SEPARATE ACCOUNT KG OF ALLMERICA FIN LIFE INS & ANNUITY CO, 497, 1999-01-12

SEPARATE ACCOUNT KG OF ALLMERICA FIN LIFE INS & ANNUITY CO
497, 1999-01-12

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<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE
AND ANNUITY COMPANY
FIRST ALLMERICA FINANCIAL LIFE
INSURANCE COMPANY

KEMPER GATEWAY ADVISOR
A VARIABLE ANNUITY

THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT
POINTS THAT YOU SHOULD KNOW AND CONSIDER BEFORE PURCHASING
PROFILE THE KEMPER GATEWAY ADVISOR VARIABLE ANNUITY CONTRACT. THE
DECEMBER 28, CONTRACT IS MORE FULLY DESCRIBED LATER IN THIS PROSPECTUS.
1998 PLEASE READ THE PROSPECTUS CAREFULLY.

1. KEMPER GATEWAY ADVISOR VARIABLE ANNUITY CONTRACT

The Kemper GATEWAY Advisor variable annuity contract is a contract between you,
the contract owner, and Allmerica Financial Life Insurance and Annuity Company
(for contracts issued in the District of Columbia, Puerto Rico, the Virgin
Islands and any state except Hawaii and New York) or First Allmerica Financial
Life Insurance Company (for contracts issued in Hawaii and New York). It is
designed to help you accumulate assets for your retirement or other important
financial goals on a tax-deferred basis. The Kemper GATEWAY Advisor contract
combines the concept of professional money management with the attributes of an
annuity contract.

Kemper GATEWAY Advisor offers a customized investment portfolio with experienced
professional portfolio managers. You may allocate your payments among the 20
Kemper investment portfolios of the Investors Fund Series, the four investment
portfolios of the Scudder Variable Life Investment Fund, the Guarantee Period
Accounts and the Fixed Account (the Guarantee Period Accounts and/or the Fixed
Account may not be available in certain jurisdictions.) This range of investment
choices enables you to allocate your money to meet your particular investment
needs.

Like all annuities, the contract has an ACCUMULATION PHASE and an ANNUITY PAYOUT
PHASE. During the ACCUMULATION PHASE you can make payments into the contract on
any frequency. Investment and interest gains accumulate tax-deferred. You may
also withdraw money from your contract during the ACCUMULATION PHASE. However,
as with other tax-deferred investments, you pay taxes on earnings and any
untaxed payments to the contract when you withdraw them. A federal tax penalty
may apply if you withdraw money prior to age 59 1/2.

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During the ANNUITY PAYOUT PHASE you, or the payee you designate, will receive
regular annuity benefit payments from your contract, provided you annuitize.
Annuitization involves beginning a series of payments from the capital that has
built up in your contract. The amount of your annuity benefit payments during
the annuity payout phase will, in part, be determined by your contract's growth
during the accumulation phase.

2. ANNUITY BENEFIT PAYMENTS

If you choose to annuitize your contract, you may select one of six annuity
options: (1) monthly payments guaranteed for the annuitant's lifetime; (2)
monthly payments guaranteed for the annuitant's lifetime, but for not less than
10 years; (3) monthly payments for the annuitant's lifetime with the guarantee
that if payments are less than the accumulated value, a refund of the remaining
value will be paid; (4) monthly payments guaranteed for the annuitant's lifetime
and one other individual's (i.e. the beneficiary or a joint annuitant) lifetime;
(5) monthly payments guaranteed for the annuitant's lifetime and one other
individual's lifetime with the payment to the survivor being reduced to 2/3; and
(6) monthly payments guaranteed for a specified period of 1 to 30 years.

You also need to decide if you want the annuity payments on a variable basis
(i.e., subject to fluctuation based on investment performance), on a fixed basis
(with benefit payments guaranteed at a fixed amount), or on a combination
variable and fixed basis. Once annuity benefit payments begin, the annuity
option cannot be changed.

3. PURCHASING THIS CONTRACT

You can buy a contract through your financial representative, who can also help
you complete the proper forms. There is no fixed schedule for making additional
payments into this contract. There are no limits to the frequency of additional
payments, but there are certain limitations as to amount. The initial payment
must be at least $25,000 and additional payments must be at least $100.

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4. INVESTMENT OPTIONS

You have full investment control over the contract. You may allocate money to
the following portfolios:

<TABLE>
<S> <C>
KEMPER INFS PORTFOLIOS:
- --------------------------------------
Kemper-Dreman Financial Services Kemper Value+Growth
Kemper Small Cap Growth Kemper Horizon 20+
Kemper Small Cap Value Kemper Total Return
Kemper-Dreman High Return Equity Kemper Horizon 10+
Kemper International Kemper High Yield
Kemper International Growth and
Income Kemper Horizon 5
Kemper Global Blue Chip Kemper Global Income
Kemper Growth Kemper Investment Grade Bond
Kemper Contrarian Value Kemper Government Securities
Kemper Blue Chip Kemper Money Market

SCUDDER VLIF PORTFOLIOS:
- --------------------------------------
Scudder International Scudder Capital Growth
Scudder Global Discovery Scudder Growth and Income
</TABLE>

You may also allocate money to the Guarantee Period Accounts and the Fixed
Account. The Guarantee Period Accounts let you choose from among nine different
Guarantee Periods (ranging in maturity from 2 to 10 years) during which
principal and interest rates are guaranteed. The Fixed Account guarantees
principal and a minimum rate of interest (never less than 3% compounded
annually).

5. EXPENSES

Each year and upon surrender, a $35 contract fee is deducted from your contract.
The contract fee is waived if the value of the contract is $75,000 or more.
(This fee may vary by state. See your contract for more information.) We also
deduct insurance charges which amount to 1.40% annually of the daily value of
your contract value allocated to the variable investment options. The insurance
charges include a mortality and expense risk charge of 1.25% and an
administrative expense charge of 0.15%. There are also investment management
fees and other portfolio operating expenses that vary by portfolio.

In states where premium taxes are imposed, a premium tax charge will be deducted
either when withdrawals are made or annuity payments commence. However, the
Company reserves the right to deduct the premium tax charge at the time payments
into the Contract are received.

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There is currently no charge for processing investment option transfers. We
reserve the right to assess a charge, not to exceed $25, for transfers in excess
of 12 per contract year.

The following chart is designed to help you understand the charges in your
contract. Column C labeled "Total Annual Charges" shows the total of the
contract fee (which is represented as 0.04%) and the 1.40% insurance charges
(Column A) plus the investment charges for each portfolio (Column B). Columns D
and E show you two examples of the charges, in dollar amounts, you would pay
under a contract. The examples assume that you invest $1,000 in a portfolio
earning 5% annually and that you withdraw your money: at the end of year 1
(Column D), and at the end of year 10 (Column E). In Column D, the Total Annual
Charges are assessed for one year. In Column E, the example shows the aggregate
of all the annual charges assessed for 10 years. The premium tax is assumed to
be 0% in both examples. The chart does not reflect the optional Enhanced Death
Benefit Rider charge of 0.25% which, if elected, would increase expenses.

<TABLE>
<CAPTION>
A B C D E
TOTAL
<S> <C> <C> <C> <C> <C>
ANNUAL
EXPENSES AT
TOTAL TOTAL END OF
ANNUAL ANNUAL TOTAL ------------
INSURANCE PORTFOLIO ANNUAL 1 10
PORTFOLIO CHARGES CHARGES* CHARGES YEAR YEARS
- -------------------------------------------------- --------- -------- ------- ---- -----
Kemper-Dreman Financial Services* 1.44% 0.99% 2.43% $24 $273
Kemper Small Cap Growth 1.44% 0.71% 2.15% $22 $245
Kemper Small Cap Value 1.44% 0.84% 2.28% $23 $258
Kemper-Dreman High Return Equity* 1.44% 0.87% 2.31% $23 $258
Kemper International 1.44% 0.91% 2.35% $24 $265
Kemper International Growth and Income* 1.44% 1.12% 2.56% $26 $286
Kemper Global Blue Chip* 1.44% 1.56% 3.00% $30 $328
Kemper Growth 1.44% 0.65% 2.09% $21 $239
Kemper Contrarian Value 1.44% 0.80% 2.24% $22 $254
Kemper Blue Chip 1.44% 0.95% 2.39% $24 $269
Kemper Value+Growth 1.44% 0.84% 2.28% $23 $258
Kemper Horizon 20+ 1.44% 0.93% 2.37% $24 $267
Kemper Total Return 1.44% 0.60% 2.04% $20 $233
Kemper Horizon 10+ 1.44% 0.83% 2.27% $23 $257
Kemper High Yield 1.44% 0.65% 2.09% $21 $239
Kemper Horizon 5 1.44% 0.97% 2.41% $24 $271
Kemper Global Income 1.44% 1.05% 2.49% $25 $279
Kemper Investment Grade Bond 1.44% 0.80% 2.24% $22 $254
Kemper Government Securities 1.44% 0.64% 2.08% $21 $238
Kemper Money Market 1.44% 0.55% 1.99% $20 $228
Scudder International 1.44% 1.00% 2.44% $24 $274
Scudder Global Discovery 1.44% 1.79% 3.23% $32 $350
Scudder Capital Growth 1.44% 0.51% 1.95% $20 $224
Scudder Growth and Income 1.44% 0.58% 2.02% $20 $231
</TABLE>

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* For newly formed Portfolios, the charges have been estimated. For more
detailed information, see the Fee Table in the Prospectus.

6. TAXES

You will not pay taxes until you withdraw money from your contract under current
tax rules. During the accumulation phase, earnings are withdrawn first and are
taxed as ordinary income. If you make a withdrawal prior to age 59 1/2, you may
be subject to a 10% federal tax penalty on the earnings. Payments during the
annuity payout phase are considered partly a return of your investment and
partly earnings. You will be subject to income taxes on the earnings portion of
each payment. However, if your contract is funded with pre-tax or tax deductible
dollars (such as a pension or profit sharing plan contribution), then the entire
payment will be taxable.

7. WITHDRAWALS

You can make withdrawals from your contract any time during the accumulation
phase. The minimum withdrawal amount is $100.

Any withdrawal from a Guarantee Period Account ("GPA") prior to the end of the
Guarantee Period will be subject to a market value adjustment which may increase
or decrease the value in that account. This adjustment will never impact your
original investment, nor will earnings in the GPA amount to less than an
effective annual rate of 3%.

8. PERFORMANCE

The value of your contract will vary depending on the investment performance of
the portfolios you choose. The following chart illustrates past returns for each
portfolio since the inception of each Sub-Account that has been in existence for
a complete year as of December 31, 1997. The performance figures reflect the
contract fee, the insurance charges, the investment charges and all other
expenses of the portfolio. They do not reflect the optional Enhanced Death
Benefit Rider charge of 0.25% which, if elected, would reduce performance. These
returns are based upon historical data and are not intended to indicate future
performance.

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ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

<TABLE>
<CAPTION>
CALENDAR
YEAR
ENDED
PORTFOLIO 12/31/97
- ------------------------------------------------- -----------
Kemper-Dreman Financial Services N/A
<S> <C>
Kemper Small Cap Growth 32.32%
Kemper Small Cap Value 20.03%
Kemper-Dreman High Return Equity N/A
Kemper International 7.92%
Kemper International Growth and Income N/A
Kemper Global Blue Chip N/A
Kemper Growth 19.63%
Kemper Contrarian Value 28.55%
Kemper Blue Chip N/A
Kemper Value+Growth 23.70%
Kemper Horizon 20+ 18.78%
Kemper Total Return 18.27%
Kemper Horizon 10+ 15.13%
Kemper High Yield 10.04%
Kemper Horizon 5 11.11%
Kemper Global Income N/A
Kemper Investment Grade Bond 7.49%
Kemper Government Securities 7.42%
Kemper Money Market 3.72%
Scudder International N/A
Scudder Global Discovery N/A
Scudder Capital Growth N/A
Scudder Growth and Income N/A
</TABLE>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY --
The Sub-Accounts had not been in existence for a complete year as of December
31, 1997, therefore, performance for a complete year is not available and is not
shown here.

9. DEATH BENEFIT

If you, a joint owner or (in the event that the owner is a non-natural person)
an annuitant dies during the accumulation phase, we will pay the beneficiary a
death benefit. The death benefit is equal to the GREATER of: (a) the accumulated
value increased by any positive market value adjustment; or (b) gross payments,
decreased proportionately to reflect withdrawals. You may also purchase a rider
that will enhance the death benefit (see "Optional Enhanced Death Benefit Rider"
below).

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10. OTHER INFORMATION

FREE LOOK PERIOD: If you cancel your contract within 10 days after receiving it
(or whatever period is required by your state), you will receive a refund in
accordance with the terms of the contract's "Right to Examine Contract"
provision.

OPTIONAL ENHANCED DEATH BENEFIT RIDER: This optional rider is available for a
separate monthly charge. Under this rider:

I. If an owner (or an annuitant if the owner is a non-natural person) dies
during the accumulation phase and before the oldest owner's 90th birthday, the
death benefit will be equal to the GREATEST of:

(a) the accumulated value increased by any positive market value adjustment (the
"accumulated value"); or

(b) gross payments compounded daily at an annual rate of 5%, starting on the
date each payment is applied, decreased proportionately to reflect
withdrawals (5% compounding not available in Hawaii and New York); or

(c) the highest accumulated value of all contract anniversaries, as determined
after the accumulated value of each contract anniversary is increased for
subsequent payments and decreased proportionately for subsequent
withdrawals.

The (c) value is determined on each contract anniversary. A snapshot is taken of
the current (a) value and compared to snapshots taken of the (a) value on all
prior contract anniversaries, AFTER all of the (a) values have been adjusted to
reflect subsequent payments and decreased proportionately for subsequent
withdrawals. The highest of all of these adjusted (a) values then becomes the
(c) value. This (c) value becomes the floor below which the death benefit will
not drop and is locked-in until the next contract anniversary. The values of (b)
and (c) will be decreased proportionately if withdrawals are taken.

II. If an owner (or an annuitant if the owner is a non-natural person) dies
during the accumulation phase but after the oldest owner's 90th birthday, the
death benefit will be equal to the GREATER of:

(a) the accumulated value increased by any positive market value adjustment; or

(b) the death benefit, as calculated under I, that would have been payable on
the contract anniversary immediately prior to the oldest owner's 90th
birthday, increased for subsequent payments and decreased proportionately
for subsequent withdrawals.

DOLLAR COST AVERAGING: You may elect to automatically transfer money on a
periodic basis from the Kemper Money Market Portfolio, the Kemper Government
Securities Portfolio or the Fixed Account to one or more of the variable
investment options.

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<PAGE>
AUTOMATIC ACCOUNT REBALANCING: You may elect to automatically have your
contract's accumulated value periodically reallocated ("rebalanced") among your
chosen investment options to maintain your designated percentage allocation mix.

11. INQUIRIES

If you need more information you may contact us at 1-800-782-8380 or send
correspondence to:

Kemper Gateway Annuities
Allmerica Financial
P.O. Box 8632
Boston, Massachusetts 02266-8632

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<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
WORCESTER, MASSACHUSETTS
FLEXIBLE PAYMENT DEFERRED VARIABLE AND FIXED ANNUITY CONTRACTS

This Prospectus describes interests under flexible payment deferred variable and
fixed annuity contracts, known as Kemper Gateway Advisor Variable Annuity
Contracts, issued either on a group basis or as individual contracts, by
Allmerica Financial Life Insurance and Annuity Company (for contracts issued in
the District of Columbia, Puerto Rico, the Virgin Islands and any state except
Hawaii and New York) or by First Allmerica Financial Life Insurance Company (for
contracts issued in Hawaii and New York) to individuals and businesses in
connection with retirement plans which may or may not qualify for special
federal income tax treatment. (For information about the tax status when used
with a particular type of plan, see "FEDERAL TAX CONSIDERATIONS"). Unless
otherwise specified, any reference to the "Company" in this Prospectus shall
refer exclusively to Allmerica Financial Life Insurance and Annuity Company for
contracts issued in the District of Columbia, Puerto Rico, the Virgin Islands
and any state except Hawaii and New York and exclusively to First Allmerica
Financial Life Insurance Company for contracts issued in Hawaii and New York.

This Prospectus sets forth the information that a prospective investor ought to
know before investing. Additional information is contained in a Statement of
Additional Information ("SAI") dated December 28, 1998, filed with the
Securities and Exchange Commission (the "SEC") and incorporated herein by
reference. The Table of Contents of the SAI is on page 5 of this Prospectus. The
SAI is available upon request and without charge through Allmerica Investments,
Inc., telephone 1-800-782-8380. In addition, the SEC maintains a website,
www.sec.gov, that contains the SAI as well as material incorporated by reference
related to this Prospectus.

Contract values may accumulate on a variable basis in the separate account known
as Separate Account KG (the "Variable Account"). The assets of the Variable
Account are divided into Sub-Accounts, each investing exclusively in shares of
one of the following Kemper Portfolios of Investors Fund Series ("Kemper INFS")
or Portfolios of Scudder Variable Life Investment Fund ("Scudder VLIF"):

<TABLE>
<CAPTION>
KEMPER INFS PORTFOLIOS:
- ----------------------------------------
<S> <C>
KEMPER-DREMAN FINANCIAL SERVICES KEMPER VALUE+GROWTH
KEMPER SMALL CAP GROWTH KEMPER HORIZON 20+
KEMPER SMALL CAP VALUE KEMPER TOTAL RETURN
KEMPER-DREMAN HIGH RETURN EQUITY KEMPER HORIZON 10+
KEMPER INTERNATIONAL KEMPER HIGH YIELD
KEMPER INTERNATIONAL GROWTH AND INCOME KEMPER HORIZON 5
KEMPER GLOBAL BLUE CHIP KEMPER GLOBAL INCOME
KEMPER GROWTH KEMPER INVESTMENT GRADE BOND
KEMPER CONTRARIAN VALUE KEMPER GOVERNMENT SECURITIES
KEMPER BLUE CHIP KEMPER MONEY MARKET
SCUDDER VLIF PORTFOLIOS:
- ----------------------------------------
SCUDDER INTERNATIONAL SCUDDER CAPITAL GROWTH
SCUDDER GLOBAL DISCOVERY SCUDDER GROWTH AND INCOME
</TABLE>

The Company offers other variable annuity contracts which also invest in many of
the same Portfolios. These contracts may have different charges that could
affect contract performance, and may offer different benefits more suitable to
your needs. To obtain information about these contracts, contact your financial
representative.

THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY CURRENT PROSPECTUSES OF
INVESTORS FUND SERIES AND SCUDDER VARIABLE LIFE INVESTMENT FUND. INVESTORS
SHOULD RETAIN A COPY OF THIS PROSPECTUS FOR FUTURE REFERENCE.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

DATED DECEMBER 28, 1998
<PAGE>
In most jurisdictions, values also may be allocated on a fixed basis to the
Fixed Account, which is part of the Company's General Account, and during the
accumulation period to one or more of the Company's Guarantee Period Accounts.
Amounts allocated to the Fixed Account earn interest at a guaranteed rate for
one year from the date allocated. Amounts allocated to a Guarantee Period
Account earn a fixed rate of interest for the duration of the applicable
Guarantee Period if held for the entire Guarantee Period. If removed prior to
the end of the Guarantee Period the value may be increased or decreased by a
Market Value Adjustment. Amounts allocated to the Guarantee Period Accounts in
the accumulation phase are held in the Company's Separate Account GPA.

Participation in a group contract will be accounted for by the issuance of a
certificate describing the individual's interest under the group contract.
Participation in an individual contract will be evidenced by the issuance of an
individual contract. Certificates and individual contracts are referred to
collectively herein as the "Contract(s)." The following is a summary of
information about these Contracts. More detailed information can be found under
the referenced captions in this Prospectus.

THE CONTRACTS ARE OBLIGATIONS OF ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY
COMPANY (FOR CONTRACTS ISSUED IN THE DISTRICT OF COLUMBIA, PUERTO RICO, THE
VIRGIN ISLANDS AND ANY STATE EXCEPT HAWAII AND NEW YORK) OR FIRST ALLMERICA
FINANCIAL LIFE INSURANCE COMPANY (FOR CONTRACTS ISSUED IN HAWAII AND NEW YORK),
AND ARE DISTRIBUTED BY ALLMERICA INVESTMENTS, INC. THE CONTRACTS ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR CREDIT
UNION. THE CONTRACTS ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION (FDIC), OR ANY OTHER FEDERAL AGENCY. INVESTMENTS IN THE
CONTRACTS ARE SUBJECT TO VARIOUS RISKS, INCLUDING THE FLUCTUATION OF VALUE AND
POSSIBLE LOSS OF PRINCIPAL.

THE CONTRACTS OFFERED BY THIS PROSPECTUS MAY NOT BE AVAILABLE IN ALL STATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.

2
<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C> <C> <C>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS 5
SPECIAL TERMS 6
SUMMARY 8
ANNUAL AND TRANSACTION EXPENSES 15
CONDENSED FINANCIAL INFORMATION 20
PERFORMANCE INFORMATION 26
DESCRIPTION OF THE COMPANIES, THE VARIABLE
ACCOUNT, INVESTORS FUND SERIES AND SCUDDER
VARIABLE LIFE INVESTMENT FUND 32
INVESTMENT OBJECTIVES AND POLICIES 34
INVESTMENT MANAGEMENT SERVICES 36
DESCRIPTION OF THE CONTRACT 37
A. Payments 37
B. Right to Cancel Individual Retirement Annuity 39
C. Right to Cancel All Other Contracts 39
D. Transfer Privilege 40
Automatic Transfers and Automatic Account Rebalancing
Options 41
E. Surrender 42
F. Withdrawals 43
Systematic Withdrawals 43
Life Expectancy Distributions 44
G. Death Benefit 45
Death of an Owner Prior to the Annuity Date 45
Optional Enhanced Death Benefit Rider 45
Payment of the Death Benefit 46
H. The Spouse of the Owner as Beneficiary 47
I. Assignment 47
J. Electing the Form of Annuity and Annuity Date 48
K. Description of Variable Annuity Payout Options 49
L. Annuity Benefit Payments 51
The Annuity Unit 51
Determination of the First and Subsequent Annuity
Benefit Payments 51
</TABLE>

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<PAGE>
<TABLE>
<S> <C> <C> <C>
M. NORRIS Decision 52
N. Computation of Values 53
The Accumulation Unit 53
Net Investment Factor 53

CHARGES AND DEDUCTIONS 54
A. Variable Account Deductions 54
Mortality and Expense Risk Charge 54
Administrative Expense Charge 55
Other Charges 55
B. Contract Fee 55
C. Optional Enhanced Death Benefit Rider Charge 56
D. Premium Taxes 56
E. Transfer Charge 57

GUARANTEE PERIOD ACCOUNTS 57

FEDERAL TAX CONSIDERATIONS 61
A. Qualified and Non-Qualified Contracts 62
B. Taxation of the Contract in General 62
Withdrawals Prior to Annuitization 63
Annuity Payouts After Annuitization 63
Penalty on Distribution 63
Assignments or Transfers 64
Non-Natural Owners 64
Deferred Compensation Plans of State and Local
Governments and Tax-Exempt Organizations 64
C. Tax Withholding 65
D. Provisions Applicable to Qualified Employer Plans 65
Corporate and Self-Employed Pension and
Profit Sharing Plans 65
Individual Retirement Annuities 66
Tax-Sheltered Annuities 66
Texas Optional Retirement Program 66
</TABLE>

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<PAGE>
<TABLE>
<S> <C> <C> <C>
REPORTS 67

LOANS (QUALIFIED CONTRACTS ONLY) 67

ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS 67

CHANGES TO COMPLY WITH LAW AND AMENDMENTS 69

VOTING RIGHTS 69

DISTRIBUTION 69

SERVICES 70

LEGAL MATTERS 70

YEAR 2000 COMPLIANCE 70

FURTHER INFORMATION 72

APPENDIX A -- MORE INFORMATION ABOUT THE FIXED
ACCOUNT A-1

APPENDIX B -- THE MARKET VALUE ADJUSTMENT B-1
</TABLE>

STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS

<TABLE>
<S> <C> <C> <C>
GENERAL INFORMATION AND HISTORY 2

TAXATION OF THE CONTRACT, THE VARIABLE ACCOUNT
AND THE COMPANY 3

SERVICES 3

UNDERWRITERS 3

ANNUITY BENEFIT PAYMENTS 4

PERFORMANCE INFORMATION 6

TAX-DEFERRED ACCUMULATION 7

FINANCIAL STATEMENTS F-1
</TABLE>

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<PAGE>
SPECIAL TERMS

ACCUMULATED VALUE: the sum of the value of all Accumulation Units in the Sub-
Accounts and of the value of all accumulations in the Fixed Account and
Guarantee Period Accounts credited to the Contract on any date before the
Annuity Date.

ACCUMULATION UNIT: a measure of the Owner's interest in a Sub-Account before
annuity benefit payments begin.

ANNUITANT: the person designated in the Contract upon whose continuation of life
annuity benefit payments involving life contingency depend. Joint Annuitants are
permitted and, unless otherwise indicated, any reference to Annuitant shall
include Joint Annuitants.

ANNUITY DATE: the date on which annuity benefit payments begin as specified
pursuant to the Contract.

ANNUITY UNIT: a measure of the value of the periodic annuity benefit payments
under the Contract.

FIXED ACCOUNT: the part of the Company's General Account that guarantees
principal and a fixed minimum interest rate and to which all or a portion of a
payment or transfer under this Contract may be allocated.

FIXED ANNUITY PAYOUT: an Annuity in the payout phase providing for annuity
benefit payments which remain fixed in amount throughout the annuity benefit
payment period selected.

GENERAL ACCOUNT: all the assets of the Company other than those held in a
separate account.

GUARANTEE PERIOD: the number of years that a Guaranteed Interest Rate is
credited to a Guarantee Period Account.

GUARANTEE PERIOD ACCOUNT: an account which corresponds to a Guaranteed Interest
Rate for a specified Guarantee Period and is supported by assets in a
non-unitized separate account.

GUARANTEED INTEREST RATE: the annual effective rate of interest, after daily
compounding, credited to a Guarantee Period Account.

MARKET VALUE ADJUSTMENT: a positive or negative adjustment to earnings in the
Guarantee Period Account assessed if any portion of a Guarantee Period Account
is withdrawn or transferred prior to the end of its Guarantee Period.

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<PAGE>
OWNER: the person, persons or entity entitled to exercise the rights and
privileges under this Contract. Joint Owners are permitted if one of the two is
an Annuitant and, unless otherwise indicated, any reference to Owner shall
include Joint Owners.

SUB-ACCOUNT: a subdivision of the Variable Account. Each Sub-Account available
under the Contract invests exclusively in the shares of a corresponding Kemper
portfolio of Investors Fund Series ("Kemper INFS") or a corresponding portfolio
of Scudder Variable Life Investment Fund ("Scudder VLIF").

SURRENDER VALUE: the Accumulated Value of the Contract on full surrender after
application of any Contract fee and Market Value Adjustment.

UNDERLYING PORTFOLIOS (OR PORTFOLIOS): currently, the twenty Portfolios of
Kemper INFS and the four Portfolios of Scudder VLIF in which the Sub-Accounts
invest.

VALUATION DATE: a day on which the net asset value of the shares of any of the
Underlying Portfolios is determined and unit values of the Sub-Accounts are
determined. Valuation Dates currently occur on each day on which the New York
Stock Exchange is open for trading, as well as each day otherwise required.

VARIABLE ACCOUNT: Separate Account KG, one of the Company's separate accounts,
consisting of assets segregated from other assets of the Company. The investment
performance of the assets of the Variable Account is determined separately from
the other assets of the Company, and are not chargeable with liabilities arising
out of any other business which the Company may conduct.

VARIABLE ANNUITY PAYOUT: an annuity in the payout phase providing for payments
varying in amount in accordance with the investment experience of certain of the
Portfolios.

7
<PAGE>
SUMMARY

WHAT IS THE KEMPER GATEWAY ADVISOR VARIABLE ANNUITY?

The Kemper Gateway Advisor variable annuity contract is an insurance contract
designed to help you accumulate assets for your retirement or other important
financial goals on a tax-deferred basis. The Contract combines the concept of
professional money management with the attributes of an annuity contract.
Features available through the Contract include:

- A customized investment portfolio;

- 20 Kemper INFS Portfolios and 4 Scudder VLIF Portfolios;

- 1 Fixed Account;

- 9 Guarantee Period Accounts;

- Experienced professional portfolio managers;

- Tax deferral on earnings;

- Guarantees that can protect your beneficiaries during the accumulation
phase;

- Income that can be guaranteed for life.

The Contract has two phases, an accumulation phase and, if you choose to
annuitize, an annuity payout phase. During the accumulation phase, your initial
payment and any additional payments you choose to make may be allocated to the
combination of portfolio of securities ("Portfolios") under your Contract, to
the Guarantee Period Accounts, and to the Fixed Account. You select the
investment options most appropriate for your investment needs. As those needs
change, you may also change your allocation without incurring any tax
consequences. Your Contract's Accumulated Value is based on the investment
performance of the Portfolios and any accumulations in the Guarantee Period and
Fixed Accounts. No income taxes are paid on any earnings under the Contract
unless and until Accumulated Values are withdrawn. In addition, during the
accumulation phase, your beneficiaries receive certain protections and
guarantees in the event of your death. See discussion below, "WHAT HAPPENS UPON
DEATH DURING THE ACCUMULATION PHASE?"

WHAT HAPPENS IN THE ANNUITY PAYOUT PHASE?

During the annuity payout phase, you, or the payee you designate, can receive
income based on several annuity payout options. You choose the annuity payout
option and the date for annuity benefit payments to begin. You also decide
whether you want variable annuity benefit payments based on the investment
performance of certain Portfolios, fixed annuity benefit payments with payment
amounts guaranteed by the Company, or a combination of fixed and variable
annuity benefit payments. Among the payout options available during the annuity
payout phase are:

8
<PAGE>
- periodic payments for the Annuitant's lifetime;

- periodic payments for the Annuitant's life and the life of another person
selected by you;

- periodic payments for the Annuitant's lifetime with guaranteed payments
continuing for ten years in the event that the Annuitant dies before the
end of ten years;

- periodic payments over a specified number of years (1 to 30) -- under this
option you may reserve the right to convert remaining payments to a lump-
sum payout by electing a "commutable" option.

WHO ARE THE KEY PERSONS UNDER THE CONTRACT?

The Contract is between you, (the "Owner") and us, Allmerica Financial Life
Insurance and Annuity Company (for contracts issued in the District of Columbia,
Puerto Rico, the Virgin Islands and any state except Hawaii and New York) or
First Allmerica Financial Life Insurance Company (for contracts issued in Hawaii
and New York). Unless otherwise specified, any reference to the "Company" in
this Prospectus shall refer exclusively to Allmerica Financial Life Insurance
and Annuity Company for contracts issued in the District of Columbia, Puerto
Rico, the Virgin Islands and any state except Hawaii and New York and
exclusively to First Allmerica Financial Life Insurance Company for contracts
issued in Hawaii and New York. Each Contract has an Owner (or an Owner and a
Joint Owner, in which case one of the two also must be an Annuitant), an
Annuitant (or an Annuitant and a Joint Annuitant) and one or more beneficiaries.
As Owner, you make payments, choose investment allocations, receive annuity
benefit payments (or designate someone else to receive annuity benefit payments)
and select the Annuitant and beneficiary. When a Contract is jointly owned, the
consent of both Owners is required in order to exercise any ownership rights.
The Annuitant is the individual upon whose continuation of life annuity benefit
payments involving life contingency depend. An Annuitant may be changed at any
time after issue of the Contract and prior to the Annuity Date, unless (1) the
Owner is a non-natural person or (2) you are taking life expectancy
distributions. For more information about life expectancy distributions, see "F.
Withdrawals." At all times there must be at least one Annuitant. If an Annuitant
dies and a replacement is not named, you will become the new Annuitant. The
beneficiary is the person, persons or entity entitled to the death benefit prior
to the Annuity Date and who, under certain circumstances, may be entitled to
annuity benefit payments upon the death of an Owner on or after the Annuity
Date.

HOW MUCH CAN I INVEST AND HOW OFTEN?

The number and frequency of your payments are flexible, subject to the minimum
and maximum payments stated in "A. Payments."

9
<PAGE>
WHAT ARE MY INVESTMENT CHOICES?

The Contract permits net payments to be allocated among the Sub-Accounts
investing in the Portfolios, the Guarantee Period Accounts, and the Fixed
Account. As to the date of this Prospectus, payments may be allocated to a
maximum of seventeen Variable Sub-Accounts during the life of the Contract and
prior to the Annuity Date in addition to the Kemper Money Market Portfolio.

VARIABLE ACCOUNT. You have a choice of Sub-Accounts investing in the following
Portfolios:

SCUDDER VLIF PORTFOLIOS:
- --------------------------------------
Scudder International Scudder Capital Growth
Scudder Global Discovery Scudder Growth and Income
</TABLE>

For a more detailed description of the Portfolios, see "INVESTMENT OBJECTIVES
AND POLICIES."

GUARANTEE PERIOD ACCOUNTS. Assets supporting the guarantees under the Guarantee
Period Accounts are held in the Company's Separate Account GPA, a non-unitized
insulated separate account. Values and benefits calculated on the basis of
Guarantee Period Account allocations, however, are obligations of the Company's
General Account. Amounts allocated to a Guarantee Period Account earn a
Guaranteed Interest Rate declared by the Company. The level of the Guaranteed
Interest Rate depends on the number of years of the Guarantee Period selected.
The Company currently makes available nine Guarantee Periods ranging from two to
ten years in duration. Once declared, the Guaranteed Interest Rate will not
change during the duration of the Guarantee Period. If amounts allocated to a
Guarantee Period Account are transferred, surrendered or applied to any annuity
option at any time other than the day following the last day of the applicable
Guarantee Period, a Market Value Adjustment will apply that may increase or
decrease the Account's value; however, this adjustment will

10
<PAGE>
never be applied against your principal. In addition, earnings in the GPA after
application of the Market Value Adjustment will not be less than an effective
annual rate of 3%. For more information about the Guarantee Period Accounts and
the Market Value Adjustment, see "GUARANTEE PERIOD ACCOUNTS."

FIXED ACCOUNT. The Fixed Account is part of the General Account, which consists
of all the Company's assets other than those allocated to the Variable Account
and any other separate account. Allocations to the Fixed Account are guaranteed
as to principal and a minimum rate of interest. Additional excess interest may
be declared periodically at the Company's discretion. Furthermore, the initial
rate in effect on the date an amount is allocated to the Fixed Account will be
guaranteed for one year from that date. For more information about the Fixed
Account see APPENDIX A, "MORE INFORMATION ABOUT THE FIXED ACCOUNT."

THE GUARANTEE PERIOD ACCOUNTS AND/OR SOME OF THE SUB-ACCOUNTS MAY NOT BE
AVAILABLE IN ALL STATES.

WHO ARE THE PORTFOLIO MANAGERS?

Scudder Kemper Investments, Inc. ("Scudder Kemper") is the investment manager of
each Portfolio of Kemper INFS and each Portfolio of Scudder VLIF. Scudder
Investments (U.K.) Limited, an affiliate of Scudder Kemper, is the sub-adviser
for the Kemper International Portfolio and the Kemper Global Income Portfolio.
Dreman Value Management, L.L.C. is the sub-advisor for the Kemper-Dreman
Financial Services Portfolio and Kemper-Dreman High Return Equity Portfolio.
Scudder Kemper is the investment manager of the Guarantee Period Accounts
pursuant to an investment advisory agreement between the Company and Scudder
Kemper.

CAN I MAKE TRANSFERS AMONG THE ACCOUNTS?

Yes. Prior to the Annuity Date, you may transfer among the Sub-Accounts
investing in the Portfolios, the Guarantee Period Accounts, and the Fixed
Account. You will incur no current taxes on transfers while your money remains
in the Contract. You also may elect Automatic Account Rebalancing to ensure
assets remain allocated according to a desired mix or choose Automatic Dollar
Cost Averaging to gradually move money into one or more Portfolios. As of the
date of this Prospectus, transfers may be made to a maximum of seventeen
variable Sub-Accounts during the life of the Contract and prior to the Annuity
Date in addition to the Kemper Money Market Portfolio. See "D. Transfer
Privilege."

11
<PAGE>
WHAT IF I NEED MY MONEY BEFORE MY ANNUITY PAYOUT PHASE BEGINS?

You may surrender your Contract or make withdrawals any time before the annuity
payout phase begins. A 10% tax penalty may apply on all amounts deemed to be
income if you are under age 59 1/2. (A Market Value Adjustment, which may
increase or decrease the value of the account, may apply to any withdrawal made
from a Guarantee Period Account prior to the expiration of the Guarantee
Period.)

WHAT HAPPENS UPON DEATH DURING THE ACCUMULATION PHASE?

If you, a Joint Owner or (in the event that the Owner is a non-natural person)
an Annuitant should die prior to the Annuity Date, a death benefit will be paid
to the beneficiary. The standard death benefit will be equal to the GREATER of:

- The Accumulated Value increased by any positive Market Value Adjustment; or

- Gross payments, decreased proportionately to reflect withdrawals (for each
withdrawal, the proportionate reduction is calculated as the death benefit
under this option immediately prior to the withdrawal, multiplied by the
withdrawal amount, and divided by the Accumulated Value immediately prior
to the withdrawal).

An optional Enhanced Death Benefit Rider is available for a separate monthly
charge. See "G. Death Benefit" under "DESCRIPTION OF THE CONTRACT." Under the
Enhanced Death Benefit Rider:

I. If an Owner (or an Annuitant if the Owner is a non-natural person) dies prior
to the Annuity Date and before the oldest Owner's 90th birthday, the death
benefit will be equal to the GREATEST of:

(a) the Accumulated Value increased by any positive Market Value Adjustment (the
"Accumulated Value"); or

(c) the highest Accumulated Value of all Contract anniversaries, as determined
after the Accumulated Value of each Contract anniversary is increased for
subsequent payments and decreased proportionately for subsequent
withdrawals.

12
<PAGE>
reflect subsequent payments and decreased proportionately for subsequent
withdrawals. The highest of all of these adjusted (a) values then becomes the
(c) value. This (c) value becomes the floor below which the death benefit will
not drop and is locked-in until the next Contract anniversary. The values of (b)
and (c) will be decreased proportionately if withdrawals are taken.

II. If an Owner (or an Annuitant if the Owner is a non-natural person) dies
prior to the Annuity Date but after the oldest Owner's 90th birthday, the death
benefit will be equal to the GREATER of:

(a) the Accumulated Value increased by any positive Market Value Adjustment; or

(b) the death benefit, as calculated under I, that would have been payable on
the Contract anniversary immediately prior to the oldest Owner's 90th
birthday, increased for subsequent payments and decreased proportionately
for subsequent withdrawals.

WHAT CHARGES WILL I INCUR UNDER MY CONTRACT?

If the Accumulated Value on a Contract anniversary and upon surrender is less
than $75,000, the Company will deduct a $35 Contract fee from the Contract.
(This fee may vary by state. See your Contract for more information.) There will
be no Contract fee if the Accumulated Value is $75,000 or more.

Depending upon the state in which you live, a deduction for state and local
premium taxes, if any, may be made as described under "D. Premium Taxes."

Currently, the Company makes no charge for processing transfers. The first 12
transfers in a Contract year are guaranteed to be free of a transfer charge. For
each subsequent transfer in a Contract year, the Company reserves the right to
assess a charge which is guaranteed never to exceed $25.

The Company will deduct, on a daily basis, an annual mortality and expense risk
charge and administrative expense charge equal to 1.25% and 0.15%, respectively,
of the average daily net assets invested in each Portfolio. The Portfolios will
incur certain management fees and expenses described more fully in "Other
Charges" under "A. Variable Account Deductions" and in the Kemper INFS and
Scudder VLIF prospectuses which accompany this Prospectus.

An optional rider (Enhanced Death Benefit Rider) is available for an additional
charge equal to an annual rate of 0.25% which is deducted on the last day of
each month and on the date the rider is terminated. For more information see "G.
Death Benefit" under "DESCRIPTION OF THE CONTRACT."

For more information, see "CHARGES AND DEDUCTIONS."

13
<PAGE>
CAN I EXAMINE THE CONTRACT?

Yes. Your Contract will be delivered to you after your purchase. If you return
the Contract to the Company within ten days of receipt, the Contract will be
canceled. (There may be a longer period in certain states; see the "Right to
Examine" provision on the cover of your Contract.) If you cancel the Contract,
you will receive a refund of any amounts allocated to the Fixed and Guarantee
Period Accounts and the Accumulated Value of any amounts allocated to the Sub-
Accounts (plus any fees or charges that may have been deducted.) However, if
state law requires or if your Contract was issued as an Individual Retirement
Annuity (IRA), you will generally receive a refund of your entire payment. In
certain states this refund may be the greater of (1) your entire payment or (2)
the amounts allocated to the Fixed and Guarantee Period Accounts plus the
Accumulated Value of amounts in the Sub-Accounts, plus any fees or charges
previously deducted. See "B. Right to Cancel Individual Retirement Annuity" and
"C. Right to Cancel All Other Contracts."

CAN I MAKE FUTURE CHANGES UNDER MY CONTRACT?

There are several changes you can make after receiving your Contract:

- You may assign your ownership to someone else, except under certain
qualified plans; see "FEDERAL TAX CONSIDERATIONS."

- You may change an Annuitant at any time after Contract issue and prior to
the Annuity Date, unless the Owner is a non-natural person and except while
taking life expectancy distributions.

- You may change the beneficiary, unless you have designated a beneficiary
irrevocably.

- You may change your allocation of payments.

- You may make transfers among your accounts prior to the Annuity Date
without any tax consequences.

- You may cancel the Contract within ten days of delivery (or longer if
required by law).

14
<PAGE>
ANNUAL AND TRANSACTION EXPENSES

The following tables show charges under the Contract, expenses of the Sub-
Accounts, and expenses of the Underlying Portfolios. In addition to the charges
and expenses described below, premium taxes are applicable in some states and
are deducted as described under "D. Premium Taxes."
<TABLE>
<CAPTION>
CONTRACT OWNER TRANSACTION EXPENSES: CHARGE
- ---------------------------------------------------------------------- -------
<S> <C>
Sales Charge Imposed on Payments: None
Deferred Sales Charge: None

CONTRACT CHARGES:
- ----------------------------------------------------------------------
<S> <C>
TRANSFER CHARGE: None
The Company currently makes no charge for processing transfers and
guarantees that the first 12 transfers in a Contract year will not be
subject to a transfer charge. For each subsequent transfer, the
Company reserves the right to assess a charge, guaranteed never to
exceed $25, to reimburse the Company for the costs of processing the
transfer.

CONTRACT FEE: $35*
The fee is deducted annually and upon surrender prior to the Annuity
Date when Accumulated Value is less than $75,000.

OPTIONAL RIDER CHARGE:
- ----------------------------------------------------------------------
(on an annual basis as a percentage of Accumulated Value)
Optional Enhanced Death Benefit Rider: 0.25%**

SUB-ACCOUNT EXPENSES:
- ----------------------------------------------------------------------
(on annual basis as percentage of average daily net assets)
Mortality and Expense Risk Charge: 1.25%
Administrative Expense Charge: 0.15%
-----
Total Asset Charge: 1.40%
</TABLE>

* This fee may vary by state. See your Contract for more information.

** If the Rider is elected, this annual charge is deducted on a monthly basis at
the end of each month within which the Rider was in effect.

15
<PAGE>
PORTFOLIO EXPENSES: The following table shows the expenses of the Underlying
Portfolios as a percentage of average net assets for the year ended December 31,
1997. For more information concerning fees and expenses, see the prospectuses
for the Underlying Portfolios.

<TABLE>
<CAPTION>
MANAGEMENT FEE
(AFTER APPLICABLE
PORTFOLIO WAIVERS) OTHER EXPENSES TOTAL EXPENSES
- ----------------------------------- ----------------------- -------------- --------------
<S> <C> <C> <C>
Kemper-Dreman Financial
Services*......................... 0.75% 0.24% 0.99%
Kemper Small Cap Growth............ 0.65% 0.06% 0.71%
Kemper Small Cap Value............. 0.75% 0.09% 0.84%
Kemper-Dreman High Return
Equity*........................... 0.75% 0.12% 0.87%
Kemper International............... 0.75% 0.16% 0.91%
Kemper International Growth and
Income*........................... 0.70%(1) 0.42% 1.12%(1)
Kemper Global Blue Chip*........... 0.85%(1) 0.71% 1.56%(1)
Kemper Growth...................... 0.60% 0.05% 0.65%
Kemper Contrarian Value............ 0.75% 0.05% 0.80%
Kemper Blue Chip**................. 0.65% 0.30% 0.95%
Kemper Value+Growth................ 0.75% 0.09% 0.84%
Kemper Horizon 20+................. 0.60% 0.33% 0.93%
Kemper Total Return................ 0.55% 0.05% 0.60%
Kemper Horizon 10+................. 0.60% 0.23% 0.83%
Kemper High Yield.................. 0.60% 0.05% 0.65%
Kemper Horizon 5................... 0.60% 0.37% 0.97%
Kemper Global Income**............. 0.75% 0.30% 1.05%
Kemper Investment Grade Bond....... 0.60% 0.20% 0.80%
Kemper Government Securities....... 0.55% 0.09% 0.64%
Kemper Money Market................ 0.50% 0.05% 0.55%
Scudder International.............. 0.83% 0.17% 1.00%
Scudder Global Discovery........... 0.98% 0.81% 1.79%
Scudder Capital Growth............. 0.47% 0.04% 0.51%
Scudder Growth and Income.......... 0.48% 0.10% 0.58%
</TABLE>

* These Portfolios commenced operations on 5/1/98, therefore "other expenses"
are estimated and annualized and should not be considered representative of
future expenses. Actual expenses may be greater or less than shown.

** These Portfolios commenced operations on 5/1/97, therefore "other expenses"
are estimated and annualized and should not be considered representative of
future expenses. Actual expenses may be greater or less than shown.

16
<PAGE>
(1) Until further notice, the Adviser has agreed to voluntarily waive its
management fee for the Kemper International Growth and Income Portfolio by
0.30% of the average daily net assets and for the Kemper Global Blue Chip
Portfolio by 0.15% of the average daily net assets. Without such a waiver,
the management fee and total expenses would be as follows: Kemper
International Growth and Income - 1.00% and 1.42% and Kemper Global Blue
Chip - 1.00% and 1.71%. The declaration of a voluntary waiver does not bind
the Manager to declare future waivers with respect to these funds. These
limitations may be terminated at any time.

EXAMPLES. The following examples demonstrate the cumulative expenses which
would be paid by the Owner at 1-year, 3-year, 5-year and 10-year intervals with
and without the optional Enhanced Death Benefit Rider. Each example assumes a
$1,000 investment in a Sub-Account and a 5% annual return on assets, as required
by rules of the SEC.

THE INFORMATION GIVEN UNDER THE FOLLOWING EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.

17
<PAGE>
(1) At the end of the applicable time period, you would pay the following
expenses on a $1,000 investment, assuming a 5% annual return on assets and no
optional Enhanced Death Benefit Rider:

<TABLE>
<CAPTION>
1 3 5 10
UNDERLYING PORTFOLIO YEAR YEARS YEARS YEARS
- -------------------------------------------------- ---- ----- ----- -----
<S> <C> <C> <C> <C>
Kemper-Dreman Financial Services.................. $24 $ 75 $128 $273
Kemper Small Cap Growth........................... $22 $ 66 $114 $245
Kemper Small Cap Value............................ $23 $ 70 $120 $258
Kemper-Dreman High Return......................... $23 $ 71 $122 $261
Kemper International.............................. $24 $ 72 $124 $265
Kemper International Growth and Income............ $26 $ 79 $134 $286
Kemper Global Blue Chip........................... $30 $ 92 $156 $328
Kemper Growth..................................... $21 $ 65 $111 $239
Kemper Contrarian Value........................... $22 $ 69 $118 $254
Kemper Blue Chip.................................. $24 $ 74 $126 $269
Kemper Value+Growth............................... $23 $ 70 $120 $258
Kemper Horizon 20+................................ $24 $ 73 $125 $267
Kemper Total Return............................... $20 $ 63 $108 $233
Kemper Horizon 10+................................ $23 $ 70 $120 $257
Kemper High Yield................................. $21 $ 65 $111 $239
Kemper Horizon 5.................................. $24 $ 74 $127 $271
Kemper Global Income.............................. $25 $ 77 $131 $279
Kemper Investment Grade Bond...................... $22 $ 69 $118 $254
Kemper Government Securities...................... $21 $ 64 $110 $238
Kemper Money Market............................... $20 $ 62 $106 $228
Scudder International............................. $24 $ 75 $128 $274
Scudder Global Discovery.......................... $32 $ 99 $167 $350
Scudder Capital Growth............................ $20 $ 60 $104 $224
Scudder Growth and Income......................... $20 $ 62 $107 $231
</TABLE>

18
<PAGE>
(2) At the end of the applicable time period, you would pay the following
expenses on a $1000 investment, assuming a 5% annual return on assets and an
optional Enhanced Death Benefit Rider:

<TABLE>
<CAPTION>
1 3 5 10
UNDERLYING PORTFOLIO YEAR YEARS YEARS YEARS
- -------------------------------------------------- ---- ----- ----- -----
<S> <C> <C> <C> <C>
Kemper-Dreman Financial Services.................. $27 $ 82 $140 $298
Kemper Small Cap Growth........................... $24 $ 74 $126 $270
Kemper Small Cap Value............................ $25 $ 78 $133 $283
Kemper-Dreman High Return......................... $26 $ 79 $134 $286
Kemper International.............................. $26 $ 80 $136 $290
Kemper International Growth and Income............ $28 $ 86 $147 $310
Kemper Global Blue Chip........................... $32 $ 99 $168 $352
Kemper Growth..................................... $23 $ 72 $123 $264
Kemper Contrarian Value........................... $25 $ 77 $131 $279
Kemper Blue Chip.................................. $26 $ 81 $138 $294
Kemper Value+Growth............................... $25 $ 78 $133 $283
Kemper Horizon 20+................................ $26 $ 80 $137 $292
Kemper Total Return............................... $23 $ 71 $121 $259
Kemper Horizon 10+................................ $25 $ 77 $132 $282
Kemper High Yield................................. $23 $ 72 $123 $264
Kemper Horizon 5.................................. $27 $ 82 $139 $296
Kemper Global Income.............................. $27 $ 84 $143 $304
Kemper Investment Grade Bond...................... $25 $ 77 $131 $279
Kemper Government Securities...................... $23 $ 72 $123 $263
Kemper Money Market............................... $22 $ 69 $118 $254
Scudder International............................. $27 $ 83 $141 $299
Scudder Global Discovery.......................... $35 $106 $179 $373
Scudder Capital Growth............................ $22 $ 68 $116 $250
Scudder Growth and Income......................... $23 $ 70 $120 $257
</TABLE>

As required in rules promulgated under the Investment Company Act of 1940 Act
(the "1940 Act"), the Contract fee is reflected in the examples by a method to
show the "average" impact on an investment in the Variable Account. The total
Contract fees collected are divided by the total average net assets attributable
to the Contract. The resulting percentage is 0.04% and the amount of the
Contract fee is assumed to be $0.40 in the examples. The Contract fee is
deducted only when the accumulated value is less than $75,000.

The Contract fee is not deducted after annuitization.

19
<PAGE>
CONDENSED FINANCIAL INFORMATION
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SEPARATE ACCOUNT KG

<TABLE>
<CAPTION>
SUB-ACCOUNT 1997 1996
- ----------------------------------------------------------------- --------- ---------
<S> <C> <C>
KEMPER SMALL CAP GROWTH PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0.989 1.000
End of Period................................................ 1.309 0.989
Number of Units Outstanding at End of Period
(in thousands).................................................. 16,339 210
KEMPER SMALL CAP VALUE PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 1.022 1.000
End of Period................................................ 1.227 1.022
Number of Units Outstanding at End of Period
(in thousands).................................................. 29,597 314
KEMPER INTERNATIONAL PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 1.019 1.000
End of Period................................................ 1.100 1.019
Number of Units Outstanding at End of Period
(in thousands).................................................. 30,789 360
KEMPER GROWTH PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0.995 1.000
End of Period................................................ 1.191 0.995
Number of Units Outstanding at End of Period
(in thousands).................................................. 24,186 370
KEMPER CONTRARIAN VALUE PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 1.036 1.000
End of Period................................................ 1.332 1.036
Number of Units Outstanding at End of Period
(in thousands).................................................. 53,634 317
KEMPER BLUE CHIP PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0 N/A
End of Period................................................ 1.105 N/A
Number of Units Outstanding at End of Period
(in thousands).................................................. 13,179 N/A
</TABLE>

20
<PAGE>
CONDENSED FINANCIAL INFORMATION
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SEPARATE ACCOUNT KG

<TABLE>
<CAPTION>
SUB-ACCOUNT 1997 1996
- ----------------------------------------------------------------- --------- ---------
<S> <C> <C>
KEMPER VALUE+GROWTH PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0.981 1.000
End of Period................................................ 1.213 0.981
Number of Units Outstanding at End of Period
(in thousands).................................................. 30,946 197
KEMPER HORIZON 20+ PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0.995 1.000
End of Period................................................ 1.183 0.995
Number of Units Outstanding at End of Period
(in thousands).................................................. 7,768 226
KEMPER TOTAL RETURN PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0.984 1.000
End of Period................................................ 1.164 0.984
Number of Units Outstanding at End of Period
(in thousands).................................................. 31,284 353
KEMPER HORIZON 10+ PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 1.002 1.000
End of Period................................................ 1.154 1.002
Number of Units Outstanding at End of Period
(in thousands).................................................. 10,199 39
KEMPER HIGH YIELD PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 1.020 1.000
End of Period................................................ 1.123 1.020
Number of Units Outstanding at End of Period
(in thousands).................................................. 64,934 941
KEMPER HORIZON 5 PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 1.002 1.000
End of Period................................................ 1.114 1.002
Number of Units Outstanding at End of Period
(in thousands).................................................. 7,888 53
</TABLE>

21
<PAGE>
CONDENSED FINANCIAL INFORMATION
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SEPARATE ACCOUNT KG

<TABLE>
<CAPTION>
SUB-ACCOUNT 1997 1996
- ----------------------------------------------------------------- --------- ---------
<S> <C> <C>
KEMPER GLOBAL INCOME PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0 N/A
End of Period................................................ 1.019 N/A
Number of Units Outstanding at End of Period
(in thousands).................................................. 1,317 N/A
KEMPER INVESTMENT GRADE BOND PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 1.003 1.000
End of Period................................................ 1.079 1.003
Number of Units Outstanding at End of Period
(in thousands).................................................. 8,255 22
KEMPER GOVERNMENT SECURITIES PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0.993 1.000
End of Period................................................ 1.067 0.993
Number of Units Outstanding at End of Period
(in thousands).................................................. 7,815 498
KEMPER MONEY MARKET PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 1.004 1.000
End of Period................................................ 1.042 1.004
Number of Units Outstanding at End of Period
(in thousands).................................................. 15,760 1,904
</TABLE>

No information is shown above for Sub-Accounts that commenced operations after
December 31, 1997.

22
<PAGE>
CONDENSED FINANCIAL INFORMATION
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT KG

<TABLE>
<CAPTION>
SUB-ACCOUNT 1997
- ----------------------------------------------------------------- ---------
<S> <C> <C>
KEMPER SMALL CAP GROWTH PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0
End of Period................................................ 0.985
Number of Units Outstanding at End of Period
(in thousands).................................................. 18
KEMPER SMALL CAP VALUE PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0
End of Period................................................ 1.003
Number of Units Outstanding at End of Period
(in thousands).................................................. 52
KEMPER INTERNATIONAL PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0
End of Period................................................ 0.932
Number of Units Outstanding at End of Period
(in thousands).................................................. 48
KEMPER GROWTH PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0
End of Period................................................ 0.973
Number of Units Outstanding at End of Period
(in thousands).................................................. 16
KEMPER CONTRARIAN VALUE PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0
End of Period................................................ 1.014
Number of Units Outstanding at End of Period
(in thousands).................................................. 174
KEMPER BLUE CHIP PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0
End of Period................................................ 1.105
Number of Units Outstanding at End of Period
(in thousands).................................................. 43
</TABLE>

23
<PAGE>
CONDENSED FINANCIAL INFORMATION
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT KG

<TABLE>
<CAPTION>
SUB-ACCOUNT 1997
- ----------------------------------------------------------------- ---------
<S> <C> <C>
KEMPER VALUE+GROWTH PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0
End of Period................................................ 0.960
Number of Units Outstanding at End of Period
(in thousands).................................................. 125
KEMPER HORIZON 20+ PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0
End of Period................................................ 0.980
Number of Units Outstanding at End of Period
(in thousands).................................................. 5
KEMPER TOTAL RETURN PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0
End of Period................................................ 1.014
Number of Units Outstanding at End of Period
(in thousands).................................................. 42
KEMPER HORIZON 10+ PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0
End of Period................................................ 1.016
Number of Units Outstanding at End of Period
(in thousands).................................................. 21
KEMPER HIGH YIELD PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0
End of Period................................................ 1.004
Number of Units Outstanding at End of Period
(in thousands).................................................. 75
KEMPER HORIZON 5 PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0
End of Period................................................ 1.017
Number of Units Outstanding at End of Period
(in thousands).................................................. 81
</TABLE>

24
<PAGE>
CONDENSED FINANCIAL INFORMATION
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT KG

<TABLE>
<CAPTION>
SUB-ACCOUNT 1997
- ----------------------------------------------------------------- ---------
<S> <C> <C>
KEMPER GLOBAL INCOME PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0
End of Period................................................ 1.019
Number of Units Outstanding at End of Period
(in thousands).................................................. 11
KEMPER INVESTMENT GRADE BOND PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0
End of Period................................................ 1.004
Number of Units Outstanding at End of Period
(in thousands).................................................. 21
KEMPER GOVERNMENT SECURITIES PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0
End of Period................................................ 1.004
Number of Units Outstanding at End of Period
(in thousands).................................................. 21
KEMPER MONEY MARKET PORTFOLIO
Unit Value $:
Beginning of Period.......................................... 0
End of Period................................................ 1.000
Number of Units Outstanding at End of Period
(in thousands).................................................. 5
</TABLE>

No information is shown above for Sub-Accounts that commenced operations after
December 31, 1997.

25
<PAGE>
PERFORMANCE INFORMATION

The Contract was first offered to the public in 1999. The Company, however, may
advertise "total return" and "average annual total return" performance
information based on the periods that the Sub-Accounts have been in existence
and the periods that the Underlying Portfolios have been in existence.
Performance results for all periods shown below are calculated with all charges
assumed to be those applicable to the Sub-Accounts and the Underlying
Portfolios. Both the total return and yield figures are based on historical
earnings and are not intended to indicate future performance.

The total return of a Sub-Account refers to the total of the income generated by
an investment in the Sub-Account and of the changes in the value of the
principal (due to realized and unrealized capital gains or losses) for a
specified period, reduced by certain charges, and expressed as a percentage of
the investment.

The average annual total return represents the average annual percentage change
in the value of an investment in a Sub-Account over a given period of time.
Average annual total return represents averaged figures as opposed to the actual
performance of a Sub-Account, which will vary from year to year.

The yield of the Sub-Account investing in the Kemper Money Market Portfolio
refers to the income generated by an investment in the Sub-Account over a seven-
day period (which period will be specified in the advertisement). This income is
then "annualized" by assuming that the income generated in the specific week is
generated over a 52-week period. This annualized yield is shown as a percentage
of the investment. The "effective yield" calculation is similar but, when
annualized, the income earned by an investment in the Sub-Account is assumed to
be reinvested. Thus the effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.

The yield of a Sub-Account investing in a Portfolio other than the Kemper Money
Market Portfolio refers to the annualized income generated by an investment in
the Sub-Account over a specified 30-day or one-month period. The yield is
calculated by assuming that the income generated by the investment during that
30-day or one-month period is generated each period over a 12-month period and
is shown as a percentage of the investment.

Quotations of average annual total return as shown in Tables 1A and 1B are
calculated in the manner prescribed by the SEC and show the percentage rate of
return of a hypothetical initial investment of $1,000 for the most recent one,
five and ten year period or for a period covering the time the Sub-Account has
been in existence, if less than the prescribed periods. The calculation is
adjusted to reflect the deduction of the annual Sub-Account asset charge of
1.40%, the Underlying

26
<PAGE>
Portfolio charges and the annual Contract fee. The calculation has not been
adjusted to reflect the deduction of the optional Enhanced Death Benefit Rider
charge of 0.25% which, if elected, would reduce performance.

The performance shown in Table 2A is calculated in exactly the same manner as
those in Tables 1A and 1B; however, the period of time is based on the
Underlying Portfolios' lifetime, which may predate the Sub-Accounts' inception
dates. These performance calculations are based on the assumption that the Sub-
Account corresponding to the applicable Underlying Portfolio was actually in
existence throughout the stated period and that the contractual charges and
expenses during that period were equal to those currently assessed under the
Contract.

For more detailed information about these performance calculations, including
actual formulas, see the Statement of Additional Information.

PERFORMANCE INFORMATION FOR ANY SUB-ACCOUNT REFLECTS ONLY THE PERFORMANCE OF A
HYPOTHETICAL INVESTMENT IN THE SUB-ACCOUNT DURING THE TIME PERIOD ON WHICH THE
CALCULATIONS ARE BASED. PERFORMANCE INFORMATION SHOULD BE CONSIDERED IN LIGHT OF
THE INVESTMENT OBJECTIVES AND POLICIES AND RISK CHARACTERISTICS OF THE
UNDERLYING PORTFOLIO IN WHICH THE SUB-ACCOUNT INVESTS AND THE MARKET CONDITIONS
DURING THE GIVEN TIME PERIOD, AND SHOULD NOT BE CONSIDERED AS A REPRESENTATION
OF WHAT MAY BE ACHIEVED IN THE FUTURE.

Performance information for a Sub-Account may be compared, in reports and
promotional literature, to: (1) the Standard & Poor's 500 Composite Stock Price
Index ("S&P 500"), Dow Jones Industrial Average ("DJIA"), Shearson Lehman
Aggregate Bond Index or other unmanaged indices so that investors may compare
the Sub-Account results with those of a group of unmanaged securities widely
regarded by investors as representative of the securities markets in general;
(2) other groups of variable annuity variable accounts or other investment
products tracked by Lipper Analytical Services, a widely used independent
research firm which ranks mutual funds and other investment products by overall
performance, investment objectives, and assets, or tracked by other services,
companies, publications, or persons, who rank such investment products on
overall performance or other criteria; or (3) the Consumer Price Index (a
measure for inflation) to assess the real rate of return from an investment in
the Sub-Account. Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions for administrative and management costs and
expenses.

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

27
<PAGE>
ratings reflect their current opinion of the Company's relative financial
strength and operating performance in comparison to the norms of the life/health
insurance industry. S&P's and Duff & Phelps' ratings measure the ability of an
insurance company to meet its obligations under insurance policies it issues and
do not measure the ability of such companies to meet other non-policy
obligations. The ratings also do not relate to the performance of the Underlying
Portfolios.

28
<PAGE>
TABLE 1A
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FOR CONTRACTS OTHER THAN THOSE ISSUED IN HAWAII AND NEW YORK
AVERAGE ANNUAL TOTAL RETURNS
OF SUB-ACCOUNT
FOR PERIODS ENDING DECEMBER 31, 1997
SINCE INCEPTION OF SUB-ACCOUNT

<TABLE>
<CAPTION>
FOR YEAR SINCE
ENDED INCEPTION OF
SUB-ACCOUNT INVESTING IN UNDERLYING PORTFOLIO 12/31/97 SUB-ACCOUNT
- ------------------------------------------------------ ----------- ----------------
<S> <C> <C>
Kemper-Dreman Financial Services...................... N/A N/A
Kemper Small Cap Growth............................... 32.32% 28.45%
Kemper Small Cap Value................................ 20.03% 19.80%
Kemper-Dreman High Return Equity...................... N/A N/A
Kemper International.................................. 7.92% 8.78%
Kemper International Growth and Income................ N/A N/A
Kemper Global Blue Chip............................... N/A N/A
Kemper Growth......................................... 19.63% 17.67%
Kemper Contrarian Value............................... 28.55% 28.81%
Kemper Blue Chip...................................... N/A 10.48%
Kemper Value+Growth................................... 23.70% 19.44%
Kemper Horizon 20+.................................... 18.78% 16.91%
Kemper Total Return................................... 18.27% 14.93%
Kemper Horizon 10+.................................... 15.13% 15.00%
Kemper High Yield..................................... 10.04% 10.77%
Kemper Horizon 5...................................... 11.11% 11.10%
Kemper Global Income.................................. N/A 1.87%
Kemper Investment Grade Bond.......................... 7.49% 7.43%
Kemper Government Securities.......................... 7.42% 6.19%
Kemper Money Market................................... 3.72% 3.69%
Scudder International................................. N/A N/A
Scudder Global Discovery.............................. N/A N/A
Scudder Capital Growth................................ N/A N/A
Scudder Growth and Income............................. N/A N/A
</TABLE>

29
<PAGE>
TABLE 1B
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
FOR CONTRACTS ISSUED IN HAWAII AND NEW YORK
AVERAGE ANNUAL TOTAL RETURNS OF SUB-ACCOUNT
FOR PERIODS ENDING DECEMBER 31, 1997
SINCE INCEPTION OF SUB-ACCOUNT

<TABLE>
<CAPTION>
SINCE
SUB-ACCOUNT INCEPTION OF
SUB-ACCOUNT INVESTING IN UNDERLYING PORTFOLIO INCEPTION DATE SUB-ACCOUNT
- ----------------------------------------------- ------------------ ----------------
<S> <C> <C>
Kemper-Dreman Financial Services............... N/A* N/A
Kemper Small Cap Growth........................ 10/16/97 -1.51%
Kemper Small Cap Value......................... 11/18/97 0.24%
Kemper-Dreman High Return Equity............... N/A* N/A
Kemper International........................... 10/16/97 -6.81%
Kemper International Growth and Income......... N/A* N/A
Kemper Global Blue Chip........................ N/A* N/A
Kemper Growth.................................. 10/16/97 -2.70%
Kemper Contrarian Value........................ 10/14/97 1.39%
Kemper Blue Chip............................... 5/1/97 10.49%
Kemper Value+Growth............................ 10/14/97 -4.02%
Kemper Horizon 20+............................. 10/16/97 -2.04%
Kemper Total Return............................ 11/17/97 1.35%
Kemper Horizon 10+............................. 11/25/97 1.53%
Kemper High Yield.............................. 10/16/97 0.38%
Kemper Horizon 5............................... 11/10/97 1.68%
Kemper Global Income........................... 5/1/97 1.87%
Kemper Investment Grade Bond................... 12/11/97 0.37%
Kemper Government Securities................... 12/11/97 0.36%
Kemper Money Market............................ 12/29/97 -0.02%
Scudder International.......................... N/A* N/A
Scudder Global Discovery....................... N/A* N/A
Scudder Capital Growth......................... N/A* N/A
Scudder Growth and Income...................... N/A* N/A
</TABLE>

* Sub-Account inception date after December 31, 1997.

30
<PAGE>
TABLE 2A
AVERAGE ANNUAL TOTAL RETURNS OF SUB-ACCOUNT
FOR PERIODS ENDING DECEMBER 31, 1997
SINCE INCEPTION OF UNDERLYING PORTFOLIO

<TABLE>
<CAPTION>
YEAR 10 YEARS
ENDED (OR SINCE
UNDERLYING PORTFOLIO 12/31/97 5 YEARS INCEPTION IF LESS)*
- ------------------------------------- ----------- ----------- ---------------------
<S> <C> <C> <C>
Kemper-Dreman Financial Services..... N/A** N/A N/A
Kemper Small Cap Growth.............. 32.32% N/A 24.02%
Kemper Small Cap Value............... 20.03% N/A 12.10%
Kemper-Dreman High Return Equity..... N/A** N/A N/A
Kemper International................. 7.92% 11.37% 9.02%
Kemper International Growth and
Income.............................. N/A** N/A N/A
Kemper Global Blue Chip.............. N/A** N/A N/A
Kemper Growth........................ 19.63% 14.96% 14.83%
Kemper Contrarian Value.............. 28.55% N/A 27.16%
Kemper Blue Chip..................... N/A N/A 10.48%
Kemper Value+Growth.................. 23.70% N/A 22.51%
Kemper Horizon 20+................... 18.78% N/A 20.04%
Kemper Total Return.................. 18.27% 10.74% 12.23%
Kemper Horizon 10+................... 15.13% N/A 15.36%
Kemper High Yield.................... 10.04% 10.27% 10.10%
Kemper Horizon 5..................... 11.11% N/A 11.85%
Kemper Global Income................. N/A N/A 1.87%
Kemper Investment Grade Bond......... 7.49% N/A 6.00%
Kemper Government Securities......... 7.42% 5.07% 6.42%
Kemper Money Market.................. 3.72% 3.03% 4.13%
Scudder International................ 7.52% 12.10% 10.21%
Scudder Global Discovery............. 10.79% N/A 9.18%
Scudder Capital Growth............... 33.84% 16.36% 15.13%
Scudder Growth and Income............ 28.63% N/A 22.29%
</TABLE>

* The inception dates for the Underlying Portfolios are: 4/6/82 for Kemper Money
Market, Kemper Total Return and Kemper High Yield; 12/9/83 for Kemper Growth;
9/3/87 for Kemper Government Securities; 1/6/92 for Kemper International; 5/2/94
for Kemper Small Cap Growth and Scudder Growth and Income; 5/1/96 for Kemper
Investment Grade Bond, Kemper Contrarian Value, Kemper Small Cap Value, Kemper
Value+Growth, Kemper Horizon 20+, Kemper Horizon 10+, Kemper Horizon 5 and
Scudder Global Discovery; 5/1/97 for Kemper Global Income and Kemper Blue Chip;
5/1/87 for Scudder International; and 7/16/85 for Scudder Capital Growth.

** Portfolio inception date after December 31, 1997.

31
<PAGE>
DESCRIPTION OF THE COMPANIES, THE VARIABLE ACCOUNT,
INVESTORS FUND SERIES AND SCUDDER VARIABLE
LIFE INVESTMENT FUND

THE COMPANIES. Allmerica Financial Life Insurance and Annuity Company
("Allmerica Financial") is a life insurance company organized under the laws of
Delaware in July 1974. Its principal office ("Principal Office") is located at
440 Lincoln Street, Worcester, MA 01653, Telephone 508-855-1000. Allmerica
Financial is subject to the laws of the State of Delaware governing insurance
companies and to regulation by the Commissioner of Insurance of Delaware. In
addition, Allmerica Financial is subject to the insurance laws and regulations
of other states and jurisdictions in which it is licensed to operate. As of
December 31, 1997, Allmerica Financial had over $9.4 billion in assets and over
$26.6 billion of life insurance in force.

Effective October 1, 1995, Allmerica Financial changed its name from SMA Life
Assurance Company to Allmerica Financial Life Insurance and Annuity Company.
Allmerica Financial is an indirectly wholly owned subsidiary of First Allmerica
Financial Life Insurance Company which, in turn is a wholly owned subsidiary of
Allmerica Financial Corporation ("AFC").

First Allmerica Financial Life Insurance Company ("First Allmerica") organized
under the laws of Massachusetts in 1844, is the fifth oldest life insurance
company in America. As of December 31, 1997, First Allmerica and its
subsidiaries had over $16.3 billion in combined assets and over $43.8 billion of
life insurance in force. Effective October 16, 1995, First Allmerica converted
from a mutual life insurance company known as State Mutual Life Assurance
Company of America to a stock life insurance company and adopted its present
name. First Allmerica is a wholly owned subsidiary of AFC. First Allmerica's
principal office is located at 440 Lincoln Street, Worcester, MA 01653,
Telephone 508-855-1000.

First Allmerica is subject to the laws of the Commonwealth of Massachusetts
governing insurance companies and to regulation by the Commissioner of Insurance
of Massachusetts. In addition, First Allmerica is subject to the insurance laws
and regulations of other states and jurisdictions in which it is licensed to
operate.

Both companies are charter members 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.

32
<PAGE>
THE VARIABLE ACCOUNT. Each Company maintains a separate investment account
called the Separate Account KG ("Variable Account") with 24 Sub-Accounts. Unless
otherwise specified, any reference to the "Company" in this Prospectus shall
refer exclusively to Allmerica Financial for contracts issued in the District of
Columbia, Puerto Rico, the Virgin Islands and any state except Hawaii and New
York and exclusively to First Allmerica for contracts issued in Hawaii and New
York. Obligations under the contracts are obligations of the Company. The assets
used to fund the variable portions of the Contract are set aside in Sub-Accounts
kept separate from the general assets of the Company. Each Sub-Account invests
in a corresponding investment series ("Portfolio") of Investors Fund Series and
Scudder Variable Life Investment Fund. Each Sub-Account is administered and
accounted for as part of the general business of the Company. The income,
capital gains, or capital losses of each Sub-Account, however, are allocated to
each Sub-Account, without regard to any other income, capital gains or capital
losses of the Company. Under Delaware and Massachusetts law, the assets of the
Variable Account may not be charged with any liabilities arising out of any
other business of the Company.

The Variable Accounts of Allmerica Financial and of First Allmerica were
authorized by votes of the Board of Directors of the Companies on June 13, 1996.
The Variable Accounts meet the definition of "separate account" under federal
securities laws, and are registered with the SEC as unit investment trusts under
the 1940 Act. This registration does not involve the supervision of management
or investment practices or policies of the Variable Accounts by the SEC.

The Company reserves the right, subject to compliance with applicable law, to
change the names of the Variable Account and the Sub-Accounts.

INVESTORS FUND SERIES. Investors Fund Series ("Kemper INFS"), is a series-type
mutual fund registered with the SEC as an open-end, management investment
company. Registration of Kemper INFS does not involve supervision of its
management, investment practices or policies by the SEC. Kemper INFS is designed
to provide an investment vehicle for certain variable annuity contracts and
variable life insurance policies. Shares of the Portfolios of Kemper INFS are
sold only to insurance company separate accounts. Scudder Kemper Investments,
Inc. serves as the investment adviser of Kemper INFS.

SCUDDER VARIABLE LIFE INVESTMENT FUND. Scudder Variable Life Investment Fund
("Scudder VLIF") is an open-end, diversified management investment company
established as a Massachusetts business trust on March 15, 1985, and registered
with the SEC under the 1940 Act. Scudder Kemper Investments, Inc. serves as the
investment adviser of Scudder VLIF.

33
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

A summary of investment objectives of each of the Underlying Portfolios is set
forth below. More detailed information regarding the investment objectives,
restrictions and risks, expenses paid by the Underlying Portfolios and other
relevant information regarding Kemper INFS and Scudder VLIF may be found in
their respective prospectuses, which accompany this Prospectus. Please read them
carefully before investing. The Statements of Additional Information of the
Underlying Portfolios are available upon request.

KEMPER INFS PORTFOLIOS:

KEMPER-DREMAN FINANCIAL SERVICES PORTFOLIO -- seeks long-term capital
appreciation by investing primarily in common stocks and other equity securities
of companies in the financial services industry believed by the Portfolio's
investment manager to be undervalued.

KEMPER SMALL CAP GROWTH PORTFOLIO -- seeks maximum appreciation of investors'
capital from a portfolio primarily of growth stocks of smaller companies.

KEMPER SMALL CAP VALUE PORTFOLIO -- seeks long-term capital appreciation from a
portfolio primarily of value stocks of smaller companies.

KEMPER-DREMAN HIGH RETURN EQUITY PORTFOLIO -- seeks to achieve a high rate of
total return.

KEMPER INTERNATIONAL PORTFOLIO -- seeks total return, a combination of capital
growth and income, principally through an internationally diversified portfolio
of equity securities.

KEMPER INTERNATIONAL GROWTH AND INCOME PORTFOLIO -- seeks long-term growth of
capital and current income, primarily from foreign equity securities.

KEMPER GLOBAL BLUE CHIP PORTFOLIO -- seeks long-term growth of capital through a
diversified worldwide portfolio of marketable securities, primarily equity
securities, including common stocks, preferred stocks and debt securities
convertible into common stocks.

KEMPER GROWTH PORTFOLIO -- seeks maximum appreciation of capital through
diversification of investment securities having potential for capital
appreciation.

KEMPER CONTRARIAN VALUE PORTFOLIO -- seeks to achieve a high rate of total
return from a portfolio primarily of value stocks of larger companies. This
Portfolio was formerly known as the Kemper Value Portfolio.

KEMPER BLUE CHIP PORTFOLIO -- seeks growth of capital and of income.

KEMPER VALUE+GROWTH PORTFOLIO -- seeks growth of capital through professional
management of a portfolio of growth and value stocks.

34
<PAGE>
KEMPER HORIZON 20+ PORTFOLIO -- designed for investors with approximately a 20+
year investment horizon, seeks growth of capital, with income as a secondary
objective.

KEMPER TOTAL RETURN PORTFOLIO -- seeks a high total return, a combination of
income and capital appreciation, by investing in a combination of debt
securities and common stocks.

KEMPER HORIZON 10+ PORTFOLIO -- designed for investors with approximately a 10+
year investment horizon, seeks a balance between growth of capital and income,
consistent with moderate risk.

KEMPER HIGH YIELD PORTFOLIO -- seeks to provide a high level of current income
by investing in fixed-income securities.

KEMPER HORIZON 5 PORTFOLIO -- designed for investors with approximately a five
year investment horizon, seeks income consistent with preservation of capital,
with growth of capital as a secondary objective.

KEMPER GLOBAL INCOME PORTFOLIO -- seeks to provide high current income
consistent with prudent total return asset management.

KEMPER INVESTMENT GRADE BOND PORTFOLIO -- seeks high current income by investing
primarily in a diversified portfolio of investment grade debt securities

KEMPER GOVERNMENT SECURITIES PORTFOLIO -- seeks high current return consistent
with preservation of capital from a portfolio composed primarily of U.S.
Government securities.

KEMPER MONEY MARKET PORTFOLIO -- seeks maximum current income to the extent
consistent with stability of principal from a portfolio of high quality money
market instruments that mature in 12 months or less.

SCUDDER VLIF PORTFOLIOS:

SCUDDER INTERNATIONAL PORTFOLIO -- seeks long term growth of capital principally
from a diversified portfolio of foreign equity securities.

SCUDDER GLOBAL DISCOVERY PORTFOLIO -- seeks above average capital appreciation
over the long term by investing primarily in the equity securities of small
companies located throughout the world.

SCUDDER CAPITAL GROWTH PORTFOLIO -- seeks to maximize long-term capital growth
from a portfolio consisting primarily of equity securities.

SCUDDER GROWTH AND INCOME PORTFOLIO -- seeks long-term growth of capital,
current income and growth of income from a portfolio consisting primarily of
common stocks and securities convertible into common stocks.

35
<PAGE>
Certain Underlying Portfolios have investment objectives and/or policies similar
to those of other Underlying Portfolios. To choose the Sub-Accounts which best
meet individual needs and objectives, carefully read the Underlying Portfolio
prospectuses. In some states, insurance regulations may restrict the
availability of particular Sub-Accounts.

INVESTMENT MANAGEMENT SERVICES

Responsibility for overall management of Kemper INFS rests with the Board of
Trustees and officers of Kemper INFS. Responsibility for overall management of
Scudder VLIF rests with its Board of Trustees and officers. Scudder Kemper
Investments, Inc. ("Scudder Kemper") is the investment manager of all the
Portfolios available under this Contract. Scudder Investments (U.K.) Limited, an
affiliate of Scudder Kemper, is a sub-adviser for the Kemper International
Portfolio and the Kemper Global Income Portfolio. Dreman Value Management,
L.L.C. serves as the sub-advisor for the Kemper-Dreman Financial Services
Portfolio and Kemper-Dreman High Return Equity Portfolio.

For its services, Scudder Kemper receives a management fee, payable monthly at
1/12 of the following annual rates based on the average daily net assets of each
Portfolio: Money Market (.50%), Total Return (.55%), High Yield (.60%), Growth
(.60%), Government Securities (.55%), International (.75%), Small Cap Growth
(.65%), Investment Grade Bond (.60%), Contrarian Value (.75%), Small Cap Value
(.75%), Value+Growth (.75%), Horizon 20+ (.60%), Horizon 10+ (.60%), Horizon 5
(.60%), Blue Chip (.65%), Global Income (.75%) and International Growth and
Income (1.00%).

The High Return Equity, Financial Services and Global Blue Chip Portfolios each
pay Scudder Kemper an investment management fee, payable monthly, at 1/12 of the
annual rates shown below.

<TABLE>
<S> <C>
High Return Equity
Portfolio and
Financial Services
Portfolio............. .75% for the first $250 million, .72% for
the next $750 million, .70% for the next
$1.5 billion, .68% for the next $2.5
billion, .65% for the next $2.5 billion,
.64% for the next $2.5 billion, .63% for the
next $2.5 billion and .62% over $12.5
billion.

Global Blue Chip
Portfolio............. 1.00% for the first $250 million, .95% for
the next $750 million and .90% over $1
billion.
</TABLE>

Scudder Kemper pays Scudder Investments (U.K.) Limited for its services as sub-
adviser for the Kemper International Portfolio and the Kemper Global Income
Portfolio a sub-advisory fee, payable monthly, at 1/12 of the annual rate of

36
<PAGE>
0.35% of average daily net assets of the Kemper International Portfolio and
0.30% of average daily net assets of the Kemper Global Income Portfolio. Scudder
Kemper also pays Dreman Value Management, L.L.C. a fee for its services to the
Kemper-Dreman Financial Services Portfolio and Kemper-Dreman High Return Equity
Portfolio. A sub-advisory fee, payable monthly at the annual rate of .24% of the
first $250 million of each Portfolio's average daily net assets, .23% of average
daily net assets between $250 million and $1 billion, .224% of average daily net
assets between $1 billion and $2.5 billion, .218% of average daily net assets
between $2.5 billion and $5 billion, .208% of average daily net assets between
$5 billion and $7.5 billion, .205% of average daily net assets between $7.5
billion and $10 billion, .202% of average daily net assets between $10 billion
and $12.5 billion and .198% of each Portfolio's average daily net assets over
$12 billion.

For its investment management services to the Scudder VLIF Portfolios, Scudder
Kemper receives compensation monthly at the following annual rates for each
Portfolio: Scudder International Portfolio (0.875% for the first $500,000,000
and 0.775% for amounts in excess of $500,000,000); Scudder Global Discovery
Portfolio (0.975%); Scudder Capital Growth Portfolio (0.475%) and Scudder Growth
and Income Portfolio (0.475%.)

For more information, see the Kemper INFS and Scudder VLIF prospectuses and
SAIs.

DESCRIPTION OF THE CONTRACT

Unless otherwise specified, any reference to the "Company" in this Prospectus
shall refer exclusively to Allmerica Financial Life Insurance and Annuity
Company for contracts issued in the District of Columbia, Puerto Rico, the
Virgin Islands and any state except Hawaii and New York and exclusively to First
Allmerica Financial Life Insurance Company for contracts issued in Hawaii and
New York.

A. PAYMENTS

The Company's underwriting requirements, which include receipt of the initial
payment and allocation instructions by the Company at its Principal Office, must
be met before a Contract can be issued. These requirements may also include the
proper completion of an application; however, where permitted, the Company may
issue a Contract without completion of an application for certain classes of
annuity contracts.

Payments are to be made payable to the Company. A net payment is equal to the
payment received less the amount of any applicable premium tax. The initial net
payment will be credited to the Contract and allocated among the requested
accounts as of the date that all issue requirements are properly met. If all
issue

37
<PAGE>
requirements are not complied with within five business days of the Company's
receipt of the initial payment, the payment will be returned unless the Owner
specifically consents to the holding of the initial payment until completion of
any outstanding issue requirements. Subsequent payments will be credited as of
the Valuation Date received at the Principal Office on the basis of accumulation
unit value next determined after receipt.

Payments are not limited as to frequency and number, but there are certain
limitations as to amount. Currently, the initial payment must be at least
$25,000. Each subsequent payment must be at least $100. The minimum allocation
to a Guarantee Period Account is $1,000. If less than $1,000 is allocated to a
Guarantee Period Account, the Company reserves the right to apply that amount to
the Kemper Money Market Portfolio.

From time to time where permitted by law, the Company may credit amounts to
Contracts when Contracts are sold to individuals or groups of individuals in a
manner that reduces sales expenses. The Company will consider factors such as
the following: (1) the size and type of group or class, and the persistency
expected from that group or class; (2) the total amount of payments to be
received and the manner in which payments are remitted; (3) the purpose for
which the Contracts are being purchased and whether that purpose makes it likely
that costs and expenses will be reduced; (4) other transactions where sales
expenses are likely to be reduced; or (5) the level of commissions paid to
selling broker-dealers or certain financial institutions with respect to
Contracts within the same group or class (for example, broker-dealers who offer
this Contract in connection with financial planning services offered on a fee
for service basis). The Company may also credit amounts to Contracts where
either the Owner or the Annuitant on the issue date is within the following
classes of individuals ("eligible persons"): employees and registered
representatives of any broker-dealer which has entered into a Sales Agreement
with the Company to sell the Contract; employees of the Company, its affiliates
or subsidiaries; officers, directors, trustees and employees of any of the
Portfolios, investment managers or sub-advisers; and the spouses of and
immediate family members residing in the same household with such eligible
persons. "Immediate family members" means children, siblings, parents and
grandparents.

Generally, unless otherwise requested, all payments will be allocated among the
accounts in the same proportion that the initial net payment is allocated or, if
subsequently changed, according to the most recent allocation instructions. As
of the date of this Prospectus, payments may be allocated to a maximum of
seventeen variable Sub-Accounts during the life of the Contract and prior to the
Annuity Date in addition to the Kemper Money Market Portfolio. There are no
restrictions on the number of times the Fixed Account and the Guarantee Period
Accounts may be used over the life of the Contract.

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<PAGE>
The Owner may change allocation instructions for new payments pursuant to a
written or telephone request. If telephone requests are elected by the Owner, a
properly completed authorization must be on file before telephone requests will
be honored. The Company will not be responsible for losses resulting from acting
upon telephone requests reasonably believed to be genuine. The Company will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine; otherwise, the Company may be liable for any losses due
to unauthorized or fraudulent instructions. The procedures the Company follows
for transactions initiated by telephone include requirements that callers on
behalf of an Owner identify themselves by name and identify the Annuitant by
name, date of birth and social security number. All transfer instructions by
telephone are tape-recorded.

B. RIGHT TO CANCEL INDIVIDUAL RETIREMENT ANNUITY

An individual purchasing a Contract intended to qualify as an IRA may cancel the
Contract at any time within ten days after receipt of the Contract and receive a
refund. In order to cancel the Contract, the Owner must mail or deliver the
Contract to the agent through whom the Contract was purchased or to the
Company's Principal Office at 440 Lincoln Street, Worcester, MA 01653. Mailing
or delivery must occur on or before ten days after receipt of the Contract for
cancellation to be effective.

Within seven days the Company will provide a refund equal to the gross
payment(s) received. In some states, however, the refund may equal the greater
of (a) gross payments or (b) any amounts allocated to the Fixed Account and the
Guarantee Period Accounts plus the Accumulated Value of amounts allocated to the
Variable Account plus any amounts deducted under the Contract or by the
Portfolios for taxes, charges or fees. At the time the Contract is issued, the
"Right to Examine" provision on the cover of the Contract will specifically
indicate whether the refund will be equal to gross payments or equal to the
greater of (a) or (b) as set forth above.

The liability of the Variable Account under this provision is limited to the
Owner's Accumulated Value in the Sub-Accounts on the date of cancellation. Any
additional amounts refunded to the Owner will be paid by the Company.

C. RIGHT TO CANCEL ALL OTHER CONTRACTS

An Owner may cancel the Contract at any time within ten days after receipt of
the Contract (or longer if required by state law) and receive a refund.
Generally, the Company will pay to the Owner an amount equal to the sum of (1)
the difference between the payment paid, including fees, and any amount
allocated to the Variable Account, and (2) the Accumulated Value of amounts
allocated to the Variable Account as of the date the request is received. If the
Contract was

39
<PAGE>
purchased as an IRA or issued in a state that requires a full refund of the
initial payment(s), the IRA cancellation right described above may be utilized
in lieu of the special surrender right. At the time the Contract is issued, the
"Right to Examine" provision on the cover of the Contract will specifically
indicate what the refund will be and the time period allowed to exercise the
right to cancel.

D. TRANSFER PRIVILEGE

At any time prior to the Annuity Date, an Owner may have amounts transferred
among accounts subject to the seventeen variable Sub-Account restriction
discussed in "A. Payments." Transfer values will be effected at the Accumulation
Value next computed after receipt of the transfer order. The Company will make
transfers pursuant to written or telephone requests. As discussed in "A.
Payments," a properly completed authorization form must be on file before
telephone requests will be honored. In Oregon and Massachusetts, payments and
transfers to the Fixed Account are subject to certain restrictions. See APPENDIX
A, "MORE INFORMATION ABOUT THE FIXED ACCOUNT."

Transfers to a Guarantee Period Account must be at least $1,000. If the amount
to be transferred to a Guarantee Period Account is less than $1,000, the Company
may transfer that amount to the Sub-Account which invests in the Kemper Money
Market Portfolio. Transfers from a Guarantee Period Account prior to the
expiration of the Guarantee Period will be subject to a Market Value Adjustment.

The Owner may authorize an independent third party to transact allocations and
transfers in accordance with an asset allocation strategy or other investment
strategy. The Company may provide administrative or other support services to
these independent third parties, however, the Company does not engage any third
parties to offer allocation or other investment services under this Contract,
does not endorse or review any allocation or transfer recommendations and is not
responsible for the investment results of such allocations or transfers
transacted on the Owner's behalf. In addition, the Company reserves the right to
discontinue services or limit the number of Portfolios that it may provide such
services for as well as to restrict such transactions altogether when exercised
by a market timing firm or any other third party authorized to initiate
allocations, transfers or exchanges on behalf of multiple Contract owners. The
Company does not charge the Owner for providing additional support services.

As indicated above, the Company reserves the right to restrict transfer
privileges when exercised by a market timing firm or any other third party
authorized to initiate allocations, transfers or exchanges on behalf of multiple
Contract owners, if the execution of such transfers may disadvantage or
potentially impair the contract rights of other contract owners. The Company
may, among other things, not accept (1) the transfer or exchange instructions of
any agent acting

40
<PAGE>
under a power of attorney on behalf of more than one Contract owner, or (2) the
transfer or exchange instructions of individual Contract owners who have
executed pre-authorized transfer or exchange forms which are submitted by market
timing firms or other third parties on behalf of more than one Contract owner at
the same time.

AUTOMATIC TRANSFERS (DOLLAR COST AVERAGING) AND AUTOMATIC ACCOUNT REBALANCING
OPTIONS. The Owner may elect automatic transfers of a predetermined dollar
amount, not less than $100, on a periodic basis (monthly, bi-monthly, quarterly,
semi-annually or annually) from the Sub-Account investing in the Kemper Money
Market Portfolio or the Kemper Government Securities Portfolio, or from the
Fixed Account (the source account) to one or more of the Sub-Accounts. Automatic
transfers may not be made into the Fixed Account, the Guarantee Period Accounts
or, if applicable, the Portfolio being used as the source account. If an
automatic transfer would reduce the balance in the source account to less than
$100, the entire balance will be transferred proportionately to the chosen
Portfolios. Automatic transfers will continue until the amount in the source
account on a transfer date is zero or the Owner's request to terminate the
option is received by the Company. If additional amounts are allocated to the
source account after its balance has fallen to zero, this option will not
restart automatically, and the Owner must provide a new request to the Company.

To the extent permitted by state law, the Company reserves the right, from time
to time, to credit an enhanced interest rate to certain initial and/or
subsequent payments which are deposited into the Fixed Account and which utilize
the Fixed Account as the source account for the payment from which to process
automatic transfers. For more information see APPENDIX A, "MORE INFORMATION
ABOUT THE FIXED ACCOUNT."

The Owner may request automatic rebalancing of Sub-Account allocations on a
monthly, bi-monthly, quarterly, semi-annual or annual basis in accordance with
specified percentage allocations. As frequently as requested, the Company will
review the percentage allocations in the Portfolios and, if necessary, transfer
amounts to ensure conformity with the designated percentage allocation mix. If
the amount necessary to re-establish the mix on any scheduled date is less than
$100, no transfer will be made. Automatic Account Rebalancing will continue
until the Owner's request to terminate or change the option is received by the
Company. As such, subsequent payments allocated in a manner different from the
percentage allocation mix in effect on the date the payment is received will be
reallocated in accordance with the existing mix on the next scheduled date
unless the Owner's timely request to change the mix or terminate the option is
received by the Company.

The Company reserves the right to limit the number of Portfolios that may be
utilized for automatic transfers and rebalancing, and to discontinue either
option

41
<PAGE>
upon advance written notice. The first automatic transfer or rebalancing and all
subsequent transfers or rebalancings of that request in the same Contract year
count as one transfer towards the 12 transfers which are guaranteed to be free
of a transfer charge in each Contract year. There currently is no charge for
either program. Currently, Dollar Cost Averaging and Automatic Account
Rebalancing may not be in effect simultaneously. Either option may be elected
when the Contract is purchased or at a later date.

E. SURRENDER

At any time prior to the Annuity Date, an Owner may surrender the Contract and
receive its Accumulated Value adjusted for any Market Value Adjustment
("Surrender Value") and applicable tax withholding. The Owner must return the
Contract and a signed, written request for surrender, satisfactory to the
Company, to the Principal Office. The amount payable to the Owner upon surrender
will be based on the Contract's Accumulated Value as of the Valuation Date on
which the request and the Contract are received at the Principal Office.

The Contract fee will be deducted upon surrender of the Contract.

After the Annuity Date, only a Contract under which future annuity benefit
payments are limited to a specified period (as specified in the Period Certain
Annuity Option) may be surrendered. The Surrender Amount is the commuted value
of any unpaid annuity benefit payments, computed on the basis of the assumed
interest rate incorporated in such annuity benefit payments.

Any amount surrendered normally is payable within seven days following the
Company's receipt of the surrender request. The Company reserves the right to
defer surrenders and withdrawals of amounts in each Sub-Account in any period
during which (1) trading on the New York Stock Exchange is restricted as
determined by the SEC or such Exchange is closed for other than weekends and
holidays, (2) the SEC has, by order, permitted such suspension, or (3) an
emergency, as determined by the SEC, exists such that disposal of Portfolio
securities or valuation of assets of each separate account is not reasonably
practicable.

The Company reserves the right to defer surrenders and withdrawals of amounts
allocated to the Company's Fixed Account and Guarantee Period Accounts for a
period not to exceed six months.

The surrender rights of Owners who are participants under Section 403(b) plans
or who are participants in the Texas Optional Retirement Program ("Texas ORP")
are restricted; see "FEDERAL TAX CONSIDERATIONS," "Tax-Sheltered Annuities" and
"Texas Optional Retirement Program."

Where an Owner who is a trustee under a pension plan surrenders, in whole or in
part, a Contract on a terminating employee, the trustee will be permitted to
reallocate all or a part of the total Accumulated Value under the Contract to

42
<PAGE>
other contracts issued by the Company and owned by the trustee. Any such
reallocation will be at the unit values for the Sub-Accounts as of the Valuation
Date on which a written, signed request is received at the Principal Office.

For important tax consequences which may result from surrender, see "FEDERAL TAX
CONSIDERATIONS."

F. WITHDRAWALS

At any time prior to the Annuity Date, an Owner may withdraw a portion of the
Accumulated Value of his or her Contract, subject to the limits stated below.
The Owner must file a signed, written request for withdrawals, satisfactory to
the Company, at the Principal Office. The written request must indicate the
dollar amount the Owner wishes to receive and the accounts from which such
amount is to be withdrawn. Amounts withdrawn from a Guarantee Period Account
prior to the end of the applicable Guarantee Period will be subject to a Market
Value Adjustment against the remaining value, as described under "GUARANTEE
PERIOD ACCOUNTS."

Where allocations have been made to more than one account, a percentage of the
withdrawal may be allocated to each such account. A withdrawal from a Sub-
Account will result in cancellation of a number of units equivalent in value to
the amount withdrawn, computed as of the Valuation Date that the request is
received at the Principal Office.

Each withdrawal must be in a minimum amount of $100. No withdrawal will be
permitted if the Accumulated Value remaining under the Contract would be reduced
to less than $1,000. Withdrawals will be paid in accordance with the time
limitations described under "E. Surrender."

After the Annuity Date, only a Contract under which future variable annuity
benefit payments are limited to a specified period may be withdrawn. A
withdrawal after the Annuity Date will result in cancellation of a number of
Annuity Units equivalent in value to the amount withdrawn.

For important restrictions on withdrawals which are applicable to Owners who are
participants under Section 403(b) plans or under the Texas ORP, see "FEDERAL TAX
CONSIDERATIONS," "Tax-Sheltered Annuities" and "Texas Optional Retirement
Program."

For important tax consequences which may result from withdrawals, see "FEDERAL
TAX CONSIDERATIONS."

SYSTEMATIC WITHDRAWALS. The Owner may elect an automatic schedule of
withdrawals (systematic withdrawals) from amounts in the Sub-Accounts and/or the
Fixed Account on a monthly, bi-monthly, quarterly, semi-annual or annual

43
<PAGE>
basis. Systematic withdrawals from Guarantee Period Accounts are not available.
The minimum amount of each automatic withdrawal is $100. If elected at the time
of purchase, the Owner must designate in writing the specific dollar amount of
each withdrawal and the percentage of this amount which should be taken from
each designated Sub-Account and/or the Fixed Account. Systematic withdrawals
then will begin on the date indicated on the application. If elected after the
issue date, the Owner may elect, by written request, a specific dollar amount
and the percentage of this amount to be taken from each designated Sub-Account
and/or the Fixed Account, or the Owner may elect to withdraw a specific
percentage of the Accumulated Value calculated as of the withdrawal dates, and
may designate the percentage of this amount which should be taken from each
account. The first withdrawal will take place on the date the written request is
received at the Principal Office or, if later, on a date specified by the Owner.

If a withdrawal would cause the remaining Accumulated Value to be less than
$1,000, systematic withdrawals will be discontinued. Systematic withdrawals will
cease automatically on the Annuity Date. The Owner may change or terminate
systematic withdrawals by written request to the Principal Office only.

LIFE EXPECTANCY DISTRIBUTIONS. Prior to the Annuity Date the Owner who also is
the Annuitant may elect to make a series of systematic withdrawals from the
Contract according to a life expectancy distribution ("LED") option by returning
a properly signed LED request form to the Principal Office. The LED option
permits the Owner to make systematic withdrawals from the Contract over his or
her lifetime. The amount withdrawn from the Contract changes each year, because
life expectancy changes each year that a person lives. For example, actuarial
tables indicate that a person age 70 has a life expectancy of 16 years, but a
person who attains age 86 has a life expectancy of another 6.5 years. While an
LED is in effect, the Owner must remain the Annuitant.

Where the Owner is a trust or other non-natural person, the Owner may elect the
LED option based on the Annuitant's life expectancy.

If an Owner elects the LED option, in each calendar year a fraction of the
Accumulated Value is withdrawn based on the Owner's then life expectancy. The
numerator of the fraction is 1 (one) and the denominator of the fraction is the
remaining life expectancy of the Owner, as determined annually by the Company.
The resulting fraction, expressed as a percentage, is applied to the Accumulated
Value at the beginning of the year to determine the amount to be distributed
during the year. The Owner may elect monthly, bi-monthly, quarterly, semi-
annual, or annual distributions, and may terminate the LED option at any time.
Under contracts issued in Hawaii and New York, the LED option will terminate
automatically on the maximum Annuity Date permitted under the Contract at which
time an Annuity Option must be elected. The Owner also may elect to

44
<PAGE>
receive distributions under an LED option which is determined on the joint life
expectancy of the Owner and a beneficiary. The Company also may offer other
systematic withdrawal options.

If an Owner makes withdrawals under the LED option prior to age 59 1/2, the
withdrawals may be treated by the Internal Revenue Service ("IRS") as premature
distributions from the Contract. The payments then would be taxed on an "income
first" basis and be subject to a 10% federal tax penalty. For more information,
see "FEDERAL TAX CONSIDERATIONS" and "B. Taxation of the Contracts in General."

The Company may discontinue or change the LED option at any time, but not with
respect to election of the option made prior to the date of any change in the
LED option.

G. DEATH BENEFIT

In the event that an Owner or (in the event the Owner is a non-natural person)
an Annuitant dies prior to the Annuity Date, the Company will pay the
beneficiary a death benefit, except where the Contract is continued as provided
in "H. The Spouse of the Owner as Beneficiary."

DEATH OF AN OWNER PRIOR TO THE ANNUITY DATE. Upon the death of an Owner (or an
Annuitant if the Owner is a non-natural person), a death benefit will be paid.
The standard death benefit will be equal to the GREATER of (a) the Accumulated
Value under the Contract increased by any positive Market Value Adjustment; or
(b) gross payments, decreased proportionately to reflect withdrawals (for each
withdrawal, the proportionate reduction is calculated as the death benefit under
this option immediately prior to the withdrawal multiplied by the withdrawal
amount and divided by the Accumulated Value immediately prior to the
withdrawal);

OPTIONAL ENHANCED DEATH BENEFIT RIDER. At the time of application for the
Contract, the Owner may elect an optional Enhanced Death Benefit Rider. Under
the Enhanced Death Benefit Rider:

I. If an Owner (or an Annuitant if the Owner is a non-natural person) dies prior
to the Annuity Date and before the oldest Owner's 90th birthday, the death
benefit will be equal to the GREATEST of:

(a) the Accumulated Value increased by any positive Market Value Adjustment (the
"Accumulated Value"); or

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<PAGE>
(c) the highest Accumulated Value of all Contract anniversaries, as determined
after the Accumulated Value of each Contract anniversary is increased for
subsequent payments and decreased proportionately for subsequent
withdrawals.

The (c) value is determined on each Contract anniversary. A snapshot is taken of
the current (a) value and compared to snapshots taken of the (a) value on all
prior Contract anniversaries, AFTER all of the (a) values have been adjusted to
reflect subsequent payments and decreased proportionately for subsequent
withdrawals. The highest of all of these adjusted (a) values then becomes the
(c) value. This (c) value becomes the floor below which the death benefit will
not drop and is locked-in until the next Contract anniversary. The values of (b)
and (c) will be decreased proportionately if withdrawals are taken.

II. If an Owner (or an Annuitant if the Owner is a non-natural person) dies
prior to the Annuity Date but after the oldest Owner's 90th birthday, the death
benefit will be equal to the GREATER of:

(a) the Accumulated Value increased by any positive Market Value Adjustment; or

A separate charge is made for an optional Enhanced Death Benefit Rider. On the
last day of each month and on the date the Rider is terminated, a charge equal
to 1/12th of an annual rate of 0.25% is made against the Accumulated Value of
the Contract at that time. The charge is deducted in arrears through a pro-rata
reduction (based on relative values) of Accumulation Units in the Sub-Accounts,
of dollar amounts in the Fixed Account, and of dollar amounts in the Guarantee
Period Accounts.

PAYMENT OF THE DEATH BENEFIT. The death benefit generally will be paid to the
beneficiary in one sum within seven business days of the receipt of due proof of
death at the Principal Office unless the Owner has specified a death benefit
annuity option. Instead of payment in one sum, the beneficiary may, by written
request, elect to:

(1) defer distribution of the death benefit for a period no more than five
years from the date of death; or

(2) receive a life annuity or an annuity for a period certain not extending
beyond the beneficiary's life expectancy, with annuity benefit payments
beginning one year from the date of death.

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<PAGE>
If distribution of the death benefit is deferred under (1) or (2), any value in
the Guarantee Period Accounts will be transferred to the Sub-Account investing
in the Kemper Money Market Portfolio. The excess, if any, of the death benefit
over the Accumulated Value also will be transferred to the Sub-Account investing
in the Kemper Money Market Portfolio. The beneficiary may, by written request,
effect transfers and withdrawals during the deferral period and prior to
annuitization under (2), but may not make additional payments. The death benefit
will reflect any earnings or losses experienced during the deferral period. If
there are multiple beneficiaries, the consent of all is required.

With respect to the death benefit, the Accumulated Value under the Contract will
be based on the unit values next computed after due proof of the death has been
received.

H. THE SPOUSE OF THE OWNER AS BENEFICIARY

The Owner's spouse, if named as the sole beneficiary, may by written request
continue the Contract in lieu of receiving the amount payable upon death of the
Owner. The spouse will then become the Owner and Annuitant subject to the
following: (1) any value in the Guarantee Period Accounts will be transferred to
the Sub-Account investing in the Kemper Money Market Portfolio and (2) the
excess, if any, of the death benefit over the Contract's Accumulated Value also
will be added to the Sub-Account investing in the Kemper Money Market Portfolio.
Additional payments may be made. All other rights and benefits provided in the
Contract will continue, except that any subsequent spouse of such new Owner will
not be entitled to continue the Contract upon such new Owner's death.

I. ASSIGNMENT

The Contract, other than those sold in connection with certain qualified plans,
may be assigned by the Owner at any time prior to the Annuity Date and prior to
the death of an Owner (see "FEDERAL TAX CONSIDERATIONS"). The Company will not
be deemed to have knowledge of an assignment unless it is made in writing and
filed at the Principal Office. The Company will not assume responsibility for
determining the validity of any assignment. If an assignment of the Contract is
in effect on the Annuity Date, the Company reserves the right to pay to the
assignee, in one sum, that portion of the Surrender Value of the Contract to
which the assignee appears to be entitled. The Company will pay the balance, if
any, in one sum to the Owner in full settlement of all liability under the
Contract. The interest of the Owner and of any beneficiary will be subject to
any assignment.

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<PAGE>
J. ELECTING THE FORM OF ANNUITY AND ANNUITY DATE

The Annuity Date is selected by the Owner. To the extent permitted by state law,
the Annuity Date may be the first day of any month (1) before the Owner's 85th
birthday, if the Owner's age on the issue date of the Contract is 75 or under;
or (2) within ten years from the issue date of the Contract and before the
Owner's 90th birthday, if the Owner's age on the issue date is between 76 and
90. The Owner may elect to change the Annuity Date by sending a request to the
Principal Office at least one month before the Annuity Date. To the extent
permitted by state law, the new Annuity Date must be the first day of any month
occurring before the Owner's 99th birthday. If there are Joint Owners, the age
of the younger will determine the Annuity Date. The Internal Revenue Code ("the
Code") and the terms of qualified plans impose limitations on the age at which
annuity benefit payments may commence and the type of annuity option selected.
See "FEDERAL TAX CONSIDERATIONS" for further information.

Subject to certain restrictions described below, the Owner has the right (1) to
select the annuity payout option under which annuity benefit payments are to be
made, and (2) to determine whether payments are to be made on a fixed basis, a
variable basis, or a combination fixed and variable basis. Annuity benefit
payments are determined according to the annuity tables in the Contract, by the
annuity option selected, and by the investment performance of the Accounts
selected.

To the extent a fixed annuity payout is selected, Accumulated Value will be
transferred to the Fixed Account, and the annuity benefit payments will be fixed
in amount. See APPENDIX A, "MORE INFORMATION ABOUT THE FIXED ACCOUNT."

Under a variable annuity payout, a payment to the Owner, or the payee the Owner
designates, equal to the value of the fixed number of Annuity Units in the
Sub-Accounts is made monthly, quarterly, semi-annually or annually. Since the
value of an Annuity Unit in a Sub-Account will reflect the investment
performance of the Sub-Account, the amount of each annuity benefit payment will
vary.

The annuity payout option selected must produce an initial payment of at least
$50 (a lower amount may be required in some states). The Company reserves the
right to increase this minimum amount. If the annuity payout option selected
does not produce an initial payment which meets this minimum, a single payment
will be made. Once the Company begins making annuity benefit payments, the Owner
cannot make withdrawals or surrender the annuity benefit, except where the Owner
has elected a commutable period certain option. Beneficiaries entitled to
receive remaining payments under either a commutable or non-commutable "period
certain" may elect instead to receive a lump sum settlement. See "K. Description
of Variable Annuity Payout Options."

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<PAGE>
If the Owner does not elect otherwise, a variable life annuity with periodic
payments for ten years guaranteed will be purchased. Changes in either the
Annuity Date or annuity option can be made up to one month prior to the Annuity
Date.

If an owner of a fixed annuity contract issued by the Company wishes to elect a
variable annuity payout option after annuitization, the Company may permit such
owner to exchange the fixed contract for a Contract offered in this Prospectus.
The proceeds of the fixed contract will be applied towards the variable annuity
option desired by the owner. The number of Annuity Units under the option will
be calculated using the Annuity Unit values as of the 15th of the month
preceding the Annuity Date.

K. DESCRIPTION OF VARIABLE ANNUITY PAYOUT OPTIONS

The Company currently provides the variable annuity payout options described
below. Currently, variable annuity payout options may be funded through the
Sub-Accounts investing in the Kemper Investment Grade Bond, Kemper Value+Growth,
Kemper Horizon 10+ and Kemper Horizon 5 Portfolios. The Company also provides
these same options funded through the Fixed Account (fixed-amount annuity
option). Regardless of how payments were allocated during the accumulation
period, any of the variable annuity options or the fixed-amount options may be
selected, or any of the variable annuity options may be selected in combination
with any of the fixed-amount annuity options. Other annuity options may be
offered by the Company. IRS regulations may not permit certain of the available
annuity options when used in connection with certain qualified Contracts.

If the Owner (or, if there are Joint Owners, the surviving Joint Owner) dies on
or after the Annuity Date, the beneficiary will become the Owner of the contract
and receive any remaining annuity benefit payments in accordance with the terms
of the annuity benefit payment option selected prior to the Annuity Date. If
there are Joint Owners on or after the Annuity Date, upon the first Owner death,
any remaining annuity benefit payments will continue to the surviving Joint
Owner in accordance with the terms of the annuity benefit payment option
selected prior to the Annuity Date.

If the Owner selects an annuity payout option which provides for the
continuation of payments after the death of an Annuitant, upon the death of an
Annuitant on or after the Annuity Date, any remaining payments will continue to
be paid to the Owner or the payee the Owner has designated.

VARIABLE LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR TEN YEARS. This variable
annuity is payable periodically during the lifetime of the Annuitant with the

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guarantee that if the Annuitant should die before the guaranteed number of
payments have been made, the remaining guaranteed payments will continue to be
paid.

VARIABLE LIFE ANNUITY PAYABLE PERIODICALLY DURING THE LIFETIME OF THE ANNUITANT
ONLY. This variable annuity is payable during the Annuitant's life. It would be
possible under this option for the Owner to receive only one annuity benefit
payment if the Annuitant dies prior to the due date of the second annuity
benefit payment, two annuity benefit payments if the Annuitant dies before the
due date of the third annuity benefit payment, and so on. Payments will
continue, however, during the lifetime of the Annuitant, no matter how long he
or she lives.

UNIT FUND VARIABLE LIFE ANNUITY. This is an annuity payable periodically during
the lifetime of the Annuitant with the guarantee that if the Annuitant dies and
(1) exceeds (2) then periodic variable annuity benefit payments will continue
until the number of such payments equals the number determined in (1).

Where: (1) is the dollar amount of the Accumulated Value divided by the dollar
amount of the first payment, and

(2) is the number of payments paid prior to the death of the Annuitant.

JOINT AND SURVIVOR VARIABLE LIFE ANNUITY. This variable annuity is payable
during the joint lifetime of the Annuitant and another individual (i.e. the
beneficiary or a Joint Annuitant), and then continues thereafter during the
lifetime of the survivor. The amount of each payment during the lifetime of the
survivor is based on the same number of Annuity Units which applied during their
joint lifetime. There is no minimum number of payments under this option.

JOINT AND TWO-THIRDS SURVIVOR VARIABLE LIFE ANNUITY. This variable annuity is
payable during the joint lifetime of the Annuitant and one other individual
(i.e., the beneficiary or a Joint Annuitant), and then continues thereafter
during the lifetime of the survivor. The amount of each periodic payment during
the lifetime of the survivor, however, is based upon two-thirds of the number of
Annuity Units which applied during their joint lifetime. There is no minimum
number of payments under this option.

PERIOD CERTAIN VARIABLE ANNUITY. This variable annuity has periodic payments
for a stipulated number of years ranging from one to 30. If the Annuitant dies
before the end of the period, remaining payments will continue to be paid. This
option may be commutable, that is, the Owner reserves the right to receive a
lump sum in place of installments, or it becomes non-commutable. The Owner must
reserve this right at the time benefits begin.

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It should be noted that the period certain option does not involve a life
contingency. In the computation of the payments under this option, the charge
for annuity rate guarantees, which includes a factor for mortality risks, is
made. Although not contractually required to do so, the Company currently
follows a practice of permitting persons receiving payments under the period
certain option to elect to convert to a variable annuity involving a life
contingency. The Company may discontinue or change this practice at any time,
but not with respect to election of the option made prior to the date of any
change in this practice. See "FEDERAL TAX CONSIDERATIONS" for a discussion of
the possible adverse tax consequences of selecting a period certain option.

L. ANNUITY BENEFIT PAYMENTS

THE ANNUITY UNIT. On and after the Annuity Date, the Annuity Unit is a measure
of the value of the monthly annuity benefit payments under a variable annuity
option. The value of an Annuity Unit in each Sub-Account on its inception date
was set at $1.00. The value of an Annuity Unit under a Sub-Account on any
Valuation Date thereafter is equal to the value of such unit on the immediately
preceding Valuation Date, multiplied by the product of (1) the net investment
factor of the Sub-Account for the current Valuation Period, and (2) a factor to
adjust benefits to neutralize the assumed interest rate. The assumed interest
rate, discussed below, is incorporated in the variable annuity options offered
in the Contract.

DETERMINATION OF THE FIRST AND SUBSEQUENT ANNUITY BENEFIT PAYMENTS. The first
periodic annuity benefit payment is based upon the Accumulated Value as of a
date not more than four weeks preceding the date that the first annuity benefit
payment is due. Variable annuity benefit payments are due on the first of a
month, which is the date the payment is to be received by the Annuitant, and
currently are based on unit values as of the 15th day of the preceding month.

The Contract provides annuity rates which determine the dollar amount of the
first periodic payment under each form of annuity for each $1,000 of applied
value. For life contingency options and non-commutable period certain options of
ten or more years (six or more years under New York contracts), the annuity
value is the Accumulated Value less any premium taxes and adjusted for any
Market Value Adjustment. For commutable period certain options or any period
certain option less than ten years (less than six years under New York
contracts), the value is Surrender Value less any premium tax. For a death
benefit annuity, the annuity value will be the amount of the death benefit. The
annuity rates in the Contract are based on a modification of the Annuity 2000
Individual Mortality Table.

The amount of the first monthly payment depends upon the form of annuity
selected, the sex (however, see "M. NORRIS Decision") and age of the Annuitant

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<PAGE>
and/or beneficiary, if applicable, and the value of the amount applied under the
annuity option. The variable annuity options offered by the Company are based on
a 3.5% assumed interest rate. Variable payments are affected by the assumed
interest rate used in calculating the annuity option rates. Variable annuity
benefit payments will increase over periods when the actual net investment
result of the Sub-Accounts funding the annuity exceeds the equivalent of the
assumed interest rate for the period. Variable annuity benefit payments will
decrease over periods when the actual net investment result of the respective
Sub-Account is less than the equivalent of the assumed interest rate for the
period.

The dollar amount of the first periodic annuity benefit payment under life
annuity options and non-commutable period certain options of ten years or more
(six or more years under New York contracts) is determined by multiplying (1)
the Accumulated Value applied under that option (after application of any Market
Value Adjustment and less premium tax, if any) divided by $1,000, by (2) the
applicable amount of the first monthly payment per $1,000 of value. For
commutable period certain options and any period certain option of less than ten
years (less than six years under New York contracts), the Surrender Value less
premium taxes, if any, is used rather than the Accumulated Value. The dollar
amount of the first variable annuity benefit payment then is divided by the
value of an Annuity Unit of the selected Sub-Accounts to determine the number of
Annuity Units represented by the first payment. This number of Annuity Units
remains fixed under all annuity options except the joint and two-thirds survivor
annuity option. For each subsequent payment, the dollar amount of the variable
annuity benefit payment is determined by multiplying this fixed number of
Annuity Units by the value of an Annuity Unit on the applicable Valuation Date.

After the first benefit payment, the dollar amount of each periodic variable
annuity benefit payment will vary with subsequent variations in the value of the
Annuity Unit of the selected Sub-Accounts. The dollar amount of each fixed
amount annuity benefit payment is fixed and will not change, except under the
joint and two-thirds survivor annuity option.

From time to time, the Company may offer Owners both fixed and variable annuity
rates more favorable than those contained in the Contract. Any such rates will
be applied uniformly to all Owners of the same class.

For an illustration of variable annuity benefit payment calculation using a
hypothetical example, see "ANNUITY BENEFIT PAYMENTS" in the SAI.

M. NORRIS DECISION

In the case of ARIZONA GOVERNING COMMITTEE V. NORRIS, the United States Supreme
Court ruled that, in connection with retirement benefit options offered under
certain employer-sponsored employee benefit plans, annuity options based on
sex-distinct actuarial tables are not permissible under Title VII of the

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Civil Rights Act of 1964. The ruling requires that benefits derived from
contributions paid into a plan after August 1, 1983 be calculated without regard
to the sex of the employee. Annuity benefits attributable to payments received
by the Company under a Contract issued in connection with an employer-sponsored
benefit plan affected by the NORRIS decision will be based on the greater of (1)
the Company's unisex non-guaranteed current annuity option rates, or (2) the
guaranteed unisex rates described in such Contract, regardless of whether the
Annuitant is male or female.

N. COMPUTATION OF VALUES

THE ACCUMULATION UNIT. Each net payment is allocated to the accounts selected
by the Owner. Allocations to the Sub-Accounts are credited to the Contract in
the form of Accumulation Units. Accumulation Units are credited separately for
each Sub-Account. The number of Accumulation Units of each Sub-Account credited
to the Contract is equal to the portion of the net payment allocated to the
Sub-Account, divided by the dollar value of the applicable Accumulation Unit as
of the Valuation Date the payment is received in good order at the Company's
Principal Office. The number of Accumulation Units resulting from each payment
will remain fixed unless changed by a subsequent split of Accumulation Unit
value, a transfer, a withdrawal, or surrender. The dollar value of an
Accumulation Unit of each Sub-Account varies from Valuation Date to Valuation
Date based on the investment experience of that Sub-Account, and will reflect
the investment performance, expenses and charges of its Portfolios. The value of
an Accumulation Unit at inception was set at $1.00 on the first Valuation Date
for each Sub-Account.

Allocations to Guarantee Period Accounts and the Fixed Account are not converted
into Accumulation Units, but are credited interest at a rate periodically set by
the Company. See "GUARANTEE PERIOD ACCOUNTS" and APPENDIX A, "MORE INFORMATION
ABOUT THE FIXED ACCOUNT."

The Accumulated Value under the Contract is determined by (1) multiplying the
number of Accumulation Units in each Sub-Account by the value of an Accumulation
Unit of that Sub-Account on the Valuation Date, (2) adding the products, and (3)
adding the amount of the accumulations in the Fixed Account and Guarantee Period
Accounts, if any.

NET INVESTMENT FACTOR. The Net Investment Factor is an index that measures the
investment performance of a Sub-Account from one Valuation Period to the next.
This factor is equal to 1.000000 plus the result from dividing (1) by (2) and
subtracting (3) and (4) where:

(1) is the investment income of a Sub-Account for the Valuation Period,
including realized or unrealized capital gains and losses during the
Valuation Period, adjusted for provisions made for taxes, if any;

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(2) is the value of that Sub-Account's assets at the beginning of the
Valuation Period;

(3) is a charge for mortality and expense risks equal to 1.25% on an annual
basis of the daily value of the Sub-Account's assets; and

(4) is an administrative charge equal to 0.15% on an annual basis of the daily
value of the Sub-Account's assets.

The dollar value of an Accumulation Unit as of a given Valuation Date is
determined by multiplying the dollar value of the corresponding Accumulation
Unit as of the immediately preceding Valuation Date by the appropriate net
investment factor. For an illustration of Accumulation Unit calculation using a
hypothetical example see the SAI.

CHARGES AND DEDUCTIONS

Deductions under the Contract and charges against the assets of the Sub-Accounts
are described below. Other deductions and expenses paid out of the assets of the
Underlying Portfolios are described in the prospectuses and SAIs of Kemper INFS
and Scudder VLIF.

A. VARIABLE ACCOUNT DEDUCTIONS

MORTALITY AND EXPENSE RISK CHARGE. The Company makes a daily charge equal to an
annual rate of 1.25% of the value of each Sub-Account's assets to cover the
mortality and expense risk which the Company assumes in relation to the variable
portion of the Contract. The charge is imposed during both the accumulation
period and the annuity payout period. The mortality risk arises from the
Company's guarantee that it will make annuity benefit payments in accordance
with annuity rate provisions established at the time the Contract is issued for
the life of the Annuitant (or in accordance with the annuity option selected),
no matter how long the Annuitant (or other individual) lives and no matter how
long all Annuitants as a class live. Therefore, the mortality charge is deducted
during the annuity payout period on all Contracts, including those that do not
involve a life contingency, even though the Company does not bear direct
mortality risk with respect to variable annuity settlement options that do not
involve life contingencies. The expense risk arises from the Company's guarantee
that the charges it makes will not exceed the limits described in the Contract
and in this Prospectus.

If the charge for mortality and expense risks is not sufficient to cover actual
mortality experience and expenses, the Company will absorb the losses. If
expenses are less than the amounts provided to the Company by the charge, the
difference will be a profit to the Company. To the extent this charge results in
a profit to the Company, such profit will be available for use by the Company
for,

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<PAGE>
among other things, the payment of distribution, sales and other expenses. The
Company intends to recoup commissions and other sales expenses through profits
from the Company's General Account, which may include amounts derived from
mortality and expense risk charges.

Since mortality and expense risks involve future contingencies which are not
subject to precise determination in advance, it is not feasible to identify
specifically the portion of the charge which is applicable to each.

ADMINISTRATIVE EXPENSE CHARGE. The Company assesses each Sub-Account with a
daily charge at an annual rate of 0.15% of the average daily net assets of the
Sub-Account. The charge is imposed during both the accumulation phase and the
annuity payout phase. The daily administrative expense charge is assessed to
help defray administrative expenses actually incurred in the administration of
the Sub-Account, without profits. There is no direct relationship, however,
between the amount of administrative expenses imposed on a given Contract and
the amount of expenses actually attributable to that Contract.

Deductions for the Contract fee (described under "B. Contract Fee") and for the
administrative expense charge are designed to reimburse the Company for the cost
of administration and related expenses and are not expected to be a source of
profit. The administrative functions and expense assumed by the Company in
connection with the Variable Account and the Contract include, but are not
limited to, clerical, accounting, actuarial and legal services, rent, postage,
telephone, office equipment and supplies, expenses of preparing and printing
registration statements, expense of preparing and typesetting prospectuses and
the cost of printing prospectuses not allocable to sales expense, filing and
other fees.

OTHER CHARGES. Because the Sub-Accounts hold shares of the Underlying
Portfolios, the value of the net assets of the Sub-Accounts will reflect the
investment advisory fee and other expenses incurred by the Underlying
Portfolios. The prospectuses and SAIs of the Underlying Portfolios contain
additional information concerning expenses of the Portfolios.

B. CONTRACT FEE

A $35 Contract fee currently is deducted on the Contract anniversary date and
upon full surrender of the Contract when the Accumulated Value is less than
$75,000. (This fee may vary by state. See your Contract for more information.)
Where Contract value has been allocated to more than one account, a percentage
of the total Contract fee will be deducted from the value in each account. The
portion of the charge deducted from each account will be equal to the percentage
which the value in that account bears to the Accumulated Value under the

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Contract. The deduction of the Contract fee from a Sub-Account will result in
cancellation of a number of Accumulation Units equal in value to the percentage
of the charge deducted from that account.

Where permitted by law, the Contract fee also may be waived for Contracts where,
on the issue date, either the Owner or the Annuitant is within the following
classes of individuals: employees and registered representatives of any
broker-dealer which has entered into a sales agreement with the Company to sell
the Contract; employees of the Company, its affiliates and subsidiaries;
officers, directors, trustees and employees of any of the Portfolios; investment
managers or Sub-Advisers; and the spouses of and immediate family members
residing in the same household with such eligible persons. "Immediate family
members" means children, siblings, parents and grandparents.

C. OPTIONAL ENHANCED DEATH BENEFIT RIDER CHARGE

Subject to state availability, the Company offers an optional Enhanced Death
Benefit Rider that may be elected by the Owner. A separate monthly charge is
made for the rider. On the last day of each month and on the date the rider is
terminated, a charge equal to 1/12th of an annual rate of 0.25% is made against
the Accumulated Value of the Contract at that time. The charge is deducted in
arrears and made through a pro-rata reduction (based on relative values in
Accumulation Units of the Sub-Accounts, of dollar amounts in the Fixed Account,
and of dollar amounts in the Guarantee Period Accounts).

For a description of this rider, see "G. Death Benefit" under "DESCRIPTION OF
THE CONTRACT," above.

D. PREMIUM TAXES

Some states and municipalities impose a premium tax on variable annuity
contracts. State premium taxes currently range up to 3.5%. The Company makes a
charge for state and municipal premium taxes, when applicable, and deducts the
amount paid as a premium tax charge. The current practice of the Company is to
deduct the premium tax charge in one of two ways:

1. if the premium tax was paid by the Company when payments were received, the
premium tax charge is deducted on a pro-rata basis when withdrawals are
made, upon surrender of the Contract, or when annuity benefit payments
begin (the Company reserves the right instead to deduct the premium tax
charge for these Contracts at the time the payments are received); or

2. the premium tax charge is deducted when annuity benefit payments begin.

In no event will a deduction be taken before the Company has incurred a tax
liability under applicable state law. If no amount for premium tax was deducted

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at the time the payment was received, but subsequently tax is determined to be
due prior to the Annuity Date, the Company reserves the right to deduct the
premium tax from the Contract value at the time such determination is made.

E. TRANSFER CHARGE

The Company currently makes no charge for processing transfers. The Company
guarantees that the first 12 transfers in a Contract year will be free of
transfer charge, but reserves the right to assess a charge, guaranteed never to
exceed $25, for each subsequent transfer in a Contract year. For more
information, see "D. Transfer Privilege" under "DESCRIPTION OF THE CONTRACT."

GUARANTEE PERIOD ACCOUNTS

Due to certain exemptive and exclusionary provisions in the securities laws,
interests in the Guarantee Period Accounts and the Fixed Account are not
registered as an investment company under the provisions of the Securities Act
of 1933 (the "1933 Act") or the 1940 Act. Accordingly, the staff of the SEC has
not reviewed the disclosures in this Prospectus relating to the Guarantee Period
Accounts or the Fixed Account. Nevertheless, disclosures regarding the Guarantee
Period Accounts and the Fixed Account of the Contract or any benefits offered
under these accounts may be subject to the provisions of the 1933 Act relating
to the accuracy and completeness of statements made in the Prospectus.

INVESTMENT OPTIONS. In most jurisdictions, there currently are nine Guarantee
Periods available under the Contract with durations of two, three, four, five,
six, seven, eight, nine and ten years. Each Guarantee Period Account established
for the Owner is accounted for separately in a non-unitized segregated account.
Each Guarantee Period Account provides for the accumulation of interest at a
Guaranteed Interest Rate. The Guaranteed Interest Rate on amounts allocated or
transferred to a Guarantee Period Account is determined from time to time by the
Company in accordance with market conditions; however, once an interest rate is
in effect for a Guarantee Period Account, the Company may not change it during
the duration of the Guarantee Period. In no event will the Guaranteed Interest
Rate be less than 3%.

To the extent permitted by law, the Company reserves the right at any time to
offer Guarantee Periods with durations that differ from those which were
available when a Contract initially was issued and to stop accepting new
allocations, transfers or renewals to a particular Guarantee Period. Owners may
allocate net payments or make transfers from any of the Sub-Accounts, the Fixed
Account or an existing Guarantee Period Account to establish a new Guarantee
Period Account at any time prior to the Annuity Date. (In Oregon and
Massachusetts, payments and transfers to the Fixed Account are subject to
certain restrictions. See APPENDIX A.) Transfers from a Guarantee Period Account
on any date

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other than on the day following the expiration of that Guarantee Period will be
subject to a Market Value Adjustment. The Company establishes a separate
investment account each time the Owner allocates or transfers amounts to a
Guarantee Period Account except that amounts allocated to the same Guarantee
Period on the same day will be treated as one Guarantee Period Account. The
minimum that may be allocated to establish a Guarantee Period Account is $1,000.
If less than $1,000 is allocated, the Company reserves the right to apply that
amount to the Kemper Money Market Portfolio. The Owner may allocate amounts to
any of the Guarantee Periods available.

At least 45 days (but not more than 75 days) prior to the end of a Guarantee
Period, the Company will notify the Owner in writing of the expiration of that
Guarantee Period. At the end of a Guarantee Period the Owner may transfer
amounts to the Sub-Accounts, the Fixed Account or establish a new Guarantee
Period Account of any duration then offered by the Company without a Market
Value Adjustment. If reallocation instructions are not received at the Principal
Office before the end of a Guarantee Period, the account value automatically
will be applied to a new Guarantee Period Account with the same duration unless
(1) less than $1,000 would remain in the Guarantee Period Account on its
expiration date, or (2) the Guarantee Period would extend beyond the Annuity
Date or is no longer available. In such cases, the Guarantee Period Account
value will be transferred to the Sub-Account investing in the Kemper Money
Market Portfolio. Where amounts have been renewed automatically in a new
Guarantee Period, it is the Company's current practice to give the Owner an
additional 30 days to transfer out of the Guarantee Period Account without
application of a Market Value Adjustment. This practice may be discontinued or
changed at the Company's discretion. Under contracts issued in New York, the
Company will transfer monies out of the Guarantee Period Account without
application of a Market Value Adjustment if the Owner's request is received
within ten days of the renewal date.

MARKET VALUE ADJUSTMENT. No Market Value Adjustment will be applied to
transfers, withdrawals or a surrender from a Guarantee Period Account on the
expiration of its Guarantee Period. In addition, no negative Market Value
Adjustment will be applied to a death benefit. However a positive Market Value
Adjustment, if any, will increase the value of the death benefit when based on
the Contract's Accumulated Value. See "G. Death Benefit." A Market Value
Adjustment will apply to all other transfers, withdrawals or a surrender.
Amounts applied under an annuity option are treated as withdrawals when
calculating the Market Value Adjustment. The Market Value Adjustment will be
determined by multiplying the amount taken from each Guarantee Period Account by
the market value factor. The market value factor for each Guarantee Period
Account is equal to:

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[(1+i)/(1+j)] to the power of n/365-1

<TABLE>
<S> <C>
where: i is the Guaranteed Interest Rate expressed as a decimal (for
example: 3% = 0.03) being credited to the current Guarantee
Period;

j is the new Guaranteed Interest Rate, expressed as a
decimal, for a Guarantee Period with a duration equal to the
number of years remaining in the current Guarantee Period,
rounded to the next higher number of whole years. If that
rate is not available, the Company will use a suitable rate
or index allowed by the Department of Insurance; and

n is the number of days remaining from the effective
Valuation Date to the end of the current Guarantee Period.
</TABLE>

Based on the application of this formula, the value of a Guarantee Period
Account will increase after the Market Value Adjustment is applied if the then
current market rates are lower than the rate being credited to the Guarantee
Period Account. Similarly, the value of a Guarantee Period Account will decrease
after the Market Value Adjustment is applied if the then current market rates
are higher than the rate being credited to the Guarantee Period Account. The
Market Value Adjustment is limited, however, so that even if the account value
is decreased after application of a Market Value Adjustment, it will equal or
exceed the Owner's principal plus 3% earnings per year less applicable Contract
fees. Conversely, if the then current market rates are lower and the account
value is increased after the Market Value Adjustment is applied, the increase in
value also is affected by the minimum guaranteed rate of 3% such that the amount
that will be added to the Guarantee Period Account is limited to the difference
between the amount earned and the 3% minimum guaranteed earnings. For examples
of how the Market Value Adjustment works, see APPENDIX B, "THE MARKET VALUE
ADJUSTMENT."

PROGRAM TO PROTECT PRINCIPAL AND PROVIDE GROWTH POTENTIAL. Under this feature,
the Owner elects a Guarantee Period and one or more Sub-Accounts. The Company
then will compute the proportion of the initial payment that must be allocated
to the Guarantee Period selected, assuming no transfers or withdrawals, in order
to ensure that on the last day of the Guarantee Period it will equal the amount
of the entire initial payment. The required amount then will be allocated to the
pre-selected Guarantee Period Account and the remaining balance to the other
investment options selected by the Owner in accordance with the procedures
described in "A. Payments."

WITHDRAWALS. Prior to the Annuity Date, the Owner may make withdrawals of
amounts held in the Guarantee Period Accounts. Withdrawals from these accounts
will be made in the same manner and be subject to the same rules as set forth
under "E. Surrender" and "F. Withdrawals." In addition, the following

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provisions also apply to withdrawals from a Guarantee Period Account: (1) a
Market Value Adjustment will apply to all withdrawals, unless made at the end of
the Guarantee Period; and (2) the Company reserves the right to defer payments
of amounts withdrawn from a Guarantee Period Account for up to six months from
the date it receives the withdrawal request. If deferred for 30 days or more,
the Company will pay interest on the amount deferred at a rate of at least 3%.

In the event that a Market Value Adjustment applies to a withdrawal of a portion
of the value of a Guarantee Period Account, it will be calculated on the amount
requested and deducted or added to the amount remaining in the Guarantee Period
Account. If the entire amount in a Guarantee Period Account is requested, the
adjustment will be made to the amount payable.

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FEDERAL TAX CONSIDERATIONS

The effect of federal income taxes on the value of the Contract, on withdrawals
or surrenders, on annuity benefit payments, and on the economic benefit to the
Owner, or beneficiary depends upon a variety of factors. The following
discussion is based upon the Company's understanding of current federal income
tax laws as they are interpreted as of the date of this Prospectus. No
representation is made regarding the likelihood of continuation of current
federal income tax laws or of current interpretations by the IRS.

IT SHOULD BE RECOGNIZED THAT THE FOLLOWING DISCUSSION OF FEDERAL INCOME TAX
ASPECTS OF AMOUNTS RECEIVED UNDER VARIABLE ANNUITY CONTRACTS IS NOT EXHAUSTIVE,
DOES NOT PURPORT TO COVER ALL SITUATIONS AND IS NOT INTENDED AS TAX ADVICE. A
QUALIFIED TAX ADVISER ALWAYS SHOULD BE CONSULTED WITH REGARD TO THE APPLICATION
OF LAW TO INDIVIDUAL CIRCUMSTANCES.

The Company intends to make a charge for any effect which the income, assets or
existence of the Contract, the Variable Account or the Sub-Accounts may have
upon its tax. The Variable Account presently is not subject to tax, but the
Company reserves the right to assess a charge for taxes should the Variable
Account at any time become subject to tax. Any charge for taxes will be assessed
on a fair and equitable basis in order to preserve equity among classes of
Owners and with respect to each separate account as though that separate account
were a separate taxable entity.

The Variable Account is considered a part of and taxed with the operations of
the Company. The Company is taxed as a life insurance company under Subchapter L
of the Code. The Company files a consolidated tax return with its affiliates.

Under Section 817(h) of the Code a variable annuity contract will not be treated
as an annuity contract for any period during which the investments made by the
Separate Account or Underlying Fund are not adequately diversified in accordance
with regulations prescribed by the Treasury Department. If a Contract is not
treated as an annuity contract, the income on a contract, for any taxable year
of an owner, would be treated as ordinary income received or accrued by the
owner. The IRS has issued regulations relating to the diversification
requirements for variable annuity and variable life insurance contracts under
Section 817(h) of the Code. The regulations provide that the investments of a
segregated asset account underlying a variable annuity contract are adequately
diversified if no more than 55% of the value of its assets is represented by any
one investment, no more than 70% by any two investments, no more than 80% by any
three investments, and no more than 90% by any four investments. It is
anticipated that the Portfolios will comply with the diversification
requirements.

In addition, in order for a variable annuity contract to qualify for tax
deferral, the Company, and not the variable contract owner, must be considered
to be the

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owner for tax purposes of the assets in the segregated asset account underlying
the variable annuity contract. In certain circumstances, however, variable
annuity contract owners may be considered the owners of these assets for federal
income tax purposes. Specifically, the IRS has stated in published rulings that
a variable annuity contract owner may be considered the owner of segregated
account assets if the contract owner possesses incidents of ownership in those
assets, such as the ability to exercise investment control over the assets. The
Treasury Department has also announced, in connection with the issuance of
regulations concerning investment diversification, that those regulations "do
not provide guidance governing the circumstances in which investor control of
the investments of a segregated asset account may cause the investor (i.e., the
contract owner), rather than the insurance company, to be treated as the owner
of the assets in the account." This announcement also states that guidance would
be issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular sub-accounts without being treated as
owners of the underlying assets." As of the date of this Prospectus, no such
guidance has been issued. The Company therefore additionally reserves the right
to modify the Contract as necessary in order to attempt to prevent a contract
owner from being considered the owner of a pro rata share of the assets of the
segregated asset account underlying the variable annuity contracts.

A. QUALIFIED AND NON-QUALIFIED CONTRACTS

From a federal tax viewpoint there are two types of variable annuity contracts:
"qualified" contracts and "non-qualified" contracts. A qualified contract is one
that is purchased in connection with a retirement plan which meets the
requirements of Sections 401, 403, or 408 of the Code, while a non-qualified
contract is one that is not purchased in connection with one of the indicated
retirement plans. The tax treatment for certain withdrawals or surrenders will
vary according to whether they are made from a qualified contract or a
non-qualified contract. For more information on the tax provisions applicable to
qualified Contracts, see "D. Provisions Applicable to Qualified Employer Plans."

B. TAXATION OF THE CONTRACT IN GENERAL

The Company believes that the Contract described in this Prospectus will, with
certain exceptions (see "Non-Natural Owners" below), be considered an annuity
contract under Section 72 of the Code. Please note, however, if the owner
chooses an Annuity Date beyond the Owner's 85th birthday, it is possible that
the Owner will be taxed on the annual increase in the Accumulated Value. The
Owner should consult tax and financial advisors for more information. This
section governs the taxation of annuities. The following discussion concerns
annuities subject to Section 72.

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WITHDRAWALS PRIOR TO ANNUITIZATION. With certain exceptions, any increase in
the Contract's Accumulated Value is not taxable to the Owner until it is
withdrawn from the Contract. If the Contract is surrendered or amounts are
withdrawn prior to the Annuity Date, any withdrawal of investment gain in value
over the cost basis of the Contract will be taxed as ordinary income. Under the
current provisions of the Code, amounts received under an annuity contract prior
to annuitization (including payments made upon the death of the annuitant or
owner), generally are first attributable to any investment gains credited to the
contract over the taxpayer's "investment in the contract." Such amounts will be
treated as gross income subject to federal income taxation. "Investment in the
contract" is the total of all payments to the Contract which were not excluded
from the Owner's gross income less any amounts previously withdrawn which were
not included in income. Section 72(e)(11)(A)(ii) requires that all non-qualified
deferred annuity contracts issued by the same insurance company to the same
owner during a single calendar year be treated as one contract in determining
taxable distributions.

ANNUITY PAYOUTS AFTER ANNUITIZATION. When annuity benefit payments are
commenced under the Contract, generally a portion of each payment may be
excluded from gross income. The excludable portion generally is determined by a
formula that establishes the ratio that the investment in the Contract bears to
the expected return under the Contract. The portion of the payment in excess of
this excludable amount is taxable as ordinary income. Once all the investment in
the Contract is recovered, the entire payment is taxable to the Owner, whether
or not the Owner is receiving the payments. If an Owner dies before the total
investment in the Contract is recovered, a deduction for the difference is
allowed on the Owner's final tax return.

PENALTY ON DISTRIBUTION. A 10% penalty tax may be imposed on the withdrawal of
investment gains if the withdrawal is made prior to age 59 1/2. The penalty tax
will not be imposed on withdrawals taken on or after age 59 1/2, or if the
withdrawal follows the death of the owner (or, if the owner is not an
individual, the death of the primary annuitant, as defined in the Code) or, in
the case of the owner's "total disability" (as defined in the Code).
Furthermore, under Section 72 of the Code, this penalty tax will not be imposed,
irrespective of age, if the amount received is one of a series of "substantially
equal" periodic payments made at least annually for the life or life expectancy
of the Owner. This requirement is met when the owner elects to have
distributions made over the owner's life expectancy, or over the joint life
expectancy of the owner and beneficiary. The requirement that the amount be paid
out as one of a series of "substantially equal" periodic payments is met when
the number of units withdrawn to make each distribution is substantially the
same. Any modification, other than by reason of death or disability, of
distributions which are part of a series of substantially equal periodic
payments that occurs before the owner's age

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59 1/2 or five years, will subject the owner to the 10% penalty tax on the prior
distributions. In addition to the exceptions above, the penalty tax will not
apply to withdrawals from a qualified contract made to an employee who has
terminated employment after reaching age 55.

In a Private Letter Ruling, the IRS took the position that where distributions
from a variable annuity contract were determined by amortizing the accumulated
value of the contract over the taxpayer's remaining life expectancy (such as
under the Contract's LED option), and the option could be changed or terminated
at any time, the distributions failed to qualify as part of a "series of
substantially equal payments" within the meaning of Section 72 of the Code. The
distributions, therefore, were subject to the 10% federal penalty tax. This
Private Letter Ruling may be applicable to an Owner who receives distributions
under the LED option prior to age 59 1/2. Subsequent Private Letter Rulings,
however, have treated LED-type withdrawal programs as effectively avoiding the
10% penalty tax. The position of the IRS on this issue is unclear.

ASSIGNMENTS OR TRANSFERS. If the Owner transfers (assigns) the Contract to
another individual as a gift prior to the Annuity Date, the Code provides that
the Owner will incur taxable income at the time of the transfer. An exception is
provided for certain transfers between spouses. The amount of taxable income
upon such taxable transfer is equal to any investment gain in value over the
Owner's cost basis at the time of the transfer. The transfer also is subject to
federal gift tax provisions.

NON-NATURAL OWNERS. As a general rule, deferred annuity contracts owned by
"non-natural persons" (e.g., a corporation) are not treated as annuity contracts
for federal tax purposes, and the investment income attributable to
contributions made after February 28, 1986 is taxed as ordinary income that is
received or accrued by the owner during the taxable year. This rule does not
apply to annuity contracts purchased with a single payment when the annuity date
is no later than a year from the issue date or to deferred annuities owned by
qualified employer plans, estates, employers with respect to a terminated
pension plan, and entities other than employers, such as a trust, holding an
annuity as an agent for a natural person. This exception, however, will not
apply in cases of any employer who is the owner of an annuity contract under a
non-qualified deferred compensation plan.

DEFERRED COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT
ORGANIZATIONS. Under Section 457 of the Code, deferred compensation plans
established by governmental and certain other tax-exempt employers for their
employees may invest in annuity contracts. Contributions and investment earnings
are not taxable to employees until distributed; however, with respect to
payments made after February 28, 1986, a contract owned by a state

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or local government or a tax-exempt organization will not be treated as an
annuity under Section 72 as well. In addition, plan assets are treated as
property of the employer and are subject to the claims of the employer's general
creditors.

C. TAX WITHHOLDING

The Code requires withholding with respect to payments or distributions from
non-qualified contracts and IRAs, unless a taxpayer elects not to have
withholding. A 20% withholding requirement applies to distributions from most
other qualified contracts. In addition, the Code requires reporting to the IRS
of the amount of income received with respect to payment or distributions from
annuities.

The tax treatment of certain withdrawals or surrenders of the non-qualified
Contracts offered by this Prospectus will vary according to whether the amount
withdrawn or surrendered is allocable to an investment in the Contract made
before or after certain dates.

D. PROVISIONS APPLICABLE TO QUALIFIED EMPLOYER PLANS

The tax rules applicable to qualified employer plans, as defined by the Code,
are complex and vary according to the type of plan. Benefits under a qualified
plan may be subject to that plan's terms and conditions irrespective of the
terms and conditions of any annuity contract used to fund such benefits. As
such, the following is simply a general description of various types of
qualified plans that may use the Contract. Before purchasing any annuity
contract for use in funding a qualified plan, more specific information should
be obtained.

A qualified Contract may include special provisions (endorsements) changing or
restricting rights and benefits otherwise available to the Owner of a
non-qualified Contract. Individuals purchasing a qualified Contract should
carefully review any such changes or limitations which may include restrictions
to ownership, transferability, assignability, contributions and distributions.

CORPORATE AND SELF-EMPLOYED ("H.R. 10" AND "KEOGH") PENSION AND PROFIT SHARING
PLANS. Sections 401(a), 401(k) and 403(a) of the Code permit business employers
and certain associations to establish various types of tax-favored retirement
plans for employees. The Self-Employed Individuals' Tax Retirement Act of 1962,
as amended, permits self-employed individuals to establish similar plans for
themselves and their employees. Employers intending to use qualified Contracts
in connection with such plans should seek competent advice as to the suitability
of the Contract to their specific needs and as to applicable Code limitations
and tax consequences.

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The Company can provide prototype plans for certain pension or profit sharing
plans for review by the plan's legal counsel. For information, ask your
financial representative.

INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity ("IRA"). Note: this term covers all IRAs permitted
under Section 408(b) of the Code, including Roth IRAs. IRAs are subject to
limits on the amounts that may be contributed, the persons who may be eligible,
and on the time when distributions may commence. In addition, certain
distributions from other types of retirement plans may be "rolled over," on a
tax-deferred basis, to an IRA. Purchasers of an IRA Contract will be provided
with supplementary information as may be required by the IRS or other
appropriate agency, and will have the right to revoke the Contract as described
in this Prospectus. See "B. Right to Revoke Individual Retirement Annuity."
Eligible employers that meet specified criteria may establish simplified
employee pension plans (SEP-IRAs) or SIMPLE IRA plans for their employees using
IRAs. Employer contributions that may be made to such plans are larger than the
amounts that may be contributed to regular IRAs, and may be deductible to the
employer.

TAX-SHELTERED ANNUITIES ("TSAS"). Under the provisions of Section 403(b) of the
Code, payments made to annuity contracts purchased for employees under annuity
plans adopted by public school systems and certain organizations which are tax
exempt under Section 501(c)(3) of the Code are excludable from the gross income
of such employees to the extent that total annual payments do not exceed the
maximum contribution permitted under the Code. Purchasers of TSA Contracts
should seek competent advice as to eligibility, limitations on permissible
payments and other tax consequences associated with the Contracts.

Withdrawals or other distributions attributable to salary reduction
contributions (including earnings thereon) made to a TSA Contract after December
31, 1988, may not begin before the employee attains age 59 1/2, separates from
service, dies or becomes disabled. In the case of hardship, an Owner may
withdraw amounts contributed by salary reduction, but not the earnings on such
amounts. Even though a distribution may be permitted under these rules (e.g.,
for hardship or after separation from service), it may be subject to a 10%
penalty tax as a premature distribution, in addition to income tax.

TEXAS OPTIONAL RETIREMENT PROGRAM. Distributions under a TSA Contract issued to
participants in the Texas Optional Retirement Program may not be received except
in the case of the participant's death, retirement or termination of employment
in the Texas public institutions of higher education. These additional
restrictions are imposed under the Texas Government Code and a prior opinion of
the Texas Attorney General.

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REPORTS

An Owner is sent a report semi-annually which states certain financial
information about the Portfolios. The Company also will furnish an annual report
to the Owner containing a statement of his or her account, including unit values
and other information as required by applicable law, rules and regulations.

LOANS (QUALIFIED CONTRACTS ONLY)

Loans are available to owners of TSA Contracts (i.e., contracts issued under
Section 403(b) of the Code) and to Contracts issued to plans qualified under
Sections 401(a) and 401(k) of the Code. Loans are subject to provisions of the
Code and to applicable qualified retirement plan rules. Tax advisors and plan
fiduciaries should be consulted prior to exercising loan privileges.

Loaned amounts will be withdrawn first from Sub-Account and Fixed Account values
on a pro-rata basis until exhausted. Thereafter, any additional amounts will be
withdrawn from the Guarantee Period Accounts (pro-rata by duration and LIFO
within each duration), subject to any applicable Market Value Adjustments. The
maximum loan amount will be determined under the Company's maximum loan formula.
The minimum loan amount is $1,000. Loans will be secured by a security interest
in the Contract and the amount borrowed will be transferred to a loan asset
account within the Company's General Account, where it will accrue interest at a
specified rate below the then current loan rate. Generally, loans must be repaid
within five years or less, and repayments must be made quarterly and in
substantially equal amounts. Repayments will be allocated pro rata in accordance
with the most recent payment allocation, except that any allocations to a
Guarantee Period Account will be allocated to the Kemper Money Market Portfolio
instead.

ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS

The Company reserves the right, subject to applicable law to make additions to,
deletions from, or substitutions for the shares that are held in the
Sub-Accounts or that the Sub-Accounts may purchase. If the shares of any
Portfolio no longer are available for investment or if in the Company's judgment
further investment in any Portfolio should become inappropriate in view of the
purposes of the Variable Account or the affected Sub-Account, the Company may
redeem the shares of that Portfolio and substitute shares of another registered
open-end management company. The Company will not substitute any shares
attributable to a Contract interest in a Sub-Account without notice to the Owner
and prior approval of the SEC and state insurance authorities, to the extent
required by the 1940 Act or other applicable law. The Variable Account may, to
the extent permitted by law, purchase other securities for other contracts or
permit a conversion between contracts upon request by an Owner.

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The Company also reserves the right to establish additional sub-accounts of the
Variable Account, each of which would invest in shares corresponding to a new
portfolio or in shares of another investment company having a specified
investment objective. Subject to applicable law and any required SEC approval,
the Company may, in its sole discretion, establish new sub-accounts or eliminate
one or more Sub-Accounts if marketing needs, tax considerations or investment
conditions warrant. Any new sub-accounts may be made available to existing
Owners on a basis to be determined by the Company.

Shares of the Portfolios also are issued to separate accounts of other insurance
companies which issue variable life contracts ("mixed funding"). Shares of the
Portfolios also are 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 owners or variable annuity
owners. Although the Company, Kemper INFS and Scudder VLIF do not currently
foresee any such disadvantages to either variable life insurance owners or
variable annuity owners, the Company and the trustees of Kemper INFS and Scudder
VLIF intend to monitor events in order to identify any material conflicts
between such Owners and to determine what action, if any, should be taken in
response thereto. If the trustees were to conclude that separate portfolios
should be established for variable life and variable annuity separate accounts,
the Company will bear the attendant expenses.

If any of these substitutions or changes is made, the Company may, by
appropriate endorsement, change the Contract to reflect the substitution or
change, and will notify Owners of all such changes. If the Company deems it to
be in the best interest of Owners, and subject to any approvals that may be
required under applicable law, the Variable Account or any Sub-Accounts may be
operated as a management company under the 1940 Act, may be deregistered under
the 1940 Act if registration no longer is required, or may be combined with
other sub-accounts or other separate accounts of the Company.

The Company reserves the right, subject to compliance with applicable law and to
the provisions of the Participation Agreements to (1) transfer assets from the
Variable Account or Sub-Account to another of the Company's variable accounts or
sub-accounts having assets of the same class, (2) to operate the Variable
Account or any Sub-Account as a management investment company under the 1940 Act
or in any other form permitted by law, (3) to deregister the Variable Account
under the 1940 Act in accordance with the requirements of the 1940 Act, (4) to
substitute the shares of any other registered investment company for the
Portfolio shares held by a Sub-Account, in the event that Portfolio shares are
unavailable for investment, or if the Company determines that further investment
in such Portfolio shares is inappropriate in view of the purpose of the Sub-
Account, (5) to change the methodology for determining the net investment

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factor, and (6) to change the names of the Variable Account or of the Sub-
Accounts. In no event will the changes described be made without notice to
Owners in accordance with the 1940 Act.

CHANGES TO COMPLY WITH LAW AND AMENDMENTS

The Company reserves the right, without the consent of Owners, to suspend sales
of the Contract as presently offered. The Company also reserves the right to
make any change to provisions of the Contract to comply with, or give Owners the
benefit of, any federal or state statute, rule or regulation, including but not
limited to requirements for annuity contracts and retirement plans under the
Code. Any such changes will apply uniformly to all Contracts that are affected.
You will be given written notice of such changes.

VOTING RIGHTS

The Company will vote Portfolio shares held by each Sub-Account in accordance
with instructions received from Owners. Each person having a voting interest in
a Sub-Account will be provided with proxy materials of the Portfolio, together
with a form with which to give voting instructions to the Company. Shares for
which no timely instructions are received will be voted in proportion to the
instructions which are received. The Company also will vote shares in a Sub-
Account that it owns and which are not attributable to the Contract in the same
proportion. If the 1940 Act or any rules thereunder should be amended, or if the
present interpretation of the 1940 Act or such rules should change, and as a
result the Company determines that it is permitted to vote shares in its own
right (whether or not such shares are attributable to the Contract) the Company
reserves the right to do so.

The number of votes which an Owner may cast will be determined by the Company as
of the record date established by the Portfolio. During the accumulation phase,
the number of Portfolio shares attributable to each Owner will be determined by
dividing the dollar value of the Accumulation Units of the Sub-Account credited
to the Contract by the net asset value of one Portfolio share. During the
annuity payout phase, the number of Portfolio shares attributable to each Owner
will be determined by dividing the reserve held in each Sub-Account for the
Owner's variable annuity by the net asset value of one Portfolio share.
Ordinarily, the Owner's voting interest in the Portfolio will decrease as the
reserve for the variable annuity is depleted.

DISTRIBUTION

The Contract offered by this Prospectus may be purchased from certain
independent broker-dealers, including representatives of Allmerica Investments,
Inc. (the

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Principal Underwriter) which are registered under the Securities Exchange Act of
1934 and are members of the National Association of Securities Dealers, Inc.
("NASD").

The Company pays commissions, not to exceed 1.0% of payments, to broker-dealers
which sell the Contract, plus ongoing annual compensation of up to 1% of
Contract value. To the extent permitted by NASD rules, promotional incentives or
payments also may be provided to such broker-dealers based on sales volumes, the
assumption of wholesaling functions, or other sales-related criteria. Additional
payments may be made for other services not directly related to the sale of the
Contract, including the recruitment and training of personnel, production of
promotional literature, and similar services.

Owners may direct any inquiries to their financial representative or to
Allmerica Investments, Inc., 440 Lincoln Street, Worcester, MA 01653, Telephone
1-800-782-8380.

SERVICES

The Company receives fees from the investment advisers or other service
providers of certain Underlying Portfolios in return for providing certain
services to Owners. Currently, the Company receives service fees with respect to
the Scudder International Portfolio, Scudder Global Discovery Portfolio, Scudder
Capital Growth Portfolio and Scudder Growth and Income Portfolio. The Company
receives service fees at an annual rate of 0.15% per annum of the aggregate net
asset value of shares held by the Variable Account. The Company may in the
future render services for which it will receive compensation from the
investment advisers or other service providers of other Underlying Portfolios.

LEGAL MATTERS

There are no legal proceedings pending to which the Variable Account, its
principal underwriter or the Company is a party.

YEAR 2000 COMPLIANCE

The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities.

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Based on a third party assessment, the Company determined that significant
portions of its software required modification or replacement to enable its
computer systems to properly process dates beyond December 31, 1999. The Company
is presently completing the process of modifying or replacing existing software
and believes that this action will resolve the Year 2000 issue. However, if such
modifications and conversions are not made, or are not completed timely, or
should there be serious unanticipated interruptions from unknown sources, the
Year 2000 issue could have a material adverse impact on the operations of the
Company. Specifically, the Company could experience, among other things, an
interruption in its ability to collect and process premiums, process claim
payments, safeguard and manage its invested assets, accurately maintain
policyholder information, accurately maintain accounting records, and perform
customer service. Any of these specific events, depending on duration, could
have a material adverse impact on the results of operations and the financial
position of the Company.

The Company has initiated formal communications with all of its significant
suppliers and large customers to determine the extent to which the Company is
vulnerable to those third parties' failure to remediate their own Year 2000
issue. The Company's total Year 2000 project cost and estimates to complete the
project include the estimated costs and time associated with the impact of a
third party's Year 2000 issue, and are based on presently available information.
However, there can be no guarantee that the systems of other companies on which
the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have material adverse effect on the Company. The
Company does not believe that it has material exposure to contingencies related
to the Year 2000 issue for the products it has sold. Although the Company does
not believe that there is a material contingency associated with the Year 2000
project, there can be no assurance that exposure for material contingencies will
not arise.

The Company will utilize both internal and external resources to reprogram or
replace, and test both information technology and embedded technology systems
for Year 2000 modifications. The Company plans to complete the mission critical
elements of the Year 2000 by December 31, 1998. The cost of the Year 2000
project will be expensed as incurred over the next two years and is being funded
primarily through a reallocation of resources from discretionary projects.
Therefore, the Year 2000 project is not expected to result in any significant
incremental technology cost and is not expected to have a material effect on the
results of operations. Through September 30, 1998, the Company and its
subsidiaries and affiliates have incurred and expensed approximately $47 million
related to the assessment of, and preliminary efforts in connection with, the
project and the development of a remediation plan. The total remaining cost of
the project is estimated at between $30-40 million.

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The costs of the project and the date on which the Company plans to complete the
Year 2000 modifications are based on management's best estimates, which were
derived utilizing numerous assumptions of future events including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans. Specific
factors that might cause such material differences include, but are not limited
to, the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, and similar uncertainties.

FURTHER INFORMATION

A Registration Statement under the 1933 Act relating to this offering has been
filed with the SEC. Certain portions of the Registration Statement and
amendments have been omitted in this Prospectus pursuant to the rules and
regulations of the SEC. The omitted information may be obtained from the SEC's
principal office in Washington, DC, upon payment of the SEC's prescribed fees.

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APPENDIX A
MORE INFORMATION ABOUT THE FIXED ACCOUNT

Because of exemption and exclusionary provisions in the securities laws,
interests in the Fixed Account generally are not subject to regulation under the
provisions of the 1933 Act or the 1940 Act. Disclosures regarding the fixed
portion of the Contract and the Fixed Account may be subject to the provisions
of the 1933 Act concerning the accuracy and completeness of statements made in
this Prospectus. The disclosures in this APPENDIX A have not been reviewed by
the SEC.

The Fixed Account is part of the Company's General Account which is made up of
all of the general assets of the Company other than those allocated to separate
accounts. Allocations to the Fixed Account become part of the assets of the
Company, and are used to support insurance and annuity obligations. A portion or
all of net payments may be allocated to accumulate at a fixed rate of interest
in the Fixed Account. Such net amounts are guaranteed by the Company as to
principal and a minimum rate of interest. Under the Contract, the minimum
interest which may be credited on amounts allocated to the Fixed Account is 3%
compounded annually. Additional "Excess Interest" may or may not be credited at
the sole discretion of the Company.

If an allocation designated as a Fixed Account allocation is received at the
Principal Office during a period when the Fixed Account is not available due to
the limitations outlined above, the monies will be allocated to the Kemper Money
Market Portfolio.

To the extent permitted by state law, the Company reserves the right, from time
to time, to credit an enhanced interest rate to certain initial and/or
subsequent payments ("eligible payments") which are deposited into the Fixed
Account under an Automatic Transfer Option (Dollar Cost Averaging election) that
uses the Fixed Account as the source account from which automatic transfers are
then processed. The following are not considered eligible payments: amounts
transferred into the Fixed Account from the Variable Account and/or the
Guarantee Period Accounts; amounts already in the Fixed Account at the time an
eligible payment is deposited and amounts transferred to the Contract from
another annuity contract issued by the Company.

An eligible payment must be automatically transferred out of the Fixed Account
over a continuous six month period. The enhanced rate will apply during the six
month period to any portion of the eligible payment remaining in the Fixed
Account. Amounts automatically transferred out of the Fixed Account will no
longer earn the enhanced rate of interest and, as of the date of transfer, will
be subject to the variable investment performance of the sub-account(s)
transferred into. If the automatic transfer option is terminated prior to the
end of the six month period, the enhanced rate will no longer apply. The Company
reserves the right to extend the period of time that the enhanced rate will
apply.

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APPENDIX B
THE MARKET VALUE ADJUSTMENT

MARKET VALUE ADJUSTMENT - The following are examples of how the Market Value
Adjustment works:

The market value factor is: [(1+i)/(1+j)] to the power of n/365-1

The following examples assume:

1. The payment was allocated to a ten-year Guarantee Period Account with a
Guaranteed Interest Rate of 8%.

2. The date of surrender is seven years (2,555 days) from the expiration
date.

3. The value of the Guarantee Period Account is equal to $62,985.60 at the
end of three years.

4. No transfers or withdrawals affecting this Guarantee Period Account have
been made.

NEGATIVE MARKET VALUE ADJUSTMENT (UNCAPPED)

Assume that on the date of surrender, the current rate (j) is 10.00% or 0.10

The market value factor = [(1+i)/(1+j)] to the power of n/365-1
= [(1+.08)/(1+.10)] to the power of 2555/365-1
= (.98182) to the power of 7-1
= -1.12054

The market value adjustment = the market value factor multiplied by the
withdrawal

= .12054 X $62,985.60
= -$7,592.11

POSITIVE MARKET VALUE ADJUSTMENT (UNCAPPED)

Assume that on the date of surrender, the current rate (j) is 7.00% or 0.07

The market value factor = [(1+i)/(1+j)] to the power of n/365-1
= [(1+.08)/(1+.07)] to the power of 2555/365-1
= (1.0093) to the power of 7-1
= .06694

The market value adjustment = the market value factor multiplied by the
withdrawal

= .06694 X $62,985.60
= $4,216.26

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NEGATIVE MARKET VALUE ADJUSTMENT (CAPPED)

Assume that on the date of surrender, the current rate (j) is 11.00% or 0.11

The market value factor = [(1+i)/(1+j)] to the power of n/365-1
= [(1+.08)/(1+.11)] to the power of 2555/365-1
= (.97297) to the power of 7-1
= -.17454

The market value adjustment = Minimum of the market value factor multiplied by
the withdrawal or the negative of the excess
interest earned over 3%

= Minimum of (-.17454X$62,985.60 or -$8,349.25)
= Minimum of (-$10,993.51 or -$8,349.25)
= -$8,349.25

POSITIVE MARKET VALUE ADJUSTMENT (CAPPED)

Assume that on the date of surrender, the current rate (j) is 6.00% or 0.06

The market value factor = [(1+i)/(1+j)]n/365-1
= [(1+.08)/(1+.06)]2555/365-1
= (1.01887)7-1
= .13981

The market value adjustment = Minimum of the market value factor multiplied by
the withdrawal or the excess interest earned over
3%

= Minimum of (.13981X$62,985.60 or $8,349.25)
= Minimum of ($8,806.02 or $8,349.25)
= $8,349.25

B-2