SEPARATE ACCOUNT FUVUL OF ALLMERICA FINAN LIFE INS & ANNU CO, 497, 2000-05-02

SEPARATE ACCOUNT FUVUL OF ALLMERICA FINAN LIFE INS & ANNU CO
497, 2000-05-02

Previous: MEDSITE COM INC, S-1/A, 2000-05-02

Next: PEPPERCORN INDUSRIAL CORP, 10KSB, 2000-05-02

<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
WORCESTER, MASSACHUSETTS
INDIVIDUAL FLEXIBLE PAYMENT VARIABLE LIFE INSURANCE POLICIES

This Prospectus provides important information about an individual flexible
payment variable life insurance policy issued by Allmerica Financial Life
Insurance and Annuity Company. The policies are funded through the Separate
Account FUVUL, a separate investment account of the Company that is referred to
as the Variable Account. PLEASE READ THIS PROSPECTUS CAREFULLY BEFORE INVESTING
AND KEEP IT FOR FUTURE REFERENCE.

The Separate Account is subdivided into Sub-Accounts. Each Sub-Account invests
exclusively in shares of one of the following Funds:

<TABLE>
<S> <C>
AIM VARIABLE INSURANCE FUNDS FEDERATED INSURANCE SERIES
AIM V.I. Capital Appreciation Fund Federated American Leaders Fund II
AIM V.I. Value Fund Federated High Income Bond Fund II
THE ALGER AMERICAN FUND Federated Prime Money Fund II
Alger American Growth Portfolio FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS
Alger American Leveraged AllCap Portfolio TRUST (CLASS 2)
Alger American Small Capitalization Portfolio Templeton Asset Strategy Fund
ALLMERICA INVESTMENT TRUST Templeton International Securities Fund
AIT Money Market Fund MFS - VARIABLE INSURANCE TRUST-SM-
DREYFUS VARIABLE INVESTMENT FUND MFS - Growth with Income Series
Dreyfus VIF Appreciation Portfolio MFS - Utilities Series
Dreyfus VIF Quality Bond Portfolio OPPENHEIMER VARIABLE ACCOUNT FUNDS
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH Oppenheimer Main Street Growth & Income Fund/VA
FUND, INC. Oppenheimer Small Cap Growth Fund/VA
Dreyfus Socially Responsible Growth Fund Oppenheimer Strategic Bond Fund/VA
EVERGREEN VARIABLE ANNUITY TRUST
Evergreen VA Equity Index Fund
Evergreen VA Foundation Fund
Evergreen VA Global Leaders Fund
Evergreen VA Small Cap Value Fund
</TABLE>

Policy owners may choose the amount of initial payment and vary the frequency
and amount of future payments, within limits. The Policy allows partial
withdrawals and full surrender of the Policy's Surrender Value, within limits.

THE POLICIES ARE NOT SUITABLE FOR SHORT-TERM INVESTMENT. VARIABLE LIFE POLICIES
INVOLVE RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL. IT MAY NOT BE ADVANTAGEOUS
TO REPLACE EXISTING INSURANCE WITH THE POLICY. THIS LIFE POLICY IS NOT: A BANK
DEPOSIT OR OBLIGATION; OR FEDERALLY INSURED; OR ENDORSED BY ANY BANK OR
GOVERNMENTAL AGENCY.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED THAT THE INFORMATION IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

This Prospectus can also be obtained from the Securities and Exchange
Commission's website (http://www.sec.gov).

<TABLE>
<S> <C>
CORRESPONDENCE MAY BE MAILED TO: DATED MAY 1, 2000
ALLMERICA LIFE WORCESTER, MASSACHUSETTS 01653
P.O. BOX 8179 (508) 855-1000
BOSTON, MA 02266-8179
</TABLE>

<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
SPECIAL TERMS............................................... 4
SUMMARY OF FEES AND CHARGES................................. 7
SUMMARY OF POLICY FEATURES.................................. 12
DESCRIPTION OF THE COMPANY, THE VARIABLE ACCOUNT AND THE
UNDERLYING FUNDS............................................ 18
INVESTMENT OBJECTIVES AND POLICIES.......................... 20
THE POLICY.................................................. 23
Applying for a Policy..................................... 23
Free-Look Period.......................................... 23
Conversion Privilege...................................... 24
Payments.................................................. 24
Allocation of Payments.................................... 25
Transfer Privilege........................................ 25
Death Benefit............................................. 26
Election of Death Benefit Options......................... 27
Changing Between Death Benefit Option 1 and
Death Benefit 2......................................... 30
Guaranteed Death Benefit Rider............................ 31
Change in Face Amount..................................... 32
Policy Value.............................................. 33
Payment Options........................................... 34
Optional Insurance Benefits............................... 34
Surrender................................................. 34
Partial Withdrawal........................................ 35
CHARGES AND DEDUCTIONS...................................... 36
Monthly Charges (The Monthly Deduction)................... 36
Computing Monthly Policy Charges.......................... 37
Fund Expenses............................................. 39
Partial Withdrawal Transaction Charge..................... 39
Transfer Charges.......................................... 39
Other Administrative Charges.............................. 39
POLICY LOANS................................................ 40
Preferred Loan Option..................................... 40
Repayment of Outstanding Loan............................. 40
Effect of Policy Loans.................................... 41
POLICY TERMINATION AND REINSTATEMENT........................ 41
Termination............................................... 41
Reinstatement............................................. 41
OTHER POLICY PROVISIONS..................................... 42
Policy Owner.............................................. 42
Beneficiary............................................... 42
Assignment................................................ 42
Limit on Right to Challenge Policy........................ 43
Suicide................................................... 43
Misstatement of Age or Sex................................ 43
Delay of Payments......................................... 43
FEDERAL TAX CONSIDERATIONS.................................. 43
The Company and The Variable Account...................... 44
Taxation of The Policies.................................. 44
Policy Loans.............................................. 44
Modified Endowment Policies............................... 45
VOTING RIGHTS............................................... 45
</TABLE>

2
<PAGE>

<TABLE>
<S> <C>
DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY............. 46
DISTRIBUTION................................................ 47
REPORTS..................................................... 48
LEGAL PROCEEDINGS........................................... 48
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS........... 48
FURTHER INFORMATION......................................... 49
MORE INFORMATION ABOUT THE FIXED ACCOUNT.................... 49
General Description....................................... 49
Fixed Account Interest and Policy Loans................... 50
Partial Withdrawals and Transfers......................... 50
INDEPENDENT ACCOUNTANTS..................................... 50
FINANCIAL STATEMENTS........................................ 50
APPENDIX A -- GUIDELINE MINIMUM DEATH BENEFIT FACTORS
TABLE....................................................... A-1
APPENDIX B -- OPTIONAL INSURANCE BENEFITS................... B-1
APPENDIX C -- GUARANTEED MONTHLY POLICY CHARGE RATES........ C-1
APPENDIX D -- ILLUSTRATIONS................................. D-1
FINANCIAL STATEMENTS........................................ FIN-1
</TABLE>

3
<PAGE>
SPECIAL TERMS

AGE: how old the Insured is on the birthday closest to a Policy anniversary.

BENEFICIARY: the person or persons you name to receive the Net Death Benefit
when the Insured dies.

COMPANY: Allmerica Financial Life Insurance and Annuity Company. "We," "our,"
"us," and "the Company" refer to Allmerica Financial Life Insurance and Annuity
Company in this Prospectus.

DATE OF ISSUE: the date the Policy was issued, used to measure the monthly
processing date, Policy months, Policy years and Policy anniversaries.

DEATH BENEFIT: the amount payable when the Insured dies prior to the Final
Payment Date, before deductions for any Outstanding Loan, partial withdrawals,
partial withdrawal transaction charge, and due and unpaid Monthly Deductions.

EVIDENCE OF INSURABILITY: information, including medical information, used to
decide the Insured's underwriting class.

FACE AMOUNT: the amount of insurance coverage applied for. The initial Face
Amount is shown in your Policy.

FINAL PAYMENT DATE: the Policy anniversary nearest the Insured's 100th birthday.
After this date, no payments may be made. The Net Death Benefit may be different
before and after the Final Payment Date. See NET DEATH BENEFIT.

FIXED ACCOUNT: a guaranteed account of the general account that guarantees
principal and a fixed interest rate.

FUNDS (UNDERLYING FUNDS): a subdivision of the Variable Account investing
exclusively in the shares of a corresponding portfolios of AIM Variable
Insurance Funds, The Alger American Fund, Allmerica Investment Trust, Dreyfus
Variable Investment Fund, Dreyfus Socially Responsible Growth Fund, Inc.,
Evergreen Variable Annuity Trust, Federated Insurance Series, Franklin Templeton
Variable Insurance Products Trust, MFS Variable Insurance Trust, and Oppenheimer
Variable Account Funds.

GENERAL ACCOUNT: all our assets other than those held in a separate investment
account.

GUIDELINE MINIMUM DEATH BENEFIT: the minimum death benefit required to qualify
the Policy as "life insurance" under federal tax laws. The Guideline Minimum
Death Benefit is the PRODUCT of:

- the Policy Value TIMES

- a percentage factor.

The percentage factor is a percentage that, when multiplied by the Policy Value,
determines the minimum death benefit required under federal tax laws. If Death
Benefit Option 3 is in effect, the percentage factor is based on the Insured's
attained age, sex, and underwriting class, as set forth in the Policy. If Death
Benefit Option 1 or Death Benefit Option 2 is in effect, the percentage factor
is based on the Insured's attained age, as set forth in APPENDIX A, Guideline
Minimum Death Benefit Factors Table.

INSURANCE AMOUNT: the death benefit less the Policy Value.

LOAN VALUE: the maximum amount you may borrow under the Policy.

4
<PAGE>
MINIMUM MONTHLY PAYMENT: a monthly amount shown in your Policy. If you pay this
amount, we guarantee that your Policy will not lapse before the 49th monthly
processing date from the Date of Issue or increase in Face Amount, within
limits.

MONTHLY PROCESSING DATE: the date, shown in your Policy, when Monthly Deductions
are taken from Policy Value.

NET DEATH BENEFIT: Before the Final Payment Date, the Net Death Benefit is:

- the death benefit under either Death Benefit Option 1, Death Benefit
Option 2, or Death Benefit Option 3, MINUS

- any Outstanding Loan on the Insured's death, partial withdrawals, partial
withdrawal transaction charge, and due and unpaid Monthly Deductions.

Where permitted by state law, we will compute the Net Death Benefit on the date
we receive due proof of the Insured's death under Death Benefit Option 2 and on
the date of death for Death Benefit Options 1 and 3. If required by state law,
we will compute the Net Death Benefit on the date of death for Death Benefit
Option 2.

After the Final Payment Date, the Net Death Benefit generally is:

- the Policy Value MINUS

- any Outstanding Loan.

If the Guaranteed Death Benefit Rider is in effect, after the Final Payment
Date, the death benefit is the greater of:

- the Face Amount as of the Final Payment Date; or

- the Policy Value as of the date due proof of death is received by the
Company.

OUTSTANDING LOAN: all unpaid Policy loans plus loan interest due or accrued.

POLICY CHANGE: any change in the Face Amount, the addition or deletion of a
Rider, underwriting reclassifications, or a change in death benefit option
(Option 1 or Option 2).

POLICY OWNER: the person who may exercise all rights under the Policy, with the
consent of any irrevocable beneficiary. "You" and "your" refer to the Policy
owner in this Prospectus.

POLICY VALUE: the total value of your Policy. It is the SUM of the:

- Value of the units of the sub-accounts credited to your Policy PLUS

- Accumulation in the Fixed Account credited to the Policy

PREMIUM: a payment you must make to us to keep the Policy in force.

PRINCIPAL OFFICE: our office at 440 Lincoln Street, Worcester, Massachusetts
01653.

PRO-RATA ALLOCATION: an allocation among the Fixed Account and the Sub-Accounts
in the same proportion that, on the date of allocation, the unloaned Policy
Value in the Fixed Account and the Policy Value in each sub-account bear to the
total unloaned Policy Value.

5
<PAGE>
SUB-ACCOUNT: a subdivision of the Variable Account investing exclusively in the
shares of a fund.

SURRENDER VALUE: the amount payable on a full surrender. It is the Policy Value
less any Outstanding Loan.

UNDERWRITING CLASS: the insurance risk classification that we assign the Insured
based on the information in the application or enrollment form and other
evidence of insurability we consider. The Insured's underwriting class will
affect the monthly charges and the payment required to keep the Policy in force.

UNIT: a measure of your interest in a Sub-Account.

VALUATION DATE: any day on which the net asset value of the shares of any funds
and unit values of any sub-accounts are computed. Valuation Dates currently
occur on:

- Each day the New York Stock Exchange is open for trading

- Other days (other than a day during which no payment, partial withdrawal
or surrender of a Policy was received) when there is a sufficient degree
of trading in a fund's portfolio securities so that the current net asset
value of the sub-accounts may be materially affected

VALUATION PERIOD: the interval between two consecutive Valuation Dates.

VARIABLE ACCOUNT: Separate Account FUVUL, one of our separate investment
accounts.

WRITTEN REQUEST: your request in writing, satisfactory to us, received at our
Principal Office.

6
<PAGE>

SUMMARY OF FEES AND CHARGES

WHAT CHARGES WILL I INCUR UNDER MY POLICY?

Charges will be deducted in connection with the Policy to compensate the Company
for:

- Administering the Policy

- Providing the insurance benefits set forth in the Policy and any optional
insurance benefits added by rider

- Payment of any applicable taxes

- Assuming certain risks in connection with the Policy

- Incurring expenses in distributing the Policy

The following charges will apply to your Policy under the circumstances
described. Some of these charges apply throughout the Policy's duration. Other
charges apply only if you choose options under the Policy.

On each monthly processing date, we will deduct certain monthly charges (the
"Monthly Deduction") from Policy Value. You may allocate the Monthly Deduction
to any number of sub-accounts and to the unloaned Policy Value in the Fixed
Account. If you make no allocation, we will make a Pro-Rata Allocation. If the
accounts you chose do not have sufficient funds to cover the Monthly Deduction,
we will make a Pro-Rata Allocation. The following monthly charges comprise the
Monthly Deduction:

- THE MONTHLY POLICY CHARGE -- will be charged on each monthly processing
date until the Final Payment Date. The primary purpose of the Monthly
Policy Charge is to compensate us for providing life insurance coverage
for the Insured. In addition, a portion of this charge compensates us for
administrative, tax and distribution expenses. The Monthly Policy Charge
is equal to a current Monthly Policy Charge rate per $1,000 times the
Insurance Amount. See CHARGES AND DEDUCTIONS. As indicated in the table in
Appendix C, the maximum Monthly Policy Charge for each $1000 of Insurance
Amount is $83.33 at age 99. For examples, see APPENDIX C.

- MONTHLY MORTALITY AND EXPENSE RISK CHARGE -- This monthly charge is
currently equal to and may not exceed 1/12th of 0.75% of the Policy Value
in each sub-account for the first 10 Policy years, 1/12th of 0.50% for
Policy Years 11 through 20, and 0.25% for Policy years 21 and later. The
charge is calculated based on the Policy Value in the sub-accounts of the
Variable Account (but not the Fixed Account) as of the prior Monthly
Processing Date. This charge compensates us for assuming mortality and
expense risks for variable interests in the Policies. This charge will
continue to be assessed after the Final Payment Date.

- MONTHLY RIDER CHARGES -- These charges will vary based on the Riders
selected and by the sex, age, and underwriting classification of the
Insured.

The charge below applies only if you make a partial withdrawal:

- PARTIAL WITHDRAWAL TRANSACTION CHARGE -- For each partial withdrawal, we
deduct a transaction fee of 2% of the amount withdrawn, not to exceed $25
for each partial withdrawal.

7
<PAGE>
The charges below are designed to reimburse us for Policy administrative costs,
and apply under the following circumstances:

- CHARGE FOR OPTIONAL GUARANTEED DEATH BENEFIT RIDER -- A one time
administrative charge of $25 will be deducted from Policy Value when the
Rider is elected.

- TRANSFER CHARGE -- Currently, the first 12 transfers of Policy Value in a
Policy year are free. A current transfer charge of $10, never to exceed
$25, applies for each additional transfer in the same Policy year. This
charge is for the costs of processing the transfer.

- OTHER ADMINISTRATIVE CHARGES -- We reserve the right to charge for other
administrative costs we incur. While there are no current charges for
these costs, we may impose a charge for:

- Changing payment allocation instructions

- Changing the allocation of the Monthly Deduction among the various
sub-accounts

- Providing a projection of values

WHAT ARE THE EXPENSES AND FEES OF THE FUNDS?

In addition to the charges described above, certain fees and expenses are
deducted from the assets of the Underlying Funds. The levels of fees and
expenses vary among the Underlying Funds. The following table shows the expenses
of the Underlying Funds for 1999. Expenses of the Funds are not fixed or
specified under the Contract, and actual expenses may vary.

Underlying Fund Annual Expenses
(as a percentage of Underlying Fund average net assets, after expense
reimbursements)

<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT FEE OTHER EXPENSES EXPENSES
(AFTER ANY 12-B-1 (AFTER ANY APPLICABLE (AFTER ANY WAIVERS/
UNDERLYING FUND VOLUNTARY WAIVERS) FEES REIMBURSEMENTS) REIMBURSEMENTS)
- --------------- ------------------ -------- --------------------- -------------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund.... 0.62% 0.00% 0.11% 0.73%
AIM V.I. Value Fund................... 0.61% 0.00% 0.15% 0.76%
Alger American Growth Portfolio....... 0.75% 0.00% 0.04% 0.79%
Alger American Leveraged AllCap
Portfolio(4)........................ 0.85% 0.00% 0.08%(4) 0.93%
Alger American Small Capitalization
Portfolio........................... 0.85% 0.00% 0.05% 0.90%
AIT Money Market Fund (6)............. 0.24% 0.00% 0.05% 0.29%(6)
Dreyfus VIF Appreciation Portfolio.... 0.75% 0.00% 0.03% 0.78%
Dreyfus VIF Quality Bond Portfolio.... 0.65% 0.00% 0.09% 0.74%
Dreyfus Socially Responsible Growth
Fund................................ 0.75% 0.00% 0.04% 0.79%
Evergreen VA Equity Index Fund
(1)(2).............................. 0.00% 0.00% 0.30% 0.30%(1)
Evergreen VA Foundation Fund (1)...... 0.83% 0.00% 0.12% 0.95%
Evergreen VA Global Leaders Fund
(1)................................. 0.68% 0.00% 0.32% 1.00%
Evergreen VA Small Cap Value Fund
(1)................................. 0.51% 0.00% 0.49% 1.00%
Federated American Leaders Fund II.... 0.75% 0.00% 0.13% 0.88%
Federated High Income Bond Fund II.... 0.60% 0.00% 0.19% 0.79%
Federated Prime Money Fund II......... 0.50% 0.00% 0.23% 0.73%
Templeton Asset Strategy Fund - Class
2................................... 0.60% 0.25% 0.18% 1.03%(7)
</TABLE>

8
<PAGE>

(1) Evergreen Investment Management has voluntarily agreed to limit aggregate
operating expenses (including investment advisory fees, but excluding
interest, brokerage commissions and extraordinary expenses) of the Evergreen
VA Equity Index Fund to 0.30% of average daily net assets. Without the
voluntarily limit, total expenses of the Evergreen VA Equity Index Fund for
1999 are estimated to be 0.62% of average daily assets. Evergreen Asset
Management Corp. has voluntarily agreed to limit aggregate operating
expenses (including investment advisory fees, but excluding interest,
brokerage commissions and extraordinary expenses) of the Evergreen VA
Foundation Fund, Evergreen Global Leaders Fund, and Evergreen VA Small Cap
Value Fund to 1.00% of average daily net assets. Without these voluntary
limitations, total expenses of the Funds during 1999, as a percentage of
average daily net assets, would have been 1.20% for Evergreen Global Leaders
Fund, and 1.37% for Evergreen VA Small Cap Value Fund. The total operating
expenses of the Evergreen VA Foundation Fund did not exceed the expense
limitation throughout 1999.

(2) The inception date of the Evergreen VA Equity Index Fund is 9/29/99.
Expenses have been estimated based upon current fund contracts.

(3) MFS - Growth with Income Series and MFS - Utilities Series have an expense
offset arrangement which reduces the series' custodian fee based on the
amount of cash maintained by the series with its custodian and dividend
disbursing agent. Each series may enter into other such arrangements and
directed brokerage arrangements, which would also have the effect of
reducing the series' expenses. "Other Expenses" do not take into account
these expense reductions, and are therefore higher than the actual expenses
of the series. Had these fee reductions been taken account, "Net Expenses"
would be lower for certain series and would equal: 0.87% for Growth with
Income Series and 0.90% for Utilities Series.

(4) Included in "Other Expenses" of Alger American Leveraged AllCap Portfolio
is 0.01% of interest expense.

(5) Reflects an agreement by the investment advisor to voluntarily limit
aggregate other expenses to 0.49% of average daily net assets of the
Oppenheimer Small Cap Growth Fund/VA.

(6) Until further notice Allmerica Financial Investment Management Services,
Inc. has declared a voluntary expense cap of 0.60% of average net assets
for the AIT Money Market Fund. The total operating expenses of the AIT Money
Market Fund did not exceed the expense limitation throughout 1999.

(7) The fund's Class 2 distribution plan or "rule 12b-1 plan" is described in
the fund's prospectus.

9
<PAGE>

Absent the voluntary limit on aggregate operating expenses, the actual
Management Fees, Other Expenses and Total Operating Expenses for 1999 were as
follows:

<TABLE>
<CAPTION>
TOTAL
MANAGEMENT 12-B-1 OPERATING
UNDERLYING FUND FEES FEES OTHER EXPENSES EXPENSES
- --------------- ---------- -------- -------------- ---------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund.............. 0.62% 0.00% 0.11% 0.73%
AIM V.I. Value Fund............................. 0.61% 0.00% 0.15% 0.76%
Alger American Growth Portfolio................. 0.75% 0.00% 0.04% 0.79%
Alger American Leveraged AllCap Portfolio....... 0.85% 0.00% 0.08%(2) 0.93%
Alger American Small Capitalization Portfolio... 0.85% 0.00% 0.05% 0.90%
AIT Money Market Fund........................... 0.24% 0.00% 0.05% 0.29%
Dreyfus VIF Appreciation Portfolio.............. 0.75% 0.00% 0.03% 0.78%
Dreyfus VIF Quality Bond Portfolio.............. 0.65% 0.00% 0.09% 0.74%
Dreyfus Socially Responsible Growth Fund........ 0.75% 0.00% 0.04% 0.79%
Evergreen VA Equity Index Fund (1).............. 0.32% 0.00% 0.30%(1) 0.62%(1)
Evergreen VA Foundation Fund.................... 0.75% 0.00% 0.20% 0.95%
Evergreen VA Global Leaders Fund................ 0.87% 0.00% 0.33% 1.20%
Evergreen VA Small Cap Value Fund............... 0.87% 0.00% 0.50% 1.37%
Federated American Leaders Fund II.............. 0.75% 0.00% 0.13% 0.88%
Federated High Income Bond Fund II.............. 0.60% 0.00% 0.19% 0.79%
Federated Prime Money Fund II................... 0.50% 0.00% 0.23% 0.73%
Templeton Asset Strategy Fund - Class 2......... 0.60% 0.25% 0.18% 1.03%(4)(6)
Templeton International Securities Fund - Class
2............................................. 0.69% 0.25% 0.19% 1.13%(4)(5)
MFS - Growth with Income Series(3).............. 0.75% 0.00% 0.13%(3) 0.88%(3)
MFS - Utilities Series(3)....................... 0.75% 0.00% 0.16%(3) 0.91%(3)
Oppenheimer Main Street Growth & Income
Fund/VA....................................... 0.73% 0.00% 0.05% 0.78%
Oppenheimer Small Cap Growth Fund/VA............ 0.75% 0.00% 1.08% 1.83%
Oppenheimer Strategic Bond Fund/VA.............. 0.74% 0.00% 0.04% 0.78%
</TABLE>

(1) The inception date of the Evergreen VA Equity Index Fund is 9/29/99.
Expenses have been estimated based upon current fund contracts.

(2) Included in "Other Expenses" of Alger American Leveraged AllCap Portfolio
is 0.01% of interest expense.

(3) Each series has an expense offset arrangement which reduces the series'
custodian fee based on the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. "Other Expenses" do
not take into account these expense reductions, and are therefore higher
than the actual expenses of the series. Had these fee reductions been taken
account, "Net Expenses" would be lower for certain series and would equal:
0.87% for MFS - Growth with Income Series, and 0.90% for MFS - Utilities
Series.

(4) The fund's Class 2 distribution plan or "rule 12b-1 plan" is described in
the fund's prospectus.

(5) On 2/8/00, shareholders approved a merger and reorganization that combined
the fund with the Templeton International Equity Fund, effective 5/1/00.
The shareholders of that fund had approved new management fees, which apply
to the combined fund effective 5/1/00. The table shows restated total
expenses based on the new fees and the assets of the fund as of 12/31/99,
and not the assets of the combined fund. However, if the table reflected
both the new fees and the combined assets, the fund's expenses after 5/1/00
would be estimated as: Management Fees 0.65%, 12b-1 Fees 0.25%, Other
Expenses 0.20%, and total Fund Expenses 1.10%.

(6) On 2/8/00, shareholders approved a merger and reorganization that combined
the fund with the Templeton Global Asset Allocation Fund, effective
5/1/00. The shareholders of that fund had approved new

10
<PAGE>

management fees, which apply to the combined fund effective 5/1/00. The
table shows restated total expenses based on the new fees and the assets of
the fund as of 12/31/99, and not the assets of the combined fund. However,
if the table reflected both the new fees and the combined assets, the fund's
expenses after 5/1/00 would be estimated as: Management Fees 0.60%, 12b-1
Fees 0.25%, Other Expenses 0.14%, and Total Fund Expenses 0.99%.

The Underlying Fund information above was provided by the Underlying Funds and
was not independently verified by the Company.

11
<PAGE>
SUMMARY OF POLICY FEATURES

This Summary is intended to provide only a very brief overview of the more
significant aspects of the Policy. If you are considering the purchase of this
product, you should read the remainder of this Prospectus carefully before
making a decision. It offers a more complete presentation of the topics
presented here, and will help you better understand the product. However, the
Policy, together with its attached application constitutes the entire agreement
between you and the Company.

There is no guaranteed minimum Policy Value. The value of a Policy will vary up
or down to reflect the investment experience of allocations to the Sub-Accounts
and the fixed rates of interest earned by allocations to the General Account.
The Policy Value will also be adjusted for other factors, including the amount
of charges imposed. The Policy Value may decrease to the point where the Policy
will lapse and provide no further death benefit without additional premium
payments, unless the optional Guaranteed Death Benefit Rider is in effect. This
Rider may not be available in all states.

WHAT IS THE POLICY'S OBJECTIVE?

The objective of the Policy is to give permanent life insurance protection and
help you build assets tax-deferred. Features available through the Policy
include:

- A Net Death Benefit that can protect your family

- Payment options that can guarantee an income for life

- A personalized investment portfolio

- Experienced professional investment advisers

- Tax deferral on earnings.

While the Policy is in force, it will provide:

- Life insurance coverage on the Insured

- Policy Value

- Surrender rights and partial withdrawal rights

- Loan privileges

- Optional insurance benefits available by Rider.

The Policy combines features and benefits of traditional life insurance with the
advantages of professional money management. However, unlike the fixed benefits
of ordinary life insurance, the Policy Value and the Death Benefit will increase
or decrease depending on investment results. Unlike traditional insurance
policies, the Policy has no fixed schedule for payments. Within limits, you may
make payments of any amount and frequency. While you may establish a schedule of
payments ("planned payments"), the Policy will not necessarily lapse if you fail
to make planned payments. Also, making planned payments will not guarantee that
the Policy will remain in force.

12
<PAGE>
WHO ARE THE KEY PERSONS UNDER THE POLICY?

The Policy is a contract between you and us. Each Policy has a Policy Owner
(you), an Insured (you or another individual you select) and a beneficiary. As
Policy Owner, you make payments, choose investment allocations and select the
Insured and beneficiary. The Insured is the person covered under the Policy. The
beneficiary is the person who receives the Net Death Benefit when the Insured
dies.

WHAT HAPPENS WHEN THE INSURED DIES?

We will pay the Net Death Benefit to the beneficiary when the Insured dies while
the Policy is in effect. You may choose between three death benefit options.
Under Death Benefit Option 1 and Death Benefit Option 3, the death benefit is
the greater of (1) the Face Amount (the amount of insurance applied for) or (2)
the Guideline Minimum Death Benefit (the Guideline Minimum Death Benefit federal
tax law requires). Under Death Benefit Option 2, the death benefit is the
greater of (1) the sum of the Face Amount and Policy Value or (2) the Guideline
Minimum Death Benefit. For more information, see "Election of Death Benefit
Options" under THE POLICY.

The Net Death Benefit is the death benefit less any Outstanding Loan, partial
withdrawals, partial withdrawal transaction charge, and due and unpaid Monthly
Deductions. However, after the Final Payment Date, the Net Death Benefit is the
Policy Value less any Outstanding Loan. The beneficiary may receive the Net
Death Benefit in a lump sum or under a payment option we offer.

An optional Guaranteed Death Benefit Rider is available ONLY AT ISSUE OF THE
POLICY. (The Guaranteed Death Benefit Rider may not be available in all states,
and is not available if the Policy is issued on a simplified underwriting
basis). If this Rider is in effect, the Company:

- guarantees that your Policy will not lapse regardless of the investment
performance of the Variable Account; and

- provides a guaranteed Net Death Benefit.

In order to maintain the Guaranteed Death Benefit Rider, certain minimum premium
payment tests must be met on each policy anniversary and within 48 months
following the Date of Issue and/or the date of any increase in Face Amount, as
described below. In addition, a one-time administrative charge of $25 will be
deducted from Policy Value when the Rider is elected. Certain transactions,
including policy loans, partial withdrawals, underwriting reclassifications,
change in face amount, and changes in Death Benefit Options, can result in the
termination of the Rider. IF THIS RIDER IS TERMINATED, IT CANNOT BE REINSTATED.
FOR MORE INFORMATION, SEE "Guaranteed Death Benefit Rider."

CAN I EXAMINE THE POLICY?

Yes. You have the right to examine and cancel your Policy by returning it to us
or to one of our representatives on or before the 10 days after you receive the
Policy or longer when state law so requires. There may be a longer period in
certain jurisdictions; see the "Right to Examine" provision in your Contract.

If your Policy provides for a full refund of payments under its "Right to
Examine Policy" provision, the Company will mail a refund to you within seven
days. We may delay a refund of any payment made by check until the check has
cleared the bank.

13
<PAGE>
If required by state law, your Policy will provide for a "full refund." Your
refund will be the GREATER of:

- Your entire payment OR

- The Policy Value PLUS deductions for taxes, charges or fees.

If your Policy does not provide for a full refund, you will receive:

- Amounts allocated to the Fixed Account PLUS

- The Policy Value in the Variable Account PLUS

- Any taxes, fees or other charges imposed on amounts in the Variable
Account.

After an increase in Face Amount, a right to cancel the increase also applies.

WHAT ARE MY INVESTMENT CHOICES?

Each Sub-Account invests exclusively in a corresponding Underlying Fund. In some
states, insurance regulations may restrict the availability of particular
Underlying Funds. The Policy also offers a Fixed Account that is part of the
general account of the Company. The Fixed Account is a guaranteed account
offering a minimum interest rate. This range of investment choices allows you to
allocate your money among the Sub-Accounts and the Fixed Account to meet your
investment needs.

If your Policy provides for a full refund under its "Right to Examine Policy"
provision as required in your state, we will allocate all sub-account
investments to the Money Market Fund until the fourth day after the expiration
of the "Right to Examine" provision of your policy. After this, we will allocate
all amounts as you have chosen.

You may allocate and transfer money among the following variable investment
options:

<S> <C>
AIM VARIABLE INSURANCE FUNDS FEDERATED INSURANCE SERIES
AIM V.I. Capital Appreciation Fund Federated American Leaders Fund II
AIM V.I. Value Fund Federated High Income Bond Fund II
Federated Prime Money Fund II

THE ALGER AMERICAN FUND FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS
Alger American Growth Portfolio TRUST (CLASS 2)
Alger American Leveraged AllCap Portfolio Templeton Asset Strategy Fund
Alger American Small Capitalization Portfolio Templeton International Securities Fund

ALLMERICA INVESTMENT TRUST MFS - VARIABLE INSURANCE TRUST-SM-
AIT Money Market Fund MFS - Growth with Income Series
MFS - Utilities Series

DREYFUS VARIABLE INVESTMENT FUND OPPENHEIMER VARIABLE ACCOUNT FUNDS
Dreyfus VIF Appreciation Portfolio Oppenheimer Main Street Growth & Income Fund/VA
Dreyfus VIF Quality Bond Portfolio Oppenheimer Small Cap Growth Fund/VA
Oppenheimer Strategic Bond Fund/VA

THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
Dreyfus Socially Responsible Growth Fund
EVERGREEN VARIABLE ANNUITY TRUST
Evergreen VA Equity Index Fund
Evergreen VA Foundation Fund
Evergreen VA Global Leaders Fund
Evergreen VA Small Cap Value Fund
</TABLE>

14
<PAGE>

The value of each Sub-Account will vary daily depending upon the performance of
the Underlying Fund in which it invests. Each Sub-Account reinvests dividends or
capital gains distributions received from an Underlying Fund in additional
shares of that Underlying Fund. There can be no assurance that the investment
objectives of the Underlying Funds can be achieved. For more information, see
DESCRIPTION OF THE COMPANY, THE VARIABLE ACCOUNT, AND THE UNDERLYING FUNDS.

CAN I MAKE TRANSFERS AMONG THE FUNDS AND THE FIXED ACCOUNT?

Yes. The Policy permits you to transfer Policy Value among the available
Sub-Accounts and between the Sub-Accounts and the General Account of the
Company, subject to certain limitations described under THE POLICY -- "Transfer
Privilege." You will incur no current taxes on transfers while your money is in
the Policy.

HOW MUCH CAN I INVEST AND HOW OFTEN?

The Policy does not limit payments as to frequency and number. As long as a
payment does not increase the death benefit by more than the amount of the
payment, additional payments may be made at any time before the Final Payment
Date. However, you must provide evidence of insurability as a condition to our
accepting any payment that would increase the Insurance Protection Amount (the
death benefit less the Policy Value). If a payment would increase the Insurance
Protection Amount, the Company will return the payment to you. The Company will
not accept any additional payments which would increase the Insurance Protection
Amount and shall not provide any additional death benefit until (1) evidence of
insurability for the Insured has been received by the Company and (2) the
Company has notified you that the Insured is in a satisfactory underwriting
class. You may then make payments that increase the Insurance Protection Amount
for 60 days (but not later than the Final Payment Date) following the date of
such notification by the Company.

However, no payment may be less than $100 without our consent. Additional
payments may be made at any time before the Final Payment Date. We reserve the
right to obtain evidence of insurability as a condition to accepting any premium
that would increase the death benefit by more than the amount of the payment.
You may choose a monthly automatic payment method of making payments. Under this
method, each month we will deduct payments from your checking account and apply
them to your Policy. The minimum automatic payment allowed is $50. For more
information, see THE POLICY -- "Payments".

WHAT IF I NEED MY MONEY?

You may borrow up to the loan value of your Policy. You may also make partial
withdrawals and surrender the Policy for its Surrender Value. There are two
types of loans that may be available to you:

- A non-preferred loan option is always available to you. The maximum total
loan amount is 90% of the Policy Value. The Company will charge interest
on the amount of the loan at a current annual rate of 4.8%. This current
rate of interest may change, but is guaranteed not to exceed 6%. However,
the Company will also credit interest on the Policy Value securing the
loan. The annual interest rate credited to the Policy Value securing a
non-preferred loan is 4.0%.

- A preferred loan option is automatically available to you unless you
request otherwise. The preferred loan option is available on that part of
an Outstanding Loan that is attributable to policy earnings. The term
"policy earnings" means that portion of the Policy Value that exceeds the
sum of the payments made less all partial withdrawals and partial
withdrawal transaction charges. The Company will charge interest on the
amount of the loan at a current annual rate of 4.00%. This current rate of
interest may change, but is guaranteed not to exceed 4.50%. The annual
interest rate credited to the Policy earnings securing a preferred loan is
4.0%.

15
<PAGE>
We will allocate Policy loans among the sub-accounts and the Fixed Account
according to your instructions. If you do not make an allocation, we will make a
Pro-Rata Allocation. We will transfer the Policy Value in each sub-account equal
to the Policy loan to the Fixed Account.

You may surrender your Policy and receive its Surrender Value. After the first
Policy year, you may make partial withdrawals of $500 or more from Policy Value,
subject to a partial withdrawal transaction charge. Under Death Benefit Option 1
and Death Benefit Option 3, the Face Amount is reduced by each partial
withdrawal. We will not allow a partial withdrawal if it would reduce the Face
Amount below $40,000. A surrender or partial withdrawal may have tax
consequences. See "Taxation of The Policies."

A request for a preferred loan after the Final Payment Date, a partial
withdrawal after the Final Payment Date, or the foreclosure of an Outstanding
Loan will terminate a Guaranteed Death Benefit Rider. See "Guaranteed Death
Benefit Rider." Policy loans may have tax consequences. There is some
uncertainty as to the tax treatment of a preferred loan, which may be treated as
a taxable withdrawal from the Policy. See FEDERAL TAX CONSIDERATIONS -- "Policy
Loans."

CAN I MAKE FUTURE CHANGES UNDER MY POLICY?

Yes. There are several changes you can make after receiving your Policy, within
limits. You may:

- Cancel your Policy under its Right-to-Examine provision

- Transfer your ownership to someone else

- Change the beneficiary

- Change the allocation of payments, with no tax consequences under current
law

- Make transfers of Policy Value among the funds

- Adjust the death benefit by increasing or decreasing the Face Amount

- Change your choice of death benefit options between Death Benefit Option 1
and Death Benefit Option 2

- Add or remove optional insurance benefits provided by Rider

CAN I CONVERT MY POLICY INTO A FIXED POLICY?

Yes. You can convert your Policy without charge during the first 24 months after
the Date of Issue or after an increase in Face Amount. On conversion, we will
transfer the Policy Value in the Variable Account to the Fixed Account. We will
allocate all future payments to the Fixed Account, unless you instruct us
otherwise.

WHAT ARE THE LAPSE AND REINSTATEMENT PROVISIONS OF MY POLICY?

The Policy will not lapse if you fail to make payments unless:

- The Policy Value is insufficient to cover the next Monthly Deduction and
loan interest accrued; or

- Outstanding Loans exceed Policy Value.

There is a 62-day grace period in either situation.

16
<PAGE>
If you make payments at least equal to minimum monthly payments, we guarantee
that your Policy will not lapse before the 49th monthly processing date from
Date of Issue or increase in Face Amount, within limits and excluding loan
foreclosure. If the Guaranteed Death Benefit Rider is in effect, the Policy will
not lapse regardless of the investment performance of the Variable Account
(excluding loan foreclosure). For more information, see "Guaranteed Death
Benefit Rider."

If the Insured has not died, you may reinstate your Policy within three years
after the grace period. The Insured must provide evidence of insurability
subject to our then current underwriting standards. In addition, you must either
repay or reinstate any Outstanding Loan and make payments sufficient to keep the
Policy in force for three months. See POLICY TERMINATION AND REINSTATEMENT.

HOW IS MY POLICY TAXED?

The Policy is given federal income tax treatment similar to a conventional fixed
benefit life insurance policy. On a withdrawal of Policy Value, Policy owners
currently are taxed only on the amount of the withdrawal that exceeds total
payments. Withdrawals greater than payments made are treated as ordinary income.
During the first 15 Policy years, however, an "interest first" rule applies to
distributions of cash required under Section 7702 of the Internal Revenue Code
("Code") because of a reduction in benefits under the Policy.

The Net Death Benefit under the Policy is excludable from the gross income of
the beneficiary. However, in some circumstances federal estate tax may apply to
the Net Death Benefit or the Policy Value.

A Policy may be considered a "modified endowment contract." This may occur if
total payments during the first seven Policy years (or within seven years of a
material change in the Policy) exceed the total net level payments payable, if
the Policy had provided paid-up future benefits after seven level payments. If
the Policy is considered a modified endowment contract, all distributions
(including Policy loans, partial withdrawals, surrenders and assignments) will
be taxed on an "income-first" basis. Also, a 10% penalty tax may be imposed on
that part of a distribution that is includible in income.

------------------------

This Summary is intended to provide only a very brief overview of the more
significant aspects of the Policy. The Prospectus and the Policy provide further
detail. The Policy and its attached application or enrollment form are the
entire agreement between you and the Company.

THE PURPOSE OF THE POLICY IS TO PROVIDE INSURANCE PROTECTION FOR THE
BENEFICIARY. IT MAY NOT BE ADVANTAGEOUS TO PURCHASE FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE AS A REPLACEMENT FOR YOUR CURRENT LIFE INSURANCE, OR IF YOU
ALREADY OWN A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY.

NO CLAIM IS MADE THAT THE POLICY IS IN ANY WAY SIMILAR OR COMPARABLE TO A
SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.

17
<PAGE>
DESCRIPTION OF THE COMPANY, THE VARIABLE ACCOUNT,
AND THE UNDERLYING FUNDS

THE COMPANY

The Company is a life insurance company organized under the laws of Delaware in
1974. As of December 31, 1999, the Company had over $17 billion in assets and
over $26 billion of life insurance in force. We are a wholly owned subsidiary of
First Allmerica Financial Life Insurance Company, formerly named State Mutual
Life Assurance Company of America ("First Allmerica"), which in turn is a
wholly-owned subsidiary of Allmerica Financial Corporation. First Allmerica was
organized under the laws of Massachusetts in 1844 and is the fifth oldest life
insurance company in America. Our Principal Office is 440 Lincoln Street,
Worcester, Massachusetts 01653, telephone 1-800-628-6267. We are subject to the
laws of the state of Delaware, to regulation by the Commissioner of Insurance of
Delaware, and to other laws and regulations where we are licensed to operate.

The Company is a charter member of the Insurance Marketplace Standards
Association ("IMSA"). Companies that belong to IMSA subscribe to a rigorous set
of standards that cover the various aspects of sales and service for
individually sold life insurance and annuities. IMSA members have adopted
policies and procedures that demonstrate a commitment to honesty, fairness, and
integrity in all customer contacts involving sales and service of individual
life insurance and annuity products.

THE VARIABLE ACCOUNT

The Variable Account is a separate investment account that is currently
comprised of four sub-accounts. Each sub-account invests in a corresponding fund
of AIM Variable Insurance Funds, The Alger American Fund, Allmerica Investment
Trust, Dreyfus Variable Investment Fund, Dreyfus Socially Responsible Growth
Fund, Inc., Evergreen Variable Annuity Trust, Federated Insurance Series,
Franklin Templeton Variable Insurance Products Trust, MFS Variable Insurance
Trust, and Oppenheimer Variable Account Funds. The assets used to fund the
variable part of the Policies are set aside in sub-accounts and are separate
from our general assets. We administer and account for each sub-account as part
of our general business. However, income, capital gains and capital losses are
allocated to each sub-account without regard to any of our other income, capital
gains or capital losses. Under Delaware law, the assets of the Variable Account
may not be charged with any liabilities arising out of any other business of
ours.

Our Board of Directors authorized the establishment of the Variable Account by
vote on June 13, 1996. The Variable Account meets the definition of "separate
account" under federal securities laws. It is registered with the Securities and
Exchange Commission ("SEC") as a unit investment trust under the Investment
Company Act of 1940 ("1940 Act"). This registration does not involve SEC
supervision of the management or investment practices or policies of the
Variable Account or of the Company. We reserve the right, subject to law, to
change the names of the Variable Account and the sub-accounts.

THE UNDERLYING FUNDS

Each Underlying Fund pays a management fee to an investment manager or adviser
for managing and providing services to the Underlying Fund. However, management
fee waivers and/or reimbursements may be in effect for certain or all of the
Underlying Funds. For specific information regarding the existence and effect of
any waiver/reimbursements see "WHAT ARE THE EXPENSES AND FEES OF THE FUNDS?"
under the SUMMARY OF FEES AND CHARGES section. The prospectuses of the
Underlying Funds also contain information regarding fees for advisory services
and should be read in conjunction with this prospectus.

18
<PAGE>

AIM VARIABLE INSURANCE FUNDS

AIM Variable Insurance Funds ("AVIF") was organized as a Maryland corporation on
January 22, 1993 and changed to a Delaware business trust on April 17, 2000. The
investment adviser for the AIM V.I. Value Fund and AIM V.I. Capital Appreciation
Fund is A I M Advisors, Inc. ("AIM"). AIM was organized in 1976, and, together
with its subsidiaries, manages or advises over 120 investment company portfolios
encompassing a broad range of investment objectives. AIM is located at 11
Greenway Plaza, Suite 100, Houston, TX 77046.

THE ALGER AMERICAN FUND

The Alger American Fund ("Alger") was established as a Massachusetts business
trust on April 6, 1988. Fred Alger Management, Inc. is the investment adviser
for the Alger American Growth, Alger American Leveraged AllCap, and Alger
American Small Capitalization Portfolios. Fred Alger Management, Inc. is located
at 1 World Trade Center, Suite 9333, New York, NY 10048.

ALLMERICA INVESTMENT TRUST

Allmerica Investment Trust ("AIT") was established as a Massachusetts business
trust on October 11, 1984. The investment adviser for AIT is Allmerica Financial
Investment Management Services, Inc., which is a wholly-owned subsidiary of the
Company. Allmerica Asset Management, Inc., an affiliate of the Company, is the
subadviser for the Money Market Fund. Both located at 440 Lincoln Street,
Worcester, MA 01653.

DREYFUS VARIABLE INVESTMENT FUND

The Dreyfus Variable Investment Fund is a Massachusetts business trust that
commenced operations August 31, 1990. The Dreyfus Corporation ("Dreyfus") serves
as the investment adviser to the Dreyfus Variable Investment Fund. Dreyfus is
located at 200 Park Avenue, New York, NY 10166.

THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.

The Dreyfus Socially Responsible Growth Fund, Inc. (the "Dreyfus Socially
Responsible Growth Fund") was incorporated under Maryland law on July 20, 1992,
commenced operations on October 7, 1993 and is registered with the SEC as an
open-end management investment company. The Dreyfus Corporation ("Dreyfus")
serves as the investment adviser to the Dreyfus Socially Responsible Growth Fund
and NCM Capital Management Group, Inc. provides sub-investment advisory
services. Dreyfus is located at 200 Park Avenue, New York, NY 10166.

EVERGREEN VARIABLE ANNUITY TRUST

The Evergreen Variable Annuity Trust (the "Evergreen Trust") is a Massachusetts
business trust that is registered with the SEC as an open-end management
investment company. Four of the fifteen Series of the Evergreen Trust are
available under the Policies. The investment adviser to the Evergreen VA Equity
Index Fund is Evergreen Investment Management ("EIM"). EIM, also known as First
Capital Group, is a division of First Union National Bank of North Carolina,
which in turn is a subsidiary of First Union Corporation. The investment adviser
to the Evergreen VA Global Leaders Fund and Evergreen VA Small Cap Value Fund is
Evergreen Asset Management Corp. ("EAMC"), a wholly-owned subsidiary of FUNB.
Lieber & Company acts as sub-advisor to these Funds and provides investment
research, information, investment recommendation advice and assistance to EAMC,
and is reimbursed by EAMC for the costs of providing such sub-advisory services.
EAMC is also the investment adviser to the Evergreen VA Foundation Fund.
Evergreen is located at 200 Berkeley Street, Boston, MA 02116.

FEDERATED INSURANCE SERIES

Federated Insurance Series ("FIS ") was established under the laws of the
Commonwealth of Massachusetts on September 15, 1993. FIS changed its name from
Insurance Management Series to Federated Insurance Series on November 14, 1995.
The Fund's investment adviser is Federated Investment Management Company
("Federated"). Federated, formerly known as Federated Advisers, changed its name
effective March 31, 1999. Federated is located at Federated Investors Tower,
1001 Liberty Avenue, Pittsburgh, PA 15222.

19
<PAGE>

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

Franklin Templeton Variable Insurance Products Trust ("FT VIP") and the funds'
investment managers and their affiliates manage over $224 billion (as of
December 31, 1999) in assets. In 1992, Franklin joined forces with Templeton, a
pioneer in international investing. The Mutual Advisers organization became part
of the Franklin Templeton organization four years later. Templeton Investment
Counsel, Inc. ("TICI") is adviser to both Templeton Asset Strategy and Templeton
International Securities Fund. Templeton is located at 100 Fountain Parkway, St.
Petersburg, Florida 33716.

MFS-VARIABLE INSURANCE TRUST

MFS Variable Insurance Trust (the "MFS Trust") is a Massachusetts business trust
organized on February 1, 1994. The investment adviser of MFS - Growth With
Income Series and MFS - Utilities Series is Massachusetts Financial Services
Company ("MFS"), America's oldest mutual fund organization. MFS and its
predecessor organizations have a history of money management dating from 1924.
MFS is located at 500 Boston Street, Boston, Massachusetts 02116.

OPPENHEIMER VARIABLE ACCOUNT FUNDS

Oppenheimer Variable Account Funds ("Oppenheimer") was organized as a
Massachusetts business trust in 1984. The investment adviser for the and the
Oppenheimer Main Street Growth & Income Fund/VA, Oppenheimer Small Cap Growth
Fund/VA and Oppenheimer Strategic Bond Fund/VA is OppenheimerFunds, Inc.
("OppenheimerFunds"). OppenheimerFunds has operated as an investment adviser
since 1959. Oppenheimer is located at 6803 S. Tucson Way, Englewood, Colorado
80112.

INVESTMENT OBJECTIVES AND POLICIES

A summary of investment objectives of the funds is set forth below. BEFORE
INVESTING, READ CAREFULLY THE PROSPECTUSES OF THE UNDERLYING FUNDS THAT
ACCOMPANY THIS PROSPECTUS. THEY CONTAIN MORE DETAILED INFORMATION ON THE
INVESTMENT OBJECTIVES, RESTRICTIONS, RISKS AND EXPENSES OF THE UNDERLYING FUNDS.
Statements of Additional Information for the funds are available on request. The
investment objectives of the funds may not be achieved. Policy Value may be less
than the aggregate payments made under the Policy.

AIM VARIABLE INSURANCE FUNDS:

AIM V.I. CAPITAL APPRECIATION FUND -- seeks capital appreciation through
investments in common stocks, with emphasis on medium-sized and smaller emerging
growth companies.

AIM V.I. VALUE FUND -- seeks to achieve long-term growth of capital by investing
primarily in equity securities judged by the fund's investment advisor to be
undervalued relative to the investment advisor's appraisal of the current or
projected earnings of the companies issuing the securities, or relative to
current market values of assets owned by the companies issuing the securities or
relative to the equity market generally. Income is a secondary objective.

THE ALGER AMERICAN FUND:

THE ALGER AMERICAN GROWTH PORTFOLIO -- seeks long-term capital appreciation. It
focuses on growing companies that generally have broad product lines, markets,
financial resources and depth of management. Under normal circumstances, the
portfolio invests primarily in the equity securities of large companies. The
portfolio considers a large company to have a market capitalization of $1
billion or greater.

THE ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO -- seeks long-term capital
appreciation. Under normal circumstances, the portfolio invests in the equity
securities of companies of any size which demonstrate promising growth
potential. The portfolio can leverage, that is, borrow money, up to one-third of
its total assets to buy additional securities. By borrowing money, the portfolio
has the potential to increase its returns

20
<PAGE>

if the increase in the value of the securities purchased exceeds the cost of
borrowing, including interest paid on the money borrowed.

THE ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO -- seeks long-term
appreciation. It focuses on small, fast-growing companies that offer innovative
products, services or technologies to a rapidly expanding marketplace. Under
normal circumstances, the portfolio invests primarily in the equity securities
of small capitalization companies. A small capitalization company is one that
has a market capitalization within the range of the Russell 2000 Growth Index or
the S&P SmallCap 600 Index.

ALLMERICA INVESTMENT TRUST:

AIT MONEY MARKET FUND -- seeks to obtain maximum current income consistent with
the preservation of capital and liquidity.

DREYFUS VARIABLE INVESTMENT FUND:

DREYFUS VIF APPRECIATION PORTFOLIO -- seeks long-term capital growth consistent
with the preservation of capital; current income is a secondary goal. The
Portfolio invests in common stocks focusing on "blue chip" companies with total
market values of more than $5 billion at the time of purchase.

DREYFUS VIF QUALITY BOND PORTFOLIO -- seeks to maximize current income as is
consistent with the preservation of capital and the maintenance of liquidity.
The Portfolio invests at least 80% of net assets in fixed-income securities,
including mortgage-related securities, collaterialized mortgage obligations
("CMOs") and asset-backed securities, that, when purchased, are rated A or
better or are the unrated equivalent as determined by Dreyfus, and in securities
issued or guaranteed by the U.S. government or its agencies or
instrumentalities.

THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.:

DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND -- seeks to provide capital growth,
with current income as a secondary goal. To pursue these goals, the fund invests
primarily in the common stock of companies that, in the opinion of the fund's
management, meet traditional investment standards and conduct their business in
a manner that contributes to the enhancement of the quality of life in America.

EVERGREEN VARIABLE ANNUITY TRUST:

EVERGREEN VA EQUITY INDEX FUND -- seeks investment results that achieve price
and yield performance similar to the Standard and Poor's 500 Composite Stock
Price Index. The Fund invests substantially all of its total assets in equity
securities that represent a composite of the S&P 500 Index.

EVERGREEN VA FOUNDATION FUND -- seeks, in order of priority, reasonable income,
conservation of capital and capital appreciation. The Fund invests in a
combination of equity and debt securities. Under normal conditions, the Fund
will invest at least 25% of the assets in debt securities and the remainder in
equity securities.

EVERGREEN VA GLOBAL LEADERS FUND -- seeks to achieve capital appreciation by
investing primarily in a diversified portfolio of U.S. and non-U.S. equity
securities of companies located in the world's major industrialized countries.
The Fund's investment adviser will attempt to screen the largest companies in
the world's major industrialized countries and cause the Fund to invest, in the
opinion of the Fund's investment adviser, in the 100 best based on certain
qualitative and quantitative criteria.

21
<PAGE>

EVERGREEN VA SMALL CAP VALUE FUND -- seeks to achieve a return consisting of
current income and capital growth. The Fund invests in equity securities of
small U.S. companies (less than $1.5 billion in market capitalization at time of
purchase).

FEDERATED INSURANCE SERIES:

FEDERATED AMERICAN LEADERS FUND II -- seeks long-term growth of capital and its
secondary objective is to provide income. The Fund pursues its investment
objectives by investing primarily in equity securities of large capitalization
companies that are in the top 25% of their industry sectors in terms of
revenues, are characterized by sound management and have the ability to finance
expected growth.

FEDERATED HIGH INCOME BOND FUND II -- seeks high current income by investing
primarily in a professionally managed, diversified portfolio of fixed income
securities. The Fund pursues its investment objective by investing in a
diversified portfolio of high yield, lower-rated corporate bonds.

FEDERATED PRIME MONEY FUND II -- seeks to provide current income consistent with
stability of principal and liquidity.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST:

TEMPLETON ASSET STRATEGY FUND (CLASS 2) -- seeks high total return. Under normal
market conditions, the Fund invests in equity securities of companies in any
nation, debt securities of companies and governments of any nation, and in money
market instruments. This Fund was formerly known as "Templeton Asset Allocation
Fund."

TEMPLETON INTERNATIONAL SECURITIES FUND (CLASS 2) -- seeks long-term capital
growth. The Fund invests primarily in stocks of companies located outside the
United States, including in emerging markets. This Fund was formerly known as
"Templeton International Fund".

If there is a material change in the investment policy of an Underlying Fund, we
will notify you of the change. If you have Policy Value allocated to that fund,
you may without charge reallocate the Policy Value to another fund or to the
Fixed Account. We must receive your written request within 60 days of the LATEST
of the effective date of the change in the investment policy OR receipt of the
notice of your right to transfer.

MFS - VARIABLE INSURANCE TRUST:

MFS - GROWTH WITH INCOME SERIES -- seeks to provide reasonable current income
and long-term growth of capital and income by investing primarily in common
stocks and related securities (such as preferred stocks, convertible securities
and depositary receipts for those securities).

MFS - UTILITIES SERIES -- seeks capital growth and current income (income above
that available from a portfolio invested entirely in equity securities) by
investing primarily in equity and debt securities of domestic and foreign
companies in the utilities industry.

OPPENHEIMER VARIABLE ACCOUNT FUNDS:

OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA -- seeks high total return,
which includes growth in the value of its shares as well as current income, from
equity and debt securities.

OPPENHEIMER SMALL CAP GROWTH FUND/VA -- seeks capital appreciation.

OPPENHEIMER STRATEGIC BOND FUND/VA -- seeks a high level of current income.

22
<PAGE>
THE POLICY

APPLYING FOR A POLICY

After receiving a completed application or enrollment form from a prospective
Policy owner, we will begin underwriting to decide the insurability of the
proposed Insured. We may require medical examinations and other information
before deciding insurability. We issue a Policy only after underwriting has been
completed. We may reject an application or enrollment form that does not meet
our underwriting guidelines.

Simplified underwriting may be available if the Face Amount applied for is
$250,000 or less. However, if a Policy is issued on the basis of simplified
underwriting, cost of Monthly Policy Charge rates are higher than they would be
if the Policy were issued using conventional underwriting methods. In addition,
if the Policy is issued on the basis of simplified underwriting, optional
benefit riders may not be available.

If a prospective Policy owner makes an initial payment of at least one minimum
monthly payment, we will provide fixed temporary insurance prior to issue. The
fixed temporary insurance will be the insurance applied for, up to a maximum of
$500,000, depending on age and underwriting class. This coverage will continue
for a maximum of 90 days from the date of the application or enrollment form or,
if required the completed medical exam. If death is by suicide, we will return
only the premium paid.

If no temporary insurance was in effect, on Policy delivery we will require a
sufficient payment to place the insurance in force. If you made payments before
the date of issue, we will allocate the payments to the Fixed Account. IF THE
POLICY IS NOT ISSUED AND ACCEPTED BY YOU, THE PAYMENTS WILL BE RETURNED TO YOU
WITHOUT INTEREST.

If the Policy is issued, we will allocate your Policy Value on issuance
according to your instructions. However, if your Policy provides for a full
refund of payments under its "Right to Examine Policy" provision as required in
your state (see THE POLICY -- "Free-Look Period"), we will initially allocate
your sub-account investments to the Money Market Fund. This allocation to the
Money Market Fund will be until the fourth day after the expiration of the
"Right to Examine" provision of your policy.

After this, we will allocate all amounts according to your investment choices.

FREE-LOOK PERIOD

The Policy provides for a free look period. You have the right to examine and
cancel your Policy by returning it to us or to one of our representatives on or
before the 10 days after you receive the Policy or longer when state law so
requires. There may be a longer period in certain jurisdictions. See the "Right
to Examine" provision in your Contract.

If your Policy provides for a full refund under its "Right to Examine Policy"
provision, the Company will mail a refund to you within seven days. We may delay
a refund of any payment made by check until the check has cleared your bank.
Where required by state law, however, your refund will be the GREATER of

- Your entire payment OR

- The Policy Value PLUS deductions under the Policy for taxes, charges or
fees

If your Policy does not provide for a full refund, you will receive

- Amounts allocated to the Fixed Account PLUS

- The Policy Value in the Variable Account PLUS

- All fees, charges and taxes which have been imposed on amounts in the
Variable Account.

23
<PAGE>
After an increase in Face Amount, we will mail or deliver a notice of a free
look for the increase. You will have the right to cancel the increase before the
10 days after you receive the Policy or longer when state law so requires. There
may be a longer period in certain jurisdictions; see the "Right to Examine"
provision in your Contract.

On canceling the increase, you will receive a credit to your Policy Value of the
charges deducted for the increase. Upon request, we will refund the amount of
the credit to you.

CONVERSION PRIVILEGE

Within 24 months of the Date of Issue or an increase in Face Amount, you can
convert your Policy into a Fixed Policy by transferring all Policy Value in the
sub-accounts to the Fixed Account. The conversion will take effect at the end of
the valuation period in which we receive, at our Principal Office, notice of the
conversion satisfactory to us. There is no charge for this conversion. We will
allocate all future payments to the Fixed Account, unless you instruct us
otherwise.

PAYMENTS

Payments are payable to the Company. Payments may be made by mail to our
Principal Office or through our authorized representative. All payments after
the initial payment are credited to the Variable Account or Fixed Account on the
date of receipt at the Principal Office.

You may establish a schedule of planned payments. If you do, we will bill you at
regular intervals. Making planned payments will not guarantee that the Policy
will remain in force. The Policy will not necessarily lapse if you fail to make
planned payments. You may make unscheduled payments before the Final Payment
Date or skip planned payments. If the Guaranteed Death Benefit Rider is in
effect, there are certain minimum payment requirements.

However, no payment may be less than $100 without our consent. You may choose a
monthly automatic payment method of making payments. Under this method, each
month we will deduct payments from your checking account and apply them to your
Policy. The minimum automatic payment allowed is $50. Payments must be
sufficient to provide a positive Policy Value (less Outstanding Loans) at the
end of each Policy month or the Policy may lapse. See POLICY TERMINATION AND
REINSTATEMENT.

During the first 48 Policy months following the Date of Issue or an increase in
Face Amount, a guarantee may apply to prevent the Policy from lapsing. The
guarantee will apply during this period if you make payments that, when reduced
by policy loans, partial withdrawals and partial withdrawal transaction charge,
equal or exceed the required minimum monthly payments. The required minimum
monthly payments are based on the number of months the Policy, increase in Face
Amount or policy change that causes a change in the minimum monthly payment has
been in force. MAKING MONTHLY PAYMENTS EQUAL TO THE MINIMUM MONTHLY PAYMENTS
DOES NOT GUARANTEE THAT THE POLICY WILL REMAIN IN FORCE, EXCEPT AS STATED IN
THIS PARAGRAPH.

24
<PAGE>
Under Death Benefit Option 1 and Death Benefit Option 2, total payments may not
exceed the current maximum payment limits under federal tax law. These limits
will change with a change in Face Amount, underwriting reclassifications, the
addition or deletion of a Rider, or a change between Death Benefit Option 1 and
Death Benefit Option 2. Where total payments would exceed the current maximum
payment limits, the excess first will be applied to repay any Outstanding Loans.
If there are remaining excess payments, any such excess payments will be
returned to you. However, we will accept a payment needed to prevent Policy
lapse during a Policy year. See POLICY TERMINATION AND REINSTATEMENT.

ALLOCATION OF PAYMENTS

In the application or enrollment form for your Policy, you decide the initial
allocation of the payment among the Fixed Account and the sub-accounts. You may
allocate payments to one or more of the sub-accounts. The minimum amount that
you may allocate to a sub-account is 1% of the payment. Allocation percentages
must be in whole numbers (for example, 33 1/3% may not be chosen) and must total
100%.

You may change the allocation of future payments by written request or telephone
request. You have the privilege to make telephone requests, unless you elected
not to have the privilege on the application or enrollment form. The policy of
the Company and its representatives and affiliates is that they will not be
responsible for losses resulting from acting on telephone requests reasonably
believed to be genuine. The Company will employ reasonable methods to confirm
that instructions communicated by telephone are genuine. Such procedures may
include, among others, requiring some form of personal identification prior to
acting upon instructions received by telephone. All telephone requests are
tape-recorded.

An allocation change will take effect on the date of receipt of the notice at
the Principal Office. No charge is currently imposed for changing payment
allocation instructions. We reserve the right to impose a charge in the future,
but guarantee that the charge will not exceed $25.

The Policy Value in the sub-accounts will vary with investment experience. You
bear this investment risk. Investment performance may also affect the death
benefit. Please review your allocations of payments and Policy Value as market
conditions and your financial planning needs change.

TRANSFER PRIVILEGE

Subject to our then current rules, you may transfer amounts among the
sub-accounts or between a sub-account and the Fixed Account. (You may not
transfer that portion of the Policy Value held in the Fixed Account that secures
a Policy loan.) We will make transfers at your written request or telephone
request, as described in THE POLICY -- "Allocation of Payments." Transfers are
effected at the value next computed after receipt of the transfer order.

Currently, the first 12 transfers in a Policy year are free. After that, we will
deduct a $10 transfer charge from amounts transferred in that Policy year. We
reserve the right to increase the charge, but we guarantee the charge will never
exceed $25. Any transfers made for a conversion privilege, Policy loan or
material change in investment policy or under an automatic transfer option will
not count toward the 12 free transfers.

The transfer privilege is subject to our consent. We reserve the right to impose
limits on transfers including, but not limited to, the:

- Minimum amount that may be transferred

- Minimum amount that may remain in a sub-account following a transfer from
that sub-account

- Minimum period between transfers involving the Fixed Account

- Maximum amounts that may be transferred from the Fixed Account

25
<PAGE>
Transfers to and from the Fixed Account are currently permitted only if:

- the amount transferred from the Fixed Account in each transfer may not
exceed the lesser of $100,000 or 25% of the Policy Value under the Policy.

- You may make only one transfer involving the Fixed Account in each policy
quarter

These rules are subject to change by the Company.

DOLLAR-COST AVERAGING OPTION AND AUTOMATIC REBALANCING OPTION

You may have automatic transfers of at least $100 a month made on a periodic
basis:

- from the Sub-Accounts which invest in the Money Market Fund of the Trust
and the Fixed Account, respectively, to one or more of the other
Sub-Accounts ("Dollar-Cost Averaging Option"), or

- to reallocate Policy Value among the Sub-Accounts ("Automatic Rebalancing
Option").

Automatic transfers may be made on a monthly, quarterly, semi-annual or annual
schedule. You may request the day of the month on which automatic transfers will
occur (the "transfer date). If you do not choose a transfer date, the transfer
date will be the 15th of the scheduled month. However, if the transfer date is
not a business day, the automatic transfer will be processed on the next
business day. Each automatic transfer is free, and will not reduce the remaining
number of transfers that are free in a Policy year.

DEATH BENEFIT

GUIDELINE MINIMUM DEATH BENEFIT -- In order to qualify as "life insurance" under
the Federal tax laws, this Policy must provide a Guideline Minimum Death
Benefit. The Guideline Minimum Death Benefit will be determined as of the date
of death. If Death Benefit Option 1 or Death Benefit Option 2 is in effect, the
Guideline Minimum Death Benefit is obtained by multiplying the Policy Value by a
percentage factor for the Insured's attained age, as shown in the table in
Appendix A. If Death Benefit Option 3 is in effect, the Guideline Minimum Death
Benefit is obtained by multiplying the Policy Value by a percentage for the
Insured's attained age, sex, and underwriting class, as set forth in the Policy.

Guideline Minimum Death Benefit Table in Appendix A is used when Death Benefit
Option 1 or Death Benefit Option 2 is in effect. The Guideline Minimum Death
Benefit Table in Appendix A reflects the requirements of the "guideline
premium/guideline death benefit" test set forth in the Federal tax laws.
Guideline Minimum Death Benefit factors are set forth in the Policy when Death
Benefit Option 3 is in effect. These factors reflect the requirements of the
"cash value accumulation" test set forth in the Federal tax laws. The Guideline
Minimum Death Benefit factors will be adjusted to conform to any changes in the
tax laws. For more information, see ELECTION OF DEATH BENEFIT OPTIONS, below.

NET DEATH BENEFIT -- If the Policy is in force on the Insured's death, we will,
with due proof of death, pay the Net Death Benefit to the named beneficiary. We
will normally pay the Net Death Benefit within seven days of receiving due proof
of the Insured's death, but we may delay payment of Net Death Benefits. See
OTHER POLICY PROVISIONS -- "Delay of Payments." The beneficiary may receive the
Net Death Benefit in a lump sum or under a payment option. See THE
POLICY --"Payment Options."

The Net Death Benefit depends on the current Face Amount and Death Benefit
Option that is in effect on the date of death. Before the Final Payment Date,
the Net Death Benefit is:

- The death benefit provided under Death Benefit Option 1, Death Benefit
Option 2, or Death Benefit Option 3, whichever is elected and in effect on
the date of death, PLUS

26
<PAGE>
- Any other insurance on the Insured's life that is provided by Rider, MINUS

- Any Outstanding Loan, any partial withdrawals, partial withdrawal
transaction charge, and due and unpaid monthly charges through the Policy
month in which the Insured dies.

After the Final Payment Date, if the Guaranteed Death Benefit Rider is not in
effect, the Net Death Benefit is:

- The Policy Value MINUS

- Any Outstanding Loan

Where permitted by state law, we will compute the Net Death Benefit on

- The date we receive due proof of the Insured's death under Death Benefit
Option 2 OR

- The date of death for Death Benefit Options 1 and 3.

If required by state law, we will compute the Net Death Benefit on the date of
death for Death Benefit Option 2 as well as for Death Benefit Options 1 and 3.

ELECTION OF DEATH BENEFIT OPTIONS

Federal tax law requires a Guideline Minimum Death Benefit in relation to Policy
Value for a Contract to qualify as life insurance. Under current Federal tax
law, either the Guideline Premium Test or the Cash Value Accumulation Test can
be used to determine if the Policy complies with the definition of "life
insurance" under the Code. At the time of application, you may elect either of
the tests. If you elect the Guideline Premium Test, you will have the choice of
electing Death Benefit Option 1 or Death Benefit Option 2. If you elect the Cash
Value Accumulation Test, Death Benefit Option 3 will apply. APPLICANTS FOR A
POLICY SHOULD CONSULT A QUALIFIED TAX ADVISER IN CHOOSING BETWEEN THE GUIDELINE
PREMIUM TEST AND THE CASH VALUE ACCUMULATION TEST AND IN CHOOSING A DEATH
BENEFIT OPTION.

GUIDELINE PREMIUM TEST AND CASH VALUE ACCUMULATION TEST -- There are two main
differences between the Guideline Premium Test and the Cash Value Accumulation
Test. First, the Guideline Premium Test limits the amount of premium that may be
paid into a Policy, while no such limits apply under the Cash Value Accumulation
Test. Second, the factors that determine the Guideline Minimum Death Benefit
relative to the Policy Value are different.

The Guideline Premium Test limits the amount of premiums payable under a Policy
to a certain amount for an Insured of a particular age, sex, and underwriting
class. Under the Guideline Premium Test, you may choose between Death Benefit
Option 1 or Death Benefit Option 2, as described below. After issuance of the
Contract, you may change the selection from Death Benefit Option 1 to Death
Benefit Option 2, or vice versa.

The Cash Value Accumulation Test requires that the Death Benefit must be
sufficient so that the cash Surrender Value does not at any time exceed the net
single premium required to fund the future benefits under the Contract. Under
the Cash Value Accumulation Test, required increases in the Guideline Minimum
Death Benefit (due to growth in Policy Value) will generally be greater than
under the Guideline Premium Test. If you choose the Cash Value Accumulation
Test, ONLY Death Benefit Option 3 is available. You may NOT switch between Death
Benefit Option 3 to Death Benefit Option 1 or to Death Benefit Option 2, or vice
versa.

DEATH BENEFIT OPTION 1 (LEVEL DEATH BENEFIT WITH GUIDELINE PREMIUM TEST) --
Under Option 1, the Death Benefit is equal to the greater of the Face Amount or
the Guideline Minimum Death Benefit, as set forth in Table A in Appendix A. The
Death Benefit will remain level unless the Guideline Minimum Death

27
<PAGE>

Benefit is greater than the Face Amount. If the Guideline Minimum Death Benefit
is greater than the Face Amount, the Death Benefit will vary as the Policy Value
varies.

Death Benefit Option 1 will offer the best opportunity for the Policy Value to
increase without increasing the Death Benefit as quickly as it might under the
other options. The Death Benefit will never go below the Face Amount.

DEATH BENEFIT OPTION 2 (ADJUSTABLE DEATH BENEFIT WITH GUIDELINE PREMIUM
TEST) -- Under Option 2, the Death Benefit is equal to the greater of (1) the
Face Amount plus the Policy Value or (2) the Guideline Minimum Death Benefit, as
set forth in Table A in Appendix A. The Death Benefit will vary as the Policy
Value changes, but will never be less than the Face Amount.

Death Benefit Option 2 will offer the best opportunity to have an increasing
Death Benefit as early as possible. The Death Benefit will increase whenever
there is an increase in the Policy Value, and will decrease whenever there is a
decrease in the Policy Value. The Death Benefit will never go below the Face
Amount.

DEATH BENEFIT OPTION 3 (LEVEL DEATH BENEFIT WITH CASH VALUE ACCUMULATION
TEST) -- Under Option 3, the Death Benefit will equal the greater of (1) the
Face Amount or (2) the Policy Value multiplied by the applicable factor as set
forth in the Policy. The applicable factor depends upon the Underwriting Class,
sex (unisex if required by law), and then-attained age of the Insured. The
factors decrease slightly from year to year as the attained age of the Insured
increases.

Death Benefit Option 3 will offer the best opportunity for an increasing death
benefit in later Policy years and/ or to fund the Policy at the "seven-pay"
limit for the full seven years. When the Policy Value multiplied by the
applicable death benefit factor exceeds the Face Amount, the Death Benefit will
increase whenever there is an increase in the Policy Value, and will decrease
whenever there is a decrease in the Policy Value. However, the Death Benefit
will never go below the Face Amount.

ALL DEATH BENEFIT OPTIONS MAY NOT BE AVAILABLE IN ALL STATES.

ILLUSTRATIONS

For the purposes of the following illustrations, assume that the Insured is
under the age of 40, and that there is no Outstanding Loan.

ILLUSTRATION OF DEATH BENEFIT OPTION 1 -- Under Option 1, a Policy with a
$100,000 Face Amount will have a death benefit of $100,000. However, because the
death benefit must be equal to or greater than 250% of Policy Value (from
Appendix A), if the Policy Value exceeds $40,000 the death benefit will exceed
the $100,000 Face Amount. In this example, each dollar of Policy Value above
$40,000 will increase the death benefit by $2.50.

For example, a Policy with a Policy Value of:

- $50,000 will have a Guideline Minimum Death Benefit of $125,000 (e.g.,
$50,000 X 2.50);

- $60,000 will produce a Guideline Minimum Death Benefit of $150,000 (e.g.,
$60,000 X 2.50)

- $75,000 will produce a Guideline Minimum Death Benefit of $187,500 (e.g.,
$75,000 X 2.50).

Similarly, if Policy Value exceeds $40,000, each dollar taken out of Policy
Value will reduce the death benefit by $2.50. If, for example, the Policy Value
is reduced from $60,000 to $50,000 because of partial withdrawals, charges or
negative investment performance, the death benefit will be reduced from $150,000
to $125,000. However, the death benefit will never be less than the Face Amount
of the Policy.

28
<PAGE>
The Guideline Minimum Death Benefit Factor becomes lower as the Insured's age
increases. If the Insured's age in the above example were, for example, 50
(rather than between zero and 40), the applicable percentage would be 185%. The
death benefit would be greater than $100,000 Face Amount when the Policy Value
exceeds $54,054 (rather than $40,000), and each dollar then added to or taken
from Policy Value would change the death benefit by $1.85.

ILLUSTRATION OF DEATH BENEFIT OPTION 2 -- Under Option 2, assume that the
Insured is under the age of 40 and that there is no Outstanding Loan. The Face
Amount of the Policy is $100,000.

Under Death Benefit Option 2, a Policy with a Face Amount of $100,000 will
produce a death benefit of $100,000 plus Policy Value. For example, a Policy
with Policy Value of :

- $10,000 will produce a death benefit of $110,000 (e.g., $100,000 +
$10,000);

- $25,000 will produce a death benefit of $125,000 (e.g., $100,000 +
$25,000);

- $50,000 will produce a death benefit of $150,000 (e.g., $100,000 +
$50,000).

However, the Guideline Minimum Death Benefit must be at least 250% of the Policy
Value. Therefore, if the Policy Value is greater than $66,667, 250% of the
Policy Value will be Guideline Minimum Death Benefit. The Guideline Minimum
Death Benefit will be greater than the Face Amount plus Policy Value. In this
example, each dollar of Policy Value above $66,667 will increase the death
benefit by $2.50. For example, if the Policy Value is:

- $70,000, the Guideline Minimum Death Benefit will be $175,000 (e.g.,
$70,000 X 2.50);

- $80,000, the Guideline Minimum Death Benefit will be $200,000 (e.g.,
$80,000 X 2.50);

- $90,000, the Guideline Minimum Death Benefit will be $225,000 (e.g.,
$90,000 X 2.50).

Similarly, if Policy Value exceeds $66,667, each dollar taken out of Policy
Value will reduce the death benefit by $2.50. If, for example, the Policy Value
is reduced from $80,000 to $70,000 because of partial withdrawals, charges or
negative investment performance, the death benefit will be reduced from $200,000
to $175,000. If, however, the Policy Value TIMES

- the Guideline Minimum Death Benefit factor is LESS THAN

- The Face Amount PLUS Policy Value, THEN

- The death benefit will be the Face Amount PLUS Policy Value.

The Guideline Minimum Death Benefit factor becomes lower as the Insured's age
increases. If the Insured's age in the above example were 50, the death benefit
must be at least 185% of the Policy Value. The death benefit would be the sum of
the Policy Value plus $100,000 unless the Policy Value exceeded $117,647 (rather
than $66,667). Each dollar added to or subtracted from the Policy would change
the death benefit by $1.85.

ILLUSTRATION OF DEATH BENEFIT OPTION 3 -- In this illustration, assume that the
insured is a male, age 35, non-smoker and that there is no Outstanding Loan.

Under Death Benefit Option 3, a Policy with a Face Amount of $100,000 will have
a death benefit of $100,000. However, because the death benefit must be equal to
or greater than 437% of Policy Value (in policy year 1), if the Policy Value
exceeds $22,883 the death benefit will exceed the $100,000 face amount. In this
example, each dollar of Policy Value above $22,883 will increase the death
benefit by $4.37.

For example, a Policy with a Policy Value of:

- $50,000 will have a Death Benefit of $218,500 ($50,000 X 4.37);

29
<PAGE>

- $60,000 will produce a Death Benefit of $262,200 ($60,000 X 4.37);

- $75,000 will produce a Death Benefit of $327,750 ($75,000 X 4.37).

Similarly, if Policy Value exceeds $22,883, each dollar taken out of Policy
Value will reduce the death benefit by $4.37. If, for example, the Policy Value
is reduced from $60,000 to $50,000 because of partial withdrawals, charges, or
negative investment performance, the death benefit will be reduced from $262,200
to $218,500. If, however, the product of the Policy Value times the applicable
percentage is less than the face amount, the death benefit will equal the face
amount.

The applicable percentage becomes lower as the Insured's age increases. If the
Insured's age in the above example were, for example, 50 (rather than 35), the
applicable percentage would be 270% (in policy year 1). The death benefit would
not exceed the $100,000 face amount unless the Policy Value exceeded $37,037
(rather than $22,883), and each dollar then added to or taken from Policy Value
would change the death benefit by $2.70.

CHANGING BETWEEN DEATH BENEFIT OPTION 1 AND DEATH BENEFIT OPTION 2

You may change between Death Benefit Option 1 and Death Benefit Option 2 once
each Policy year by written request. (YOU MAY NOT CHANGE BETWEEN DEATH BENEFIT
OPTION 3 TO DEATH BENEFIT OPTION 1 OR TO DEATH BENEFIT OPTION 2, OR VICE VERSA).
Changing options may require evidence of insurability. The change takes effect
on the monthly processing date on or following the date of underwriting
approval. We do not impose a charge for changes in death benefit options.

CHANGE FROM DEATH BENEFIT OPTION 1 TO DEATH BENEFIT OPTION 2 -- If you change
Death Benefit Option 1 to Death Benefit Option 2, we will decrease the Face
Amount to equal:

- The death benefit MINUS

- The Policy Value on the date of the change

The change may not be made if the Face Amount would fall below $50,000. After
the change from Death Benefit Option 1 to Death Benefit Option 2, future Monthly
Policy Charges may be higher or lower than if no change in option had been made.
However, the Insurance Amount will always equal the Face Amount, unless the
Guideline Minimum Death Benefit applies.

CHANGE FROM DEATH BENEFIT OPTION 2 TO DEATH BENEFIT OPTION 1 -- If you change
Death Benefit Option 2 to Death Benefit Option 1, we will increase the Face
Amount by the Policy Value on the date of the change. The death benefit will be
the GREATER of:

- The new Face Amount or

- The Guideline Minimum Death Benefit under Death Benefit Option 1

After the change from Death Benefit Option 2 to Death Benefit Option 1, an
increase in Policy Value will reduce the Insurance Amount and the Monthly Policy
Charge. A decrease in Policy Value will increase the Insurance Amount and the
Monthly Policy Charge.

A change in death benefit option may result in total payments exceeding the then
current maximum payment limitation under federal tax law. Where total payments
would exceed the current maximum payment limits, the excess first will be
applied to repay any Outstanding Loans. If there are remaining excess payments,
any such excess payments will be returned to you. However, we will accept a
payment needed to prevent Policy lapse during a Policy year.

30
<PAGE>
A change from Death Benefit Option 2 to Death Benefit Option 1 within five
policy years of the Final Payment Date will terminate a Guaranteed Death Benefit
Rider.

GUARANTEED DEATH BENEFIT RIDER (NOT AVAILABLE IN ALL STATES)

An optional Guaranteed Death Benefit Rider is available only at issue of the
Policy. The Guaranteed Death benefit Rider is not available if the Policy is
issued on the basis of simplified underwriting. If this Rider is in effect, the
Company:

- guarantees that your Policy will not lapse regardless of the investment
performance of the Variable Account and

- provides a guaranteed Net Death Benefit.

In order to maintain the Guaranteed Death Benefit Rider, certain minimum premium
payment tests must be met on each Policy anniversary and within 48 months
following the Date of Issue and/or the date of any increase in Face Amount, as
described below. In addition, a one-time administrative charge of $25 will be
deducted from Policy Value when the Rider is elected. Certain transactions,
including policy loans, partial withdrawals, underwriting reclassifications,
change in face amount, and change in Death benefit Option, can result in the
termination of the Rider. If this Rider is terminated, it cannot be reinstated.

GUARANTEED DEATH BENEFIT TESTS

While the Guaranteed Death Benefit Rider is in effect, the Policy will not lapse
if the following two tests are met:

1. Within 48 months following the Date of Issue of the Policy or of any
increase in the Face Amount, the sum of the premiums paid, less any
Outstanding Loans, partial withdrawals and partial withdrawal transaction
charges, must be greater than the minimum monthly payment multiplied by the
number of months which have elapsed since the relevant Date of Issue; and

2. On each Policy anniversary, (a) must exceed (b), where, since the Date of
Issue:

(a) is the sum of your premiums, less any withdrawals, partial withdrawal
transaction charges and Outstanding Loans, which is classified as a
preferred loan; and

(b) is the sum of the minimum Guaranteed Death Benefit premiums, as shown
on the specifications page of the Policy.

GUARANTEED DEATH BENEFIT

If the Guaranteed Death Benefit Rider is in effect on the Final Premium Payment
Date, a guaranteed Death Benefit will be provided as long as the Rider is in
force. The Death Benefit will be the GREATER of:

- the Face Amount as of the Final Premium Payment Date; or

- the Policy Value as of the date due proof of death is received by the
Company.

TERMINATION OF THE GUARANTEED DEATH BENEFIT RIDER

The Guaranteed Death Benefit Rider will end and may not be reinstated on the
first to occur of the following:

- foreclosure of an Outstanding Loan; or

- the date on which the sum of your payments less withdrawals and loans does
not meet or exceed the applicable Guaranteed Death Benefit test (above);
or

- any Policy change that results in a negative guideline level premium;

31
<PAGE>
- the effective date of a change from Death Benefit Option 2 to Death
Benefit Option 1, if such changes occur within 5 policy years of the Final
Payment Date; or

- a request for a partial withdrawal or preferred loan is made after the
Final Premium Payment Date.

It is possible that the Policy Value will not be sufficient to keep the Policy
in force on the first Monthly Payment Date following the date the Rider
terminates.

CHANGE IN FACE AMOUNT

You may increase or decrease the Face Amount by written request. An increase or
decrease in the Face Amount takes effect on the LATER of the:

- The monthly processing date on or next following date of receipt of your
written request or

- The date of approval of your written request, if evidence of insurability
is required

INCREASES -- You must submit with your written request for an increase
satisfactory evidence of insurability. The consent of the Insured is also
required whenever the Face Amount is increased. An increase in Face Amount may
not be less than $10,000. You may not increase the Face Amount after the Insured
reaches age 80. A written request for an increase must include a payment if the
Policy Value less debt is less than the sum of three minimum monthly payments

An increase in the Face Amount will increase the Insurance Amount and,
therefore, the Monthly Policy Charges.

After increasing the Face Amount, you will have the right, during a free-look
period, to have the increase canceled. See THE POLICY -- "Free-Look Period." If
you exercise this right, we will credit to your Policy the charges deducted for
the increase, unless you request a refund of these charges.

DECREASES -- You may decrease the Face Amount by written request. The minimum
amount for a decrease in Face Amount is $10,000. The minimum Face Amount
required after a decrease is $50,000. If

- you have chosen the Guideline Premium Test and the Policy would not comply
with the maximum payment limitations under federal tax law; and

- If you have previously made payments in excess of the amount allowed for
the lower Face Amount, then the excess payments will first be used to
repay Outstanding Loans, if any. If there are any remaining excess
payments, we will pay any such excess to you. A return of Policy Value may
result in tax liability to you.

A decrease in the Face Amount will lower the insurance protection amount and,
therefore, the Monthly Policy Charge. In computing the Monthly Policy Charge, a
decrease in the Face Amount will reduce the Face Amount in the following order:

- the Face Amount provided by the most recent increase;

- the next most recent increases successively; and

- the initial Face Amount.

32
<PAGE>
POLICY VALUE

The Policy Value is the total value of your Policy. It is the SUM of:

- Your accumulation in the Fixed Account PLUS

- The value of your units in the sub-accounts There is no guaranteed minimum
Policy Value. Policy Value on any date depends on variables that cannot be
predetermined.

Your Policy Value is affected by the:

- Frequency and amount of your payments

- Interest credited in the Fixed Account

- Investment performance of your sub-accounts

- Partial withdrawals

- Loans, loan repayments and loan interest paid or credited

- Charges and deductions under the Policy

- Death Benefit Option

COMPUTING POLICY VALUE -- We compute the Policy Value on the Date of Issue and
on each Valuation Date. On the Date of Issue, the Policy Value is:

- Accumulations in the Fixed Account, MINUS

- The Monthly Deductions due

On each Valuation Date after the Date of Issue, the Policy Value is the SUM of:

- Accumulations in the Fixed Account PLUS

- The SUM of the PRODUCTS of:

- The number of units in each sub-account TIMES

- The value of a unit in each sub-account on the Valuation Date

THE UNIT -- We allocate each payment to the sub-accounts you selected. We credit
allocations to the sub-accounts as units. Units are credited separately for each
sub-account.

The number of units of each sub-account credited to the Policy is the QUOTIENT
of:

- That part of the payment allocated to the sub-account DIVIDED BY

- The dollar value of a unit on the Valuation Date the payment is received
at our Principal Office.

33
<PAGE>
The number of units will remain fixed unless changed by a split of unit value,
transfer, partial withdrawal or surrender. Also, each deduction of charges from
a sub-account will result in cancellation of units equal in value to the amount
deducted.

The dollar value of a unit of a sub-account varies from Valuation Date to
Valuation Date based on the investment experience of that sub-account. This
investment experience reflects the investment performance, expenses and charges
of the fund in which the sub-account invests. The value of each unit was set at
$1.00 on the first Valuation Date of each sub-account. The value of a unit on
any Valuation Date is the PRODUCT of:

- The dollar value of the unit on the preceding Valuation Date TIMES

- The net investment factor

NET INVESTMENT FACTOR -- The net investment factor measures the investment
performance of a sub-account during the valuation period just ended. The net
investment factor for each sub-account is 1.0000 PLUS the QUOTIENT of:

- The investment income of that sub-account for the valuation period,
adjusted for realized and unrealized capital gains and losses and for
taxes during the valuation period, DIVIDED BY

- The value of that sub-account's assets at the beginning of the valuation
period

The net investment factor may be greater or less than one.

PAYMENT OPTIONS

Upon your written request, the Company will pay the Surrender Value or all or
part of any payable Net Death Benefit under one or more of our then-available
payment options. If you do not make an election, we will pay the Surrender Value
or the Net Death Benefit in a single sum. A certificate will be provided to the
payee describing the payment option selected.

The amount applied under any one option for any one payee must be at least
$5,000. The periodic payment for any one payee must be at least $50. Subject to
the Policy Owner and beneficiary provisions, any option selection may be changed
before the Net Death Benefit becomes payable. If you make no selection, the
beneficiary may select an option when the Net Death Benefit becomes payable.

The amounts payable under a payment option are paid from the General Account.
These amounts are not based on the investment experience of the Variable
Account.

OPTIONAL INSURANCE BENEFITS

You may add optional insurance benefits to the Policy by Rider, as described in
APPENDIX B -- OPTIONAL INSURANCE BENEFITS. The cost of certain optional
insurance benefits becomes part of the Monthly Deduction.

SURRENDER

You may surrender the Policy and receive its Surrender Value. The Surrender
Value is:

- The Policy Value MINUS

- Any Outstanding Loan.

34
<PAGE>
We will compute the Surrender Value on the Valuation Date on which we receive
the Policy with a written request for surrender.

The Surrender Value may be paid in a lump sum or under a payment option then
offered by us. We will normally pay the Surrender Value within seven days
following our receipt of written request. We may delay benefit payments under
the circumstances described in OTHER POLICY PROVISIONS -- "Delay of Payments."

For important tax consequences of surrender, see FEDERAL TAX CONSIDERATIONS.

PARTIAL WITHDRAWAL

After the first Policy year, you may withdraw part of the Surrender Value of
your Policy on written request. Your written request must state the dollar
amount you wish to receive. You may allocate the amount withdrawn among the
sub-accounts and the Fixed Account. If you do not provide allocation
instructions, we will make a Pro-Rata Allocation. Each partial withdrawal must
be at least $500. Under both Level Death Benefit Options, the Face Amount is
reduced by the partial withdrawal. We will not allow a partial withdrawal if it
would reduce Death Benefit Option 1 and 3 Face Amount below $40,000.

On a partial withdrawal from a sub-account, we will cancel the number of units
equal in value to the amount withdrawn. The amount withdrawn will be the amount
you requested plus the partial withdrawal transaction charge. See CHARGES AND
DEDUCTIONS -- "Partial Withdrawal Transaction Charge." We will normally pay the
partial withdrawal within seven days following our receipt of written request.
We may delay payment as described in OTHER POLICY PROVISIONS -- "Delay of
Payments."

For important tax consequences of partial withdrawals, see FEDERAL TAX
CONSIDERATIONS.

35
<PAGE>
CHARGES AND DEDUCTIONS

Charges will be deducted in connection with the Policy to compensate the Company
for:

- Administering the Policy

- Providing the insurance benefits set forth in the Policy and any optional
insurance benefits added by Rider

- Payment of any applicable taxes

- Assuming certain risks in connection with the Policy

- Incurring expenses in distributing the Policy

MONTHLY CHARGES (THE MONTHLY DEDUCTION)

The Monthly Deduction is comprised of the following:

- MONTHLY POLICY CHARGE -- The Monthly Policy Charge will be charged on each
monthly processing date until the Final Payment Date. The primary purpose
of the Monthly Policy Charge is to compensate us for providing life
insurance coverage for the Insured. In addition, a portion of this charge
compensates us for administrative, tax, and distribution expenses. The
Monthly Policy Charge is equal to a current rate per $1,000 times the
Insurance Amount (the "Monthly Policy Charge rate"). The current Monthly
Policy Charge rates are based on our expectations as to future mortality
experience. Any change in the current Monthly Policy Charge rates will
apply to all Insureds of the same age, sex and underwriting class whose
Policies have been in force for the same period.

The current Monthly Policy Charge rate may vary based on:

- Sex of the Insured (male, female, or blended unisex)

- Issue age and underwriting class of the Insured

- Issue date of the Policy or effective date of an increase or date of any
Rider.

For the initial Face Amount, the Monthly Policy Charge rate is based on the
issue age of the Insured and the Policy year. For an increase in Face Amount or
for a Rider, the Monthly Policy Charge rate is based on the age of the Insured
as of the effective date of the increase or Rider and the years since then. Our
Monthly Policy Charge rates are generally higher under a Policy that has been in
force for some period of time than they would be under an otherwise identical
Policy purchased more recently on the same insured person.

The underwriting class of an Insured will affect the Monthly Policy Charge
rates. We currently place Insureds into standard underwriting classes,
non-standard underwriting classes, and simplified underwriting classes. The
underwriting classes are also divided into two categories: smokers and
non-smokers. We compute the Monthly Policy Charge separately for the initial
Face Amount and for any increase in Face Amount. However,

36
<PAGE>
if the Insured's underwriting class improves on an increase, the current Monthly
Policy Charge rates for the better class will apply to the total Face Amount.

The current rates for the Monthly Policy Charge will not be greater than the
guaranteed rates set forth in the Policy, which in turn will never exceed the
Commissioners 1980 Standard Ordinary Mortality Tables (Mortality Table B for
unisex Policies) and the Insured's sex and age. The Tables used for this purpose
set forth different mortality estimates for males and females. For examples, see
APPENDIX C -- GUARANTEED MONTHLY POLICY CHARGE RATES. As indicated in the table
in APPENDIX C, the maximum Monthly Policy Charge for each $1000 of Insurance
Amount is $83.33 at age 99.

We deduct the Monthly Policy Charge on each monthly processing date starting
with the Date of Issue, but do not deduct the Monthly Policy Charge after the
Final Payment Date.

- MONTHLY MORTALITY AND EXPENSE RISK CHARGE -- This monthly charge is
currently equal to (and is guaranteed not to exceed) 1/12 of 0.75% of the
Policy Value in each sub-account for the first 10 Policy years, 1/12 of
0.50% for Policy Years 11 through 20, and 0.25% for Policy years 21 and
later. The charge is based on the Policy Value in the sub-accounts as of
the prior Monthly Processing Date. The charge will continue to be assessed
after the Final Payment Date.

This charge compensates us for assuming mortality and expense risks for variable
interests in the Policies. The mortality risk we assume is that Insureds may
live for a shorter time than anticipated. If this happens, we will pay more Net
Death Benefits than anticipated. The expense risk we assume is that the expenses
incurred in issuing and administering the Policies will exceed the expense
portion of the Monthly Policy Charge. If the charge for mortality and expense
risks is not sufficient to cover mortality experience and expenses, we will
absorb the losses. If the charge turns out to be higher than mortality and
expense risk expenses, the difference will be a profit to us. If the charge
provides us with a profit, the profit will be available for our use to pay
distribution, sales and other expenses.

- Monthly Rider Charges -- Rider Charges will vary depending upon the riders
selected, and by the sex, underwriting classification of the Insured.

COMPUTING MONTHLY POLICY CHARGES

Monthly Policy Charges can vary depending upon the Death Benefit Option you
select. Monthly Policy Charges will also be different for the initial Face
Amount, any increases in Face Amount, and for that part of the death benefit
subject to the Guideline Minimum Death Benefit.

DEATH BENEFIT OPTION 1 AND DEATH BENEFIT OPTION 3

INITIAL FACE AMOUNT -- For the initial Face Amount under Death Benefit Option 1
and Death Benefit Option 3, the Monthly Policy Charge is the PRODUCT of:

- the current Monthly Policy Charge rate TIMES

- the DIFFERENCE between

- the initial Face Amount AND

- the Policy Value (MINUS any Rider charges) at the beginning of the
Policy month.

Under Death Benefit Option 1 and Death Benefit Option 3, the Monthly Policy
Charge decreases as the Policy Value increases (if the Guideline Minimum Death
Benefit is not in effect).

37
<PAGE>

INCREASES IN FACE AMOUNT -- For each increase in Face Amount under Death Benefit
Option 1 or Death Benefit Option 3, the Monthly Policy Charge is the PRODUCT of:

- the current Monthly Policy Charge rate for the increase TIMES

- the DIFFERENCE between

- the increase in Face Amount AND

- any Policy Value (MINUS any Rider charges) IN EXCESS OF than the
initial Face Amount at the beginning of the Policy month and not
allocated to a prior increase.

GUIDELINE MINIMUM DEATH BENEFIT -- If the Guideline Minimum Death Benefit is in
effect, we will compute a Monthly Policy Charge for that part of the death
benefit subject to the Guideline Minimum Death Benefit that exceeds the current
death benefit not subject to the Guideline Minimum Death Benefit. Under Death
Benefit Option 1 or Death Benefit Option 3, this Monthly Policy Charge is the
PRODUCT of:

- the current Monthly Policy Charge rate for the initial Face Amount TIMES

- the DIFFERENCE between

- the Guideline Minimum Death Benefit AND

- the GREATER of the Face Amount OR the Policy Value.

We will adjust the Monthly Policy Charge for any decreases in Face Amount. See
THE POLICY -- "Change in Face Amount: Decreases."

DEATH BENEFIT OPTION 2

INITIAL FACE AMOUNT -- For the initial Face Amount under Death Benefit Option 2,
the Monthly Policy Charge is the PRODUCT of:

- the current Monthly Policy Charge rate TIMES

- the initial Face Amount.

INCREASES IN FACE AMOUNT -- For each increase in Face Amount under Death Benefit
Option 2, the Monthly Policy Charge is the PRODUCT of:

- the current Monthly Policy Charge rate for the increase TIMES

- the increase in Face Amount.

- the current Monthly Policy Charge rate for the initial Face Amount TIMES

- the DIFFERENCE between

38
<PAGE>
- the Guideline Minimum Death Benefit AND

- the Face Amount PLUS the Policy Value.

We will adjust the Monthly Policy Charge for any decreases in Face Amount. See
THE POLICY -- "Change in Face Amount: Decreases."

FUND EXPENSES

The value of the units of the sub-accounts will reflect the investment advisory
fee and other expenses of the funds whose shares the sub-accounts purchase. The
Prospectus and Statement of Additional Information of the Underlying Funds
contain more information concerning the fees and expenses.

No charges are currently made against the sub-accounts for federal or state
income taxes. Should income taxes be imposed, we may make deductions from the
sub-accounts to pay the taxes. See FEDERAL TAX CONSIDERATIONS.

PARTIAL WITHDRAWAL TRANSACTION CHARGE

For each partial withdrawal, we deduct a transaction fee of 2% of the amount
withdrawn, not to exceed $25. This fee is intended to reimburse us for the cost
of processing the withdrawal. The transaction fee applies to all partial
withdrawals.

TRANSFER CHARGES

Currently, the first 12 transfers in a Policy year are free. We reserve the
right to limit the number of free transfers in a Policy year to six. After that,
we will deduct a $10 transfer charge for amounts transferred in that Policy
year. We reserve the right to increase the charge, but it will never exceed $25.
This charge reimburses us for the administrative costs of processing the
transfer.

Each of the following transfers of Policy Value from the sub-accounts to the
Fixed Account is free and does not count as one of the 12 free transfers in a
Policy year:

- A conversion within the first 24 months from Date of Issue or increase

- A transfer to the Fixed Account to secure a loan

- A reallocation of Policy Value within 20 days of the Date of Issue

- Dollar-Cost Averaging Option and Automatic Rebalancing Option

OTHER ADMINISTRATIVE CHARGES

We reserve the right to charge for other administrative costs we incur. While
there are no current charges for these costs, we may impose a charge for:

- Changing payment allocation instructions

- Changing the allocation of Monthly Policy Charges among the various
sub-accounts and the Fixed Account

- Providing a projection of values

We do not currently charge for these costs. Any future charge is guaranteed not
to exceed $25 per transaction.

39
<PAGE>
POLICY LOANS

You may borrow money secured by your Policy Value at any time. There is no
minimum loan amount. The total amount you may borrow, including any Outstanding
Loan, is the loan value. The loan value is 90% of the Policy Value.

We will usually pay the loan within seven days after we receive the written
request. We may delay the payment of loans as stated in OTHER POLICY PROVISIONS
- -- "Delay of Payments."

We will allocate the loan among the sub-accounts and the Fixed Account according
to your instructions. If you do not make an allocation, we will make a Pro-Rata
Allocation. We will transfer Policy Value in each sub-account equal to the
Policy loan to the Fixed Account. We will not count this transfer as a transfer
subject to the transfer charge.

Policy Value equal to the Outstanding Loan will earn monthly interest in the
Fixed Account at an annual rate of 4.0%. NO OTHER INTEREST WILL BE CREDITED. The
loan interest rate charged by the Company accrues daily. The current annual
interest rate charged by the Company is 4.80%. The current annual rate of
interest charged on loans may change, but is guaranteed not to exceed 6.00%.

PREFERRED LOAN OPTION

The preferred loan option is automatically available to you, unless you request
otherwise. You may change a preferred loan to a non-preferred loan at any time
upon written request. A request for a preferred loan after the Final Payment
Date will terminate the optional Guaranteed Death Benefit Rider. Any part of the
Outstanding Loan that represents earnings under the Policy may be treated as a
preferred loan. There is some uncertainty as to the tax treatment of a preferred
loan, which may be treated as a taxable withdrawal from the Policy. You should
consult a qualified tax adviser (and see FEDERAL TAX CONSIDERATIONS).

Policy Value equal to the Outstanding Loan will earn monthly interest in the
Fixed Account at an annual rate of at least 4.0%. NO OTHER INTEREST WILL BE
CREDITED. The loan interest rate charged by the Company accrues daily. The
current annual loan interest rate charged by the Company for Preferred Loans is
4.00%. The current annual rate of interest charged on preferred loans may
change, but is guaranteed not to exceed 4.50%.

REPAYMENT OF OUTSTANDING LOAN

You may pay any loans before Policy lapse. We will allocate that part of the
Policy Value in the Fixed Account that secured a repaid loan to the sub-accounts
and Fixed Account according to your instructions. If you do not make a repayment
allocation, we will allocate Policy Value according to your most recent payment
allocation instructions. However, loan repayments allocated to the Variable
Account cannot exceed Policy Value previously transferred from the Variable
Account to secure the Outstanding Loan.

If the Outstanding Loan exceeds the next monthly deduction, the Policy will
terminate. We will mail a notice of termination to the last known address of you
and any assignee. If you do not make sufficient payment within 62 days after
this notice is mailed, the Policy will terminate with no value. See POLICY
TERMINATION AND REINSTATEMENT. The foreclosure of an Outstanding Loan will
terminate the optional Guaranteed Death Benefit Rider.

40
<PAGE>
EFFECT OF POLICY LOANS

Policy loans will permanently affect the Policy Value and Surrender Value, and
may permanently affect the death benefit. The effect could be favorable or
unfavorable, depending on whether the investment performance of the sub-accounts
is less than or greater than the interest credited to the Policy Value in the
Fixed Account that secures the loan.

We will deduct any Outstanding Loan from the proceeds payable when the Insured
dies or from surrender.

POLICY TERMINATION AND REINSTATEMENT

TERMINATION

Unless the Guaranteed Death Benefit Rider is in effect, the Policy will
terminate if:

- Policy Value is insufficient to cover the next Monthly Deduction plus loan
interest accrued OR

- Outstanding Loans exceed the Policy Value

If one of these situations occurs, the Policy will be in default. You will then
have a grace period of 62 days, measured from the date of default, to pay a
premium sufficient to prevent termination. On the date of default, we will send
a notice to you and to any assignee of record. The notice will state the premium
due and the date by which it must be paid.

Failure to pay a sufficient premium within the grace period will result in
Policy termination. If the Insured dies during the grace period, we will deduct
from the Net Death Benefit any monthly charges due and unpaid through the Policy
month in which the Insured dies and any other overdue charge.

During the first 48 Policy months following the Date of Issue or an increase in
the Face Amount, a guarantee may apply to prevent the Policy from terminating
because of insufficient Policy Value. This guarantee applies if, during this
period, you pay premiums that, when reduced by partial withdrawals and partial
withdrawal transaction charges, equal or exceed specified minimum monthly
payments. The specified minimum monthly payments are based on the number of
months the Policy, increase in Face Amount or policy change that causes a change
in the minimum monthly payment has been in force. A policy change that causes a
change in the minimum monthly payment is a change in the Face Amount,
underwriting reclassifications, or the addition or deletion of a Rider. Except
for the first 48 months after the Date of Issue or the effective date of an
increase, payments equal to the minimum monthly payment do not guarantee that
the Policy will remain in force.

If the optional Guaranteed Death Benefit Rider is in effect, the Policy will not
lapse regardless of the investment performance of the Variable Account. See
"Guaranteed Death Benefit Rider."

REINSTATEMENT

A terminated Policy may be reinstated within three years of the date of default
and before the Final Payment Date. The reinstatement takes effect on the monthly
processing date following the date you submit to us:

- Written application for reinstatement

- Evidence of insurability showing that the Insured is insurable according
to our underwriting rules and

- A payment that, after the deduction of the payment expense charge, is
large enough to cover the minimum amount payable

Policies which have been surrendered may not be reinstated.

41
<PAGE>
MINIMUM AMOUNT PAYABLE -- If reinstatement is requested when less than 48
Monthly Deductions have been paid since the Date of Issue or increase in the
Face Amount, you must pay for the lesser of three minimum monthly premiums and
three Monthly Deductions.

If you request reinstatement more than 48 Monthly Processing Dates from the Date
of Issue or increase in the Face Amount, you must pay three Monthly Deductions.

POLICY VALUE ON REINSTATEMENT -- The Policy Value on the date of reinstatement
is:

- The payment made to reinstate the Policy and interest earned from the date
the payment was received at our Principal Office PLUS

- The Policy Value less any Outstanding Loan on the date of default MINUS

- The Monthly Deductions due on the date of reinstatement

You may reinstate any Outstanding Loan.

OTHER POLICY PROVISIONS

POLICY OWNER

The Policy Owner is the Insured unless another Policy owner has been named in
the application or enrollment form. As Policy owner, you are entitled to
exercise all rights under your Policy while the Insured is alive, with the
consent of any irrevocable beneficiary. The consent of the Insured is required
whenever the Face Amount is increased.

BENEFICIARY

The beneficiary is the person or persons to whom the Net Death Benefit is
payable on the Insured's death. Unless otherwise stated in the Policy, the
beneficiary has no rights in the Policy before the Insured dies. While the
Insured is alive, you may change the beneficiary, unless you have declared the
beneficiary to be irrevocable. If no beneficiary is alive when the Insured dies,
the Policy owner (or the Policy owner's estate) will be the beneficiary. If more
than one beneficiary is alive when the Insured dies, we will pay each
beneficiary in equal shares, unless you have chosen otherwise. Where there is
more than one beneficiary, the interest of a beneficiary who dies before the
Insured will pass to surviving beneficiaries proportionally.

ASSIGNMENT

You may assign a Policy as collateral or make an absolute assignment. All Policy
rights will be transferred as to the assignee's interest. The consent of the
assignee may be required to make changes in payment allocations, make transfers
or to exercise other rights under the Policy. We are not bound by an assignment
or release thereof, unless it is in writing and recorded at our Principal
Office. When recorded, the assignment will take effect on the date the written
request was signed. Any rights the assignment creates will be subject to any
payments we made or actions we took before the assignment is recorded. We are
not responsible for determining the validity of any assignment or release.

42
<PAGE>
THE FOLLOWING POLICY PROVISIONS MAY VARY BY STATE.

LIMIT ON RIGHT TO CHALLENGE POLICY

We cannot challenge the validity of your Policy if the Insured was alive after
the Policy had been in force for two years from the Date of Issue. Also, we
cannot challenge the validity of any increase in the Face Amount if the Insured
was alive after the increase was in force for two years from the effective date
of the increase.

SUICIDE

The Net Death Benefit will not be paid if the Insured commits suicide, while
sane or insane, within two years from the Date of Issue. Instead, we will pay
the beneficiary all payments made for the Policy, without interest, less any
Outstanding Loan and partial withdrawals. If the Insured commits suicide, while
sane or insane, within two years from any increase in Face Amount, we will not
recognize the increase. We will pay to the beneficiary the Monthly Policy
Charges paid for the increase.

MISSTATEMENT OF AGE OR SEX

If the Insured's age or sex is not correctly stated in the Policy application or
enrollment form, we will adjust benefits under the Policy to reflect the correct
age and sex. The adjusted benefit will be the benefit that the most recent
Monthly Policy Charge would have purchased for the correct age and sex. We will
not reduce the death benefit to less than the Guideline Minimum Death Benefit.
For a unisex Policy, there is no adjusted benefit for misstatement of sex.

DELAY OF PAYMENTS

Amounts payable from the Variable Account for surrender, partial withdrawals,
Net Death Benefit, Policy loans and transfers may be postponed whenever:

- The New York Stock Exchange is closed other than customary weekend and
holiday closings

- The SEC restricts trading on the New York Stock Exchange

- The SEC determines an emergency exists, so that disposal of securities is
not reasonably practicable or it is not reasonably practicable to compute
the value of the Variable Account's net assets

We may delay paying any amounts derived from payments you made by check until
the check has cleared your bank.

We reserve the right to defer amounts payable from the Fixed Account. This delay
may not exceed six months.

FEDERAL TAX CONSIDERATIONS

The following summary of federal tax considerations is based on our
understanding of the present federal income tax laws as they are currently
interpreted. Legislation may be proposed which, if passed, could adversely and
possibly retroactively affect the taxation of the Policies. This summary is not
exhaustive, does not purport to cover all situations, and is not intended as tax
advice. We do not address tax provisions that may apply if the Policy owner is a
corporation or the trustee of an employee benefit plan. You should consult a
qualified tax adviser to apply the law to your circumstances.

43
<PAGE>
THE COMPANY AND THE VARIABLE ACCOUNT

The Company is taxed as a life insurance company under Subchapter L of the Code.
We file a consolidated tax return with our parent and affiliates. We do not
currently charge for any income tax on the earnings or realized capital gains in
the Variable Account. We do not currently charge for federal income taxes
respecting the Variable Account. A charge may apply in the future for any
federal income taxes we incur. The charge may become necessary, for example, if
there is a change in our tax status. Any charge would be designed to cover the
federal income taxes on the investment results of the Variable Account.

Under current laws, the Company may incur state and local taxes besides premium
taxes. These taxes are not currently significant. If there is a material change
in these taxes affecting the Variable Account, we may charge for taxes paid or
for tax reserves.

TAXATION OF THE POLICIES

We believe that the Policies described in this Prospectus are life insurance
contracts under Section 7702 of the Code. Section 7702 affects the taxation of
life insurance contracts and places limits on the relationship of the Policy
Value to the death benefit. So long as the Policies are life insurance
contracts, the Net Death Benefits of the Policies are excludable from the gross
income of the beneficiaries. Also, any increase in Policy Value is not taxable
until received by you or your designee (but see "Modified Endowment Policies").

Federal tax law requires that the investment of each sub-account funding the
Policies be adequately diversified according to Treasury regulations. Although
we do not have control over the investments of the funds, we believe that the
funds currently meet the Treasury's diversification requirements. We will
monitor continued compliance with these requirements.

The Treasury Department has announced that previous regulations on
diversification do not provide guidance concerning the extent to which Policy
owners may direct their investments to divisions of a separate investment
account. Regulations may provide guidance in the future. The Policies or our
administrative rules may be modified as necessary to prevent a Policy owner from
being considered the owner of the assets of the Variable Account.

A surrender, partial withdrawal, change in Death Benefit Option, change in the
Face Amount, lapse with Policy loan outstanding, or assignment of the Policy may
have tax consequences. Within the first fifteen Policy years, a distribution of
cash required under Section 7702 of the Code because of a reduction of benefits
under the Policy will be taxed to the Policy owner as ordinary income respecting
any investment earnings. Federal, state and local income, estate, inheritance
and other tax consequences of ownership or receipt of Policy proceeds depend on
the circumstances of each Insured, policy owner or beneficiary.

POLICY LOANS

We believe that non-preferred loans received under the Policy will be treated as
an indebtedness of the Policy Owner for federal income tax purposes. Under
current law, these loans will not constitute income for the Policy Owner while
the Policy is in force (but see "Modified Endowment Policies"). There is a risk,
however, that a preferred loan may be characterized by the Internal Revenue
Service ("IRS") as a withdrawal and taxed accordingly. At the present time, the
IRS has not issued any guidance on whether loans with the attributes of a
preferred loan should be treated differently than a non-preferred loan. This
lack of specific guidance makes the tax treatment of preferred loans uncertain.
In the event IRS guidelines are issued in the future, you may convert your
preferred loan to a non-preferred loan. However, it is possible that,
notwithstanding the conversion, some or all of the loan could be treated as a
taxable withdrawal from the Policy.

Section 264 of the Code restricts the deduction of interest on Policy loans.
Consumer interest paid on Policy loans under an individually owned Policy is not
tax deductible. Generally, no tax deduction for interest is

44
<PAGE>
allowed on Policy loans, if the Insured is an officer or employee of, or is
financially interested in, any business carried on by the taxpayer. There is an
exception to this rule which permits a deduction for interest on loans up to
$50,000 related to business-owned policies covering officers or 20-percent
owners, up to a maximum equal to the greater of (1) five individuals or (2) the
lesser of (a) 5% of the total number of officers and employees of the
corporation or (b) 20 individuals.

MODIFIED ENDOWMENT POLICIES

The Technical and Miscellaneous Revenue Act of 1988 ("1988 Act") adversely
affects the tax treatment of distributions under so-called "modified endowment
contracts." Under the 1988 Act, a Policy may be considered a "modified endowment
contract" if total payments during the first seven Policy years (or within seven
years of a material change in the Policy) EXCEED the total net level payments
payable had the Policy provided for paid-up future benefits after making seven
level annual payments. In addition, if benefits are reduced at anytime during
the life of the Policy, there may be adverse tax consequences. PLEASE CONSULT
YOUR TAX ADVISER.

If the Policy is considered a modified endowment contract, distributions
(including Policy loans, partial withdrawals, surrenders and assignments) will
be taxed on an "income-first" basis and includible in gross income to the extent
that the Surrender Value exceeds the policy owner's investment in the Policy.
Any other amounts will be treated as a return of capital up to the Policy
Owner's basis in the Policy. A 10% additional tax is imposed on that part of any
distribution that is includible in income, unless the distribution is:

- Made after the taxpayer becomes disabled,

- Made after the taxpayer attains age 59 1/2, or

- Part of a series of substantially equal periodic payments for the
taxpayer's life or life expectancy or joint life expectancies of the
taxpayer and beneficiary.

All modified endowment contracts issued by the same insurance company to the
same policy owner during any calendar year will be treated as a single modified
endowment contract in computing taxable distributions.

Currently, we review each Policy when payments are received to determine if the
payment will render the Policy a modified endowment contract. If a payment would
so render the Policy, we will notify you of the option of requesting a refund of
the excess payment. The refund process must be completed within 60 days after
the Policy anniversary or the Policy will be permanently classified as a
modified endowment contract.

VOTING RIGHTS

Where the law requires, we will vote fund shares that each sub-account holds
according to instructions received from Policy Owners with Policy Value in the
sub-account. If, under the 1940 Act or its rules, we may vote shares in our own
right, whether or not the shares relate to the Policies, we reserve the right to
do so.

We will provide each person having a voting interest in a fund with proxy
materials and voting instructions. We will vote shares held in each sub-account
for which no timely instructions are received in proportion to all instructions
received for the sub-account. We will also vote in the same proportion our
shares held in the Variable Account that does not relate to the Policies.

45
<PAGE>
We will compute the number of votes that a Policy owner has the right to
instruct on the record date established for the fund. This number is the
quotient of:

- Each Policy Owner's Policy Value in the sub-account divided by

- The net asset value of one share in the fund in which the assets of the
sub-account are invested

We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that Fund shares be voted so as
(1) to cause to change in the sub-classification or investment objective of one
or more of the Funds, or (2) to approve or disapprove an investment advisory
contract for the Funds. In addition, we may disregard voting instructions that
are in favor of any change in the investment policies or in any investment
adviser or principal underwriter if the change has been initiated by Contract
Owners or the Trustees. Our disapproval of any such change must be reasonable
and, in the case of a change in investment policies or investment adviser, based
on a good faith determination that such change would be contrary to state law or
otherwise is inappropriate in light of the objectives and purposes of the Funds.
In the event we do disregard voting instructions, a summary of and the reasons
for that action will be included in the next periodic report to Contract Owners.

DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY

<TABLE>
<CAPTION>
NAME AND POSITION WITH COMPANY PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------------------------------ --------------------------------------------------
<S> <C>
Bruce C. Anderson Director (since 1996), Vice President (since 1984)
Director and Assistant Secretary (since 1992) of First
Allmerica

Warren E. Barnes Vice President (since 1996) and Corporate
Vice President and Corporate Controller Controller (since 1998) of First Allmerica

Mark R. Colborn Director (since 2000) and Vice President (since
Director and Vice President 1992) of First Allmerica.

Mary Eldridge Secretary (since 1999) of First Allmerica;
Secretary Secretary (since 1999) of Allmerica Investments,
Inc.; and Secretary (since 1999) of Allmerica
Financial Investment Management Services, Inc.

J. Kendall Huber Director, Vice President and General Counsel of
Director, Vice President and General First Allmerica (since 2000); Vice President
Counsel (1999) of Promos Hotel Corporation; Vice President
& Deputy General Counsel (1998-1999) of Legg
Mason, Inc.; Vice President and Deputy General
Counsel (1995-1998) of USF&G Corporation.

John P. Kavanaugh Director and Chief Investment Officer (since 1996)
Director, Vice President and and Vice President (since 1991) of First
Chief Investment Officer Allmerica; Vice President (since 1998) of
Allmerica Financial Investment Management
Services, Inc.; and President (since 1995) and
Director (since 1996) of Allmerica Asset
Management, Inc.

J. Barry May Director (since 1996) of First Allmerica; Director
Director and President (since 1996) of The Hanover
Insurance Company; and Vice President (1993 to
1996) of The Hanover Insurance Company
</TABLE>

46
<PAGE>

<TABLE>
<CAPTION>
NAME AND POSITION WITH COMPANY PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------------------------------ --------------------------------------------------
<S> <C>
James R. McAuliffe Director (since 1996) of First Allmerica; Director
Director (since 1992), President (since 1994) and Chief
Executive Officer (since 1996) of Citizens
Insurance Company of America

Mark C. McGivney Vice President (since 1997) and Treasurer (since
Vice President and Treasurer 2000) of First Allmerica; Associate, Investment
Banking (1996-1997) of Merrill Lynch & Co.;
Associate, Investment Banking (1995) of Salomon
Brothers, Inc.; Treasurer (since 2000) of
Allmerica Investments, Inc., Allmerica Asset
Management, Inc. and Allmerica Financial
Investment Management Services, Inc.

John F. O'Brien Director, President and Chief Executive Officer
Director and Chairman of the Board (since 1989) of First Allmerica

Edward J. Parry, III Director and Chief Financial Officer (since 1996),
Director, Vice President Vice President (since 1993), and Treasurer (1993 -
Chief Financial Officer 2000) of First Allmerica

Richard M. Reilly Director (since 1996) and Vice President (since
Director, President and Chief Executive 1990) of First Allmerica; President (since 1995)
Officer of Allmerica Financial Life Insurance and Annuity
Company; Director (since 1990) of Allmerica
Investments, Inc.; and Director and President
(since 1998) of Allmerica Financial Investment
Management Services, Inc.

Robert P. Restrepo, Jr. Director and Vice President (since 1998) of First
Director Allmerica; Director (since 1998) of The Hanover
Insurance Company; Chief Executive Officer (1996
to 1998) of Travelers Property & Casualty; Senior
Vice President (1993 to 1996) of Aetna Life &
Casualty Company

Eric A. Simonsen Director (since 1996) and Vice President (since
Director and Vice President 1990) of First Allmerica; Director (since 1991) of
Allmerica Investments, Inc.; and Director (since
1991) of Allmerica Financial Investment Management
Services, Inc.
</TABLE>

DISTRIBUTION

Allmerica Investments, Inc., an indirect wholly owned subsidiary of First
Allmerica, acts as the principal underwriter and general distributor of the
Policies. Allmerica Investments, Inc. is registered with the SEC as a
broker-dealer and is a member of the National Association of Securities
Dealers, Inc. ("NASD"). First Union Securities, Inc. acts as the distributor and
wholesaler of the Policies. First Union Securities, Inc. is registered with the
SEC as a broker-dealer and is a member of the NASD.

The Company, Allmerica Investments, Inc, and First Union Securities, Inc. have
sales agreements with various broker-dealers and banks under which the Policies
will be sold by registered representatives of the broker-dealers or employees of
the banks. These registered representatives and employees must also be
authorized under applicable state regulations as life insurance agents to sell
variable life insurance. The broker-dealers are ordinarily required to be
registered with the SEC and must be members of the NASD.

Broker-dealers who sell the Policy receive commissions based on a commission
schedule. Commissions may be up to 8.50% for payments in Years 1-4, 4.0% in
Years 5-10, and 2% thereafter. From time-to-time alternative commission
schedules may be available, but the maximum value of any alternative amounts the

47
<PAGE>
Company may pay as commissions on the Policies is expected to be equivalent over
time to the amounts described above. To the extent permitted by NASD rules,
overrides and promotional incentives or payments based on sales volumes, the
assumption of wholesaling functions or other sales-related criteria. Other
payments may be made for other services that do not directly involve the sale of
the Policies. These services may include the recruitment and training of
personnel, production of promotional literature, and similar services.

Commissions paid on the Policies, including other incentives or payments, are
not charged to Policy Owners or to the Variable Account.

REPORTS

We will maintain the records for the Variable Account. We will promptly send you
statements of transactions under your Policy, including:

- Payments

- Changes in Face Amount

- Changes in death benefit option

- Transfers among Sub-Accounts and the Fixed Account

- Partial withdrawals

- Increases in loan amount or loan repayments

- Lapse or termination for any reason

- Reinstatement

We will send an annual statement to you that will summarize all of the above
transactions and deductions of charges during the Policy year. It will also set
forth the status of the death benefit, Policy Value, Surrender Value, amounts in
the Sub-Accounts and Fixed Account, and any Policy loans. The Owner should
review the information in all Statements carefully. All errors or corrections
must be reported to the Company immediately to assure proper crediting to the
Contract. The Company will assume that all transactions are accurately reported
on confirmation statements and quarterly/annual statements unless the Owner
notifies the Principal Office in writing within 30 days after receipt of the
statement. We will send you reports containing financial statements and other
information for the Variable Account and the Underlying Funds.

LEGAL PROCEEDINGS

There are no pending legal proceedings involving the Variable Account or its
assets. The Company and Allmerica Investments, Inc. are not involved in any
litigation that is materially important to their total assets.

ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS

We reserve the right, subject to law, to make additions to, deletions from, or
substitutions for the shares that are held in the Sub-Accounts. We may redeem
the shares of a Fund and substitute shares of another registered open-end
management company, if:

- The shares of the fund are no longer available for investment or

48
<PAGE>
- In our judgment further investment in the Fund would be improper based on
the purposes of the Variable Account or the affected Sub-Account

Where the 1940 Act or other law requires, we will not substitute any shares
respecting a Policy interest in a sub-account without notice to Policy Owners
and prior approval of the SEC and state insurance authorities. The Variable
Account may, as the law allows, purchase other securities for other policies or
allow a conversion between policies on a Policy Owner's request.

We reserve the right to establish additional sub-accounts funded by a new fund
or by another investment company. Subject to law, we may, in our sole
discretion, establish new sub-accounts or eliminate one or more sub-accounts.

Shares of the Underlying Funds are issued to other separate accounts of the
Company and its affiliates that fund variable annuity contracts ("mixed
funding") and are also issued to other unaffiliated insurance companies ("shared
funding"). It is conceivable that in the future such mixed funding or shared
funding may be disadvantageous for variable life Policy Owners or variable
annuity Policy Owners. The Company and the Underlying Funds do not believe that
mixed and shared funding is currently disadvantageous to either variable life
insurance Policy Owners or variable annuity Policy Owners. The Company and the
Trustees will monitor events to identify any material conflicts among Policy
Owners because of mixed and shared funding. If the Trustees conclude that
separate funds should be established for variable life and variable annuity
separate accounts, we will bear the expenses.

We may change the Policy to reflect a substitution or other change and will
notify Policy Owners of the change. Subject to any approvals the law may
require, the Variable Account or any sub-accounts may be:

- Operated as a management company under the 1940 Act

- Deregistered under the 1940 Act if registration is no longer required

- Combined with other sub-accounts or our other separate accounts

FURTHER INFORMATION

We have filed a 1933 Act registration statement for this offering with the SEC.
Under SEC rules and regulations, we have omitted from this Prospectus part of
the registration statement and amendments. Statements contained in this
Prospectus are summaries of the Policy and other legal documents. The complete
documents and omitted information may be obtained from the SEC's Principal
Office in Washington, D.C., on payment of the SEC's prescribed fees.

MORE INFORMATION ABOUT THE FIXED ACCOUNT

This Prospectus serves as a disclosure document only for the aspects of the
Policy relating to the Variable Account. For complete details on the Fixed
Account, read the Policy itself. The Fixed Account and other interests in the
general account are not regulated under the 1933 Act or the 1940 Act because of
exemption and exclusionary provisions. The 1933 Act provisions on the accuracy
and completeness of statements made in prospectuses may apply to information on
the fixed part of the Policy and the Fixed Account. The SEC has not reviewed the
disclosures in this section of the Prospectus.

GENERAL DESCRIPTION

You may allocate part or all of your payments to accumulate at a fixed rate of
interest in the Fixed Account. The Fixed Account is a part of our general
account. The general account is made up of all of our general assets

49
<PAGE>
other than those allocated to any separate account. Allocations to the Fixed
Account become part of our general account assets and are used to support
insurance and annuity obligations.

FIXED ACCOUNT INTEREST AND POLICY LOANS

We guarantee amounts allocated to the Fixed Account as to principal and a
minimum rate of interest. The minimum interest we will credit on amounts
allocated to the Fixed Account is 4.0% compounded annually. "Excess interest"
may or may not be credited at our sole discretion. We will guarantee initial
rates on amounts allocated to the Fixed Account, either as payments or
transfers, to the next Policy anniversary. At each Policy anniversary, we will
credit the then current interest rate to money remaining in the Fixed Account.
We will guarantee this rate for one year. Thus, if a payment has been allocated
to the Fixed Account for less than one Policy year, the interest rate credited
to such payment may be greater or less than the interest rate credited to
payments that have been allocated to the Policy for more than one Policy year.

Policy loans may also be made from the Policy Value in the Fixed Account. We
will credit that part of the Policy Value that is equal to any Outstanding Loan
with interest at an effective annual yield of at least 4.0%.

We may delay transfers, surrenders, partial withdrawals, Net Death Benefits and
Policy loans up to six months. However, if payment is delayed for 30 days or
more, we will pay interest at our then current interest rate. The rate applied
will be at least equal to the rate required by state law for deferment of
payments. Amounts from the Fixed Account used to make payments on policies that
we or our affiliates issue will not be delayed.

PARTIAL WITHDRAWALS AND TRANSFERS

If a partial withdrawal is made, a partial withdrawal transaction charge may be
imposed. We deduct partial withdrawals from Policy Value allocated to the Fixed
Account on a last-in/first-out basis. This means that the last payments
allocated to Fixed Account will be withdrawn first.

The first 12 transfers in a Policy year currently are free. After that, we may
deduct a $10 transfer charge for each transfer in that Policy year. The transfer
privilege is subject to our consent and to our then current rules.

INDEPENDENT ACCOUNTANTS

The financial statements of the Company as of December 31, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999, included in this
Prospectus constituting part of this Registration Statement, have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of the firm as experts in auditing and
accounting.

The financial statements of the Company included herein should be considered
only as bearing on the ability of the Company to meet its obligations under the
Policy.

FINANCIAL STATEMENTS

Financial Statements for the Company and for the Variable Account are included
in this Prospectus, beginning immediately after the Appendices. The financial
statements of the Company should be considered only as bearing on our ability to
meet our obligations under the Policy. They should not be considered as bearing
on the investment performance of the assets held in the Variable Account.

50
<PAGE>
APPENDIX A
GUIDELINE MINIMUM DEATH BENEFIT FACTORS TABLE

(DEATH BENEFIT OPTION 1 AND DEATH BENEFIT OPTION 2)
------------------------------------------------

Under Death Benefit Option 1 and Death Benefit Option 2, the Guideline Minimum
Death Benefit is a percentage of the Policy Value as set forth below:

GUIDELINE MINIMUM DEATH BENEFIT FACTORS

<TABLE>
<CAPTION>
Percentage of
Attained Age Policy Value
- ------------ -------------
<S> <C>
40 and under.......................................... 250%
41.................................................... 243%
42.................................................... 236%
43.................................................... 229%
44.................................................... 222%
45.................................................... 215%
46.................................................... 209%
47.................................................... 203%
48.................................................... 197%
49.................................................... 191%
50.................................................... 185%
51.................................................... 178%
52.................................................... 171%
53.................................................... 164%
54.................................................... 157%
55.................................................... 150%
56.................................................... 146%
57.................................................... 142%
58.................................................... 138%
59.................................................... 134%
60.................................................... 130%
61.................................................... 128%
62.................................................... 126%
63.................................................... 124%
64.................................................... 122%
65.................................................... 120%
66.................................................... 119%
67.................................................... 118%
68.................................................... 117%
69.................................................... 116%
70.................................................... 115%
71.................................................... 113%
72.................................................... 111%
73.................................................... 109%
74.................................................... 107%
75 - 90............................................... 105%
91.................................................... 104%
92.................................................... 103%
93.................................................... 102%
94.................................................... 101%
95 and above.......................................... 100%
</TABLE>

A-1
<PAGE>
APPENDIX B
OPTIONAL INSURANCE BENEFITS

This Appendix provides only a summary of other insurance benefits that may be
available by Rider for an additional charge. The Riders are not available if the
Policy is issued on the basis of simplified underwriting. For more information,
contact your representative.

WAIVER OF PREMIUM RIDER

This Rider provides that, during periods of total disability continuing more
than four months, we will add to the Policy Value each month an amount you
selected or the amount needed to pay the Monthly Policy Charges, whichever is
greater. This amount will keep the Policy in force. This benefit is subject to
our maximum issue benefits. Its cost will change yearly.

OTHER INSURED RIDER

This Rider provides a term insurance benefit for up to five Insureds. At present
this benefit is only available for the spouse and children of the primary
Insured. The Rider includes a feature that allows the "other Insured" to convert
the coverage to a flexible premium adjustable life insurance policy.

GUARANTEED DEATH BENEFIT RIDER

This Rider, which is available only at issue, (a) guarantees that your Policy
will not lapse regardless of the Performance of the Variable Account and (b)
provides a guaranteed Net Death Benefit.

Certain Riders May Not Be Available in All States.

B-1
<PAGE>
APPENDIX C
GUARANTEED MONTHLY POLICY CHARGE RATES

The Monthly Policy Charge will be charged on each monthly processing date until
the Final Payment Date. The Monthly Policy Charge compensates us for the cost of
providing life insurance coverage for the Insured and for certain
administrative, tax and distribution expenses. The Monthly Policy Charge is
equal to a specified amount that varies with the sex (unisex rates where
required by state law), age, and underwriting class of the Insured and Death
Benefit Option selected, for each $1,000 of the Policy's Face Amount. For a
standard underwriting class, the rates for the Monthly Policy Charge will never
exceed the guaranteed rates set forth in the Policy, which in turn will not
exceed the Commissioners 1980 Standard Ordinary Mortality Tables (Mortality
Table B for unisex Policies) and the Insured's sex and age, as set forth below.

<TABLE>
<CAPTION>
AGE MALE FEMALE AGE MALE FEMALE
- --- --------- --------- --- --------- ---------
<S> <C> <C> <C> <C> <C>
0 0.349002 0.241153 34 0.166820 0.131762
1 0.089210 0.072529 35 0.176004 0.137604
2 0.082537 0.067525 36 0.186859 0.146785
3 0.081703 0.065857 37 0.200220 0.157637
4 0.079201 0.064189 38 0.215255 0.170159
5 0.075031 0.063355 39 0.232798 0.185189
6 0.071695 0.060854 40 0.252016 0.201891
7 0.066691 0.060020 41 0.274581 0.220267
8 0.063355 0.058352 42 0.297152 0.239482
9 0.061688 0.057518 43 0.323073 0.257865
10 0.060854 0.056684 44 0.349839 0.277089
11 0.064189 0.057518 45 0.379960 0.297152
12 0.070861 0.060020 46 0.410927 0.317220
13 0.082537 0.062521 47 0.444418 0.338128
14 0.095884 0.066691 48 0.479596 0.361551
15 0.110901 0.070861 49 0.518979 0.386655
16 0.125921 0.075031 50 0.560894 0.414276
17 0.139273 0.079201 51 0.610378 0.443581
18 0.148454 0.081703 52 0.665766 0.476245
19 0.155132 0.085040 53 0.728747 0.513950
20 0.158471 0.087542 54 0.800179 0.552509
21 0.159306 0.089210 55 0.876715 0.592762
22 0.157637 0.090879 56 0.960053 0.633033
23 0.155132 0.092547 57 1.046840 0.671642
24 0.151793 0.095050 58 1.139616 0.708588
25 0.147620 0.096718 59 1.239245 0.748070
26 0.144281 0.099221 60 1.349978 0.792613
27 0.142612 0.101724 61 1.473551 0.848112
28 0.141777 0.105061 62 1.613407 0.917954
29 0.142612 0.108398 63 1.772172 1.007228
30 0.144281 0.112570 64 1.949092 1.110929
31 0.148454 0.116742 65 2.143422 1.224040
32 0.152628 0.120914 66 2.350996 1.343212
33 0.159306 0.125086 67 2.572761 1.464235
</TABLE>

C-1
<PAGE>

<TABLE>
<CAPTION>
AGE MALE FEMALE AGE MALE FEMALE
- --- --------- --------- --- --------- ---------
<S> <C> <C> <C> <C> <C>
68 2.808822 1.583722 84 12.513845 9.091985
69 3.065321 1.712709 85 13.737727 10.231576
70 3.353673 1.861440 86 15.021846 11.470894
71 3.681989 2.041944 87 16.356613 12.808171
72 4.060290 2.267226 88 17.737983 14.246630
73 4.496204 2.544475 89 19.171986 15.797873
74 4.983518 2.872449 90 20.677655 17.482656
75 5.513313 3.243922 91 22.287142 19.335047
76 6.076525 3.653355 92 24.063468 21.418993
77 6.665690 4.094284 93 26.119927 23.852378
78 7.275881 4.567162 94 28.812996 26.926360
79 7.923872 5.085703 95 32.817580 31.310116
80 8.635205 5.672859 96 39.642945 38.504787
81 9.430778 6.350514 97 53.066045 52.275714
82 10.338952 7.140527 98 83.330000 83.330000
83 11.373499 8.058585 99 83.330000 83.330000
</TABLE>

EXAMPLES

1. For a female Insured, age 35, under a Policy with a Face Amount of $100,000,
the maximum Monthly Policy Charge would be $13.76, as follows:

- The Face Amount of $100,000 divided by 1000 = 100

- From the table, the applicable factor is 0.137604

- 100 times the factor of 0.137604= $13.76

2. For a male Insured, age 47, under a Policy with a Face Amount of $150,000,
the maximum Monthly Policy Charge would be $66.63, as follows:

- The Face Amount of $150,000 divided by 1000 = 150

- From the table, the applicable factor is 0.44418

- 150 times the factor of 0.444418 = $66.63

C-2
<PAGE>
APPENDIX D
ILLUSTRATIONS OF DEATH BENEFIT, POLICY VALUES
AND ACCUMULATED PAYMENTS

The following tables illustrate the way in which the Policy's death benefit and
Policy Value could vary over an extended period of time. ON REQUEST, WE WILL
PROVIDE A COMPARABLE ILLUSTRATION BASED ON THE PROPOSED INSURED'S AGE, SEX, AND
UNDERWRITING CLASS, AND THE REQUESTED FACE AMOUNT, DEATH BENEFIT OPTION AND
RIDERS.

ASSUMPTIONS

The tables illustrate Policies issued both on a simplified and fully
underwritten basis to a male non-smoker, Age 30, under a standard Underwriting
Class, and to a male non-smoker, Age 45, under a standard Underwriting Class. In
each case, one table illustrates the guaranteed Monthly Policy Charge rates and
the other table illustrates the current Monthly Policy Charge rates as presently
in effect.

The tables assume that no Policy loans have been made, that there has not been
an increase or decrease in the initial Face Amount, that no partial withdrawals
have been made, and that no transfers above 12 have been made in any Policy year
(so that no transaction or transfer charges have been incurred).

The tables assumed that all premiums are allocated to and remain in the Variable
Account for the entire period shown. The tables are based on hypothetical gross
investment rates of return for the Underlying Fund (i.e., investment income and
capital gains and losses, realized or unrealized) equivalent to constant gross
(after tax) annual rates of 0%, 6%, and 12%. The second column of the tables
show the amount which would accumulate if an amount equal to the premiums paid
were invested each year to earn interest (after taxes) at 5%, compounded
annually.

The Policy Values and Death Proceeds would be different from those shown if the
gross annual investment rates of return averaged 0%, 6%, and 12% over a period
of years, but fluctuated above or below such averages for individual Policy
years. The values also would be different depending on the allocation of the
Policy's total Policy Value among the Sub-Accounts of the Variable Account, if
the actual rates of return averaged 0%, 6% or 12%, but the rates of each
Underlying Fund varied above and below such averages.

DEDUCTIONS FOR CHARGES

The amounts shown in the tables take into account the Monthly Deduction from
Policy Value.

EXPENSES OF THE UNDERLYING FUNDS

The amounts shown in the tables also take into account the Underlying Fund
advisory fees and operating expenses, which are assumed to be at an annual rate
of 0.95% of the average daily net assets of the Underlying Funds. The actual
fees and expenses of each Underlying Fund vary, and with expense limitations
range from an annual rate of 0.29% to an annual rate of 1.34% of average daily
net assets. The fees and expenses associated with your Policy may be more or
less than 0.95% in the aggregate, depending upon how you make allocations of
Policy Value among the Sub-Accounts.

Evergreen Investment Management has voluntarily agreed to limit aggregate
operating expenses (including investment advisory fees, but excluding interest,
brokerage commissions and extraordinary expenses) of the Evergreen VA Equity
Index Fund to 0.30% of average daily net assets. Without the voluntarily limit,
total expenses of the Evergreen VA Equity Index Fund for 1999 are estimated to
be 0.62% of average daily assets. Evergreen Asset Management Corp. has
voluntarily agreed to limit aggregate operating expenses (including investment
advisory fees, but excluding interest, brokerage commissions and extraordinary
expenses) of the Evergreen VA Foundation Fund, Evergreen Global Leaders Fund,
and Evergreen VA Small Cap Value Fund to 1.00% of average daily net assets.
Without these voluntary limitations, total expenses of the Funds during 1999, as
a percentage of average daily net assets, would have been 1.20% for Evergreen
Global Leaders Fund,

D-1
<PAGE>

and 1.37% for Evergreen VA Small Cap Value Fund. Total operating expenses for
the Evergreen VA Foundation Fund did not exceed its expense limitations during
1999.

MFS - Growth with Income Series and MFS - Utilities Series have an expense
offset arrangement which reduces the series' custodian fee based on the amount
of cash maintained by the series with its custodian and dividend disbursing
agent. Each series may enter into other such arrangements and directed brokerage
arrangements, which would also have the effect of reducing the series' expenses.
"Other Expenses" do not take into account these expense reductions, and are
therefore higher than the actual expenses of the series. Had these fee
reductions been taken account, "Net Expenses" would be lower for certain series
and would equal: 0.87% for Growth with Income Series, and 0.90% for Utilities
Series.

The investment adviser of the Oppenheimer Small Cap Growth Fund/VA has
voluntarily agreed to limit aggregate other expenses of the Fund to 0.49% of
average daily net assets.

NET ANNUAL RATES OF INVESTMENT

Applying the average Fund advisory fees and operating expenses of 0.95% of
average net assets, in the Current Cost of Insurance Charges tables the gross
annual rates of investment return of 0%, 6% and 12% would produce net annual
rates of -0.95%, 5.05% and 11.05%. In the Guaranteed Cost of Insurance Charges
tables, the gross annual rates of investment return of 0%, 6% and 12% would
produce net annual rates of -0.95%, 5.05%% and 11.05%, respectively.

The hypothetical returns shown in the tables do not reflect any charges for
income taxes against the Variable Account since no charges are currently made.
However, if in the future the charges are made, to produce illustrated death
benefits and values, the gross annual investment rates of return would have to
exceed 0%, 6% or 12% by a sufficient amount to cover the tax charges. The second
column of the tables shows the amount that would accumulate if the guideline
level premium were invested to earn interest (after taxes) at 5%, compounded
annually.

D-2
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SIMPLIFIED UNDERWRITING

FACE AMOUNT = $100,000

MALE NON-SMOKER AGE 30

DEATH BENEFIT OPTION 2

BASED ON CURRENT MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 3,735 3,332 3,332 103,332 3,539 3,539 103,539
2 7,656 6,599 6,599 106,599 7,220 7,220 107,220
3 11,774 9,808 9,808 109,808 11,055 11,055 111,055
4 16,098 12,957 12,957 112,957 15,047 15,047 115,047
5 20,637 16,052 16,052 116,052 19,210 19,210 119,210
6 25,404 19,112 19,112 119,112 23,568 23,568 123,568
7 30,409 22,117 22,117 122,117 28,108 28,108 128,108
8 35,664 25,086 25,086 125,086 32,858 32,858 132,858
9 41,183 28,004 28,004 128,004 37,809 37,809 137,809
10 46,977 30,870 30,870 130,870 42,969 42,969 142,969
11 53,060 33,773 33,773 133,773 48,471 48,471 148,471
12 59,448 36,636 36,636 136,636 54,225 54,225 154,225
13 66,155 39,464 39,464 139,464 60,245 60,245 160,245
14 73,198 42,258 42,258 142,258 66,545 66,545 166,545
15 80,593 45,007 45,007 145,007 73,125 73,125 173,125
16 88,357 47,710 47,710 147,710 79,997 79,997 179,997
17 96,510 50,355 50,355 150,355 87,161 87,161 187,161
18 105,070 52,942 52,942 152,942 94,628 94,628 194,628
19 114,059 55,469 55,469 155,469 102,410 102,410 202,410
20 123,496 57,935 57,935 157,935 110,519 110,519 211,092
Age 60 248,139 80,558 80,558 180,558 217,535 217,535 317,535
Age 65 337,333 88,718 88,718 188,718 290,433 290,433 390,433
Age 70 451,169 93,726 93,726 193,726 379,459 379,459 479,459
Age 75 596,456 94,250 94,250 194,250 487,112 487,112 587,112

<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 3,746 3,746 103,746
2 7,865 7,865 107,865
3 12,403 12,403 112,403
4 17,398 17,398 117,398
5 22,904 22,904 122,904
6 28,991 28,991 128,991
7 35,697 35,697 135,697
8 43,105 43,105 143,105
9 51,270 51,270 151,270
10 60,267 60,267 160,267
11 70,357 70,357 175,892
12 81,494 81,494 198,029
13 93,790 93,790 221,345
14 107,371 107,371 245,880
15 122,356 122,356 271,631
16 138,889 138,889 298,612
17 157,107 157,107 328,355
18 177,182 177,182 359,680
19 199,299 199,299 392,620
20 223,668 223,668 427,206
Age 60 672,744 672,744 901,476
Age 65 1,133,827 1,133,827 1,383,269
Age 70 1,891,545 1,891,545 2,194,192
Age 75 3,141,178 3,141,178 3,361,060
</TABLE>

(1) Assumes a $3,557 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.

(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.

THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYOWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS. THE
SURRENDER VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6%, AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
POLICY VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.

D-3
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SIMPLIFIED UNDERWRITING

FACE AMOUNT = $100,000

MALE NON-SMOKER AGE 30

DEATH BENEFIT OPTION 2

BASED ON GUARANTEED MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 3,735 3,328 3,328 103,328 3,534 3,534 103,534
2 7,656 6,594 6,594 106,594 7,214 7,214 107,214
3 11,774 9,800 9,800 109,800 11,046 11,046 111,046
4 16,098 12,944 12,944 112,944 15,033 15,033 115,033
5 20,637 16,026 16,026 116,026 19,180 19,180 119,180
6 25,404 19,044 19,044 119,044 23,494 23,494 123,494
7 30,409 21,999 21,999 121,999 27,978 27,978 127,978
8 35,664 24,888 24,888 124,888 32,638 32,638 132,638
9 41,183 27,710 27,710 127,710 37,478 37,478 137,478
10 46,977 30,464 30,464 130,464 42,502 42,502 142,502
11 53,060 33,230 33,230 133,230 47,836 47,836 147,836
12 59,448 35,930 35,930 135,930 53,384 53,384 153,384
13 66,155 38,564 38,564 138,564 59,156 59,156 159,156
14 73,198 41,130 41,130 141,130 65,157 65,157 165,157
15 80,593 43,626 43,626 143,626 71,396 71,396 171,396
16 88,357 46,050 46,050 146,050 77,881 77,881 177,881
17 96,510 48,402 48,402 148,402 84,622 84,622 184,622
18 105,070 50,681 50,681 150,681 91,627 91,627 191,627
19 114,059 52,885 52,885 152,885 98,906 98,906 198,906
20 123,496 55,010 55,010 155,010 106,466 106,466 206,466
Age 60 248,139 72,245 72,245 172,245 203,608 203,608 303,608
Age 65 337,333 75,662 75,662 175,662 266,812 266,812 366,812
Age 70 451,169 73,300 73,300 173,300 340,242 340,242 440,242
Age 75 596,456 62,162 62,162 162,162 422,787 422,787 522,787

<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 3,741 3,741 103,741
2 7,859 7,859 107,859
3 12,392 12,392 112,392
4 17,382 17,382 117,382
5 22,871 22,871 122,871
6 28,911 28,911 128,911
7 35,554 35,554 135,554
8 42,860 42,860 142,860
9 50,894 50,894 150,894
10 59,727 59,727 159,727
11 69,609 69,609 174,024
12 80,470 80,470 195,543
13 92,404 92,404 218,072
14 105,510 105,510 241,618
15 119,905 119,905 266,190
16 135,715 135,715 291,787
17 153,073 153,073 319,922
18 172,131 172,131 349,426
19 193,057 193,057 380,322
20 216,033 216,033 412,623
Age 60 632,371 632,371 847,378
Age 65 1,052,728 1,052,728 1,284,328
Age 70 1,732,062 1,732,062 2,009,192
Age 75 2,838,547 2,838,547 3,037,245
</TABLE>

(1) Assumes a $3,557 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.

(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.

D-4
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SIMPLIFIED UNDERWRITING

FACE AMOUNT = $100,000

MALE NON-SMOKER AGE 45

DEATH BENEFIT OPTION 1

BASED ON CURRENT MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,132 1,571 1,571 100,000 1,678 1,678 100,000
2 4,370 3,070 3,070 100,000 3,382 3,382 100,000
3 6,720 4,516 4,516 100,000 5,132 5,132 100,000
4 9,187 5,952 5,952 100,000 6,973 6,973 100,000
5 11,778 7,336 7,336 100,000 8,867 8,867 100,000
6 14,498 8,685 8,685 100,000 10,834 10,834 100,000
7 17,355 9,976 9,976 100,000 12,852 12,852 100,000
8 20,354 11,276 11,276 100,000 14,994 14,994 100,000
9 23,503 12,551 12,551 100,000 17,229 17,229 100,000
10 26,810 13,791 13,791 100,000 19,554 19,554 100,000
11 30,282 15,043 15,043 100,000 22,037 22,037 100,000
12 33,927 16,281 16,281 100,000 24,645 24,645 100,000
13 37,755 17,517 17,517 100,000 27,397 27,397 100,000
14 41,774 18,763 18,763 100,000 30,310 30,310 100,000
15 45,995 19,967 19,967 100,000 33,345 33,345 100,000
16 50,426 21,124 21,124 100,000 36,509 36,509 100,000
17 55,079 22,214 22,214 100,000 39,791 39,791 100,000
18 59,964 23,232 23,232 100,000 43,199 43,199 100,000
19 65,094 24,176 24,176 100,000 46,742 46,742 100,000
20 70,480 25,043 25,043 100,000 50,430 50,430 100,000
Age 60 45,995 19,967 19,967 100,000 33,345 33,345 100,000
Age 65 70,480 25,043 25,043 100,000 50,430 50,430 100,000
Age 70 101,730 28,365 28,365 100,000 72,404 72,404 100,000
Age 75 141,614 28,681 28,681 100,000 101,393 101,393 108,491

<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
--------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- --------
<S> <C> <C> <C>
1 1,786 1,786 100,000
2 3,708 3,708 100,000
3 5,801 5,801 100,000
4 8,126 8,126 100,000
5 10,667 10,667 100,000
6 13,464 13,464 100,000
7 16,521 16,521 100,000
8 19,936 19,936 100,000
9 23,712 23,712 100,000
10 27,880 27,880 100,000
11 32,575 32,575 100,000
12 37,793 37,793 100,000
13 43,603 43,603 100,000
14 50,079 50,079 100,000
15 57,260 57,260 100,000
16 65,229 65,229 100,000
17 74,074 74,074 100,000
18 83,895 83,895 105,708
19 94,729 94,729 117,464
20 106,670 106,670 130,138
Age 60 57,260 57,260 100,000
Age 65 106,670 106,670 130,138
Age 70 189,506 189,506 219,827
Age 75 326,114 326,114 348,942
</TABLE>

(1) Assumes a $2,030 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.

(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.

D-5
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SIMPLIFIED UNDERWRITING

FACE AMOUNT = $100,000

MALE NON-SMOKER AGE 45

DEATH BENEFIT OPTION 1

BASED ON GUARANTEED MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,132 1,553 1,553 100,000 1,660 1,660 100,000
2 4,370 3,051 3,051 100,000 3,362 3,362 100,000
3 6,720 4,494 4,494 100,000 5,106 5,106 100,000
4 9,187 5,879 5,879 100,000 6,894 6,894 100,000
5 11,778 7,206 7,206 100,000 8,725 8,725 100,000
6 14,498 8,473 8,473 100,000 10,600 10,600 100,000
7 17,355 9,674 9,674 100,000 12,515 12,515 100,000
8 20,354 10,804 10,804 100,000 14,468 14,468 100,000
9 23,503 11,859 11,859 100,000 16,456 16,456 100,000
10 26,810 12,831 12,831 100,000 18,475 18,475 100,000
11 30,282 13,752 13,752 100,000 20,577 20,577 100,000
12 33,927 14,586 14,586 100,000 22,718 22,718 100,000
13 37,755 15,329 15,329 100,000 24,902 24,902 100,000
14 41,774 15,978 15,978 100,000 27,129 27,129 100,000
15 45,995 16,529 16,529 100,000 29,402 29,402 100,000
16 50,426 16,970 16,970 100,000 31,720 31,720 100,000
17 55,079 17,291 17,291 100,000 34,081 34,081 100,000
18 59,964 17,476 17,476 100,000 36,482 36,482 100,000
19 65,094 17,507 17,507 100,000 38,921 38,921 100,000
20 70,480 17,364 17,364 100,000 41,395 41,395 100,000
Age 60 45,995 16,529 16,529 100,000 29,402 29,402 100,000
Age 65 70,480 17,364 17,364 100,000 41,395 41,395 100,000
Age 70 101,730 13,603 13,603 100,000 55,203 55,203 100,000
Age 75 141,614 724 724 100,000 71,626 71,626 100,000

<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
--------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- --------
<S> <C> <C> <C>
1 1,767 1,767 100,000
2 3,686 3,686 100,000
3 5,772 5,772 100,000
4 8,041 8,041 100,000
5 10,513 10,513 100,000
6 13,208 13,208 100,000
7 16,146 16,146 100,000
8 19,350 19,350 100,000
9 22,849 22,849 100,000
10 26,671 26,671 100,000
11 30,934 30,934 100,000
12 35,625 35,625 100,000
13 40,800 40,800 100,000
14 46,526 46,526 100,000
15 52,877 52,877 100,000
16 59,940 59,940 100,000
17 67,815 67,815 100,000
18 76,624 76,624 100,000
19 86,461 86,461 107,212
20 97,282 97,282 118,684
Age 60 52,877 52,877 100,000
Age 65 97,282 97,282 118,684
Age 70 171,537 171,537 198,983
Age 75 292,463 292,463 312,935
</TABLE>

(1) Assumes a $2,030 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.

(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.

D-6
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SIMPLIFIED UNDERWRITING

FACE AMOUNT = $100,000

MALE NON-SMOKER AGE 45

DEATH BENEFIT OPTION 3

BASED ON CURRENT MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,132 1,571 1,571 100,000 1,678 1,678 100,000
2 4,370 3,070 3,070 100,000 3,382 3,382 100,000
3 6,720 4,516 4,516 100,000 5,132 5,132 100,000
4 9,187 5,952 5,952 100,000 6,973 6,973 100,000
5 11,778 7,336 7,336 100,000 8,867 8,867 100,000
6 14,498 8,685 8,685 100,000 10,834 10,834 100,000
7 17,355 9,976 9,976 100,000 12,852 12,852 100,000
8 20,354 11,276 11,276 100,000 14,994 14,994 100,000
9 23,503 12,551 12,551 100,000 17,229 17,229 100,000
10 26,810 13,791 13,791 100,000 19,554 19,554 100,000
11 30,282 15,043 15,043 100,000 22,037 22,037 100,000
12 33,927 16,281 16,281 100,000 24,645 24,645 100,000
13 37,755 17,517 17,517 100,000 27,397 27,397 100,000
14 41,774 18,763 18,763 100,000 30,310 30,310 100,000
15 45,995 19,967 19,967 100,000 33,345 33,345 100,000
16 50,426 21,124 21,124 100,000 36,509 36,509 100,000
17 55,079 22,214 22,214 100,000 39,791 39,791 100,000
18 59,964 23,232 23,232 100,000 43,199 43,199 100,000
19 65,094 24,176 24,176 100,000 46,742 46,742 100,000
20 70,480 25,043 25,043 100,000 50,430 50,430 100,000
Age 60 45,995 19,967 19,967 100,000 33,345 33,345 100,000
Age 65 70,480 25,043 25,043 100,000 50,430 50,430 100,000
Age 70 101,730 28,365 28,365 100,000 72,223 72,223 109,854
Age 75 141,614 28,681 28,681 100,000 98,226 98,226 135,532

<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 1,786 1,786 100,000
2 3,708 3,708 100,000
3 5,801 5,801 100,000
4 8,126 8,126 100,000
5 10,667 10,667 100,000
6 13,464 13,464 100,000
7 16,521 16,521 100,000
8 19,936 19,936 100,000
9 23,712 23,712 100,000
10 27,880 27,880 100,000
11 32,575 32,575 100,000
12 37,793 37,793 100,000
13 43,603 43,603 100,000
14 50,079 50,079 100,000
15 57,227 57,227 110,204
16 65,072 65,072 122,112
17 73,664 73,664 134,763
18 83,071 83,071 148,220
19 93,367 93,367 162,559
20 104,633 104,633 177,862
Age 60 57,227 57,227 110,204
Age 65 104,633 104,633 177,862
Age 70 180,968 180,968 275,260
Age 75 300,888 300,888 415,165
</TABLE>

(1) Assumes a $2,030 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.

(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.

D-7
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SIMPLIFIED UNDERWRITING

FACE AMOUNT = $100,000

MALE NON-SMOKER AGE 45

DEATH BENEFIT OPTION 3

BASED ON GUARANTEED MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,132 1,553 1,553 100,000 1,660 1,660 100,000
2 4,370 3,051 3,051 100,000 3,362 3,362 100,000
3 6,720 4,494 4,494 100,000 5,106 5,106 100,000
4 9,187 5,879 5,879 100,000 6,894 6,894 100,000
5 11,778 7,206 7,206 100,000 8,725 8,725 100,000
6 14,498 8,473 8,473 100,000 10,600 10,600 100,000
7 17,355 9,674 9,674 100,000 12,515 12,515 100,000
8 20,354 10,804 10,804 100,000 14,468 14,468 100,000
9 23,503 11,859 11,859 100,000 16,456 16,456 100,000
10 26,810 12,831 12,831 100,000 18,475 18,475 100,000
11 30,282 13,752 13,752 100,000 20,577 20,577 100,000
12 33,927 14,586 14,586 100,000 22,718 22,718 100,000
13 37,755 15,329 15,329 100,000 24,902 24,902 100,000
14 41,774 15,978 15,978 100,000 27,129 27,129 100,000
15 45,995 16,529 16,529 100,000 29,402 29,402 100,000
16 50,426 16,970 16,970 100,000 31,720 31,720 100,000
17 55,079 17,291 17,291 100,000 34,081 34,081 100,000
18 59,964 17,476 17,476 100,000 36,482 36,482 100,000
19 65,094 17,507 17,507 100,000 38,921 38,921 100,000
20 70,480 17,364 17,364 100,000 41,395 41,395 100,000
Age 60 45,995 16,529 16,529 100,000 29,402 29,402 100,000
Age 65 70,480 17,364 17,364 100,000 41,395 41,395 100,000
Age 70 101,730 13,603 13,603 100,000 55,203 55,203 100,000
Age 75 141,614 724 724 100,000 71,626 71,626 100,000

<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 1,767 1,767 100,000
2 3,686 3,686 100,000
3 5,772 5,772 100,000
4 8,041 8,041 100,000
5 10,513 10,513 100,000
6 13,208 13,208 100,000
7 16,146 16,146 100,000
8 19,350 19,350 100,000
9 22,849 22,849 100,000
10 26,671 26,671 100,000
11 30,934 30,934 100,000
12 35,625 35,625 100,000
13 40,800 40,800 100,000
14 46,526 46,526 100,000
15 52,875 52,875 101,824
16 59,816 59,816 112,249
17 67,345 67,345 123,203
18 75,505 75,505 134,721
19 84,338 84,338 146,838
20 93,888 93,888 159,597
Age 60 52,875 52,875 101,824
Age 65 93,888 93,888 159,597
Age 70 156,193 156,193 237,576
Age 75 247,412 247,412 341,379
</TABLE>

(1) Assumes a $2,030 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.

(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.

D-8
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FULL UNDERWRITING

FACE AMOUNT = $300,000

MALE NON-SMOKER AGE 30

DEATH BENEFIT OPTION 2

BASED ON CURRENT MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- ---------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 11,205 10,194 10,194 310,194 10,820 10,820 310,820
2 22,969 20,237 20,237 320,237 22,124 22,124 322,124
3 35,322 30,131 30,131 330,131 33,933 33,933 333,933
4 48,293 39,865 39,865 339,865 46,253 46,253 346,253
5 61,912 49,424 49,424 349,424 59,088 59,088 359,088
6 76,212 58,807 58,807 358,807 72,456 72,456 372,456
7 91,228 68,010 68,010 368,010 86,372 86,372 386,372
8 106,993 77,064 77,064 377,064 100,889 100,889 400,889
9 123,548 85,944 85,944 385,944 116,004 116,004 416,004
10 140,930 94,646 94,646 394,646 131,735 131,735 431,735
11 159,181 103,432 103,432 403,432 148,479 148,479 448,479
12 178,344 112,066 112,066 412,066 165,955 165,955 465,955
13 198,466 120,557 120,557 420,557 184,205 184,205 484,205
14 219,594 128,908 128,908 428,908 203,262 203,262 503,262
15 241,778 137,124 137,124 437,124 223,167 223,167 523,167
16 265,072 145,204 145,204 445,204 243,955 243,955 543,955
17 289,530 153,110 153,110 453,110 265,625 265,625 565,625
18 315,211 160,840 160,840 460,840 288,214 288,214 588,214
19 342,176 168,391 168,391 468,391 311,756 311,756 614,159
20 370,489 175,762 175,762 475,762 336,287 336,287 642,308
Age 60 744,417 243,405 243,405 543,405 660,141 660,141 960,141
Age 65 1,011,998 267,778 267,778 567,778 880,812 880,812 1,180,812
Age 70 1,353,507 282,707 282,707 582,707 1,150,397 1,150,397 1,450,397
Age 75 1,789,368 284,175 284,175 584,175 1,476,508 1,476,508 1,776,508

<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
----------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ----------
<S> <C> <C> <C>
1 11,447 11,447 311,447
2 24,087 24,087 324,087
3 38,043 38,043 338,043
4 53,433 53,433 353,433
5 70,387 70,387 370,387
6 89,058 89,058 389,058
7 109,617 109,617 409,617
8 132,286 132,286 432,286
9 157,251 157,251 457,251
10 184,738 184,738 484,738
11 215,532 215,532 538,829
12 249,489 249,489 606,259
13 286,945 286,945 677,190
14 328,263 328,263 751,721
15 373,850 373,850 829,947
16 424,148 424,148 911,918
17 479,573 479,573 1,002,307
18 540,645 540,645 1,097,509
19 607,931 607,931 1,197,624
20 682,066 682,066 1,302,747
Age 60 2,048,314 2,048,314 2,744,741
Age 65 3,451,075 3,451,075 4,210,312
Age 70 5,756,312 5,756,312 6,677,321
Age 75 9,558,074 9,558,074 10,227,139
</TABLE>

(1) Assumes a $10,671 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.

(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.

D-9
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FULL UNDERWRITING

FACE AMOUNT = $300,000

MALE NON-SMOKER AGE 30

DEATH BENEFIT OPTION 2

BASED ON GUARANTEED MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- ---------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 11,205 9,983 9,983 309,983 10,603 10,603 310,603
2 22,969 19,783 19,783 319,783 21,643 21,643 321,643
3 35,322 29,400 29,400 329,400 33,137 33,137 333,137
4 48,293 38,832 38,832 338,832 45,098 45,098 345,098
5 61,912 48,077 48,077 348,077 57,541 57,541 357,541
6 76,212 57,133 57,133 357,133 70,482 70,482 370,482
7 91,228 65,996 65,996 365,996 83,934 83,934 383,934
8 106,993 74,664 74,664 374,664 97,913 97,913 397,913
9 123,548 83,131 83,131 383,131 112,433 112,433 412,433
10 140,930 91,391 91,391 391,391 127,507 127,507 427,507
11 159,181 99,691 99,691 399,691 143,509 143,509 443,509
12 178,344 107,790 107,790 407,790 160,152 160,152 460,152
13 198,466 115,693 115,693 415,693 177,467 177,467 477,467
14 219,594 123,389 123,389 423,389 195,470 195,470 495,470
15 241,778 130,877 130,877 430,877 214,188 214,188 514,188
16 265,072 138,150 138,150 438,150 233,644 233,644 533,644
17 289,530 145,207 145,207 445,207 253,866 253,866 553,866
18 315,211 152,044 152,044 452,044 274,882 274,882 574,882
19 342,176 158,654 158,654 458,654 296,717 296,717 596,717
20 370,489 165,029 165,029 465,029 319,397 319,397 619,397
Age 60 744,417 216,734 216,734 516,734 610,823 610,823 910,823
Age 65 1,011,998 226,986 226,986 526,986 800,437 800,437 1,100,437
Age 70 1,353,507 219,900 219,900 519,900 1,020,725 1,020,725 1,320,725
Age 75 1,789,368 186,487 186,487 486,487 1,268,360 1,268,360 1,568,360

<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 11,223 11,223 311,223
2 23,578 23,578 323,578
3 37,177 37,177 337,177
4 52,145 52,145 352,145
5 68,613 68,613 368,613
6 86,732 86,732 386,732
7 106,661 106,661 406,661
8 128,580 128,580 428,580
9 152,682 152,682 452,682
10 179,182 179,182 479,182
11 208,828 208,828 522,071
12 241,411 241,411 586,629
13 277,211 277,211 654,217
14 316,530 316,530 724,853
15 359,716 359,716 798,569
16 407,144 407,144 875,360
17 459,218 459,218 959,766
18 516,394 516,394 1,048,280
19 579,170 579,170 1,140,966
20 648,100 648,100 1,237,871
Age 60 1,897,116 1,897,116 2,542,135
Age 65 3,158,186 3,158,186 3,852,986
Age 70 5,196,191 5,196,191 6,027,582
Age 75 8,515,647 8,515,647 9,111,742
</TABLE>

(1) Assumes a $10,671 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.

(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.

D-10
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FULL UNDERWRITING

FACE AMOUNT = $300,000

MALE NON-SMOKER AGE 45

DEATH BENEFIT OPTION 1

BASED ON CURRENT MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% GROSS HYPOTHETICAL 6% GROSS
PAID PLUS INVESTMENT RETURN INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,398 5,448 5,448 300,000 5,794 5,794 300,000
2 13,115 10,658 10,658 300,000 11,686 11,686 300,000
3 20,169 15,848 15,848 300,000 17,901 17,901 300,000
4 27,575 20,851 20,851 300,000 24,283 24,283 300,000
5 35,351 25,694 25,694 300,000 30,866 30,866 300,000
6 43,516 30,393 30,393 300,000 37,672 37,672 300,000
7 52,090 34,958 34,958 300,000 44,722 44,722 300,000
8 61,092 39,390 39,390 300,000 52,029 52,029 300,000
9 70,544 43,679 43,679 300,000 59,593 59,593 300,000
10 80,469 47,796 47,796 300,000 67,401 67,401 300,000
11 90,890 51,877 51,877 300,000 75,659 75,659 300,000
12 101,832 55,806 55,806 300,000 84,231 84,231 300,000
13 113,321 59,606 59,606 300,000 93,155 93,155 300,000
14 125,385 63,286 63,286 300,000 102,463 102,463 300,000
15 138,052 66,844 66,844 300,000 112,176 112,176 300,000
16 151,352 70,265 70,265 300,000 122,308 122,308 300,000
17 165,318 73,489 73,489 300,000 132,841 132,841 300,000
18 179,981 76,506 76,506 300,000 143,801 143,801 300,000
19 195,378 79,309 79,309 300,000 155,221 155,221 300,000
20 211,544 81,886 81,886 300,000 167,136 167,136 300,000
Age 60 138,052 66,844 66,844 300,000 112,176 112,176 300,000
Age 65 211,544 81,886 81,886 300,000 167,136 167,136 300,000
Age 70 305,341 91,943 91,943 300,000 238,736 238,736 300,000
Age 75 425,052 93,280 93,280 300,000 332,547 332,547 355,825

<CAPTION>
HYPOTHETICAL 12% GROSS
INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 6,140 6,140 300,000
2 12,756 12,756 300,000
3 20,124 20,124 300,000
4 28,149 28,149 300,000
5 36,927 36,927 300,000
6 46,554 46,554 300,000
7 57,131 57,131 300,000
8 68,762 68,762 300,000
9 81,552 81,552 300,000
10 95,605 95,605 300,000
11 111,347 111,347 300,000
12 128,741 128,741 300,000
13 148,002 148,002 300,000
14 169,355 169,355 300,000
15 193,051 193,051 300,000
16 219,363 219,363 300,000
17 248,557 248,557 318,154
18 280,753 280,753 353,749
19 316,236 316,236 392,133
20 355,346 355,346 433,522
Age 60 193,051 193,051 300,000
Age 65 355,346 355,346 433,522
Age 70 626,731 626,731 727,008
Age 75 1,074,282 1,074,282 1,149,482
</TABLE>

(1) Assumes a $6,093 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.

(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.

D-11
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FULL UNDERWRITING

FACE AMOUNT = $300,000

MALE NON-SMOKER AGE 45

DEATH BENEFIT OPTION 1

BASED ON GUARANTEED MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,398 4,662 4,662 300,000 4,983 4,983 300,000
2 13,115 9,159 9,159 300,000 10,092 10,092 300,000
3 20,169 13,489 13,489 300,000 15,329 15,329 300,000
4 27,575 17,648 17,648 300,000 20,696 20,696 300,000
5 35,351 21,632 21,632 300,000 26,193 26,193 300,000
6 43,516 25,435 25,435 300,000 31,821 31,821 300,000
7 52,090 29,042 29,042 300,000 37,572 37,572 300,000
8 61,092 32,436 32,436 300,000 43,434 43,434 300,000
9 70,544 35,602 35,602 300,000 49,401 49,401 300,000
10 80,469 38,521 38,521 300,000 55,464 55,464 300,000
11 90,890 41,288 41,288 300,000 61,776 61,776 300,000
12 101,832 43,792 43,792 300,000 68,206 68,206 300,000
13 113,321 46,025 46,025 300,000 74,762 74,762 300,000
14 125,385 47,976 47,976 300,000 81,450 81,450 300,000
15 138,052 49,631 49,631 300,000 88,277 88,277 300,000
16 151,352 50,958 50,958 300,000 95,238 95,238 300,000
17 165,318 51,922 51,922 300,000 102,328 102,328 300,000
18 179,981 52,481 52,481 300,000 109,542 109,542 300,000
19 195,378 52,576 52,576 300,000 116,867 116,867 300,000
20 211,544 52,152 52,152 300,000 124,301 124,301 300,000
Age 60 138,052 49,631 49,631 300,000 88,277 88,277 300,000
Age 65 211,544 52,152 52,152 300,000 124,301 124,301 300,000
Age 70 305,341 40,890 40,890 300,000 165,799 165,799 300,000
Age 75 425,052 2,287 2,287 300,000 215,205 215,205 300,000

<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 5,304 5,304 300,000
2 11,064 11,064 300,000
3 17,326 17,326 300,000
4 24,140 24,140 300,000
5 31,559 31,559 300,000
6 39,650 39,650 300,000
7 48,470 48,470 300,000
8 58,091 58,091 300,000
9 68,593 68,593 300,000
10 80,069 80,069 300,000
11 92,868 92,868 300,000
12 106,951 106,951 300,000
13 122,491 122,491 300,000
14 139,681 139,681 300,000
15 158,751 158,751 300,000
16 179,957 179,957 300,000
17 203,603 203,603 300,000
18 230,053 230,053 300,000
19 259,588 259,588 321,889
20 292,075 292,075 356,332
Age 60 158,751 158,751 300,000
Age 65 292,075 292,075 356,332
Age 70 515,003 515,003 597,403
Age 75 878,045 878,045 939,508
</TABLE>

(1) Assumes a $6,093 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.

(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.

D-12
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FULL UNDERWRITING

FACE AMOUNT = $300,000

MALE NON-SMOKER AGE 45

DEATH BENEFIT OPTION 3

BASED ON CURRENT MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,398 5,448 5,448 300,000 5,794 5,794 300,000
2 13,115 10,658 10,658 300,000 11,686 11,686 300,000
3 20,169 15,848 15,848 300,000 17,901 17,901 300,000
4 27,575 20,851 20,851 300,000 24,283 24,283 300,000
5 35,351 25,694 25,694 300,000 30,866 30,866 300,000
6 43,516 30,393 30,393 300,000 37,672 37,672 300,000
7 52,090 34,958 34,958 300,000 44,722 44,722 300,000
8 61,092 39,390 39,390 300,000 52,029 52,029 300,000
9 70,544 43,679 43,679 300,000 59,593 59,593 300,000
10 80,469 47,796 47,796 300,000 67,401 67,401 300,000
11 90,890 51,877 51,877 300,000 75,659 75,659 300,000
12 101,832 55,806 55,806 300,000 84,231 84,231 300,000
13 113,321 59,606 59,606 300,000 93,155 93,155 300,000
14 125,385 63,286 63,286 300,000 102,463 102,463 300,000
15 138,052 66,844 66,844 300,000 112,176 112,176 300,000
16 151,352 70,265 70,265 300,000 122,308 122,308 300,000
17 165,318 73,489 73,489 300,000 132,841 132,841 300,000
18 179,981 76,506 76,506 300,000 143,801 143,801 300,000
19 195,378 79,309 79,309 300,000 155,221 155,221 300,000
20 211,544 81,886 81,886 300,000 167,136 167,136 300,000
Age 60 138,052 66,844 66,844 300,000 112,176 112,176 300,000
Age 65 211,544 81,886 81,886 300,000 167,136 167,136 300,000
Age 70 305,341 91,943 91,943 300,000 236,665 236,665 359,968
Age 75 425,052 93,280 93,280 300,000 318,744 318,744 439,791

<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 6,140 6,140 300,000
2 12,756 12,756 300,000
3 20,124 20,124 300,000
4 28,149 28,149 300,000
5 36,927 36,927 300,000
6 46,554 46,554 300,000
7 57,131 57,131 300,000
8 68,762 68,762 300,000
9 81,552 81,552 300,000
10 95,605 95,605 300,000
11 111,347 111,347 300,000
12 128,741 128,741 300,000
13 148,002 148,002 300,478
14 169,238 169,238 334,558
15 192,551 192,551 370,787
16 218,134 218,134 409,328
17 246,153 246,153 450,300
18 276,828 276,828 493,916
19 310,402 310,402 540,414
20 347,137 347,137 590,065
Age 60 192,551 192,551 370,787
Age 65 347,137 347,137 590,065
Age 70 596,104 596,104 906,672
Age 75 987,149 987,149 1,362,032
</TABLE>

(1) Assumes a $6,093 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.

(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.

D-13
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FULL UNDERWRITING

FACE AMOUNT = $300,000

MALE NON-SMOKER AGE 45

DEATH BENEFIT OPTION 3

BASED ON GUARANTEED MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% GROSS HYPOTHETICAL 6% GROSS
PAID PLUS INVESTMENT RETURN INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,398 4,662 4,662 300,000 4,983 4,983 300,000
2 13,115 9,159 9,159 300,000 10,092 10,092 300,000
3 20,169 13,489 13,489 300,000 15,329 15,329 300,000
4 27,575 17,648 17,648 300,000 20,696 20,696 300,000
5 35,351 21,632 21,632 300,000 26,193 26,193 300,000
6 43,516 25,435 25,435 300,000 31,821 31,821 300,000
7 52,090 29,042 29,042 300,000 37,572 37,572 300,000
8 61,092 32,436 32,436 300,000 43,434 43,434 300,000
9 70,544 35,602 35,602 300,000 49,401 49,401 300,000
10 80,469 38,521 38,521 300,000 55,464 55,464 300,000
11 90,890 41,288 41,288 300,000 61,776 61,776 300,000
12 101,832 43,792 43,792 300,000 68,206 68,206 300,000
13 113,321 46,025 46,025 300,000 74,762 74,762 300,000
14 125,385 47,976 47,976 300,000 81,450 81,450 300,000
15 138,052 49,631 49,631 300,000 88,277 88,277 300,000
16 151,352 50,958 50,958 300,000 95,238 95,238 300,000
17 165,318 51,922 51,922 300,000 102,328 102,328 300,000
18 179,981 52,481 52,481 300,000 109,542 109,542 300,000
19 195,378 52,576 52,576 300,000 116,867 116,867 300,000
20 211,544 52,152 52,152 300,000 124,301 124,301 300,000
Age 60 138,052 49,631 49,631 300,000 88,277 88,277 300,000
Age 65 211,544 52,152 52,152 300,000 124,301 124,301 300,000
Age 70 305,341 40,890 40,890 300,000 165,799 165,799 300,000
Age 75 425,052 2,287 2,287 300,000 215,205 215,205 300,000

<CAPTION>
HYPOTHETICAL 12% GROSS
INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 5,304 5,304 300,000
2 11,064 11,064 300,000
3 17,326 17,326 300,000
4 24,140 24,140 300,000
5 31,559 31,559 300,000
6 39,650 39,650 300,000
7 48,470 48,470 300,000
8 58,091 58,091 300,000
9 68,593 68,593 300,000
10 80,069 80,069 300,000
11 92,868 92,868 300,000
12 106,951 106,951 300,000
13 122,491 122,491 300,000
14 139,681 139,681 300,000
15 158,745 158,745 305,689
16 179,581 179,581 336,982
17 202,184 202,184 369,865
18 226,682 226,682 404,445
19 253,197 253,197 440,819
20 281,866 281,866 479,118
Age 60 158,745 158,745 305,689
Age 65 281,866 281,866 479,118
Age 70 468,911 468,911 713,213
Age 75 742,761 742,761 1,024,835
</TABLE>

(1) Assumes a $6,093 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.

(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.

D-14
<PAGE>
ALLMERICA FINANCIAL
LIFE INSURANCE AND
ANNUITY COMPANY

CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholder of
Allmerica Financial Life Insurance and Annuity Company

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, comprehensive income, shareholder's equity
and cash flows present fairly, in all material respects, the financial position
of Allmerica Financial Life Insurance and Annuity Company (the "Company") at
December 31, 1999 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

/s/ PRICEWATERHOUSECOOPERS LLP

Boston, Massachusetts
February 1, 2000
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
------------- ---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums................................... $ 0.5 $ 0.5 $ 22.8
Universal life and investment product
policy fees.............................. 328.1 267.4 212.2
Net investment income...................... 150.2 151.3 164.2
Net realized investment (losses) gains..... (8.7) 20.0 2.9
Other income............................... 36.9 0.6 1.4
------ ------ ------
Total revenues......................... 507.0 439.8 403.5
------ ------ ------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims and losses......... 173.6 153.9 187.8
Policy acquisition expenses................ 49.8 64.6 2.8
Sales practice litigation.................. -- 21.0 --
Loss from cession of disability income
business................................. -- -- 53.9
Other operating expenses................... 151.3 104.1 101.3
------ ------ ------
Total benefits, losses and expenses.... 374.7 343.6 345.8
------ ------ ------
Income before federal income taxes............. 132.3 96.2 57.7
------ ------ ------
FEDERAL INCOME TAX EXPENSE
Current.................................... 15.5 22.1 13.9
Deferred................................... 30.5 11.8 7.1
------ ------ ------
Total federal income tax expense....... 46.0 33.9 21.0
------ ------ ------
Net income..................................... $ 86.3 $ 62.3 $ 36.7
====== ====== ======
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-1
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS, EXCEPT PER SHARE DATA) 1999 1998
------------------------------------ --------- ---------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities at fair value (amortized cost of
$1,354.2 and $1,284.6)............................ $ 1,324.6 $ 1,330.4
Equity securities at fair value (cost of $25.2 and
$27.4)............................................ 32.6 31.8
Mortgage loans...................................... 223.7 230.0
Policy loans........................................ 166.8 151.5
Real estate and other long-term investments......... 25.1 23.6
--------- ---------
Total investments............................... 1,772.8 1,767.3
--------- ---------
Cash and cash equivalents............................. 132.9 217.9
Accrued investment income............................. 36.0 33.5
Deferred policy acquisition costs..................... 1,156.4 950.5
Reinsurance receivable on paid and unpaid losses,
benefits and unearned premiums...................... 287.2 308.0
Other assets.......................................... 64.8 46.9
Separate account assets............................... 14,527.9 11,020.4
--------- ---------
Total assets.................................... $17,978.0 $14,344.5
========= =========
LIABILITIES
Policy liabilities and accruals:
Future policy benefits.............................. $ 2,274.7 $ 2,284.8
Outstanding claims and losses....................... 13.7 17.9
Unearned premiums................................... 2.6 2.7
Contractholder deposit funds and other policy
liabilities....................................... 44.3 38.1
--------- ---------
Total policy liabilities and accruals........... 2,335.3 2,343.5
--------- ---------
Expenses and taxes payable............................ 216.8 146.2
Reinsurance premiums payable.......................... 17.9 45.7
Deferred federal income taxes......................... 94.8 78.8
Separate account liabilities.......................... 14,527.9 11,020.4
--------- ---------
Total liabilities............................... 17,192.7 13,634.6
--------- ---------
Contingencies (Note 12)
SHAREHOLDER'S EQUITY
Common stock, $1,000 par value, 10,000 shares
authorized, 2,526 and 2,524 shares, issued and
outstanding......................................... 2.5 2.5
Additional paid-in capital............................ 423.7 407.9
Accumulated other comprehensive (loss) income......... (2.6) 24.1
Retained earnings..................................... 361.7 275.4
--------- ---------
Total shareholder's equity...................... 785.3 709.9
--------- ---------
Total liabilities and shareholder's equity...... $17,978.0 $14,344.5
========= =========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-2
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
------------- ------- ------- -------
<S> <C> <C> <C>
COMMON STOCK................................... $ 2.5 $ 2.5 $ 2.5
------ ------ ------

ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period............. 407.9 386.9 346.3
Issuance of common stock................... 15.8 21.0 40.6
------ ------ ------
Balance at end of period................... 423.7 407.9 386.9
------ ------ ------
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Net unrealized (depreciation) appreciation
on investments:
Balance at beginning of period............. 24.1 38.5 20.5
(Depreciation) appreciation during the
period:
Net (depreciation) appreciation on
available-for-sale securities........ (41.1) (23.4) 27.0
Benefit (provision) for deferred
federal income taxes................. 14.4 9.0 (9.0)
------ ------ ------
(26.7) (14.4) 18.0
------ ------ ------
Balance at end of period................... (2.6) 24.1 38.5
------ ------ ------
RETAINED EARNINGS
Balance at beginning of period............. 275.4 213.1 176.4
Net income................................. 86.3 62.3 36.7
------ ------ ------
Balance at end of period................... 361.7 275.4 213.1
------ ------ ------
Total shareholder's equity............. $785.3 $709.9 $641.0
====== ====== ======
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-3
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
------------- ------ ------ ------
<S> <C> <C> <C>
Net income.................................. $ 86.3 $ 62.3 $36.7
Other comprehensive (loss) income:
Net (depreciation) appreciation on
available-for-sale securities......... (41.1) (23.4) 27.0
Benefit (provision) for deferred federal
income taxes.......................... 14.4 9.0 (9.0)
------ ------ -----
Other comprehensive (loss) income... (26.7) (14.4) 18.0
------ ------ -----
Comprehensive income.................... $ 59.6 $ 47.9 $54.7
====== ====== =====
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-4
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
------------- ------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.............................. $ 86.3 $ 62.3 $ 36.7
Adjustments to reconcile net income to
net cash used in operating activities:
Net realized losses/(gains)......... 8.7 (20.0) (2.9)
Net amortization and depreciation... (2.3) (7.1) --
Sales practice litigation expense... -- 21.0 --
Loss from cession of disability
income business................... -- -- 53.9
Deferred federal income taxes....... 30.5 11.8 7.1
Payment related to cession of
disability income business........ -- -- (207.0)
Change in deferred acquisition
costs............................. (169.7) (177.8) (181.3)
Change in reinsurance premiums
payable........................... (31.5) 40.8 3.9
Change in accrued investment
income............................ (2.5) 0.7 3.5
Change in policy liabilities and
accruals, net..................... (8.4) 193.1 (72.4)
Change in reinsurance receivable.... 20.7 (56.9) 22.1
Change in expenses and taxes
payable........................... 64.1 55.4 0.2
Other, net.......................... (14.8) (28.5) (7.1)
------- ------- -------
Net cash (used in) provided by
operating activities.......... (18.9) 94.8 (343.3)
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposals and maturities
of available-for-sale fixed
maturities............................ 330.9 187.0 909.7
Proceeds from disposals of equity
securities............................ 30.9 53.3 2.4
Proceeds from disposals of other
investments........................... 0.8 22.7 23.7
Proceeds from mortgages matured or
collected............................. 30.5 60.1 62.9
Purchase of available-for-sale fixed
maturities............................ (415.5) (136.0) (579.7)
Purchase of equity securities........... (20.2) (30.6) (3.2)
Purchase of other investments........... (44.1) (22.7) (9.0)
Purchase of mortgages................... -- (58.9) (70.4)
Other investing activities, net......... 2.0 (3.9) --
------- ------- -------
Net cash (used in) provided by
investing activities.............. (84.7) 71.0 336.4
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Contribution from subsidiaries.......... 14.6 -- --
Proceeds from issuance of stock and
capital paid in....................... 4.0 21.0 19.2
------- ------- -------
Net cash provided by financing
activities........................ 18.6 21.0 19.2
------- ------- -------
Net change in cash and cash equivalents..... (85.0) 186.8 12.3
Cash and cash equivalents, beginning of
period..................................... 217.9 31.1 18.8
------- ------- -------
Cash and cash equivalents, end of period.... $ 132.9 $ 217.9 $ 31.1
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid........................... $ -- $ -- $ --
Income taxes paid....................... $ 4.4 $ 36.2 $ 5.4
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-5
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

Allmerica Financial Life Insurance and Annuity Company ("AFLIAC" or the
"Company") is organized as a stock life insurance company, and is a wholly-owned
subsidiary of First Allmerica Financial Life Insurance Company ("FAFLIC") which
is a wholly-owned subsidiary of Allmerica Financial Corporation ("AFC"). As
noted below, the consolidated accounts of AFLIAC include the accounts of certain
wholly-owned non-insurance subsidiaries (principally brokerage and investment
advisory subsidiaries).

Prior to July 1, 1999, AFLIAC was a wholly-owned subsidiary of SMA Financial
Corporation ("SMAFCO"), which was a wholly-owned subsidiary of FAFLIC. Effective
July 1, 1999 and in connection with AFC's restructuring activities, SMAFCO was
renamed Allmerica Asset Management , Inc. ("AAM") and contributed it's ownership
of AFLIAC to FAFLIC. AAM also contributed Allmerica Investments, Inc., Allmerica
Investment Management Company, Inc., Allmerica Financial Investment Management
Services, Inc., and Allmerica Financial Services Insurance Agency, Inc., to
AFLIAC in exchange for one share of AFLIAC common stock. The equity of these
four companies on July 1, 1999 was $11.8 million. For the six months ended
December 31, 1999, the subsidiaries of AFLIAC had total revenue of $35.5 million
and total benefits, losses and expenses of $24.4 million. All significant
intercompany accounts and transactions have been eliminated.

In addition, effective November 1, 1999, the Company's consolidated financial
statements include five wholly-owned insurance agencies. These agencies are
Allmerica Investments Insurance Agency Inc. of Alabama, Allmerica Investments
Insurance Agency of Florida Inc., Allmerica Investment Insurance Agency Inc. of
Georgia, Allmerica Investment Insurance Agency Inc. of Kentucky, and Allmerica
Investments Insurance Agency Inc. of Mississippi.

The consolidated financial statements of AFLIAC include the accounts of Somerset
Square, Inc., a wholly-owned non-insurance company, which was transferred from
SMAFCO effective November 30, 1997 and dissolved as a subsidiary effective
November 30, 1998. Its results of operations are included for eleven months of
1998 and for the month of December, 1997.

The statutory stockholder's equity of the Company is being maintained at a
minimum level of 5% of general account assets by FAFLIC in accordance with a
policy established by vote of FAFLIC's Board of Directors.

The preparation of financial statements in conformity with generally accepted
accounting principles requires the Company to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

B. VALUATION OF INVESTMENTS

In accordance with the provisions of Statement of Financial Accounting Standards
No. 115 ("Statement No. 115"), "Accounting for Certain Investments in Debt and
Equity Securities," the Company is required to classify its investments into one
of three categories: held-to-maturity, available-for-sale or trading. The
Company determines the appropriate classification of debt securities at the time
of purchase and re-evaluates such designation as of each balance sheet date.

F-6
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Debt securities and marketable equity securities are classified as
available-for-sale. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses, net of tax, reported in a separate
component of shareholder's equity. The amortized cost of debt securities is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in investment income.

Mortgage loans on real estate are stated at unpaid principal balances, net of
unamortized discounts and reserves. Reserves on mortgage loans are based on
losses expected by the Company to be realized on transfers of mortgage loans to
real estate (upon foreclosure), on the disposition or settlement of mortgage
loans and on mortgage loans which the Company believes may not be collectible in
full. In establishing reserves, the Company considers, among other things, the
estimated fair value of the underlying collateral.

Fixed maturities and mortgage loans that are delinquent are placed on
non-accrual status, and thereafter interest income is recognized only when cash
payments are received.

Policy loans are carried principally at unpaid principal balances.

During 1997, the Company adopted a plan to dispose of all real estate assets. As
of December 31, 1999, there was one property remaining in the Company's real
estate portfolio, which is being actively marketed. This asset is carried at the
estimated fair value less costs of disposal. Depreciation is not recorded on
this asset while it is held for disposal.

Realized investment gains and losses, other than those related to separate
accounts for which the Company does not bear the investment risk, are reported
as a component of revenues based upon specific identification of the investment
assets sold. When an other than temporary impairment of the value of a specific
investment or a group of investments is determined, a realized investment loss
is recorded. Changes in the valuation allowance for mortgage loans are included
in realized investment gains or losses.

C. FINANCIAL INSTRUMENTS

In the normal course of business, the Company enters into transactions involving
various types of financial instruments, including debt, investments such as
fixed maturities, mortgage loans and equity securities and investment and loan
commitments. These instruments involve credit risk and also may be subject to
risk of loss due to interest rate fluctuation. The Company evaluates and
monitors each financial instrument individually and, when appropriate, obtains
collateral or other security to minimize losses.

D. CASH AND CASH EQUIVALENTS

Cash and cash equivalents includes cash on hand, amounts due from banks and
highly liquid debt instruments purchased with an original maturity of three
months or less.

E. DEFERRED POLICY ACQUISITION COSTS

Acquisition costs consist of commissions, underwriting costs and other costs,
which vary with, and are primarily related to, the production of revenues.
Acquisition costs related to universal life products, variable annuities and
contractholder deposit funds are deferred and amortized in proportion to total
estimated gross profits from investment yields, mortality, surrender charges and
expense margins over the expected life of the contracts. This amortization is
reviewed annually and adjusted retrospectively when the Company revises its
estimate of current or future gross profits to be realized from this group of
products, including realized and unrealized gains and losses from investments.
Acquisition costs related to fixed annuities and other life insurance products
are deferred and amortized, generally in proportion to the ratio of annual
revenue to the

F-7
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

estimated total revenues over the contract periods based upon the same
assumptions used in estimating the liability for future policy benefits.

Deferred acquisition costs for each product are reviewed to determine if they
are recoverable from future income, including investment income. If such costs
are determined to be unrecoverable, they are expensed at the time of
determination. Although realization of deferred policy acquisition costs is not
assured, the Company believes it is more likely than not that all of these costs
will be realized. The amount of deferred policy acquisition costs considered
realizable, however, could be reduced in the near term if the estimates of gross
profits or total revenues discussed above are reduced. The amount of
amortization of deferred policy acquisition costs could be revised in the near
term if any of the estimates discussed above are revised.

F. SEPARATE ACCOUNTS

Separate account assets and liabilities represent segregated funds administered
and invested by the Company for the benefit of variable annuity and variable
life insurance contractholders. Assets consist principally of bonds, common
stocks, mutual funds, and short-term obligations at market value. The investment
income, gains and losses of these accounts generally accrue to the
contractholders and, therefore, are not included in the Company's net income.
Appreciation and depreciation of the Company's interest in the separate
accounts, including undistributed net investment income, is reflected in
shareholder's equity or net investment income.

G. POLICY LIABILITIES AND ACCRUALS

Future policy benefits are liabilities for life, disability income and annuity
products. Such liabilities are established in amounts adequate to meet the
estimated future obligations of policies in force. The liabilities associated
with traditional life insurance products are computed using the net level
premium method for individual life and annuity policies, and are based upon
estimates as to future investment yield, mortality and withdrawals that include
provisions for adverse deviation. Future policy benefits for individual life
insurance and annuity policies are computed using interest rates ranging from
3.0% to 6.0% for life insurance and 3 1/2% to 9 1/2% for annuities. Mortality,
morbidity and withdrawal assumptions for all policies are based on the Company's
own experience and industry standards. Liabilities for universal life, variable
universal life and variable annuities include deposits received from customers
and investment earnings on their fund balances, less administrative charges.
Universal life fund balances are also assessed mortality and surrender charges.
Liabilities for variable annuities include a reserve for benefit claims in
excess of a guaranteed minimum fund value.

Individual disability income benefit liabilities for active lives are estimated
using the net level premium method, and assumptions as to future morbidity and
interest which provide a margin for adverse deviation. Benefit liabilities for
disabled lives are estimated using the present value of benefits method and
experience assumptions as to claim terminations, expenses and interest.

Liabilities for outstanding claims and losses are estimates of payments to be
made for reported claims and estimates of claims incurred but not reported for
individual life and disability income policies. These estimates are continually
reviewed and adjusted as necessary; such adjustments are reflected in current
operations.

Contractholder deposit funds and other policy liabilities include
investment-related products and consist of deposits received from customers and
investment earnings on their fund balances.

F-8
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

All policy liabilities and accruals are based on the various estimates discussed
above. Although the adequacy of these amounts cannot be assured, the Company
believes that it is more likely than not that policy liabilities and accruals
will be sufficient to meet future obligations of policies in force. The amount
of liabilities and accruals, however, could be revised in the near term if the
estimates discussed above are revised.

H. PREMIUM AND FEE REVENUE AND RELATED EXPENSES

Premiums for individual life insurance and individual and group annuity
products, excluding universal life and investment-related products, are
considered revenue when due. Individual disability income insurance premiums are
recognized as revenue over the related contract periods. The unexpired portion
of these premiums is recorded as unearned premiums. Benefits, losses and related
expenses are matched with premiums, resulting in their recognition over the
lives of the contracts. This matching is accomplished through the provision for
future benefits, estimated and unpaid losses and amortization of deferred policy
acquisition costs. Revenues for investment-related products consist of net
investment income and contract charges assessed against the fund values. Related
benefit expenses include annuity benefit claims in excess of a guaranteed
minimum fund value, and net investment income credited to the fund values after
deduction for investment and risk charges. Revenues for universal life and group
variable universal life products consist of net investment income, with
mortality, administration and surrender charges assessed against the fund
values. Related benefit expenses include universal life benefit claims in excess
of fund values and net investment income credited to universal life fund values.
Certain policy charges that represent compensation for services to be provided
in future periods are deferred and amortized over the period benefited using the
same assumptions used to amortize capitalized acquisition costs.

I. FEDERAL INCOME TAXES

AFC and its domestic subsidiaries (including certain non-insurance operations)
file a consolidated United States federal income tax return. Entities included
within the consolidated group are segregated into either a life insurance or
non-life insurance company subgroup. The consolidation of these subgroups is
subject to certain statutory restrictions on the percentage of eligible non-life
tax losses that can be applied to offset life insurance company taxable income.

The Board of Directors has delegated to AFC management, the development and
maintenance of appropriate federal income tax allocation policies and
procedures, which are subject to written agreement between the companies. The
Federal income tax for all subsidiaries in the consolidated return of AFC is
calculated on a separate return basis. Any current tax liability is paid to AFC.
Tax benefits resulting from taxable operating losses or credits of AFC's
subsidiaries are not reimbursed to the subsidiary until such losses or credits
can be utilized by the subsidiary on a separate return basis.

Deferred income taxes are generally recognized when assets and liabilities have
different values for financial statement and tax reporting purposes, and for
other temporary taxable and deductible differences as defined by Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("Statement No. 109"). These differences result primarily from policy reserves,
policy acquisition expenses, and unrealized appreciation or depreciation on
investments.

J. OTHER INCOME AND OTHER OPERATING EXPENSES

Other income and other operating expenses for the year ended December 31, 1999
include investment management and brokerage income and sub-advisory expenses
arising from the activities of the non-insurance subsidiaries that were
transferred to AFLIAC during 1999, as more fully described in Note 1A.

F-9
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

K. NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("Statement No. 133"), which establishes
accounting and reporting standards for derivative instruments. Statement No. 133
requires that an entity recognize all derivatives as either assets or
liabilities at fair value in the statement of financial position, and
establishes special accounting for the following three types of hedges; fair
value hedges, cash flow hedges, and hedges of foreign currency exposures of net
investments in foreign operations. This statement is effective for fiscal
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY (an indirect wholly-owned
subsidiary of Allmerica Financial Corporation) years beginning after June 15,
2000. The Company is currently assessing the impact of adoption of Statement No.
133.

In March 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position 98-1, "Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use" ("SoP 98-1"). SoP 98-1 requires that
certain costs incurred in developing internal-use computer software be
capitalized and provides guidance for determining whether computer software is
to be considered for internal use. This statement is effective for fiscal years
beginning after December 15, 1998. In the second quarter of 1998, the Company
adopted SoP 98-1 effective January 1, 1998, resulting in an increase in pre-tax
income of $9.8 million through December 31, 1998. The adoption of SOP 98-1 did
not have a material effect on the results of operations or financial position
for the three months ended March 31, 1998.

In December 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments" ("SoP 97-3"). SoP 97-3 provides
guidance when a liability should be recognized for guaranty fund and other
assessments and how to measure the liability. This statement allows for the
discounting of the liability if the amount and timing of the cash payments are
fixed and determinable. In addition, it provides criteria for when an asset may
be recognized for a portion or all of the assessment liability or paid
assessment that can be recovered through premium tax offsets or policy
surcharges. This statement is effective for fiscal years beginning after
December 15, 1998. The adoption of this statement had no effect on the results
of operations or financial position of the Company.

In June 1997, the FASB issued Statement No. 131, "Disclosures About Segments of
an Enterprise and Related Information" ("Statement No. 131"). This statement
establishes standards for the way that public enterprises report information
about operating segments in annual financial statements and requires that
selected information about those operating segments be reported in interim
financial statements. This statement supersedes Statement No. 14, "Financial
Reporting for Segments of a Business Enterprise". Statement No. 131 requires
that all public enterprises report financial and descriptive information about
their reportable operating segments. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. This statement
is effective for fiscal years beginning after December 15, 1997. AFLIAC consists
of one segment, Allmerica Financial Services, which underwrites and distributes
variable annuities and variable universal life insurance via retail channels.

In June 1997, the FASB also issued Statement No. 130, "Reporting Comprehensive
Income" ("Statement No. 130"). Statement No. 130 establishes standards for the
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. All items that are required to be
recognized under accounting standards as components of comprehensive income are
to be reported in a financial statement that is displayed with the same
prominence as other financial statements. This statement stipulates that
comprehensive income reflect the change in equity of an enterprise during a
period from transactions and

F-10
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

other events and circumstances from non-owner sources. This statement is
effective for fiscal years beginning after December 15, 1997. The Company
adopted Statement No. 130 for the first quarter of 1998, which resulted
primarily in reporting unrealized gains and losses on investments in debt and
equity securities in comprehensive income.

L. RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current year
presentation.

2. SIGNIFICANT TRANSACTIONS

During 1999, AFLIAC's parent contributed $11.8 million of additional paid-in
capital to the Company in the form of four subsidiaries as disclosed in Note 1A
above. These subsidiaries consisted of assets of $22.0 million, of which $14.6
million was cash and cash equivalents, and liabilities of $10.2 million. During
1999, 1998 and 1997, SMAFCO contributed $4.0 million, $21.0 million, and $40.6
million respectively, of additional paid-in capital to the Company. The nature
of the 1997 contribution was $19.2 million in cash and $21.4 million in other
assets including Somerset Square, Inc.

Effective January 1, 1998, the Company entered into an agreement with a highly
rated reinsurer to reinsure the mortality risk on the universal life and
variable universal life blocks of business. The agreement did not have a
material effect on the results of operations or financial position of the
Company.

On April 14, 1997, the Company entered into an agreement in principle to cede
substantially all of the Company's individual disability income line of business
under a 100% coinsurance agreement with a highly rated reinsurer. The
coinsurance agreement became effective October 1, 1997. The transaction has
resulted in the recognition of a $53.9 million pre-tax loss in the first quarter
of 1997.

3. INVESTMENTS

A. SUMMARY OF INVESTMENTS

The Company accounts for its investments, all of which are classified as
available-for-sale, in accordance with the provisions of Statement No. 115.

The amortized cost and fair value of available-for-sale fixed maturities and
equity securities were as follows:

<TABLE>
<CAPTION>
1999
-------------------------------------------
GROSS GROSS
DECEMBER 31, AMORTIZED UNREALIZED UNREALIZED FAIR
(IN MILLIONS) COST (1) GAINS LOSSES VALUE
- ------------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C>
U.S. Treasury securities and U.S.
government and agency securities....... $ 5.2 $ 0.2 $-- $ 5.4
States and political subdivisions....... 12.4 0.1 -- 12.5
Foreign governments..................... 38.6 0.9 0.6 38.9
Corporate fixed maturities.............. 1,180.0 10.3 38.9 1,151.4
Mortgage-backed securities.............. 118.0 1.1 2.7 116.4
-------- ----- ----- --------
Total fixed maturities.................. $1,354.2 $12.6 $42.2 $1,324.6
======== ===== ===== ========
Equity securities....................... $ 25.2 $ 7.4 $-- $ 32.6
======== ===== ===== ========
</TABLE>

(1) Amortized cost for fixed maturities and cost for equity securities.

F-11
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
1998
-------------------------------------------
GROSS GROSS
DECEMBER 31, AMORTIZED UNREALIZED UNREALIZED FAIR
(IN MILLIONS) COST (1) GAINS LOSSES VALUE
- ------------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C>
U.S. Treasury securities and U.S.
government and agency securities....... $ 5.8 $ 0.8 $-- $ 6.6
States and political subdivisions....... 2.7 0.2 -- 2.9
Foreign governments..................... 48.8 1.6 1.5 48.9
Corporate fixed maturities.............. 1,096.0 58.0 17.7 1,136.3
Mortgage-backed securities.............. 131.3 5.8 1.4 135.7
-------- ----- ----- --------
Total fixed maturities.................. $1,284.6 $66.4 $20.6 $1,330.4
======== ===== ===== ========
Equity securities....................... $ 27.4 $ 8.9 $ 4.5 $ 31.8
======== ===== ===== ========
</TABLE>

(1) Amortized cost for fixed maturities and cost for equity securities.

In connection with AFLIAC's voluntary withdrawal of its license in New York,
AFLIAC agreed with the New York Department of Insurance to maintain, through a
custodial account in New York, a security deposit, the market value of which
will at all times equal 102% of all outstanding liabilities of AFLIAC for New
York policyholders, claimants and creditors. At December 31, 1999, the amortized
cost and market value of these assets on deposit in New York were
$196.4 million and $193.0 million, respectively. At December 31, 1998, the
amortized cost and market value of assets on deposit were $268.5 million and
$284.1 million, respectively. In addition, fixed maturities, excluding those
securities on deposit in New York, with an amortized cost of $4.1 million and
$4.2 million were on deposit with various state and governmental authorities at
December 31, 1999 and 1998, respectively.

There were no contractual fixed maturity investment commitments at December 31,
1999.

The amortized cost and fair value by maturity periods for fixed maturities are
shown below. Actual maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties, or the Company may have the right to put or sell the
obligations back to the issuers. Mortgage backed securities are included in the
category representing their ultimate maturity.

<TABLE>
<CAPTION>
1999
-------------------
DECEMBER 31, AMORTIZED FAIR
(IN MILLIONS) COST VALUE
- ------------- --------- --------
<S> <C> <C>
Due in one year or less..................................... $ 54.5 $ 54.8
Due after one year through five years....................... 349.1 347.2
Due after five years through ten years...................... 652.9 637.1
Due after ten years......................................... 297.7 285.5
-------- --------
Total....................................................... $1,354.2 $1,324.6
======== ========
</TABLE>

F-12
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unrealized gains and losses on available-for-sale and other securities, are
summarized as follows:

<TABLE>
<CAPTION>
EQUITY
FOR THE YEARS ENDED DECEMBER 31, FIXED SECURITIES
(IN MILLIONS) MATURITIES AND OTHER (1) TOTAL
- ------------- ---------- ------------- ------
<S> <C> <C> <C>
1999
Net appreciation, beginning of year......................... $ 16.2 $ 7.9 $ 24.1
------ ------ ------
Net depreciation on available-for-sale securities........... (75.3) (0.2) (75.5)
Net appreciation from the effect on deferred policy
acquisition costs and on policy liabilities................ 34.4 -- 34.4
Benefit from deferred federal income taxes.................. 14.3 0.1 14.4
------ ------ ------
(26.6) (0.1) (26.7)
------ ------ ------
Net (depreciation) appreciation, end of year................ $(10.4) $ 7.8 $ (2.6)
====== ====== ======

1998
Net appreciation, beginning of year......................... $ 22.1 $ 16.4 $ 38.5
------ ------ ------
Net depreciation on available-for-sale securities........... (16.2) (14.3) (30.5)
Net appreciation from the effect on deferred policy
acquisition costs and on policy liabilities................ 7.1 -- 7.1
Benefit from deferred federal income taxes.................. 3.2 5.8 9.0
------ ------ ------
(5.9) (8.5) (14.4)
------ ------ ------
Net appreciation, end of year............................... $ 16.2 $ 7.9 $ 24.1
====== ====== ======

1997
Net appreciation, beginning of year......................... $ 12.7 $ 7.8 $ 20.5
------ ------ ------
Net appreciation on available-for-sale securities........... 24.3 12.5 36.8
Net depreciation from the effect on deferred policy
acquisition costs and on policy liabilities................ (9.8) -- (9.8)
Provision for deferred federal income taxes................. (5.1) (3.9) (9.0)
------ ------ ------
9.4 8.6 18.0
------ ------ ------
Net appreciation, end of year............................... $ 22.1 $ 16.4 $ 38.5
====== ====== ======
</TABLE>

(1) Includes net (depreciation) appreciation on other investments of $(3.1)
million, $0.9 million, and $1.3 million in 1999, 1998, and 1997,
respectively.

B. MORTGAGE LOANS AND REAL ESTATE

AFLIAC's mortgage loans are diversified by property type and location. The real
estate investment was obtained by an affiliate through foreclosure. Mortgage
loans are collateralized by the related properties and generally are no more
than 75% of the property's value at the time the original loan is made.

The carrying values of mortgage loans and the real estate investment net of
applicable reserves were $234.6 million and $244.5 million at December 31, 1999
and 1998, respectively. Reserves for mortgage loans were $2.4 million and
$3.3 million at December 31, 1999 and 1998, respectively.

F-13
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

During 1997, the Company committed to a plan to dispose of all real estate
assets. At December 31, 1999, there was one property remaining in the Company's
real estate portfolio which is being actively marketed. Depreciation is not
recorded on this asset while it is held for disposal.

There were no non-cash investing activities, including real estate acquired
through foreclosure of mortgage loans, in 1999, 1998 and 1997.

There were no material contractual commitments to extend credit under commercial
mortgage loan agreements at December 31, 1999.

Mortgage loans and real estate investments comprised the following property
types and geographic regions:

<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS) 1999 1998
- ------------- ------ ------
<S> <C> <C>
Property type:
Office building........................................... $136.1 $129.2
Residential............................................... 18.5 18.9
Retail.................................................... 28.3 37.4
Industrial/warehouse...................................... 51.1 59.2
Other..................................................... 3.0 3.1
Valuation allowances...................................... (2.4) (3.3)
------ ------
Total....................................................... $234.6 $244.5
====== ======
Geographic region:
South Atlantic............................................ $ 60.7 $ 55.5
Pacific................................................... 76.2 80.0
East North Central........................................ 35.9 41.4
Middle Atlantic........................................... 20.1 22.5
New England............................................... 29.9 26.9
West South Central........................................ 1.9 6.7
Other..................................................... 12.3 14.8
Valuation allowances...................................... (2.4) (3.3)
------ ------
Total....................................................... $234.6 $244.5
====== ======
</TABLE>

At December 31, 1999, scheduled mortgage loan maturities were as follows:
2000 -- $40.8 million; 2001 -- $6.3 million; 2002 -- $11.2 million; 2003 --
$0.5 million; 2004 -- $23.7 million; and $141.2 million thereafter. Actual
maturities could differ from contractual maturities because borrowers may have
the right to prepay obligations with or without prepayment penalties and loans
may be refinanced. During 1999, the Company did not refinance any mortgage loans
based on terms which differed from those granted to new borrowers.

F-14
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

C. INVESTMENT VALUATION ALLOWANCES

Investment valuation allowances which have been deducted in arriving at
investment carrying values as presented in the consolidated balance sheets and
changes thereto are shown below.

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, BALANCE AT BALANCE AT
(IN MILLIONS) JANUARY 1 PROVISIONS WRITE-OFFS DECEMBER 31
- ------------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
1999
Mortgage loans.............................................. $ 3.3 $(0.8) $0.1 $2.4
===== ===== ==== ====
1998
Mortgage loans.............................................. $ 9.4 $(4.5) $1.6 $3.3
===== ===== ==== ====
1997
Mortgage loans.............................................. $ 9.5 $ 1.1 $1.2 $9.4
Real estate................................................. 1.7 3.7 5.4 --
----- ----- ---- ----
Total................................................... $11.2 $ 4.8 $6.6 $9.4
===== ===== ==== ====
</TABLE>

Provisions on mortgages during 1999 and 1998 reflect the release of redundant
specific reserves. Write-offs of $5.4 million to the investment valuation
allowance related to real estate in 1997 primarily reflect write downs to the
estimated fair value less costs to sell pursuant to the aforementioned 1997 plan
of disposal.

The carrying value of impaired loans was $11.4 million and $15.3 million, with
related reserves of $0.7 million and $1.5 million as of December 31, 1999 and
1998, respectively. All impaired loans were reserved for as of December 31, 1999
and 1998.

The average carrying value of impaired loans was $14.3 million, $17.0 million
and $19.8 million, with related interest income while such loans were impaired
of $1.5 million, $2.0 million and $2.2 million as of December 31, 1999, 1998 and
1997, respectively.

D. OTHER

At December 31, 1999 and 1998, AFLIAC had no concentration of investments in a
single investee exceeding 10% of shareholder's equity.

4. INVESTMENT INCOME AND GAINS AND LOSSES

A. NET INVESTMENT INCOME

The components of net investment income were as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- ------ ------ ------
<S> <C> <C> <C>
Fixed maturities............................................ $107.2 $107.7 $130.0
Mortgage loans.............................................. 19.0 25.5 20.4
Equity securities........................................... 0.4 0.3 1.3
Policy loans................................................ 12.4 11.7 10.8
Real estate and other long-term investments................. 4.0 4.8 4.9
Short-term investments...................................... 9.5 4.2 1.4
------ ------ ------
Gross investment income................................. 152.5 154.2 168.8
Less investment expenses.................................... (2.3) (2.9) (4.6)
------ ------ ------
Net investment income................................... $150.2 $151.3 $164.2
====== ====== ======
</TABLE>

F-15
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

At December 31, 1999, the Company had fixed maturities with a carrying value of
$0.8 million on non-accrual status. There were no mortgage loans on non-accrual
status at December 31, 1999. There were no mortgage loans or fixed maturities on
non-accrual status at December 31, 1998. The effect of non-accruals, compared
with amounts that would have been recognized in accordance with the original
terms of the investments, was a reduction in net income of $1.2 million in 1999,
and had no impact in 1998 and 1997.

The payment terms of mortgage loans may from time to time be restructured or
modified. The investment in restructured mortgage loans, based on amortized
cost, amounted to $12.2 million, $12.6 million and $21.1 million at December 31,
1999, 1998 and 1997, respectively. Interest income on restructured mortgage
loans that would have been recorded in accordance with the original terms of
such loans amounted to $0.9 million, $1.4 million and $1.9 million in 1999,
1998, and 1997, respectively. Actual interest income on these loans included in
net investment income aggregated $1.1 million, $1.8 million and $2.1 million in
1999, 1998 and 1997, respectively.

There were no fixed maturities or mortgage loans which were non-income producing
for the year ended December 31, 1999.

Included in other long-term investments is income from limited partnerships of
$0.9 million and $0.7 million in 1999 and 1998, respectively. There was no
income from limited partnerships included in other long-term investments in
1997.

B. NET REALIZED INVESTMENT GAINS AND LOSSES

Realized (losses) gains on investments were as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- ------ ----- -----
<S> <C> <C> <C>
Fixed maturities............................................ $(18.8) $(6.1) $ 3.0
Mortgage loans.............................................. 0.8 8.0 (1.1)
Equity securities........................................... 8.5 15.7 0.5
Real estate and other....................................... 0.8 2.4 0.5
------ ----- -----
Net realized investment (losses) gains...................... $ (8.7) $20.0 $ 2.9
====== ===== =====
</TABLE>

The proceeds from voluntary sales of available-for-sale securities and the gross
realized gains and gross realized losses on those sales were as follows:

<TABLE>
<CAPTION>
PROCEEDS FROM
FOR THE YEARS ENDED DECEMBER 31, VOLUNTARY GROSS GROSS
(IN MILLIONS) SALES GAINS LOSSES
- ------------- ------------- ----- ------
<S> <C> <C> <C>
1999
Fixed maturities............................................ $162.3 $ 2.7 $4.3
Equity securities........................................... $ 30.4 $10.1 $1.6
1998
Fixed maturities............................................ $ 60.0 $ 2.0 $2.0
Equity securities........................................... $ 52.6 $17.5 $0.9
1997
Fixed maturities............................................ $702.9 $11.4 $5.0
Equity securities........................................... $ 1.3 $ 0.5 $--
</TABLE>

F-16
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

C. OTHER COMPREHENSIVE INCOME RECONCILIATION

The following table provides a reconciliation of gross unrealized (losses) gains
to the net balance shown in the consolidated statements of comprehensive income:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- ------ ------ -----
<S> <C> <C> <C>
Unrealized (losses) gains on securities:
Unrealized holding (losses) gains arising during period (net
of taxes of $(18.0) million, $(5.6) million and
$10.2 million in 1999, 1998 and 1997, respectively)........ $(33.4) $ (8.2) $20.3
Less: reclassification adjustment for (losses) gains
included in net income (net of taxes of $(3.6) million,
$3.4 million and $1.2 million in 1999, 1998 and 1997,
respectively).............................................. (6.7) 6.2 2.3
------ ------ -----
Other comprehensive (loss) income........................... $(26.7) $(14.4) $18.0
====== ====== =====
</TABLE>

5. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS

Statement No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about certain financial
instruments (insurance contracts, real estate, goodwill and taxes are excluded)
for which it is practicable to estimate such values, whether or not these
instruments are included in the balance sheet. The fair values presented for
certain financial instruments are estimates which, in many cases, may differ
significantly from the amounts which could be realized upon immediate
liquidation. In cases where market prices are not available, estimates of fair
value are based on discounted cash flow analyses which utilize current interest
rates for similar financial instruments which have comparable terms and credit
quality.

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:

CASH AND CASH EQUIVALENTS

For these short-term investments, the carrying amount approximates fair value.

FIXED MATURITIES

Fair values are based on quoted market prices, if available. If a quoted market
price is not available, fair values are estimated using independent pricing
sources or internally developed pricing models using discounted cash flow
analyses.

EQUITY SECURITIES

F-17
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MORTGAGE LOANS

Fair values are estimated by discounting the future contractual cash flows using
the current rates at which similar loans would be made to borrowers with similar
credit ratings. The fair value of below investment grade mortgage loans are
limited to the lesser of the present value of the cash flows or book value.

POLICY LOANS

The carrying amount reported in the balance sheet approximates fair value since
policy loans have no defined maturity dates and are inseparable from the
insurance contracts.

FIXED ANNUITY AND OTHER CONTRACTS (WITHOUT MORTALITY FEATURES)

Fair values for the Company's liabilities under individual fixed annuity
contracts are estimated based on current surrender values, supplemental
contracts without life contingencies reflect current fund balances, and other
individual contract funds represent the present value of future policy benefits.

The estimated fair values of the financial instruments were as follows:

<TABLE>
<CAPTION>
1999 1998
------------------ ------------------
DECEMBER 31, CARRYING FAIR CARRYING FAIR
(IN MILLIONS) VALUE VALUE VALUE VALUE
- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and cash equivalents................................. $ 132.9 $ 132.9 $ 217.9 $ 217.9
Fixed maturities.......................................... 1,324.6 1,324.6 1,330.4 1,330.4
Equity securities......................................... 32.6 32.6 31.8 31.8
Mortgage loans............................................ 223.7 222.8 230.0 241.9
Policy loans.............................................. 166.8 166.8 151.5 151.5
-------- -------- -------- --------
$1,880.6 $1,879.7 $1,961.6 $1,973.5
======== ======== ======== ========
FINANCIAL LIABILITIES
Individual fixed annuity contracts........................ $1,048.0 $1,014.9 $1,069.4 $1,034.6
Supplemental contracts without life contingencies......... 25.0 25.0 21.0 21.0
Other individual contract deposit funds................... 19.3 19.3 17.0 17.0
-------- -------- -------- --------
$1,092.3 $1,059.2 $1,107.4 $1,072.6
======== ======== ======== ========
</TABLE>

F-18
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. FEDERAL INCOME TAXES

Provisions for federal income taxes have been calculated in accordance with the
provisions of Statement No. 109. A summary of the federal income tax expense in
the consolidated statement of income is shown below:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- ----- ----- -----
<S> <C> <C> <C>
Federal income tax expense
Current................................................... $15.5 $22.1 $13.9
Deferred.................................................. 30.5 11.8 7.1
----- ----- -----
Total....................................................... $46.0 $33.9 $21.0
===== ===== =====
</TABLE>

The provision for federal income taxes does not materially differ from the
amount of federal income tax determined by applying the appropriate U.S.
statutory income tax rate to income before federal income taxes.

The deferred income tax (asset) liability represents the tax effects of
temporary differences:

<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS) 1999 1998
- ------------- ------- -------
<S> <C> <C>
Deferred tax (assets) liabilities
Policy reserves........................................... $(233.7) $(205.1)
Deferred acquisition costs................................ 339.7 278.8
Investments, net.......................................... (4.0) 12.5
Litigation reserves....................................... (4.3) (7.4)
Bad debt reserve.......................................... -- (0.4)
Other, net................................................ (2.9) 0.4
------- -------
Deferred tax liability, net................................. $ 94.8 $ 78.8
======= =======
</TABLE>

Gross deferred income tax liabilities totaled $360.4 million and $291.7 million
at December 31, 1999 and 1998, respectively. Gross deferred income tax assets
totaled $265.6 million and $212.9 million at December 31, 1999 and 1998,
respectively.

The Company believes, based on its recent earnings history and its future
expectations, that the Company's taxable income in future years will be
sufficient to realize all deferred tax assets. In determining the adequacy of
future income, the Company considered the future reversal of its existing
temporary differences and available tax planning strategies that could be
implemented, if necessary.

The Company's federal income tax returns are routinely audited by the Internal
Revenue Service ("IRS"), and provisions are routinely made in the financial
statements in anticipation of the results of these audits. The IRS has examined
the FAFLIC/AFLIAC consolidated group's federal income tax returns through 1994.
The Company has appealed certain adjustments proposed by the IRS with respect
federal income tax returns for 1992, 1993, and 1994 for the FAFLIC/AFLIAC
consolidated group. Also, certain adjustments proposed by the IRS with respect
to FAFLIC/AFLIAC's federal income tax returns for 1982 and 1983 remain
unresolved. If upheld, these adjustments would result in additional payments;
however, the Company will vigorously defend its position with respect to these
adjustments. In the Company's opinion, adequate tax liabilities have

F-19
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

been established for all years. However, the amount of these tax liabilities
could be revised in the near term if estimates of the Company's ultimate
liability are revised.

7. RELATED PARTY TRANSACTIONS

The Company has no employees of its own, but has agreements under which FAFLIC
provides management, space and other services, including accounting, electronic
data processing, human resources, legal and other staff functions. Charges for
these services are based on full cost including all direct and indirect overhead
costs, and amounted to $173.9 million, $145.4 million and $124.1 million in
1999, 1998 and 1997 respectively. The net amounts payable to FAFLIC and
affiliates for accrued expenses and various other liabilities and receivables
were $48.6 million and $16.4 million at December 31, 1999 and 1998,
respectively.

8. DIVIDEND RESTRICTIONS

Delaware has enacted laws governing the payment of dividends to stockholders by
insurers. These laws affect the dividend paying ability of the Company.

Pursuant to Delaware's statute, the maximum amount of dividends and other
distributions that an insurer may pay in any twelve month period, without the
prior approval of the Delaware Commissioner of Insurance, is limited to the
greater of (i) 10% of its policyholders' surplus as of the preceding December 31
or (ii) the individual company's statutory net gain from operations for the
preceding calendar year (if such insurer is a life company) or its net income
(not including realized capital gains) for the preceding calendar year (if such
insurer is not a life company). Any dividends to be paid by an insurer, whether
or not in excess of the aforementioned threshold, from a source other than
statutory earned surplus would also require the prior approval of the Delaware
Commissioner of Insurance.

No dividends were declared by the Company during 1999, 1998 or 1997. During
2000, AFLIAC could pay dividends of $34.3 million to FAFLIC without prior
approval.

9. REINSURANCE

In the normal course of business, the Company seeks to reduce the loss that may
arise from events that cause unfavorable underwriting results by reinsuring
certain levels of risk in various areas of exposure with other insurance
enterprises or reinsurers. Reinsurance transactions are accounted for in
accordance with the provisions of Statement No. 113, "Accounting and Reporting
for Reinsurance of Short-Duration and Long-Duration Contracts" ("Statement
No. 113").

The Company reinsures 100% of its traditional individual life and certain blocks
of its universal life business, substantially all of its disability income
business, and effective January 1, 1998, the mortality risk on the variable
universal life and remaining universal life blocks of business in-force at
December 31, 1997.

Amounts recoverable from reinsurers are estimated in a manner consistent with
the claim liability associated with the reinsured policy. Reinsurance contracts
do not relieve the Company from its obligations to policyholders. Failure of
reinsurers to honor their obligations could result in losses to the Company;
consequently, allowances are established for amounts deemed uncollectible. The
Company determines the appropriate amount of reinsurance based on evaluation of
the risks accepted and analyses prepared by consultants and reinsurers and on
market conditions (including the availability and pricing of reinsurance). The
Company also believes that the terms of its reinsurance contracts are consistent
with industry practice in that they contain

F-20
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

standard terms with respect to lines of business covered, limit and retention,
arbitration and occurrence. Based on its review of its reinsurers' financial
statements and reputations in the reinsurance marketplace, the Company believes
that its reinsurers are financially sound.

Amounts recoverable from reinsurers at December 31, 1999 and 1998 for the
disability income business were $241.5 million and $230.8 million, respectively,
traditional life were $9.7 million and $11.4 million, respectively, and
universal and variable universal life were $36.0 million and $65.8 million,
respectively.

The effects of reinsurance were as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- ------ ------ ------
<S> <C> <C> <C>
Insurance premiums:
Direct.................................................... $ 41.3 $ 45.5 $ 48.8
Assumed................................................... -- -- 2.6
Ceded..................................................... (40.8) (45.0) (28.6)
------ ------ ------
Net premiums................................................ $ 0.5 $ 0.5 $ 22.8
====== ====== ======
Insurance and other individual policy benefits, claims and
losses:
Direct.................................................... $210.6 $204.0 $226.0
Assumed................................................... -- -- 4.2
Ceded..................................................... (37.0) (50.1) (42.4)
------ ------ ------
Net policy benefits, claims and losses...................... $173.6 $153.9 $187.8
====== ====== ======
</TABLE>

10. DEFERRED POLICY ACQUISITION COSTS

The following reflects the changes to the deferred policy acquisition cost
asset:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- -------- ------ ------
<S> <C> <C> <C>
Balance at beginning of year................................ $ 950.5 $765.3 $632.7
Acquisition expenses deferred............................. 219.5 242.4 184.2
Amortized to expense during the year...................... (49.8) (64.6) (53.1)
Adjustment to equity during the year...................... 36.2 7.4 (10.2)
Adjustment for cession of disability income insurance..... -- -- (38.6)
Adjustment for revision of universal life and variable
universal life insurance mortality assumptions.......... -- -- 50.3
-------- ------ ------
Balance at end of year...................................... $1,156.4 $950.5 $765.3
======== ====== ======
</TABLE>

On October 1, 1997, the Company revised the mortality assumptions for universal
life and variable universal life product lines. These revisions resulted in a
$50.3 million recapitalization of deferred policy acquisition costs.

11. LIABILITIES FOR INDIVIDUAL DISABILITY INCOME BENEFITS

The Company regularly updates its estimates of liabilities for future policy
benefits and outstanding claims and losses as new information becomes available
and further events occur which may impact the resolution of

F-21
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

unsettled claims. Changes in prior estimates are recorded in results of
operations in the year such changes are determined to be needed.

The liability for future policy benefits and outstanding claims and losses
related to the Company's disability income business was $240.7 million and
$233.3 million at December 31, 1999 and 1998. Due to the reinsurance agreement
whereby the Company has ceded substantially all of its disability income
business to a highly rated reinsurer, the Company believes that no material
adverse development of losses will occur. However, the amount of the liabilities
could be revised in the near term if the estimates used in determining the
liability are revised.

12. CONTINGENCIES

REGULATORY AND INDUSTRY DEVELOPMENTS

Unfavorable economic conditions may contribute to an increase in the number of
insurance companies that are under regulatory supervision. This may result in an
increase in mandatory assessments by state guaranty funds, or voluntary payments
by solvent insurance companies to cover losses to policyholders of insolvent or
rehabilitated companies. Mandatory assessments, which are subject to statutory
limits, can be partially recovered through a reduction in future premium taxes
in some states. The Company is not able to reasonably estimate the potential
effect on it of any such future assessments or voluntary payments.

LITIGATION

In July 1997, a lawsuit on behalf of a putative class was instituted in
Louisiana against AFC and certain of its subsidiaries including AFLIAC, by
individual plaintiffs alleging fraud, unfair or deceptive acts, breach of
contract, misrepresentation, and related claims in the sale of life insurance
policies. In October 1997, plaintiffs voluntarily dismissed the Louisiana suit
and filed a substantially similar action in Federal District Court in Worcester,
Massachusetts. In early November 1998, AFC and the plaintiffs entered into a
settlement agreement. The court granted preliminary approval of the settlement
on December 4, 1998. On May 19, 1999, the Court issued an order certifying the
class for settlement purposes and granting final approval of the settlement
agreement. AFLIAC recognized a $21.0 million pre-tax expense during the third
quarter of 1998 related to this litigation. Although the Company believes that
this expense reflects appropriate recognition of its obligation under the
settlement, this estimate assumes the availability of insurance coverage for
certain claims, and the estimate may be revised based on the amount of
reimbursement actually tendered by AFC's insurance carriers, and based on
changes in the Company's estimate of the ultimate cost of the benefits to be
provided to members of the class.

The Company has been named a defendant in various legal proceedings arising in
the normal course of business. In the Company's opinion, based on the advice of
legal counsel, the ultimate resolution of these proceedings will not have a
material effect on the Company's consolidated financial statements. However,
liabilities related to these proceedings could be established in the near term
if estimates of the ultimate resolution of these proceedings are revised.

YEAR 2000

The Year 2000 issue resulted from computer programs being written using two
digits rather than four to define the applicable year. 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.

F-22
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Although the Company does not believe that there is a material contingency
associated with the Year 2000 issue, there can be no assurance that exposure for
material contingencies will not arise.

13. STATUTORY FINANCIAL INFORMATION

The Company is required to file annual statements with state regulatory
authorities prepared on an accounting basis prescribed or permitted by such
authorities (statutory basis). Statutory surplus differs from shareholder's
equity reported in accordance with generally accepted accounting principles
primarily because policy acquisition costs are expensed when incurred,
investment reserves are based on different assumptions, life insurance reserves
are based on different assumptions and income tax expense reflects only taxes
paid or currently payable. In 1999, 49 out of 50 states have adopted the
National Association of Insurance Commissioners proposed Codification, which
provides for uniform statutory accounting principles. These principles are
effective January 1, 2001. The Company is currently assessing the impact that
the adoption of Codification will have on its statutory results of operations
and financial position. Statutory net income and surplus are as follows:

<TABLE>
<CAPTION>
(IN MILLIONS) 1999 1998 1997
- ------------- ------ ------ ------
<S> <C> <C> <C>
Statutory net income........................................ $ 5.0 $ (8.2) $ 31.5
Statutory shareholder's surplus............................. $342.7 $312.2 $309.7
</TABLE>

F-23