSA Plans" below, and FEDERAL TAX
CONSIDERATIONS -- "Policies Issued in Connection with TSA Plans."
PREFERRED LOAN OPTION
This option is available to you upon written request after the first Policy
year. You may change a preferred loan to a non-preferred loan at any time upon
written request. It may be revoked by you at any time. A request for a preferred
loan after the Final Payment Date will terminate the optional Guaranteed Death
Benefit Rider.
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 loan, which may
be treated as a taxable withdrawal from the Policy. 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. The foreclosure of an outstanding loan
will terminate the optional Guaranteed Death Benefit Rider.
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.
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We will deduct any outstanding loan from the proceeds payable when the Insured
dies or from a surrender.
POLICIES ISSUED IN CONNECTION WITH TSA PLANS
If your Policy was issued in connection with a TSA plan, Policy loans are
permitted in accordance with the terms of the Policy. However, if a Policy loan
does not comply with the requirements of Code Section 72(p), the TSA plan may
become disqualified and Policy Values may be includible in your current income.
Policy loans must meet the following additional requirements:
- Loans must be repaid within five years, except when the loan is used to
acquire any dwelling unit which within a reasonable time is to be used as
the Policy owner's principal residence.
- All Policy loans must be amortized on a level basis with loan repayments
being made not less frequently than quarterly.
- The sum of all outstanding loan balances for all loans from all of your
TSA plans may not exceed the lesser of:
- $50,000 reduced by the excess (if any) of
- the highest outstanding balance of loans from all of the Policy owner's
TSA plans during the one-year period preceding the date of the loan,
minus
- the outstanding balance of loans from the Policy owner's TSA plans on
the date on which such loan was made;
OR
- 50% of the Policy owner's non-forfeitable accrued benefit in all of
his/her TSA plans, but not less than $10,000.
See FEDERAL TAX CONSIDERATIONS -- "Policies Issued in Connection with TSA
Plans."
A qualified tax adviser should be consulted before requesting a Policy loan.
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POLICY TERMINATION AND REINSTATEMENT
TERMINATION
Unless the Guaranteed Death Benefit Rider is in effect, 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.
If the optional Guaranteed Death Benefit Rider is in effect, the Policy will not
lapse regardless of the investment performance of the Variable Account. See
"Guaranteed Death Benefit Rider."
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
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- the sum of:
- The amount by which the surrender charge on the date of reinstatement
exceeds the policy value on the date of default plus
- Monthly insurance protection charges for the three months beginning on
the date of reinstatement
If you request reinstatement more than 48 monthly processing dates from the date
of issue or increase in the face amount, you must pay the sum shown above
without regard to the three months of minimum monthly payments.
Surrender Charge -- The surrender charge on the date of reinstatement is the
surrender charge that would have been in effect had the Policy remained in force
from the date of issue.
Policy Value on Reinstatement -- The policy value on the date of reinstatement
is:
- The net payment made to reinstate the Policy and interest earned from the
date the payment was received at our principal office PLUS
- The policy value less any outstanding loan on the date of default (not to
exceed the surrender charge on the date of reinstatement) MINUS
- The monthly insurance protection charges due on the date of reinstatement
You may reinstate any outstanding loan.
46
<PAGE>
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 Policy owner (or the Policy 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.
47
<PAGE>
DELAY OF PAYMENTS
Amounts payable from the variable account for surrender, partial withdrawals,
net death benefit, Policy loans and transfers may be postponed whenever:
- The New York Stock Exchange is closed other than customary weekend and
holiday closings
- The SEC restricts trading on the New York Stock Exchange
- The SEC determines an emergency exists, so that disposal of securities is
not reasonably practicable or it is not reasonably practicable to compute
the value of the variable account's net assets
We may delay paying any amounts derived from payments you made by check until
the check has cleared your bank.
We reserve the right to defer amounts payable from the fixed account. This delay
may not exceed six months.
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.
THE COMPANY AND THE VARIABLE ACCOUNT
The Company is taxed as a life insurance company under Subchapter L of the 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, the Company 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 Code. Section 7702 affects the taxation of
life insurance contracts and places limits on the relationship of the policy
value to the death benefit. So long as the Policies are 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 be 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.
48
<PAGE>
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.
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 Code because of a reduction of
benefits under the Policy 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.
POLICY LOANS
We believe that non-preferred loans received under the Policy will be treated as
an 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"). There is a risk,
however, that a preferred loan may be characterized by the Internal Revenue
Service ("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, may convert your preferred
loan to a non-preferred loan. However, it is possible that, notwithstanding the
conversion, some or all of the loan could be treated as a taxable withdrawal
from the Policy.
Section 264 of the Code restricts the deduction of interest on Policy loans.
Consumer interest paid on Policy loans under an individually owned Policy is not
tax deductible. Generally, no tax deduction for interest is allowed on Policy
loans, if the Insured is an officer or employee of, or is financially interested
in, any business carried on by the taxpayer. There is an exception to this rule
which permits a deduction for interest on loans up to $50,000 related to
business-owned policies covering officers or 20-percent owners, up to a maximum
equal to the greater of (1) five individuals or (2) the lesser of (a) 5% of the
total number of officers and employees of the corporation or (b) 20 individuals.
POLICIES ISSUED IN CONNECTION WITH TSA PLANS
The Policies may be issued in connection with tax-sheltered annuity ("TSA")
plans of certain public school systems and organizations that are tax exempt
under Section 501(c)(3) of the Code.
A Policy issued in connection with a TSA Plan will be endorsed to reflect the
restrictions under Section 403(b) of the Code. The Policy Owner may terminate
the endorsement at any time. However, the termination of the endorsement may
cause the Policy to fail to qualify under Section 403(b) of the Code. A Policy
issued in connection with a TSA Plan may also have limitations on Policy loans.
See POLICY LOANS -- "Policies Issued in Connection with TSA Plans."
Under the provisions of Section 403(b) of the Code, payments made for annuity
policies purchased for employees under TSA plans are excludable from the gross
income of such employees, to the extent that the aggregate purchase payments in
any year do not exceed the maximum contribution permitted under the Code. The
Company has received a Private Letter Ruling with respect to the status of the
Policies as providing "incidental life insurance" when issued in connection with
TSA plans. In the Private Letter Ruling, the IRS has taken the position that the
purchase of a life insurance policy by the employer as part of a TSA plan will
not violate the "incidental benefit" rules of Section 403(b) and the regulations
thereunder. The Private Letter Ruling also stated that the use of current or
accumulated contributions to purchase a life insurance policy will
49
<PAGE>
not result in current taxation of the premium payments for the life insurance
policy, except for the current cost of the life insurance protection.
A Policy qualifying under Section 403(b) of the Code must provide that
withdrawals or other distributions attributable to salary reduction
contributions (including earnings) may not begin before the employee attains age
59 1/2, separates from service, dies, or becomes disabled. In the case of
hardship, you may withdraw amounts contributed by salary reduction, but not the
earnings on such amounts. Even though a distribution may be permitted under
these rules (e.g., for hardship or after separation from service), it may
nonetheless be subject to a 10% penalty tax as a premature distribution, in
addition to income tax.
Policy loans are generally permitted in accordance with the terms of the Policy,
but there are certain additional limitations; see POLICY LOANS -- "Policies
Issued in Connection with TSA Plans." However, if a Policy loan does not comply
with the requirements of Code Section 72(p), your TSA plan may become
disqualified and Policy values may be includible in current income.
MODIFIED ENDOWMENT POLICIES
The Technical and Miscellaneous Revenue Act of 1988 ("1988 Act") adversely
affects the tax treatment of distributions under so-called "modified endowment
contracts." Under the 1988 Act, a Policy may be considered a "modified endowment
contract" if:
Total payments during the first seven Policy years (or within seven years of a
material change in the Policy) EXCEED
- The total net level payments payable had the Policy provided for paid-up
future benefits after making seven level annual payments.
In addition, if benefits are reduced at anytime during the life of the Policy,
there may be adverse tax consequences. Please consult your tax adviser.
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% additional 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 calendar 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.
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<PAGE>
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, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that Fund shares be voted so as
(1) to cause to change in the sub-classification or investment objective of one
or more of the Funds, or (2) to approve or disapprove an investment advisory
contract for the Funds. In addition, we may disregard voting instructions that
are in favor of any change in the investment policies or in any investment
adviser or principal underwriter if the change has been initiated by Contract
Owners or the Trustees. Our disapproval of any such change must be reasonable
and, in the case of a change in investment policies or investment adviser, based
on a good faith determination that such change would be contrary to state law or
otherwise is inappropriate in light of the objectives and purposes of the Funds.
In the event we do disregard voting instructions, a summary of and the reasons
for that action will be included in the next periodic report to Contract Owners.
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<PAGE>
DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
Name and Position With Company Principal Occupation(s) During Past Five Years
- ------------------------------ ----------------------------------------------
<S> <C>
Bruce C. Anderson Director (since 1996), Vice President (since 1984)
Director and Assistant Secretary (since 1992) of First
Allmerica
Abigail M. Armstrong Secretary (since 1996) and Counsel (since 1991) of
Secretary and Counsel First Allmerica; Secretary (since 1988) and Counsel
(since 1994) of Allmerica Investments, Inc.; and
Secretary (since 1990) of Allmerica Financial
Investment Management Services, Inc.
Warren E. Barnes Vice President (since 1996) and Corporate Controller
Vice President and Corporate (since 1998) of First Allmerica
Controller
Robert E. Bruce Director and Chief Information Officer (since 1997)
Director and Chief Information and Vice President (since 1995) of First Allmerica;
Officer and Corporate Manager (1979 to 1995) of Digital
Equipment Corporation
John P. Kavanaugh Director and Chief Investment Officer (since 1996)
Director, Vice President and Chief and Vice President (since 1991) of First Allmerica;
Investment Officer and Vice President (since 1998) of Allmerica
Financial Investment Management Services, Inc.
John F. Kelly Director (since 1996), Senior Vice President (since
Director, Vice President and 1986), General Counsel (since 1981) and Assistant
General Counsel Secretary (since 1991) of First Allmerica; Director
(since 1985) of Allmerica Investments, Inc.; and
Director (since 1990) of Allmerica Financial
Investment Management Services, Inc.
J. Barry May Director (since 1996) of First Allmerica; Director
Director and President (since 1996) of The Hanover Insurance
Company; and Vice President (1993 to 1996) of The
Hanover Insurance Company
James R. McAuliffe Director (since 1996) of First Allmerica; Director
Director (since 1992), President (since 1994) and Chief
Executive Officer (since 1996) of Citizens Insurance
Company of America
John F. O'Brien Director, President and Chief Executive Officer
Director and Chairman of the Board (since 1989) of First Allmerica; Director (since
1989) of Allmerica Investments, Inc.; and Director
and Chairman of the Board (since 1990) of Allmerica
Financial Investment Management Services, Inc.
Edward J. Parry, III Director and Chief Financial Officer (since 1996) and
Director, Vice President, Chief Vice President and Treasurer (since 1993) of First
Financial Officer and Treasurer Allmerica; Treasurer (since 1993) of Allmerica
Investments, Inc.; and Treasurer (since 1993) of
Allmerica Financial Investment Management
Services, Inc.
Richard M. Reilly Director (since 1996) and Vice President (since 1990)
Director, President and Chief of First Allmerica; Director (since 1990) of
Executive Officer Allmerica Investments, Inc.; and Director and
President (since 1998) of Allmerica Financial
Investment Management Services, Inc.
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
Name and Position With Company Principal Occupation(s) During Past Five Years
- ------------------------------ ----------------------------------------------
<S> <C>
Robert P. Restrepo, Jr. Director and Vice President (since 1998) of First
Director Allmerica; Chief Executive Officer (1996 to 1998) of
Travelers Property & Casualty; Senior Vice President
(1993 to 1996) of Aetna Life & Casualty Company
Eric A. Simonsen Director (since 1996) and Vice President (since 1990)
Director and Vice President of First Allmerica; Director (since 1991) of
Allmerica Investments, Inc.; and Director (since
1991) of Allmerica Financial Investment Management
Services, Inc.
</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,
Inc. ("NASD"). Broker-dealers sell the Policies through their registered
representatives who are appointed by us.
We pay to broker-dealers who sell the Policy commissions based on a commission
schedule. After the date of issue or an increase in Face Amount, commissions
will be 90% of the first-year payments up to a payment amount we established and
4% of any excess. Commissions will be 2% for subsequent payments, plus 0.25% of
unloaned Policy value. To the extent permitted by NASD rules, overrides and
promotional incentives or payments may also be provided to General Agents,
independent marketing organizations, and 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 Variable 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
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<PAGE>
- 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, Fidelity VIP and T. Rowe Price as the 1940 Act requires.
LEGAL PROCEEDINGS
There are no pending legal proceedings involving the Variable Account or its
assets. The Company and Allmerica Investments, Inc. are not involved in any
litigation that is materially important to their 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 the Company and its
affiliates that fund variable annuity contracts ("mixed funding"). Shares of the
Portfolios of Fidelity 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. The Company, the
Trust, Fidelity 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. The Company and the Trustees will monitor events
to identify any material conflicts among Policy Owners because of mixed and
shared funding. If the Trustees conclude that separate funds should be
established for variable life and variable annuity separate accounts, we will
bear the expenses.
We may change the Policy to reflect a substitution or other change and will
notify 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
54
<PAGE>
- 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.
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. The 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.
Policy loans may also be made from the policy value in the fixed account. We
will credit that part of the policy value that is equal to any outstanding loan
with interest at an effective annual yield of at least 6.0% (8.0% for preferred
loans).
We may delay transfers, surrenders, partial withdrawals, net death benefits and
Policy loans up to six months. However, if payment is delayed for 30 days or
more, we will pay interest at least equal to an effective annual yield of 3.0%
per year for the deferment. Amounts from the fixed account used to make payments
on policies that we or our affiliates issue will not be delayed.
TRANSFERS, SURRENDERS, AND PARTIAL WITHDRAWALS
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. This means that the
last payments allocated to Fixed Account will be withdrawn first.
55
<PAGE>
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.
INDEPENDENT ACCOUNTANTS
The financial statements of the Company as of December 31, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999, and the financial
statements of Allmerica Select Separate Account II of the Company as of
December 31, 1999 and for the periods indicated, included in this Prospectus
constituting part of this Registration Statement, have been so included in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The financial statements of the Company included herein should be considered
only as bearing on the ability of the Company to meet its obligations under the
Policy.
FINANCIAL STATEMENTS
Financial Statements for the Company and for the Variable Account are included
in this Prospectus, beginning immediately after the Appendices. The financial
statements of the Company 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.
56
<PAGE>
APPENDIX A
GUIDELINE MINIMUM SUM INSURED TABLE
The guideline minimum sum insured is a percentage of the policy value as set
forth below, according to federal tax regulations:
<TABLE>
<CAPTION>
Age of Insured Percentage of
on Date of Death Policy Value
- ---------------- -------------
<S> <C>
40 and under.......................................... 250%
41.................................................... 245%
42.................................................... 240%
43.................................................... 235%
44.................................................... 220%
45.................................................... 215%
46.................................................... 209%
47.................................................... 203%
48.................................................... 197%
49.................................................... 191%
50.................................................... 185%
51.................................................... 178%
52.................................................... 171%
53.................................................... 164%
54.................................................... 157%
55.................................................... 150%
56.................................................... 146%
57.................................................... 142%
58.................................................... 138%
59.................................................... 134%
60.................................................... 130%
61.................................................... 128%
62.................................................... 126%
63.................................................... 124%
64.................................................... 122%
65.................................................... 120%
70.................................................... 115%
71.................................................... 113%
72.................................................... 111%
73.................................................... 109%
74.................................................... 107%
75-90................................................. 105%
91.................................................... 104%
92.................................................... 103%
93.................................................... 102%
94.................................................... 101%
95 and above.......................................... 100%
</TABLE>
A-1
<PAGE>
APPENDIX B
OPTIONAL INSURANCE BENEFITS
This Appendix provides only a summary of other insurance benefits available by
Rider for an additional charge. For more information, contact your
representative.
WAIVER OF PREMIUM RIDER
This Rider provides that, during periods of total disability continuing more
than four months, we will add to the policy value each month an amount you
selected or the amount needed to pay the monthly insurance protection charges,
whichever is greater. This amount will keep the Policy in force. This benefit is
subject to our maximum issue benefits. Its cost will change yearly.
GUARANTEED INSURABILITY RIDER
This Rider guarantees that insurance may be added at various option dates
without Evidence of Insurability. This benefit may be exercised on the option
dates even if the Insured is disabled.
OTHER INSURED RIDER
This Rider provides a term insurance benefit for up to five Insureds. At present
this benefit is only available for the spouse and children of the primary
Insured. The Rider includes a feature that allows the "other Insured" to convert
the coverage to a flexible premium adjustable life insurance policy.
OPTION TO ACCELERATE BENEFITS ENDORSEMENT
This endorsement allows part of the Policy proceeds to be available before death
if the Insured becomes terminally ill or is permanently confined to a nursing
home.
EXCHANGE OPTION RIDER
This Rider allows you to use the Policy to insure a different person, subject to
our guidelines.
GUARANTEED DEATH BENEFIT RIDER
This Rider, which is available only at issue, (a) guarantees that your Policy
will not lapse regardless of the Performance of the Variable Account and (b)
provides a guaranteed net death benefit.
Certain Riders May Not Be Available In All States.
B-1
<PAGE>
APPENDIX C
PAYMENT OPTIONS
PAYMENT OPTIONS
On written request, the surrender value or all or part of any payable net death
benefit may be paid under one or more payment options then offered by the
Company. 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 becomes payable. If you make no selection, the
beneficiary may select an option when the net death benefit becomes payable.
C-1
<PAGE>
APPENDIX D
ILLUSTRATIONS OF DEATH BENEFIT, POLICY VALUES
AND ACCUMULATED PAYMENTS
The following tables illustrate the way in which the Policy's death benefit and
Policy Value could vary over an extended period of time. 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.
ASSUMPTIONS
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. In each case, one table illustrates the guaranteed cost
of insurance rates and the other table illustrates the current costs of
insurance rates as presently in effect.
The tables assume that no Policy loans have been made, that you have not
requested an increase or decrease in the initial Fact Amount, that no partial
withdrawals have been made, and that no transfers above 12 have been made in any
Policy year (so that no transaction or transfer charges have been incurred).
The tables assumed that all premiums are allocated to and remain in the
Allmerica Select II Separate Account for the entire period shown. The tables are
based on hypothetical gross investment rates of return for the Underlying Fund
(i.e., investment income and capital gains and losses, realized or unrealized)
equivalent to constant gross (after tax) annual rate of 0%, 6%, and 12%. The
second column of the tables show the amount which would accumulate if an amount
equal to the Guideline Annual Premium were invested each year to earn interest
(after taxes) at 5%, compounded annually.
The Policy Values and Death Proceeds 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 such averages for individual Policy
years. The values also would be different depending on the allocation of the
Policy's total Policy Value among the Sub-Accounts of the Variable Account, if
the actual rates of return averaged 0%, 6% or 12%, but the rates of each
Underlying Fund varied above and below such averages.
DEDUCTIONS FOR CHARGES
The amounts shown in the tables take into account the deduction of the payment
expense charge, the monthly deduction from Policy Value, the daily charge
against the Variable Account for mortality and expense risks and for the
Variable Account administrative charge (for the first ten Policy years). In the
Current Cost of Insurance Charges tables, the Variable Account charges are
equivalent to an effective annual rate of 0.80% of the average daily value of
the assets in the Variable Account in the first ten Policy Years, and 0.65%
thereafter. In the Guaranteed Cost of Insurance Charges tables, the Variable
Account charges are equivalent to an effective annual rate of 0.95% of the
average daily value of the assets in the Variable Account in the first ten
Policy Years, and 0.80% thereafter.
EXPENSES OF THE UNDERLYING FUNDS
The amounts shown in the tables also take into account the Underlying Fund
advisory fees and operating expenses, which are assumed to be at an annual rate
of 0.95% of the average daily net assets of the Underlying Funds. The actual
fees and expenses of each Underlying Fund vary, and in 1999, ranged from an
annual rate of X.XX% to an annual rate of X.XX% of average daily net assets. The
fees and expenses associated with your Policy may be more or less than 0.95% in
the aggregate, depending upon how you make allocations of Policy Value among the
Sub-Accounts.
AFIMS has declared a voluntary expense limitation of 1.35% of average net assets
for the Select Aggressive Growth Fund and Select Capital Appreciation Fund,
1.50% for the Select International Equity Fund, 1.25%
D-1
<PAGE>
for the Select Value Opportunity 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. The total operating expenses of these Funds of
the Trust were less than their respective expense limitations throughout 1998.
These limitations may be terminated at any time.
Until further notice, AFIMS has declared a voluntary expense limitation of 1.20%
of average daily net assets for the Select Strategic Growth Fund. In addition,
AFIMS has agreed to voluntarily waive its management fee to the extent that
expenses of the Select Emerging Markets Fund exceed 2.00% of the Fund's average
daily net assets, except that such waiver shall not exceed the net amount of
management fees earned by AFIMS from the Fund after subtracting fees paid by
AFIMS to a sub-adviser. These limitations may be terminated at any time.
Until further notice, the Select Value Opportunity Fund's management fee rate
has been voluntarily limited to an annual rate of 0.90% of average daily net
assets, and total expenses are limited to 1.25% of average daily net assets.
NET ANNUAL RATES OF INVESTMENT
Applying the mortality and expense risk charge, the administrative charge, and
the average Fund advisory fees and operating expenses of 0.95% of average net
assets, in the Current Cost of Insurance Charges tables the gross annual rates
of investment return of 0%, 6% and 12% would produce net annual rates of -1.75%,
4.25% and 10.25%, respectively, during the first 10 Policy years and -1.60%,
4.40% and 10.40%, respectively, after that. In the Guaranteed Cost of Insurance
Charges tables, the gross annual rates of investment return of 0%, 6% and 12%
would produce net annual rates of -1.90%, 4.10% and 10.10%, respectively, during
the first 10 Policy years and -1.75%, 4.25% and 10.25%, respectively, after
that.
The hypothetical returns shown in the tables 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 rates 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 shows the amount that would accumulate if the
Guideline Annual Premium were invested to earn interest (after taxes) at 5%,
compounded annually.
D-2
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
ALLMERICA SELECT VARIABLE LIFE POLICY
Amount = $100,000
Male Non-Smoker Age 30
Sum Insured Option 2
BASED ON CURRENT MONTHLY INSURANCE PROTECTION
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
Premiums Hypothetical 0% Hypothetical 6%
Paid Plus Gross Investment Return Gross Investment Return
Interest -------------------------------- --------------------------------
Policy At 5% Surrender Policy Death Surrender Policy Death
Year Per Year (1) Value Value (2) Benefit Value Value (2) Benefit
- --------------------- ------------- --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,100 667 1,744 101,744 777 1,854 101,854
2 4,305 2,380 3,457 103,457 2,710 3,788 103,788
3 6,620 4,198 5,140 105,140 4,860 5,803 105,803
4 9,051 5,986 6,794 106,794 7,096 7,904 107,904
5 11,604 7,734 8,407 108,407 9,408 10,082 110,082
6 14,284 9,441 9,980 109,980 11,801 12,340 112,340
7 17,098 11,121 11,525 111,525 14,290 14,694 114,694
8 20,053 12,763 13,032 113,032 16,867 17,136 117,136
9 23,156 14,365 14,500 114,500 19,535 19,670 119,670
10 26,414 15,931 15,931 115,931 22,298 22,298 122,298
11 29,834 17,345 17,345 117,345 25,057 25,057 125,057
12 33,426 18,720 18,720 118,720 27,920 27,920 127,920
13 37,197 20,056 20,056 120,056 30,890 30,890 130,890
14 41,157 21,351 21,351 121,351 33,971 33,971 133,971
15 45,315 22,604 22,604 122,604 37,166 37,166 137,166
16 49,681 23,820 23,820 123,820 40,485 40,485 140,485
17 54,265 24,991 24,991 124,991 43,922 43,922 143,922
18 59,078 26,125 26,125 126,125 47,492 47,492 147,492
19 64,132 27,221 27,221 127,221 51,199 51,199 151,199
20 69,439 28,278 28,278 128,278 55,046 55,046 155,046
Age 60 139,522 36,259 36,259 136,259 102,102 102,102 202,102
Age 65 189,673 38,090 38,090 138,090 132,367 132,367 232,367
Age 70 253,680 38,113 38,113 138,113 167,967 167,967 267,967
Age 75 335,370 35,266 35,266 135,266 208,864 208,864 308,864
<CAPTION>
Hypothetical 12%
Gross Investment Return
---------------------------------
Policy Surrender Policy Death
Year Value Value (2) Benefit
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 888 1,965 101,965
2 3,054 4,131 104,131
3 5,577 6,520 106,520
4 8,345 9,153 109,153
5 11,370 12,043 112,043
6 14,679 15,217 115,217
7 18,313 18,717 118,717
8 22,293 22,562 122,562
9 26,655 26,789 126,789
10 31,437 31,437 131,437
11 36,592 36,592 136,592
12 42,265 42,265 142,265
13 48,510 48,510 148,510
14 55,383 55,383 155,383
15 62,949 62,949 162,949
16 71,284 71,284 171,284
17 80,458 80,458 180,458
18 90,567 90,567 190,567
19 101,706 101,706 201,706
20 113,978 113,978 217,698
Age 60 331,018 331,018 443,564
Age 65 549,309 549,309 670,157
Age 70 903,529 903,529 1,048,094
Age 75 1,480,061 1,480,061 1,583,665
</TABLE>
(1) Assumes a $2,000 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, and should
not be deemed a representation of past or future investment rates of return.
Actual investment results may be more or less than those shown, and will depend
on a number of factors, including the investment allocations by a Policyowner,
and the different investment rates of return for the Underlying Funds. The
Surrender Value of units, Policy Value, and death benefit for a Policy would be
different from those shown if the actual rates of investment return averaged 0%,
6%, and 12% over a period of years, but fluctuated above and below those
averages for individual policy years, or if any premiums were allocated or
Policy Value transferred to the Fixed Account. No representations can be made
that these hypothetical investment rates of return can be achieved for any one
year or sustained over any period of time.
D-3
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
ALLMERICA SELECT VARIABLE LIFE POLICY
Amount = $100,000
Male Non-Smoker Age 30
Sum Insured Option 2
BASED ON GUARANTEED MONTHLY INSURANCE PROTECTION
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
Premiums Hypothetical 0% Hypothetical 6%
Paid Plus Gross Investment Return Gross Investment Return
Interest -------------------------------- --------------------------------
Policy At 5% Surrender Policy Death Surrender Policy Death
Year Per Year (1) Value Value (2) Benefit Value Value (2) Benefit
- --------------------- ------------- --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,100 664 1,741 101,741 774 1,852 101,852
2 4,305 2,372 3,449 103,449 2,702 3,779 103,779
3 6,620 4,182 5,124 105,124 4,843 5,785 105,785
4 9,051 5,960 6,768 106,768 7,066 7,874 107,874
5 11,604 7,695 8,369 108,369 9,363 10,036 110,036
6 14,284 9,388 9,927 109,927 11,736 12,275 112,275
7 17,098 11,052 11,455 111,455 14,201 14,605 114,605
8 20,053 12,674 12,943 112,943 16,749 17,019 117,019
9 23,156 14,256 14,391 114,391 19,384 19,519 119,519
10 26,414 15,799 15,799 115,799 22,109 22,109 122,109
11 29,834 17,183 17,183 117,183 24,817 24,817 124,817
12 33,426 18,531 18,531 118,531 27,628 27,628 127,628
13 37,197 19,832 19,832 119,832 30,534 30,534 130,534
14 41,157 21,098 21,098 121,098 33,551 33,551 133,551
15 45,315 22,318 22,318 122,318 36,672 36,672 136,672
16 49,681 23,493 23,493 123,493 39,900 39,900 139,900
17 54,265 24,623 24,623 124,623 43,242 43,242 143,242
18 59,078 25,698 25,698 125,698 46,688 46,688 146,688
19 64,132 26,731 26,731 126,731 50,257 50,257 150,257
20 69,439 27,710 27,710 127,710 53,940 53,940 153,940
Age 60 139,522 33,493 33,493 133,493 96,807 96,807 196,807
Age 65 189,673 32,226 32,226 132,226 121,420 121,420 221,420
Age 70 253,680 25,942 25,942 125,942 145,829 145,829 245,829
Age 75 335,370 11,579 11,579 111,579 165,998 165,998 265,998
<CAPTION>
Hypothetical 12%
Gross Investment Return
---------------------------------
Policy Surrender Policy Death
Year Value Value (2) Benefit
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 885 1,962 101,962
2 3,045 4,122 104,122
3 5,558 6,501 106,501
4 8,312 9,120 109,120
5 11,317 11,990 111,990
6 14,600 15,138 115,138
7 18,200 18,604 118,604
8 22,138 22,407 122,407
9 26,447 26,582 126,582
10 31,166 31,166 131,166
11 36,237 36,237 136,237
12 41,815 41,815 141,815
13 47,939 47,939 147,939
14 54,678 54,678 154,678
15 62,083 62,083 162,083
16 70,222 70,222 170,222
17 79,169 79,169 179,169
18 88,996 88,996 188,996
19 99,805 99,805 199,805
20 111,683 111,683 213,314
Age 60 317,909 317,909 425,998
Age 65 520,322 520,322 634,793
Age 70 840,654 840,654 975,158
Age 75 1,349,832 1,349,832 1,449,832
</TABLE>
(1) Assumes a $2,000 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, and should
not be deemed a representation of past or future investment rates of return.
Actual investment results may be more or less than those shown, and will depend
on a number of factors, including the investment allocations by a Policyowner,
and the different investment rates of return for the Underlying Funds. The
Surrender Value of units, Policy Value, and death benefit for a Policy would be
different from those shown if the actual rates of investment return averaged 0%,
6% and 12% over a period of years, but fluctuated above and below those averages
for individual policy years, or if any premiums were allocated or Policy Value
transferred to the Fixed Account. No representations can be made that these
hypothetical investment rates of return can be achieved for any one year or
sustained over any period of time.
D-4
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
ALLMERICA SELECT VARIABLE LIFE POLICY
Male Non-Smoker Age 45
Face Amount = $250,000
Sum Insured Option 1
BASED ON CURRENT MONTHLY INSURANCE PROTECTION
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
Premiums Hypothetical 0% Hypothetical 6%
Paid Plus Gross Investment Return Gross Investment Return
Interest -------------------------------- --------------------------------
Policy At 5% Surrender Policy Death Surrender Policy Death
Year Per Year (1) Value Value (2) Benefit Value Value (2) Benefit
- --------------------- ------------- --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,410 0 3,171 250,000 65 3,387 250,000
2 9,041 2,913 6,238 250,000 3,544 6,870 250,000
3 13,903 6,275 9,185 250,000 7,524 10,434 250,000
4 19,008 9,532 12,027 250,000 11,603 14,097 250,000
5 24,368 12,668 14,746 250,000 15,767 17,846 250,000
6 29,996 15,680 17,343 250,000 20,020 21,683 250,000
7 35,906 18,561 19,808 250,000 24,356 25,603 250,000
8 42,112 21,298 22,129 250,000 28,766 29,597 250,000
9 48,627 23,882 24,298 250,000 33,245 33,661 250,000
10 55,469 26,298 26,298 250,000 37,782 37,782 250,000
11 62,652 28,582 28,582 250,000 42,424 42,424 250,000
12 70,195 30,751 30,751 250,000 47,211 47,211 250,000
13 78,114 32,809 32,809 250,000 52,155 52,155 250,000
14 86,430 34,757 34,757 250,000 57,265 57,265 250,000
15 95,161 36,587 36,587 250,000 62,546 62,546 250,000
16 104,330 38,297 38,297 250,000 68,008 68,008 250,000
17 113,956 39,882 39,882 250,000 73,659 73,659 250,000
18 124,064 41,335 41,335 250,000 79,506 79,506 250,000
19 134,677 42,646 42,646 250,000 85,557 85,557 250,000
20 145,821 43,808 43,808 250,000 91,823 91,823 250,000
Age 60 95,161 36,587 36,587 250,000 62,546 62,546 250,000
Age 65 145,821 43,808 43,808 250,000 91,823 91,823 250,000
Age 70 210,477 47,405 47,405 250,000 127,125 127,125 250,000
Age 75 292,995 45,138 45,138 250,000 170,558 170,558 250,000
<CAPTION>
Hypothetical 12%
Gross Investment Return
--------------------------------
Policy Surrender Policy Death
Year Value Value (2) Benefit
- --------------------- --------- --------- --------
<S> <C> <C> <C>
1 282 3,604 250,000
2 4,203 7,529 250,000
3 8,879 11,789 250,000
4 13,942 16,437 250,000
5 19,415 21,494 250,000
6 25,342 27,005 250,000
7 31,763 33,010 250,000
8 38,722 39,553 250,000
9 46,271 46,687 250,000
10 54,466 54,466 250,000
11 63,427 63,427 250,000
12 73,298 73,298 250,000
13 84,187 84,187 250,000
14 96,217 96,217 250,000
15 109,520 109,520 250,000
16 124,247 124,247 250,000
17 140,571 140,571 250,000
18 158,685 158,685 250,000
19 178,812 178,812 250,000
20 201,208 201,208 250,000
Age 60 109,520 109,520 250,000
Age 65 201,208 201,208 250,000
Age 70 353,475 353,475 410,031
Age 75 601,316 601,316 643,408
</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, and should
not be deemed a representation of past or future investment rates of return.
Actual investment results may be more or less than those shown, and will depend
on a number of factors, including the investment allocations by a Policyowner,
and the different investment rates of return for the Underlying Funds. The
Surrender Value of units, Policy Value, and death benefit for a Policy would be
different from those shown if the actual rates of investment return averaged 0%,
6%, and 12% over a period of years, but fluctuated above and below those
averages for individual policy years, or if any premiums were allocated or
Policy Value transferred to the Fixed Account. No representations can be made
that these hypothetical investment rates of return can be achieved for any one
year or sustained over any period of time.
D-5
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
ALLMERICA SELECT VARIABLE LIFE POLICY
Male Non-Smoker Age 45
Face Amount = $250,000
Sum Insured Option 1
BASED ON GUARANTEED MONTHLY INSURANCE PROTECTION
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
Premiums Hypothetical 0% Hypothetical 6%
Paid Plus Gross Investment Return Gross Investment Return
Interest -------------------------------- --------------------------------
Policy At 5% Surrender Policy Death Surrender Policy Death
Year Per Year (1) Value Value (2) Benefit Value Value (2) Benefit
- --------------------- ------------- --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,410 0 3,165 250,000 60 3,382 250,000
2 9,041 2,897 6,223 250,000 3,528 6,854 250,000
3 13,903 6,237 9,147 250,000 7,483 10,393 250,000
4 19,008 9,476 11,970 250,000 11,539 14,033 250,000
5 24,368 12,589 14,667 250,000 15,674 17,753 250,000
6 29,996 15,551 17,214 250,000 19,867 21,530 250,000
7 35,906 18,396 19,643 250,000 24,151 25,398 250,000
8 42,112 21,099 21,931 250,000 28,507 29,338 250,000
9 48,627 23,638 24,054 250,000 32,914 33,330 250,000
10 55,469 25,990 25,990 250,000 37,355 37,355 250,000
11 62,652 27,790 27,790 250,000 41,482 41,482 250,000
12 70,195 29,388 29,388 250,000 45,642 45,642 250,000
13 78,114 30,790 30,790 250,000 49,843 49,843 250,000
14 86,430 31,974 31,974 250,000 54,071 54,071 250,000
15 95,161 32,918 32,918 250,000 58,313 58,313 250,000
16 104,330 33,600 33,600 250,000 62,554 62,554 250,000
17 113,956 33,996 33,996 250,000 66,783 66,783 250,000
18 124,064 34,085 34,085 250,000 70,989 70,989 250,000
19 134,677 33,815 33,815 250,000 75,139 75,139 250,000
20 145,821 33,109 33,109 250,000 79,181 79,181 250,000
Age 60 95,161 32,918 32,918 250,000 58,313 58,313 250,000
Age 65 145,821 33,109 33,109 250,000 79,181 79,181 250,000
Age 70 210,477 21,602 21,602 250,000 97,202 97,202 250,000
Age 75 292,995 0 0 250,000 107,255 107,255 250,000
<CAPTION>
Hypothetical 12%
Gross Investment Return
--------------------------------
Policy Surrender Policy Death
Year Value Value (2) Benefit
- --------------------- --------- --------- --------
<S> <C> <C> <C>
1 277 3,599 250,000
2 4,187 7,512 250,000
3 8,836 11,746 250,000
4 13,871 16,365 250,000
5 19,306 21,385 250,000
6 25,160 26,823 250,000
7 31,509 32,756 250,000
8 38,385 39,216 250,000
9 45,823 46,239 250,000
10 53,870 53,870 250,000
11 62,273 62,273 250,000
12 71,448 71,448 250,000
13 81,498 81,498 250,000
14 92,520 92,520 250,000
15 104,627 104,627 250,000
16 117,955 117,955 250,000
17 132,665 132,665 250,000
18 148,947 148,947 250,000
19 167,016 167,016 250,000
20 187,125 187,125 250,000
Age 60 104,627 104,627 250,000
Age 65 187,125 187,125 250,000
Age 70 324,231 324,231 376,108
Age 75 542,791 542,791 580,786
</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, and should
not be deemed a representation of past or future investment rates of return.
Actual investment results may be more or less than those shown, and will depend
on a number of factors, including the investment allocations by a Policyowner,
and the different investment rates of return for the Underlying Funds. The
Surrender Value of units, Policy Value, and death benefit for a Policy would be
different from those shown if the actual rates of investment return averaged 0%,
6% and 12% over a period of years, but fluctuated above and below those averages
for individual policy years, or if any premiums were allocated or Policy Value
transferred to the Fixed Account. No representations can be made that these
hypothetical investment rates of return can be achieved for any one year or
sustained over any period of time.
D-6
<PAGE>
APPENDIX E
CALCULATION OF 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.
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
</TABLE>
E-1
<PAGE>
<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>
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
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
</TABLE>
E-2
<PAGE>
<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>
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:
Maximum surrender charge per table (11.39 X 100) $1,139.00
During the first two Policy years after the date of issue, the actual surrender
charge is the smaller of the maximum surrender charge and the following sum:
(1) Deferred administrative charge $850.00
($8.50/$1,000 of Face Amount)
(2) Deferred sales charge Varies
(not to exceed 29% of Premiums 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.
E-3
<PAGE>
APPENDIX F
PERFORMANCE INFORMATION
The Policies were first offered to the public in 1994. However, we may advertise
"Total Return" and "Average Annual Total Return" performance information based
on the periods that the Sub-Accounts have been in existence (Tables IA and IB),
and based on the periods that the Underlying Funds have been in existence
(Tables IIA and IIB). 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 and the Funds.
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
Funds' return.
In Tables IA and IIA, performance information under the Policies is net of fund
expenses, mortality and expense risk charges, administrative 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 Composite Stock Price 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 Inc.
- 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.
F-1
<PAGE>
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.
At times, the Company may also advertise the ratings and other information
assigned to it by independent rating organizations such as A.M. Best Company
("A.M. Best"), Moody's Investors Service ("Moody's"), Standard & Poor's
Insurance Rating Services ("S&P") and Duff & Phelps. A.M. Best's and Moody's
ratings reflect their current opinion of the Company's relative financial
strength and operating performance in comparison to the norms of the life/heath
insurance industry. S&P's and Duff & Phelps' ratings measure the ability of an
insurance company to meet its obligations under insurance policies it issues do
not measure the ability of such companies to meet other non-policy obligations.
The ratings also do not relate to the performance of the Underlying Portfolios.
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,
1998. "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.
F-2
<PAGE>
TABLE I(A)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1999
SINCE INCEPTION OF THE SUB-ACCOUNTS
NET OF ALL CHARGES AND ASSUMING SURRENDER OF THE POLICY
The following performance information is based on the periods that the
Sub-Accounts have been in existence. The data is net of expenses of the
Underlying Funds, all Sub-Account charges, and all Policy charges (including
surrender charges) for a representative Policy. It is assumed that the Insured
is male, Age 36, standard (nonsmoker) Premium Class, that the Face Amount of the
Policy is $250,000, that an annual premium payment of $3,000 (approximately one
Guideline Annual Premium) was made at the beginning of each Policy year, that
all premiums were allocated to each Sub-Account individually, and that there was
a full surrender of the Policy at the end of the applicable period.
<TABLE>
10 Years
One-Year or Life
Total 5 of Sub-Account
Underlying Fund Return Years (if less)
<S> <C> <C> <C>
Select Emerging Markets Fund
Select International Equity Fund
T. Rowe Price International Stock Portfolio
Select Aggressive Growth Fund
Select Capital Appreciation Fund
Select Value Opportunity Fund
Select Growth Fund
Select Strategic Growth Fund
Fidelity VIP Growth Portfolio
Select Growth and Income Fund
Fidelity VIP Equity-Income Portfolio
Fidelity VIP High Income Portfolio
Select Income Fund
Money Market Fund
</TABLE>
The inception dates for the Sub-Accounts are: 5/1/95 for Money Market, Select
Aggressive Growth, Select Growth, Select Growth and Income, Select Income,
Select International Equity, Select Capital Appreciation, Fidelity VIP
Equity-Income, Fidelity VIP Growth, and Fidelity VIP High Income; 8/23/95 for T.
Rowe Price International Stock; and 2/20/98 for Select Emerging Markets, Select
Value Opportunity and Select Strategic Growth.
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.
F-3
<PAGE>
TABLE I(B)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1999
SINCE INCEPTION OF THE SUB-ACCOUNTS
EXCLUDING MONTHLY POLICY CHARGES AND SURRENDER CHARGES
The following performance information is based on the periods that the
Sub-Accounts have been in existence. The performance information is net of total
Underlying Fund expenses and all Sub-Account charges. The data does NOT reflect
monthly charges under the Policy 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>
10 Years
One-Year or Life
Total 5 of Sub-Account
Underlying Fund Return Years (if less)
<S> <C> <C> <C>
Select Emerging Markets Fund
Select International Equity Fund
T. Rowe Price International Stock Portfolio
Select Aggressive Growth Fund
Select Capital Appreciation Fund
Select Value Opportunity Fund
Select Growth Fund
Select Strategic Growth Fund
Fidelity VIP Growth Portfolio
Select Growth and Income Fund
Fidelity VIP Equity-Income Portfolio
Fidelity VIP High Income Portfolio
Select Income Fund
Money Market Fund
</TABLE>
The inception dates for the Sub-Accounts are: 5/1/95 for Money Market, Select
Aggressive Growth, Select Growth, Select Growth and Income, Select Income,
Select International Equity, Select Capital Appreciation, Fidelity VIP
Equity-Income, Fidelity VIP Growth, and Fidelity VIP High Income; 8/23/95 for T.
Rowe Price International Stock; and 2/20/98 for Select Emerging Markets, Select
Value Opportunity and Select Strategic Growth.
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.
F-4
<PAGE>
TABLE II(A)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1999
SINCE INCEPTION OF THE UNDERLYING FUNDS
NET OF ALL CHARGES AND ASSUMING SURRENDER OF THE POLICY
The following performance information is based on the periods that the
Underlying Funds have been in existence. The data is net of expenses of the
Underlying Funds, all Sub-Account charges, and all Policy charges (including
surrender charges) for a representative Policy. It is assumed that the Insured
is male, Age 36, standard (nonsmoker) Premium Class, that the Face Amount of the
Policy is $250,000, that an annual premium payment of $3,000 (approximately one
Guideline Annual Premium) was made at the beginning of each Policy year, that
ALL premiums were allocated to EACH Sub-Account individually, and that there was
a full surrender of the Policy at the end of the applicable period.
<TABLE>
10 Years
One-Year or Life
Total 5 of Fund
Underlying Fund Return Years (if less)
<S> <C> <C> <C>
Select Emerging Markets Fund
Select International Equity Fund
T. Rowe Price International Stock Portfolio
Select Aggressive Growth Fund
Select Capital Appreciation Fund
Select Value Opportunity Fund
Select Growth Fund
Select Strategic Growth Fund
Fidelity VIP Growth Portfolio
Select Growth and Income Fund
Fidelity VIP Equity-Income Portfolio
Fidelity VIP High Income Portfolio
Select Income Fund
Money Market Fund
</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 Growth and Income,
and Select Income; 4/30/93 for Select Value Opportunity; 5/02/94 for Select
International Equity; 4/28/95 for Select Capital Appreciation; 10/09/86 for
Fidelity VIP Equity-Income and Fidelity VIP Growth; 9/19/85 for Fidelity VIP
High Income; 3/31/94 for T. Rowe Price International Stock; and 2/20/98 for
Select Emerging Markets and Select Strategic Growth.
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.
F-5
<PAGE>
TABLE II(B)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1999
SINCE INCEPTION OF THE UNDERLYING FUNDS
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 and all Sub-Account charges. The data does NOT
reflect monthly charges under the Policy 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>
10 Years
One-Year or Life
Total 5 of Fund
Underlying Fund Return Years (if less)
<S> <C> <C> <C>
Select Emerging Markets Fund
Select International Equity Fund
T. Rowe Price International Stock Portfolio
Select Aggressive Growth Fund
Select Capital Appreciation Fund
Select Value Opportunity Fund
Select Growth Fund
Select Strategic Growth Fund
Fidelity VIP Growth Portfolio
Select Growth and Income Fund
Fidelity VIP Equity-Income Portfolio
Fidelity VIP High Income Portfolio
Select Income Fund
Money Market Fund
</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 Growth and Income,
and Select Income; 4/30/93 for Select Value Opportunity; 5/02/94 for Select
International Equity; 4/28/95 for the Select Capital Appreciation; 10/09/86 for
Fidelity VIP Equity-Income and Fidelity VIP Growth; 9/19/85 for Fidelity VIP
High Income; 3/31/94 for the T. Rowe Price International Stock; and 2/20/98 for
Select Emerging Markets and Select Strategic Growth.
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.
F-6
<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 ("SEC") such supplementary and
periodic information, documents, and reports as may be prescribed by any rule
or regulation of the SEC 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 1933 Act 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 SEC such indemnification is against public
policy as expressed in the 1933 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 1933 Act and will be governed by the final
adjudication of such issue.
REPRESENTATIONS PURSUANT TO SECTION 26(E) OF THE INVESTMENT COMPANY ACT OF 1940
The Company hereby represents that the aggregate fees and charges under the
Policy are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the Company.
REPRESENTATIONS CONCERNING WITHDRAWAL RESTRICTIONS ON SECTION 403(b) PLANS UNDER
THE TEXAS OPTIONAL RETIREMENT PROGRAM.
The Company and its registered separate accounts which fund annuity contracts
issued in connection with Section 403(b) plans have relied (a) on Rule 6c-7
under the 1940 Act with respect to withdrawal restrictions under the Texas
Optional Retirement Program ("Program") and (b) on the "no-action" letter
(Ref. No. IP-6-88) issued on November 28, 1988 to the American Council of
Life Insurance, in applying the withdrawal restrictions of Internal Revenue
Code Section 403(b)(11). The variable life insurance Policies issued by the
Registrant may be issued in connection with Section 403(b) plans ("Plans"),
and would be subject to the same restrictions on redeemability which are
applicable to annuity contracts issued to such Plans. The Company and the
Registrant represent that they will take the following steps in connection
with the issuance of the policies to Section 403(b) plans:
<PAGE>
1. Appropriate disclosures regarding the redemption restrictions imposed by
the Program and by Section 403(b)(11) have been included in the prospectus
of each registration statement issued in connection with the offer of the
Company's variable contracts.
2. Appropriate disclosure regarding the redemption restrictions imposed by the
Program and by section 403(b)(11) have been included in sales literature
used in connection with the offer of the Company's variable contracts.
3. Sales Representatives who solicit participants to purchase the variable
contracts have been instructed to specifically bring the redemption
restrictions imposed by the Program and by Section 403(b) (11) to the
attention of potential participants.
4. A signed statement acknowledging the participant's understanding of (i) the
restrictions on redemption imposed by the Program and by Section 403(b)(11)
and (ii) the investment alternatives available under the employer's
arrangement will be obtained from each participant who purchases a variable
contract prior to or at the time of purchase.
Registrant hereby represents that it will not act to deny or limit a transfer
request except to the extent that a Service-Ruling or written opinion of
counsel, specifically addressing the fact pattern involved and taking into
account the terms of the applicable employer plan, determines that denial or
limitation is necessary for the variable contracts to meet the requirements
of the Program or of Section 403(b). Any transfer request not so denied or
limited will be effected as expeditiously as possible.
<PAGE>
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 1933 Act. Representations
pursuant to Section 26(e) of the 1940 Act.
The signatures.
Written consents of the following persons:
1. Actuarial Consent will be filed by amendment in Rule 485(b) filing.
2. Opinion of Counsel
3. Consent of Independent Accountants will be filed by amendment in Rule 485(b)
filing.
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 on April 16, 1998 in
Post-Effective Amendment No. 5, are is incorporated by
reference herein.
(2) Not Applicable.
(3) (a) Underwriting and Administrative Services Agreement
between the Company and Allmerica Investments, Inc.
was previously filed on April 16, 1998 in
Post-Effective Amendment No. 5, and is incorporated
by reference herein.
(b) Registered Representatives/Agents Agreement was
previously filed on April 16, 1998 in Post-Effective
Amendment No. 5, and is incorporated by reference
herein.
(c) Sales Agreements (Select) were previously filed on
April 16, 1998 in Post-Effective Amendment No. 5, and
are incorporated by reference herein.
(d) Commission Schedule was previously filed on April 16,
1998 in Post-Effective Amendment No. 5, and is
incorporated by reference herein.
(e) General Agent's Agreement was previously filed on
April 16, 1998 in Post-Effective Amendment No. 5, and
is incorporated by reference herein.
(f) Career Agent Agreement was previously filed on April
16, 1998 in Post-Effective Amendment No. 5, and is
incorporated by reference herein.
(4) Not Applicable.
(5) Policy and Policy riders were previously filed on April 16,
1998 in Post-Effective Amendment No. 5, and are incorporated
by reference herein. 403(b) Life Insurance Policy Endorsement
and Riders were previously filed on April 16, 1998 in
Post-Effective Amendment No. 5, and are incorporated by
reference herein.
<PAGE>
(6) Articles of Incorporation and Bylaws, as amended, of the
Company were previously filed on October 1, 1995 in
Post-Effective Amendment No. 1, and are incorporated by
reference herein.
(7) Not Applicable.
(8) (a) Participation Agreement with Allmerica Investment
Trust was previously filed on April 16, 1998 in
Post-Effective Amendment No. 5, and is incorporated
by reference herein.
(b) Participation Agreement with T. Rowe Price
International Series, Inc. was previously filed on
April 16, 1998 in Post-Effective Amendment No. 5, and
is incorporated by reference herein.
(c) Participation Agreement with Variable Insurance
Products Fund, as amended, was previously filed on
April 16, 1998 in Post-Effective Amendment No. 5, and
is incorporated by reference herein.
(d) Fidelity Service Agreement, effective as of November
1, 1995, was previously filed on April 30, 1996 in
Post-Effective Amendment No. 2, and is incorporated
by reference herein.
(e) An Amendment to the Fidelity Service Agreement,
effective as of January 1, 1997, was previously filed
on May 1, 1997 in Post-Effective Amendment No. 3, and
is incorporated by reference herein.
(f) Fidelity Service Contract, effective as of January 1,
1997, was previously filed on May 1, 1997 in
Post-Effective Amendment No. 3, and is incorporated
by reference herein.
(g) Service Agreement with Rowe-Price Fleming
International, Inc. was previously filed on April 16,
1998 in Post-Effective Amendment No. 5, and is
incorporated by reference herein.
(9) (a) BFDS Agreements for lockbox and mailroom services
were previously filed on April 16, 1998 in
Post-Effective Amendment No. 5, and are incorporated
by reference herein.
(b) Directors' Power of Attorney is filed herewith.
(10) Application was previously filed on April 16, 1998 in
Post-Effective Amendment No. 5, and is incorporated by
reference herein.
2. Policy and Policy riders are included in Exhibit 1(5) above.
3. Opinion of Counsel is filed herewith.
4. Not Applicable.
5. Not Applicable.
6. Actuarial Consent will be filed by amendment in Rule 485(b) filing.
7. Procedures Memorandum dated July, 1994 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
on April 16, 1998 in Post-Effective Amendment No. 5, and is
incorporated by reference herein.
8. Consent of Independent Accountants will be filed by amendment in Rule
485(b) filing.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this 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 7th day of
February, 2000.
ALLMERICA SELECT SEPARATE ACCOUNT II
OF ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
By: /s/ Mary Eldridge
-------------------------
Mary Eldridge, Secretary
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Warren E. Barnes Vice President and Corporate Controller February 7, 2000
- ---------------------------
Warren E. Barnes
Edward J. Parry* Director, Vice President, Chief Financial
- --------------------------- Officer and Treasurer
Richard M. Reilly* Director, President and
- --------------------------- Chief Executive Officer
John F. O'Brien* Director and Chairman of the Board
- ---------------------------
Bruce C. Anderson* Director
- ---------------------------
Robert E. Bruce* Director and Chief Information Officer
- ---------------------------
John P. Kavanaugh* Director, Vice President and
- --------------------------- Chief Investment Officer
John F. Kelly* Director, Vice President and
- --------------------------- General Counsel
J. Barry May* Director
- ---------------------------
James R. Mcauliffe* Director
- ---------------------------
Robert P. Restrepo, JR.* Director
- ---------------------------
Eric A. Simonsen* Director and Vice President
- ---------------------------
</TABLE>
* Sheila B. St. Hilaire, by signing her name hereto, does hereby sign this
document on behalf of each of the above-named Directors and Officers of the
Registrant pursuant to the Power of Attorney dated February 1, 2000 duly
executed by such persons.
/s/ Sheila B. St. Hilaire
- ---------------------------------------
Sheila B. St. Hilaire, Attorney-in-Fact
(333-63093)
<PAGE>
FORM S-6 EXHIBIT TABLE
Exhibit 1(9)(b) Directors' Power of Attorney
Exhibit 3 Opinion of Counsel
<PAGE>
POWER OF ATTORNEY
We, the undersigned, hereby severally constitute and appoint Richard M. Reilly,
John F. Kelly, Joseph W. MacDougall, Jr., and Sheila B. St. Hilaire, and each of
them singly, our true and lawful attorneys, with full power to them and each of
them, to sign for us, and in our names and in any and all capacities, any and
all Registration Statements and all amendments thereto, including post-effective
amendments, with respect to the Separate Accounts supporting variable life and
variable annuity contracts issued by Allmerica Financial Life Insurance and
Annuity Company, and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
and with any other regulatory agency or state authority that may so require,
granting unto said attorneys and each of them, acting alone, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys or any of them may lawfully do or cause to be done by virtue hereof.
Witness our hands on the date set forth below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ John F. O'Brien Director and Chairman of the Board 2/1/2000
- ----------------------------
John F. O'Brien
/s/ Bruce C. Anderson Director 2/1/2000
- ----------------------------
Bruce C. Anderson
/s/ Robert E. Bruce Director and Chief Information Officer 2/1/2000
- ----------------------------
Robert E. Bruce
/s/ John P. Kavanaugh Director, Vice President and 2/1/2000
- ---------------------------- Chief Investment Officer
John P. Kavanaugh
/s/ John F. Kelly Director, Vice President and 2/1/2000
- ---------------------------- General Counsel
John F. Kelly
/s/ J. Barry May Director 2/1/2000
- ----------------------------
J. Barry May
/s/ James R. McAuliffe Director 2/1/2000
- ----------------------------
James R. McAuliffe
/s/ Edward J. Parry, III Director, Vice President, Chief Financial 2/1/2000
- ---------------------------- Officer and Treasurer
Edward J. Parry, III
/s/ Richard M. Reilly Director, President and 2/1/2000
- ---------------------------- Chief Executive Officer
Richard M. Reilly
/s/ Robert P. Restrepo, Jr. Director 2/1/2000
- ----------------------------
Robert P. Restrepo, Jr.
/s/ Eric A. Simonsen Director and Vice President 2/1/2000
- ----------------------------
Eric A. Simonsen
</TABLE>
<PAGE>
February 1, 2000
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester, MA 01653
RE: ALLMERICA SELECT SEPARATE ACCOUNT II OF ALLMERICA
FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FILE NO.'S: 33-83604 AND 811-8746
Gentlemen:
In my capacity as Assistant Vice President and Counsel of Allmerica Financial
Life Insurance and Annuity Company (the "Company"), I have participated in
the preparation of this Post-Effective Amendment to the Registration
Statement for the 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. The 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 the Allmerica Select Separate Account II equal to the
reserves and other Policy liabilities of the Policies which are
supported by the 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 Post-Effective
Amendment to 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 this
Post-Effective Amendment to the Registration Statement of the 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
Assistant Vice President and Counsel
