SEP ACCT VA K EXECANNUITY OF ALLMERICA FIN LFE INS & ANN CO, N-4/A, 1999-10-14

SEP ACCT VA K EXECANNUITY OF ALLMERICA FIN LFE INS & ANN CO
N-4/A, 1999-10-14

Previous: MERRILL LYNCH FL MUN BOND FD OF MERRILL LYNCH MUL ST MUN SER, 24F-2NT, 1999-10-14

Next: ADDVANTAGE MEDIA GROUP INC /OK, SC 13D, 1999-10-14

<PAGE>

File Nos. 333-81861
811-6293

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-effective Amendment No. 1

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 31

SEPARATE ACCOUNT VA-K OF ALLMERICA FINANCIAL LIFE INSURANCE
AND ANNUITY COMPANY
(Exact Name of Registrant)

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(Name of Depositor)
440 Lincoln Street
Worcester, MA 01653
(Address of Depositor's Principal Executive Offices)
(508) 855-1000
(Depositor's Telephone Number, including Area Code)

Mary Eldridge, Secretary
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester, MA 01653
(Name and Address of Agent for Service of Process)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b) of Rule 485
-----
on (date) pursuant to paragraph (b) of Rule 485
-----
60 days after filing pursuant to paragraph (a)(1) of Rule 485
-----
on (date) pursuant to paragraph (a)(1) of Rule 485
-----
this post-effective amendment designates a new effective
-----
date for a previously filed post-effective amendment

VARIABLE ANNUITY POLICIES

Pursuant to Reg. Section 270.24f-2 of the Investment Company Act of 1940 ("the
1940 Act"), Registrant hereby declares that an indefinite amount of its
securities is being registered under the Securities Act of 1933 ("the 1933
Act"). The Rule 24f-2 Notice for the issuer's fiscal year ended December 31,
1998 was filed on or before March 30, 1999.

Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until Registrant shall file a
further amendment which specifically states that this Registration Statement
shall become effective in accordance with section 8(a) of the Securities Act
of 1933 or until this Registration Statement shall become effective on such
date or dates as the Commission, acting pursuant to said section 8(a), may
determine.

<PAGE>

CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF
ITEMS CALLED FOR BY FORM N-4

FORM N-4 ITEM NO. CAPTION IN PROSPECTUS
- ----------------- ---------------------
1 . . . . . . . . . Cover Page

2 . . . . . . . . . Special Terms

3 . . . . . . . . . Summary of Fees and Expenses; Summary of the Contract
Features

4 . . . . . . . . . Condensed Financial Information

5 . . . . . . . . . Description of the Companies, the Variable Accounts,
the Trust, Fidelity VIP, Fidelity VIP II, T. Rowe Price
International Series, Inc. and DGPF.

6 . . . . . . . . . Charges and Deductions

7 . . . . . . . . . Description of the Contract

8 . . . . . . . . . Electing the Annuity Income Date; Choosing an Income
Option; Description of Annuity Benefit Options; Variable
Annuity Payments

9 . . . . . . . . . Death Benefit

10. . . . . . . . . Variable Annuity Payments; Distribution

11. . . . . . . . . Withdrawals; Texas Optional Retirement Program

12. . . . . . . . . Federal Tax Considerations

13. . . . . . . . . Legal Matters

14. . . . . . . . . Statement of Additional Information - Table of Contents

<PAGE>

FORM N-4 ITEM NO. CAPTION IN THE STATEMENT OF ADDITIONAL INFORMATION
- ----------------- --------------------------------------------------
15. . . . . . . . . Cover Page

16. . . . . . . . . Table of Contents

17. . . . . . . . . General Information and History

18. . . . . . . . . Services

19. . . . . . . . . Underwriters

20. . . . . . . . . Underwriters

21. . . . . . . . . Performance Information

22. . . . . . . . . Annuity Benefit Payments

23. . . . . . . . . Financial Statements

<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
WORCESTER, MASSACHUSETTS

This Prospectus provides important information about
the Allmerica Immediate Advantage Variable Annuity
contracts issued by Allmerica Financial Life
Insurance and Annuity Company (in all jurisdictions
except New York) or by First Allmerica Financial Life
Insurance Company (in New York). The Contract is a
single payment immediate combination variable and
fixed annuity offered on both a group and individual
PLEASE READ THIS basis.
PROSPECTUS CAREFULLY
BEFORE INVESTING AND
KEEP IT FOR FUTURE
REFERENCE.

The Contract offers a Variable Income Option, which
is supported by a legally segregated separate account
of the Company called the Variable Account. The
Variable Account is subdivided into Sub-Accounts.
Each Sub-Account invests exclusively in shares of the
following funds:

<TABLE>
<C> <S> <C>
ALLMERICA INVESTMENT TRUST FIDELITY VARIABLE INSURANCE PRODUCTS FUND
----------------------- -------------------------------------
Select Emerging Markets Fund Overseas Portfolio
Select International Equity Fund Equity-Income Portfolio
Select Aggressive Growth Fund Growth Portfolio
Select Capital Appreciation Fund High Income Portfolio
Select Value Opportunity Fund
Select Growth Fund FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Select Strategic Growth Fund ---------------------------------------
Growth Fund Asset Manager Portfolio
Equity Index Fund
Select Growth and Income Fund T. ROWE PRICE INTERNATIONAL SERIES, INC.
Investment Grade Income Fund ----------------------------------
Government Bond Fund T. Rowe Price International Stock Portfolio
Money Market Fund DELAWARE GROUP PREMIUM FUND, INC.
--------------------------------
ANNUITIES INVOLVE DGPF International Equity Series
RISKS INCLUDING
POSSIBLE LOSS
OF PRINCIPAL.
</TABLE>

The Company's General Account will support the
Fixed Income Option.

THIS ANNUITY IS A Statement of Additional Information dated
NOT: ________, 1999 containing more information about
- A BANK DEPOSIT OR this annuity is on file with the Securities and
OBLIGATION; Exchange Commission and is incorporated by
- FEDERALLY INSURED; reference into this Prospectus. A copy may be
- ENDORSED BY ANY obtained free of charge by calling Allmerica
BANK OR Investments, Inc. at 1-800-723-6550. The Table of
GOVERNMENTAL Contents of the Statement of Additional
AGENCY. Information is listed on page 3 of this
Prospectus.
This Prospectus and the Statement of Additional
Information can also be obtained from the
Securities and Exchange Commission's website
(http://www.sec.gov).
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.

DATED ________, 1999

<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
SPECIAL TERMS........................................................................... 4
SUMMARY OF FEES AND EXPENSES............................................................ 6
SUMMARY OF CONTRACT FEATURES............................................................ 10
DESCRIPTION OF THE COMPANIES, THE VARIABLE ACCOUNTS, THE TRUST,
FIDELITY VIP, FIDELITY VIP II, T. ROWE PRICE AND DGPF.................................. 14
INVESTMENT OBJECTIVES AND POLICIES...................................................... 15
DESCRIPTION OF THE CONTRACT............................................................. 18
A. Single Purchase Payment.......................................................... 18
B. Right to Cancel.................................................................. 18
C. Electing the Annuity Income Date................................................. 19
D. Choosing an Income Option........................................................ 19
E. Description of Annuity Benefit Options........................................... 20
F. Variable Annuity Payments........................................................ 20
Net Investment Factor........................................................... 20
The Annuity Unit and Annuity Unit Value......................................... 21
Determination of First Annuity Payment.......................................... 21
Determination of the Number of Annuity Units.................................... 21
Dollar Amount of First Variable Annuity Payment................................. 22
Dollar Amount of Subsequent Variable Annuity Payments........................... 22
Payment of Annuity Payments..................................................... 22
G. Transfers of Annuity Units....................................................... 22
Automatic Account Rebalancing................................................... 23
H. Withdrawals...................................................................... 23
Calculation of Proportionate Reduction.......................................... 24
Calculation of Present Value.................................................... 25
I. Death Benefit.................................................................... 26
Death of an Owner or an Annuitant Before the Annuity Income Date................ 26
Payment of the Death Benefit.................................................... 26
The Spouse of the Deceased Owner as Beneficiary................................. 26
Death of the Owner or the Annuitant After the Annuity Income Date............... 26
J. General Restrictions on Payments................................................. 27
K. Telephone Authorization.......................................................... 27
L. Assignment....................................................................... 27
M. NORRIS Decision................................................................... 27
CHARGES AND DEDUCTIONS.................................................................. 28
A. Variable Account Deductions...................................................... 28
Mortality and Expense Risk Charge............................................... 28
Administrative Expense Charge................................................... 28
Expenses of the Underlying Funds................................................ 28
B. Premium Taxes.................................................................... 28
C. Transfer Charge.................................................................. 29
D. Withdrawal Adjustment Charge..................................................... 29
FEDERAL TAX CONSIDERATIONS.............................................................. 30
A. Annuity Contracts in General..................................................... 30
B. Tax on Annuity Payments.......................................................... 30
C. Tax on Withdrawals............................................................... 30
Withdrawals Before the Annuity Date............................................. 30
Withdrawals After the Annuity Income Date....................................... 31
D. Exchanges........................................................................ 31
E. Tax Withholding.................................................................. 31
F. Diversification and Control of Underlying Assets................................. 32
</TABLE>

2
<PAGE>

<TABLE>
<S> <C>
STATEMENTS AND REPORTS.................................................................. 32
LOANS................................................................................... 32
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS....................................... 32
CHANGES TO COMPLY WITH LAW AND AMENDMENTS............................................... 33
VOTING RIGHTS........................................................................... 33
DISTRIBUTION............................................................................ 33
SERVICES................................................................................ 34
LEGAL MATTERS........................................................................... 34
YEAR 2000 COMPLIANCE.................................................................... 34
FURTHER INFORMATION..................................................................... 35
APPENDIX A -- CONDENSED FINANCIAL INFORMATION........................................... A-1
APPENDIX B -- EXAMPLES OF PRESENT VALUE WITHDRAWALS AND PAYMENT WITHDRAWALS............. B-1

STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS

GENERAL INFORMATION AND HISTORY......................................................... 2
TAXATION OF THE CONTRACT, THE VARIABLE ACCOUNT AND THE COMPANY.......................... 3
SERVICES................................................................................ 3
UNDERWRITERS............................................................................ 4
ANNUITY BENEFIT PAYMENTS................................................................ 5
EXCHANGE OFFER.......................................................................... 5
PERFORMANCE INFORMATION................................................................. 7
FINANCIAL STATEMENTS.................................................................... F-1
</TABLE>

3
<PAGE>
SPECIAL TERMS

ANNUITANT: the person who must be alive for annuity payments to be made (unless
payments are guaranteed). Joint Annuitants are permitted and, unless otherwise
indicated, any reference to Annuitant shall include Joint Annuitants. In
contrast, the person to whom annuity payments are made is the Owner (or a person
requested by the Owner). The Annuitant and the Owner may be the same individual.

ANNUITY INCOME DATE: the date annuity payments begin. The Annuity Income Date
must be within twelve months of the Contract's Issue Date.

ANNUITY UNIT: a measure used to calculate annuity payments under a Variable
Income Option.

ASSUMED INVESTMENT RETURN (AIR): used to calculate the initial variable annuity
payment and to determine how the payment will change over time in response to
the investment performance of the selected Sub-Accounts.

BENEFICIARY: the person, persons or entity entitled to the Death Benefit upon
the death of the Owner prior to the Annuity Income Date or remaining annuity
payments, if any, upon the death of the Owner on or after the Annuity Income
Date.

CHANGE FREQUENCY: the frequency (monthly, quarterly, semi-annually or annually)
that the dollar value of an annuity payment under a Variable Income Option will
change due to investment performance.

COMPANY (OR WE, US OR OUR): Allmerica Financial Life Insurance and Annuity
Company (in all jurisdictions except New York) or First Allmerica Financial Life
Insurance Company (in New York).

CONTRACT VALUE: the Present Value of all future and/or remaining annuity
payments. (See the section entitled "Present Value Determination.").

CONTRACT YEAR: a period of twelve consecutive months starting on the Contract's
Issue Date or on any anniversary of the Issue Date.

DATE OF FIRST CHANGE: The date on which your variable annuity payment will
change in value for the first time.

FIXED INCOME OPTION: an income option with annuity payments that are fixed in
amount (unless a withdrawal is taken or as a result of the death of the first
Joint Annuitant).

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

ISSUE DATE: the date the Contract is issued and the date that is used to
determine Contract days, Contract months, Contract years and anniversaries.

NET PAYMENT: the Single Purchase Payment less any premium tax.

OWNER (OR YOU OR YOUR): the person, persons (Joint Owners) or entity entitled to
exercise the rights and privileges under this Contract. Unless otherwise
indicated, any reference to You and Your shall include Joint Owners.

SUB-ACCOUNT: a subdivision of the Variable Account. Each Sub-Account available
under the Contract invests exclusively in the shares of a corresponding fund of
Allmerica Investment Trust ("Trust"), a corresponding portfolio of the Fidelity
Variable Insurance Products Fund ("Fidelity VIP"), the Asset Manager Portfolio
of the Fidelity Variable Insurance Products Fund II ("Fidelity VIP II") or the
T. Rowe Price International Stock

4
<PAGE>

Portfolio of T. Rowe Price International Series, Inc. ("T. Rowe Price"); or the
DGPF International Equity Series of the Delaware Group Premium Fund, Inc.
("DGPF").

UNDERLYING FUND: an investment portfolio of the Trust, Fidelity VIP, Fidelity
VIP II, T. Rowe Price or DGPF in which a Sub-Account invests.

VALUATION DATE: a day on which the net asset value of the unit values of the
Sub-Accounts are determined. Valuation Dates currently occur on each day on
which the New York Stock Exchange is open for trading.

VALUATION PERIOD: a period used in measuring the investment experience of a
Sub-Account. The Valuation Period begins at the close of one Valuation Date and
ends at the close of the next succeeding Valuation Date.

VARIABLE ACCOUNT: one of our separate accounts, which we call Separate Account
VA-K, consisting of assets segregated from our other assets. The investment
performance of the assets of each of our separate accounts (and, under the
Contract, each Sub-Account) is determined separately from our other assets and
the assets are not chargeable with liabilities arising out of any other business
which we may conduct.

VARIABLE INCOME OPTION: an income option providing for annuity payments varying
in amount in accordance with the investment experience of the Underlying Funds
selected.

VARIABLE INCOME OPTION RATE: the factor applied to the portion of the Net
Payment allocated to the Variable Income Option and used to determine the number
of Annuity Units in each annuity payment. The factor takes into account the
Issue Date, the Annuity Income Date, annuity benefit option, the Assumed
Investment Return, the Change Frequency and Date of First Change.

5
<PAGE>
SUMMARY OF FEES AND EXPENSES

There are certain fees and expenses that you will bear under the Allmerica
Immediate Advantage Variable Annuity Contract. The purpose of the following
tables is to assist you in understanding these fees and expenses. The tables
show (1) charges under the Contract, including (2) annual expenses of the
Sub-Accounts, and (3) annual expenses of the Funds. Contract charges including
the annual Sub-Account expenses are specified under the terms of the Contract.
Annual Fund expenses are not fixed or specified under the terms of the Contract
and will vary from year to year. In addition to the charges and expenses
described below, premium taxes are applicable in some states and deducted as
described under "B. Premium Taxes" under CHARGES AND DEDUCTIONS.

<TABLE>
<CAPTION>
(1) CONTRACT CHARGES: CHARGE
- ------------------------------------------------------------------------------------------------------ ---------
<S> <C>
TRANSFER CHARGE: None
We currently do not charge for processing transfers and guarantee that the first 12 transfers in a
Contract year will not be subject to a transfer charge. For each subsequent transfer, we reserve the
right to assess a charge, guaranteed never to exceed $25, to reimburse us for the costs of processing
the transfer.

WITHDRAWAL ADJUSTMENT CHARGE:
After the Issue Date, you may request withdrawals, which will result in a calculation by the Company
of the Present Value of future annuity payments. For withdrawals taken within 5 years from the Issue
Date, the Assumed Investment Return ("AIR") you have chosen (in the case of a Variable Income
Option) or the interest rate (in the case of a Fixed Income Option) used to determine the Present
Value is increased by a Withdrawal Adjustment Charge in the following manner:

ADJUSTMENT TO AIR OR INTEREST RATE:
If 15 or more years of annuity payments are being valued, the increase is 1.00%
If 10-14 years of annuity payments are being valued, the increase is 1.50%
If less than 10 years of annuity payments are being valued, the increase is 2.00%

The increase to the AIR or interest rate used to determine the Present Value results in a greater
proportionate reduction in the number of Annuity Units (under a variable income option) or dollar
amount (under a fixed income option), than if the increase had not been made. Because each variable
annuity payment is determined by multiplying the number of Annuity Units by the value of an Annuity
Unit, the reduction in the number of Annuity Units will result in lower future variable annuity
payments. See "H. Withdrawals" under DESCRIPTION OF THE CONTRACT for additional information.

(2) ANNUAL SUB-ACCOUNT EXPENSES:
- ------------------------------------------------------------------------------------------------------
(on an annual basis as a percentage of average daily net assets)
Mortality and Expense Risk Charge: 1.25%
Administrative Expense Charge: 0.20%
---------
Total Annual Expenses: 1.45%
</TABLE>

(3) ANNUAL UNDERLYING FUND EXPENSES:
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 as a percentage of average daily net assets
for the year ended December 31, 1998, as adjusted for material changes. For
more information concerning fees and expenses, see the prospectuses of the
Underlying Funds.

6
<PAGE>

<TABLE>
<CAPTION>
MANAGEMENT FEE OTHER TOTAL FUND EXPENSES
(AFTER ANY VOLUNTARY EXPENSES (AFTER (AFTER ANY WAIVERS/
FUND WAIVERS) ANY REIMBURSEMENTS) REIMBURSEMENTS)
- --------------------------------------------------- --------------------- --------------------- ----------------------
<S> <C> <C> <C>
Select Emerging Markets Fund(@).................... 1.00%(1)* 1.19% 2.19%(1)(2)*
Select International Equity Fund................... 0.90% 0.12% 1.02%(1)(2)
DGPF International Equity Series................... 0.82% 0.13% 0.95%(3)
Fidelity VIP Overseas Portfolio.................... 0.74% 0.17% 0.91%(4)
T. Rowe Price International Stock Portfolio........ 1.05% 0.00% 1.05%
Select Aggressive Growth Fund...................... 0.82%(***) 0.07% 0.89%(1)(2)***
Select Capital Appreciation Fund................... 0.94%(***) 0.10% 1.04%(1)(2)***
Select Value Opportunity Fund...................... 0.90%(1)* 0.08% 0.98%(1)(2)*
Select Growth Fund................................. 0.81%(**) 0.05% 0.86%(1)(2)**
Select Strategic Growth Fund(@).................... 0.39%(*) 0.81% 1.20%(1)(2)*
Growth Fund........................................ 0.44% 0.05% 0.49%(1)(2)
Fidelity VIP Growth Portfolio...................... 0.59% 0.09% 0.68%(4)
Equity Index Fund.................................. 0.29% 0.07% 0.36%(1)
Select Growth and Income Fund...................... 0.68% 0.05% 0.73%(1)(2)
Fidelity VIP Equity-Income Portfolio............... 0.49% 0.09% 0.58%(4)
Fidelity VIP II Asset Manager Portfolio............ 0.54% 0.10% 0.64%(4)
Fidelity VIP High Income Portfolio................. 0.58% 0.12% 0.70%
Investment Grade Income Fund....................... 0.43% 0.09% 0.52%(1)
Government Bond Fund............................... 0.50% 0.14% 0.64%(1)
Money Market Fund.................................. 0.26% 0.06% 0.32%(1)
</TABLE>

(@) Select Emerging Markets Fund and Select Strategic Growth Fund commenced
operations on February 20, 1998. Expenses shown are annualized.

(*) Amount has been adjusted to reflect a voluntary expense limitation currently
in effect for Select Emerging Markets Fund, Select Value Opportunity Fund and
Select Strategic Growth Fund. Without these adjustments, the Management Fees and
Total Fund Expenses would have been 1.35% and 2.54%, respectively, for Select
Emerging Markets Fund, 0.91% and 0.99%, respectively, for Select Value
Opportunity Fund, and 0.85% and 1.66%, respectively, for Select Strategic Growth
Fund.

(**) Effective June 1, 1998, the management fee rate for the Select Growth Fund
was revised. The Management Fee and Total Fund Expense ratios shown in the table
above have been adjusted to assume that the revised rates took effect January 1,
1998.

(***) Effective September 1, 1999, the management fee rates for the Select
Aggressive Growth Fund and Select Capital Appreciation Fund were revised. The
Management Fee and Total Fund Expenses shown in the table above have been
adjusted to assume that the revised rates took effect January 1, 1998.

(1) Until further notice, Allmerica Financial Investment Management Services,
Inc. ("AFIMS") has declared a voluntary expense limitation of 1.35% of average
net assets for Select Aggressive Growth Fund and Select Capital Appreciation
Fund, 1.25% for Select Value Opportunity Fund, 1.50% for Select International
Equity Fund, 1.20% for Growth Fund and Select Growth Fund, 1.10% for Select
Growth and Income Fund, 1.00% for Investment Grade Income Fund and Government
Bond Fund, and 0.60% for Money Market Fund and Equity Index Fund. The total
operating expenses of these Funds of the Trust were less than their respective
expense limitations throughout 1998.

Until further notice, AFIMS has declared a voluntary expense limitation of 1.20%
of average daily net assets for the Select Strategic Growth Fund. In addition,
AFIMS has agreed to voluntarily waive its management fee to the extent that
expenses of the Select Emerging Markets Fund exceed 2.00% of the Fund's average
daily net assets, except that such waiver shall not exceed the net amount of
management fees earned by AFIMS from the Fund after subtracting fees paid by
AFIMS to a sub-advisor.

Until further notice, the Select Value Opportunity Fund's management fee rate
has been voluntarily limited to an annual rate of 0.90% of average daily net
assets, and total expenses are limited to 1.25% of average daily net assets.

7
<PAGE>
The declaration of a voluntary management fee or expense limitation in any year
does not bind AFIMS to declare future expense limitations with respect to these
Funds. These limitations may be terminated at any time.

(2) These Funds have entered into agreements with brokers whereby the brokers
rebate a portion of commissions. Had these amounts been treated as reductions of
expenses, the total annual fund operating expenses would have been 2.19% for
Select Emerging Markets Fund, 0.86% for Select Aggressive Growth Fund, 1.02% for
Select Capital Appreciation Fund, 0.94% for Select Value Opportunity Fund, 1.01%
for Select International Equity Fund, 0.84% for Select Growth Fund, 1.14% for
Select Strategic Growth Fund, 0.70% for Select Growth and Income Fund and 0.46%
for Growth Fund.

(3) Effective May 1, 1999, Delaware International Advisers Ltd., the investment
adviser for the International Equity Series, has agreed to limit total annual
expenses of the fund to 0.95%. This limitation replaces a prior limitation of
0.95% that expired on April 30, 1999. The new limitation will be in effect
through October 31, 1999. For the fiscal year ended December 31, 1998, the
actual ratio of total annual expenses was 0.88%.

(4) A portion of the brokerage commissions that certain funds paid was used to
reduce fund expenses. In addition, certain funds, or Fidelity Management &
Research Company on behalf of certain funds, have entered into arrangements with
their custodian whereby credits realized as a result of uninvested cash balances
were used to reduce custodian expenses. Including these reductions, total
operating expenses would have been 0.89% for the Fidelity VIP Overseas
Portfolio; 0.57% for the Fidelity VIP Equity-Income Portfolio; 0.63% for the
Fidelity VIP II Asset Manager Portfolio and 0.66% for the Fidelity VIP Growth
Portfolio.

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

Expense limitations described above may not include extraordinary expenses, such
as litigation.

EXPENSE EXAMPLES. The following examples demonstrate the cumulative expenses
which an Owner would pay at 1-year, 3-year, 5-year and 10-year intervals under
certain contingencies. Each example assumes a $1,000 investment in a Sub-Account
and a 5% annual return on assets. Because the expenses of the Underlying Funds
differ, separate examples are used to illustrate the expenses incurred by an
Owner on an investment in the various Sub-Accounts.

THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. THE ASSUMED
5% ANNUAL RETURN IS HYPOTHETICAL AND IS NOT A REPRESENTATION OF PAST OR FUTURE
RETURNS.

8
<PAGE>
At the end of the applicable time period, you would pay the following expenses
on a $1,000 investment, assuming a 5% annual return on assets:

<TABLE>
<CAPTION>
FUNDS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Select Emerging Markets Fund................................................. $ 36 $ 111 $ 187 $ 387
Select International Equity Fund............................................. $ 25 $ 76 $ 130 $ 277
DGPF International Equity Series............................................. $ 24 $ 74 $ 126 $ 270
Fidelity VIP Overseas Portfolio.............................................. $ 24 $ 73 $ 124 $ 266
T. Rowe Price International Stock Portfolio.................................. $ 25 $ 77 $ 131 $ 280
Select Aggressive Growth Fund................................................ $ 24 $ 74 $ 126 $ 270
Select Capital Appreciation Fund............................................. $ 25 $ 77 $ 131 $ 279
Select Value Opportunity Fund................................................ $ 24 $ 75 $ 128 $ 273
Select Growth Fund........................................................... $ 23 $ 71 $ 122 $ 261
Select Strategic Growth Fund................................................. $ 19 $ 60 $ 103 $ 223
Growth Fund.................................................................. $ 21 $ 66 $ 113 $ 243
Fidelity VIP Growth Portfolio................................................ $ 18 $ 56 $ 96 $ 209
Equity Index Fund............................................................ $ 22 $ 67 $ 115 $ 248
Select Growth and Income Fund................................................ $ 20 $ 63 $ 108 $ 232
Fidelity Equity-Income Portfolio............................................. $ 21 $ 65 $ 111 $ 239
Fidelity VIP II Asset Manager Portfolio...................................... $ 22 $ 66 $ 114 $ 245
Fidelity VIP High Income Portfolio........................................... $ 20 $ 61 $ 105 $ 226
Investment Grade Income Fund................................................. $ 21 $ 65 $ 111 $ 239
Government Bond Fund......................................................... $ 18 $ 55 $ 94 $ 205
Money Market Fund............................................................ $ 27 $ 81 $ 139 $ 295
</TABLE>

9
<PAGE>
SUMMARY OF CONTRACT FEATURES

WHAT IS THE ALLMERICA IMMEDIATE ADVANTAGE VARIABLE ANNUITY?

The Allmerica Immediate Advantage Variable Annuity contract ("Contract") is an
insurance contract designed to provide you, the Owner, with monthly annuity
income during the lifetime of the Annuitant or Joint Annuitants, or for a period
of years. The Contract combines the concept of professional money management
with the attributes of an annuity contract. Features available through the
Contract include:

- - A menu of investment options that you can customize to support your annuity
payments;

- - Underlying Funds managed by experienced professional investment advisers;

- - Income that you can receive for life;

- - Access to your money through withdrawals; and

- - The ability to tailor your income stream by choosing from multiple annuity
benefit options and selecting the first date the amount of your payments will
change.

You may allocate your Net Payment to the Fixed Income Option or the Variable
Income Option, or a combination of both. If you select the Variable Income
Option, you may allocate your money to the Sub-Accounts investing in the
Underlying Funds. You select the investment allocation most appropriate for your
income needs. As those needs change, you may also change your allocation without
incurring any tax consequences.

WHAT CHOICES DO I MAKE WHEN I PURCHASE THE CONTRACT?

At the time you apply for the Contract, you choose:

- - the Annuitant(s) and the Beneficiary(ies);

- - the date annuity payments begin, which must be within twelve months of the
Contract's Issue Date;

- - the annuity benefit option;

- - whether you want variable annuity payments based on the investment performance
of the Underlying Funds (the Variable Income Option), fixed annuity payments
with payment amounts guaranteed by the Company (the Fixed Income Option), or a
combination of fixed and variable annuity payments;

- - a Change Frequency, if you allocate any portion of the Net Payment to the
Variable Income Option (and you may select the first date your annuity payment
will change); and

- - one of the available Assumed Investment Returns ("AIR") if you allocate any
portion of the Net Payment to the Variable Income Option.

On the Annuity Income Date, you, or the payee you designate, will begin to
receive income based on one of the several annuity benefit options available
under the Contract.

WHO ARE THE KEY PERSONS UNDER THE CONTRACT?

The Contract is between you, (the "Owner"), and us, Allmerica Financial Life
Insurance and Annuity Company (for contracts issued in all jurisdictions except
New York) or First Allmerica Financial Life

10
<PAGE>

Insurance Company (for contracts issued in New York). Each Contract has an Owner
(or Joint Owners), an Annuitant (or Joint Annuitants) and one or more
Beneficiaries.

The Annuitant is the person whose life is used to determine the duration of
annuity payments involving a life contingency, unless payments are guaranteed
for a certain number of years. The Beneficiary is the person, persons or entity
entitled to the Death Benefit upon the death of the Owner prior to the Annuity
Income Date or remaining annuity payments, if any, upon the death of the Owner
on or after the Annuity Income Date. If the contract has Joint Owners and one
Owner dies, the surviving Joint Owner is the primary Beneficiary.

HOW MUCH CAN I INVEST?

You may make a single purchase payment to the Contract. This payment is subject
to a $75,000 minimum. The maximum single purchase payment is $5,000,000 without
our prior approval. No additional payments may be made.

WHAT ARE MY INVESTMENT CHOICES?

You may allocate the Net Payment to the Fixed Income Option, the Variable Income
Option, or a combination of both. Once selected, the Income Option may not be
changed. If you select the Variable Income Option, you can allocate the Net
Payment among the Sub-Accounts investing in the Underlying Funds.

VARIABLE INCOME OPTION: You have a choice of Sub-Accounts investing in the
following Underlying Funds:

<TABLE>
<S> <C>
ALLMERICA INVESTMENT TRUST FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Select Emerging Markets Fund Overseas Portfolio
Select International Equity Fund Equity-Income Portfolio
Select Aggressive Growth Fund Growth Portfolio
Select Capital Appreciation Fund High Income Portfolio
Select Value Opportunity Fund FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Select Growth Fund Asset Manager Portfolio
Select Strategic Growth Fund T. ROWE PRICE INTERNATIONAL SERIES, INC.
Growth Fund T. Rowe Price International Stock Portfolio
Equity Index Fund DELAWARE GROUP PREMIUM FUND, INC.
Select Growth and Income Fund DGPF International Equity Series
Investment Grade Income Fund
Government Bond Fund
Money Market Fund
</TABLE>

FOR A MORE DETAILED DESCRIPTION OF THE UNDERLYING FUNDS, SEE "INVESTMENT
OBJECTIVES AND POLICIES."

FIXED INCOME OPTION: If you select the Fixed Income Option, your money will be
supported by the General Account, which consists of all the Company's assets
other than those allocated to the Variable Account and any other separate
account.

CAN I MAKE TRANSFERS AMONG THE VARIABLE SUB-ACCOUNTS?

If you select the Variable Income Option, you may transfer among the
Sub-Accounts investing in the Underlying Funds. You will incur no current taxes
on transfers while your money remains in the Contract. See "G. Transfers of
Annuity Units" under DESCRIPTION OF THE CONTRACT.

The first 12 transfers in a Contract year are guaranteed to be free of a
transfer charge. For each subsequent transfer in a Contract year, the Company
does not currently charge but reserves the right to assess a processing

11
<PAGE>

charge guaranteed never to exceed $25. The automatic rebalancing under an
Automatic Account Rebalancing program counts as one transfer for purposes of the
12 transfers guaranteed to be free of transfer charge in each Contract year.
Each subsequent automatic rebalancing is without charge and does not reduce the
remaining number of transfers which may be made free of charge in that Contract
year.

WHAT IF I NEED TO MAKE A WITHDRAWAL?

You have the right to make withdrawals after the Annuity Income Date. The type
of withdrawal and the number of withdrawals that may be made each calendar year
depends upon whether the annuity benefit option is based upon the life of one or
more Annuitants with no guaranteed payments (a "Life Annuity" option), under a
life annuity benefit option that in part provides for a guaranteed number of
payments (a "Life Annuity with Payment for a Certain Number of Years" or "Life
Annuity with Cash Back" option), or an annuity benefit option based on a
guaranteed number of payments (a "Payment for a Certain Number of Years"
option). Under a Life Annuity option, the Owner may make one Payment Withdrawal
each calendar year. Under a Life Annuity with Payment for a Certain Number of
Years or a Life Annuity with Cash Back option, the Owner may make one Payment
Withdrawal and one Present Value Withdrawal in each calendar year. Under a
Payment for a Certain Number of Years option, the Owner may make multiple
Present Value Withdrawals each calendar year. For more information, see "H.
Withdrawals" under DESCRIPTION OF THE CONTRACT.

WHAT HAPPENS UPON DEATH OF THE OWNER OR THE ANNUITANT?

Before the Annuity Income Date, if an Owner or an Annuitant dies, a death
benefit will be paid.

After the Annuity Income Date, if an Owner or an Annuitant dies, we will
continue to pay remaining annuity payments, if any, in accordance with the terms
of the annuity benefit option selected. See "I. Death Benefit" under DESCRIPTION
OF THE CONTRACT.

WHAT CHARGES WILL I INCUR UNDER MY CONTRACT?

We will deduct, on a daily basis, an annual mortality and expense risk charge
and administrative expense charge equal to 1.25% and 0.20%, respectively, of the
average daily net assets invested in each Fund. The Funds will incur certain
management fees and expenses that are described in "Other Charges" and in the
Fund prospectuses accompanying this Prospectus. Also, depending upon the state
in which you live, a deduction for state and local premium taxes, if any, may be
made as described under "B. Premium Taxes" under CHARGES AND DEDUCTIONS.

You may request a withdrawal after the Annuity Income Date. Any withdrawals will
result in a calculation by the Company of the present value of future annuity
payments. For withdrawals taken within 5 years from the Issue date, an
adjustment is made to the Assumed Investment Return ("AIR") you have chosen (in
the case of a Variable Income Option) and/or the interest rate (in the case of a
Fixed Income Option) used to calculate the present value of the future annuity
payments.

The adjustment to the AIR or the interest rate used to determine the Present
Value results in lower future annuity payments than if the adjustment had not
been made. See "H. Withdrawals" under DESCRIPTION OF THE CONTRACT for additional
information.

For more information regarding the charges applied to your Contract, see CHARGES
AND DEDUCTIONS.

CAN I EXAMINE THE CONTRACT?

Your Contract will be delivered to you after your purchase. If you return the
Contract to the Company within ninety days of receipt, the Contract will be
canceled. See the "Right to Examine" provision on the cover of

12
<PAGE>
your Contract. If you cancel the Contract within ninety days after you received
it, you will receive a refund of the Contract Value on the date the Contract is
returned to us, plus any premium tax deducted on the Issue Date. However, if
state law requires or if the Contract was issued as an Individual Retirement
Annuity ("IRA"), and if you return the Contract within ten days after you have
received it, you will receive a refund of the Single Purchase Payment less any
annuity payments made and/or withdrawals taken. See "B. Right to Cancel" under
DESCRIPTION OF THE CONTRACT.

CAN I MAKE FUTURE CHANGES UNDER MY CONTRACT?

You can make several changes after receiving your Contract:

- - You may change the Beneficiary, unless you have designated a Beneficiary
irrevocably;

- - You may change the person(s) you have designated to receive your annuity
payments;

- - If you selected the Variable Income Option, you may make transfers among your
current investments without any tax consequences;

- - You may make withdrawals; and

- - You may cancel the Contract within ninety days of delivery.

13
<PAGE>
DESCRIPTION OF THE COMPANIES, THE VARIABLE ACCOUNTS,
THE TRUST, FIDELITY VIP, FIDELITY VIP II, T. ROWE PRICE, AND DGPF

THE COMPANIES. Allmerica Financial Life Insurance and Annuity Company
("Allmerica Financial") is a life insurance company organized under the laws of
Delaware in July 1974. Its Principal Office is located at 440 Lincoln Street,
Worcester, MA 01653, telephone 508-855-1000. Allmerica Financial is subject to
the laws of the state of Delaware governing insurance companies and to
regulation by the Commissioner of Insurance of Delaware. In addition, Allmerica
Financial is subject to the insurance laws and regulations of other states and
jurisdictions in which it is licensed to operate. As of December 31, 1998,
Allmerica Financial had over $14 billion in assets and over $26 billion of life
insurance in force.

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

First Allmerica Financial Life Insurance Company ("First Allmerica"), organized
under the laws of Massachusetts in 1844, is among the five oldest life insurance
companies in America. As of December 31, 1998, First Allmerica and its
subsidiaries had over $27 billion in combined assets and over $48 billion of
life insurance in force. Effective October 16, 1995, First Allmerica converted
from a mutual life insurance company known as State Mutual Life Assurance
Company of America to a stock life insurance company and adopted its present
name. First Allmerica is a wholly owned subsidiary of AFC. First Allmerica's
principal office ("Principal Office") is located at 440 Lincoln Street,
Worcester MA 01653, telephone 508-855-1000.

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

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

THE VARIABLE ACCOUNTS. Each Company maintains a separate account called
Separate Account VA-K (the "Variable Account"). The Variable Account of
Allmerica Financial was authorized by vote of our Board of Directors on November
1, 1990. The Variable Account of First Allmerica was authorized by vote of our
Board of Directors on November 1, 1990. Each Variable Account is registered with
the SEC as a unit investment trust under the 1940 Act. This registration does
not involve the supervision or management of investment practices or policies of
the Variable Accounts or the Company by the SEC.

Separate Account VA-K is a separate investment account of the Company. The
assets used to fund the variable portions of the Contracts are set aside in the
Sub-Accounts of the Variable Account, and are kept separate and apart from the
general assets of the Company. Each Sub-Account is administered and accounted
for as part of our general business, but the income, capital gains, or capital
losses of each Sub-Account are allocated to such Sub-Account, without regard to
other income, capital gains, or capital losses of the Company. Obligations under
the Contracts are our obligations. Under Delaware and Massachusetts law, the
assets of the Variable Account may not be charged with any liabilities arising
out of any other business of the Company.

We reserve the right, subject to compliance with applicable law, to change the
names of the Variable Account and the Sub-Accounts. We also offer other variable
annuity contracts investing in the Variable Account which are not discussed in
this Prospectus. In addition the Variable Account may invest in other underlying
funds which are not available to the Contracts described in this Prospectus.

14
<PAGE>
ALLMERICA INVESTMENT TRUST. Allmerica Investment Trust (the "Trust") is an
open-end, diversified management investment company registered with the SEC
under the 1940 Act. Thirteen investment portfolios of the Trust are currently
available under the Contract, each issuing a series of shares: the Growth Fund,
Investment Grade Income Fund, Money Market Fund, Equity Index Fund, Government
Bond Fund, Select International Equity Fund, Select Emerging Markets Fund,
Select Strategic Growth Fund, Select Aggressive Growth Fund, Select Capital
Appreciation Fund, Select Growth Fund, Select Growth and Income Fund and Select
Value Opportunity Fund. Shares of the Trust are not offered to the general
public but solely to such variable accounts.

Allmerica Financial Investment Management Services, Inc. ("AFIMS"), an indirect
wholly owned subsidiary of First Allmerica, serves as the investment adviser of
the Trust and has entered into sub-advisory agreements with other investment
managers ("Sub-Advisers") who manage the investments of the Funds.

FIDELITY VARIABLE INSURANCE PRODUCTS FUND. Fidelity Variable Insurance Products
Fund ("Fidelity VIP") managed by Fidelity Management & Research Company ("FMR"),
is an open-end, diversified management investment company registered with the
SEC under the 1940 Act. Four of its investment portfolios are available under
the Contract: Fidelity VIP High Income Portfolio, Fidelity VIP Equity-Income
Portfolio, Fidelity VIP Growth Portfolio and Fidelity VIP Overseas Portfolio.

FMR is one of America's largest investment management organizations and has its
principal business address at 82 Devonshire Street, Boston, Massachusetts. It
provides a number of mutual funds and other clients with investment research and
portfolio management services.

FIDELITY VARIABLE INSURANCE PRODUCTS FUND II. Fidelity Variable Insurance
Products Fund II ("Fidelity VIP II"), managed by FMR (see discussion above) is
an open-end, diversified management investment company registered with the SEC
under the 1940 Act. One of its investment portfolios is available under the
Contract: Fidelity VIP II Asset Manager Portfolio.

T. ROWE PRICE INTERNATIONAL SERIES, INC. T. Rowe Price International Series,
Inc. ("T. Rowe Price"), managed by Rowe Price-Fleming International, Inc.
("Price-Fleming"), is an open-end, diversified management investment company
registered with the SEC under the 1940 Act. One of its investment portfolios is
available under the Contracts: the T. Rowe Price International Stock Portfolio.
One of its affiliates, T. Rowe Price Associates, Inc., serves as the Sub-Adviser
to the Select Capital Appreciation Fund.

DELAWARE GROUP PREMIUM FUND, INC. Delaware Group Premium Fund, Inc. ("DGPF") is
an open-end, diversified, management investment company registered with the SEC
under the 1940 Act. DGPF was established to provide a vehicle for the investment
of assets of various separate accounts supporting variable insurance contracts.
One investment portfolio is available under the Contract, the International
Equity Series. The investment adviser for the International Equity Series is
Delaware International Advisers Ltd. ("Delaware International").

INVESTMENT OBJECTIVES AND POLICIES

A summary of investment objectives of each of the Underlying Funds is set forth
below. The Underlying Funds are listed by general investment risk
characteristics. MORE DETAILED INFORMATION REGARDING THE INVESTMENT OBJECTIVES,
RESTRICTIONS AND RISKS, EXPENSES PAID BY THE UNDERLYING FUNDS AND OTHER RELEVANT
INFORMATION REGARDING THE UNDERLYING INVESTMENT COMPANIES MAY BE FOUND IN THEIR
RESPECTIVE PROSPECTUSES, WHICH ACCOMPANY THIS PROSPECTUS AND SHOULD BE READ
CAREFULLY BEFORE INVESTING. The Statements of Additional Information of the
Underlying Funds are available upon request. There can be no assurance that the
investment objectives of the Underlying Funds can be achieved.

SELECT EMERGING MARKETS FUND -- The Select Emerging Markets Fund seeks long-term
growth of capital by investing in the world's emerging markets.

15
<PAGE>
SELECT INTERNATIONAL EQUITY FUND -- The Select International Equity Fund seeks
maximum long-term total return (capital appreciation and income) primarily by
investing in common stocks of established non-U.S. companies.

DGPF INTERNATIONAL EQUITY SERIES -- The International Equity Series of DGPF
seeks long-term growth without undue risk to principal by investing primarily in
equity securities of foreign issuers providing the potential for capital
appreciation and income.

FIDELITY VIP OVERSEAS PORTFOLIO -- The Overseas Portfolio of Fidelity VIP seeks
long-term growth of capital primarily through investments in foreign securities
and provides a means to diversify their own portfolios by participating in
companies and economies outside of the United States.

T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO -- The T. Rowe Price International
Stock Portfolio seeks long-term growth of capital through investments primarily
in common stocks of established, non-U.S. companies.

SELECT AGGRESSIVE GROWTH FUND -- The Select Aggressive Growth Fund seeks
above-average capital appreciation by investing primarily in common stocks of
companies which are believed to have significant potential for capital
appreciation.

SELECT CAPITAL APPRECIATION FUND -- The Select Capital Appreciation Fund seeks
long-term growth of capital. Realization of income is not a significant
investment consideration and any income realized on the Fund's investments will
be incidental to its primary objective. The Fund invests primarily in common
stock of industries and companies which are believed to be experiencing
favorable demand for their products and services, and which operate in a
favorable competitive environment and regulatory climate.

SELECT VALUE OPPORTUNITY FUND -- The Select Value Opportunity Fund seeks
long-term growth by investing principally in a diversified portfolio of common
stocks of small and mid-size companies whose securities at the time of purchase
are considered by the Sub-Adviser to be undervalued.

SELECT GROWTH FUND -- The Select Growth Fund seeks to achieve long-term growth
of capital by investing in a diversified portfolio consisting primarily of
common stocks selected on the basis of their long-term growth potential.

SELECT STRATEGIC GROWTH FUND -- The Select Strategic Growth Fund seeks long-term
growth of capital by investing primarily in common stocks of established
companies.

GROWTH FUND -- The Growth Fund is invested in common stocks and securities
convertible into common stocks that are believed to represent significant
underlying value in relation to current market prices. The objective of the
Growth Fund is to achieve long-term growth of capital. Realization of current
investment income, if any, is incidental to this objective.

FIDELITY VIP GROWTH PORTFOLIO -- The Growth Portfolio of Fidelity VIP seeks to
achieve capital appreciation. The Portfolio normally purchases common stocks,
although its investments are not restricted to any one type of security. Capital
appreciation also may be found in other types of securities, including bonds and
preferred stocks.

EQUITY INDEX FUND -- The Equity Index Fund seeks to provide investment results
that correspond to the aggregate price and yield performance of a representative
selection of United States publicly traded common stocks. The Equity Index Fund
seeks to achieve its objective by attempting to replicate the aggregate price
and yield performance of the Standard & Poor's Composite Index of 500 Stocks.

16
<PAGE>
SELECT GROWTH AND INCOME FUND -- The Select Growth and Income Fund seeks a
combination of long-term growth of capital and current income. The Fund will
invest primarily in dividend-paying common stocks and securities convertible
into common stocks.

FIDELITY VIP EQUITY-INCOME PORTFOLIO -- The Equity-Income Portfolio of Fidelity
VIP seeks reasonable income by investing primarily in income-producing equity
securities. In choosing these securities, the Portfolio also will consider the
potential for capital appreciation. The Portfolio's goal is to achieve a yield
which exceeds the composite yield on the securities comprising the S&P 500.

FIDELITY VIP II ASSET MANAGER PORTFOLIO -- The Asset Manager Portfolio of
Fidelity VIP II seeks high total return with reduced risk over the long term by
allocating its assets among domestic and foreign stocks, bonds and short-term
money market instruments.

FIDELITY VIP HIGH INCOME PORTFOLIO -- The High Income Portfolio of Fidelity VIP
seeks to obtain a high level of current income by investing primarily in
high-yielding, lower-rated fixed-income securities (commonly referred to as
"junk bonds"), while also considering growth of capital. These securities often
are considered to be speculative, and involve greater risk of default or price
changes than securities assigned a high quality rating.

INVESTMENT GRADE INCOME FUND -- The Investment Grade Income Fund is invested in
a diversified portfolio of fixed income securities with the objective of seeking
as high a level of total return (including both income and capital appreciation)
as is consistent with prudent investment management.

GOVERNMENT BOND FUND -- The Government Bond Fund has the investment objectives
of seeking high income, preservation of capital and maintenance of liquidity,
primarily through investments in debt instruments issued or guaranteed by the
U.S. Government or its agencies or instrumentalities, and in related options,
futures and repurchase agreements.

MONEY MARKET FUND -- The Money Market Fund is invested in a diversified
portfolio of high-quality, short-term money market instruments with the
objective of obtaining maximum current income consistent with the preservation
of capital and liquidity.

CERTAIN UNDERLYING FUNDS HAVE INVESTMENT OBJECTIVES AND/OR POLICIES SIMILAR TO
THOSE OF OTHER UNDERLYING FUNDS. THEREFORE, TO CHOOSE THE SUB-ACCOUNTS WHICH
BEST MEET YOUR INDIVIDUAL NEEDS AND OBJECTIVES, CAREFULLY READ THE PROSPECTUSES
OF THE TRUST, FIDELITY VIP, FIDELITY VIP II, T. ROWE PRICE AND DGPF, ALONG WITH
THIS PROSPECTUS. IN SOME STATES, INSURANCE REGULATIONS MAY RESTRICT THE
AVAILABILITY OF PARTICULAR SUB-ACCOUNTS. THE INVESTMENT ADVISER OR SUB-ADVISER
OF AN UNDERLYING FUND MAY MANAGE OTHER MUTUAL FUNDS THAT HAVE SIMILAR NAMES,
GOALS, AND/OR STRATEGIES AS THOSE OF AN UNDERLYING FUND. DESPITE THESE
SIMILARITIES, THERE MAY BE DIFFERENCES BETWEEN THE UNDERLYING FUND AND THE OTHER
FUND MANAGED BY THE SAME ADVISER, WHICH COULD RESULT IN DIFFERENCES IN THE RISKS
AND RETURNS OF THE TWO FUNDS. NO REPRESENTATION IS MADE THAT ANY UNDERLYING FUND
IS SIMILAR TO OR DIFFERENT FROM OTHER FUNDS MANAGED BY THE SAME ADVISER. FOR
INFORMATION ON AN UNDERLYING FUND, CONSULT ITS PROSPECTUS.

If there is a material change in the investment objective of a Fund, you will be
notified of the change. If a portion of your Variable Income Option is allocated
to that Fund, you may transfer this amount without charge to another Fund. We
must receive your written request within 60 days of the latest of the:

- - effective date of the change in the investment objective or

- - receipt of the notice of your right to transfer.

17
<PAGE>
DESCRIPTION OF THE CONTRACT

Subject to certain restrictions discussed below, you have the right:

- - to select the annuity benefit option under which annuity payments are to be
made;

- - to determine whether those payments are to be made on a fixed basis (the Fixed
Income Option), a variable basis (the Variable Income Option), or a
combination fixed and variable basis;

- - to allocate any portion of the Net Payment to the Variable Income Option, and
you must choose:

- how to allocate the Net Payment;

- a Change Frequency (you may select the first date your annuity payment
will change);

- one of the available Assumed Investment Returns ("AIR") for a Variable
Income Option (see "F. Variable Annuity Payments" below for details);

- to elect how the Beneficiary should receive annuity payments, if any; and

- to receive annuity payments (or designate someone else to receive annuity
payments).

A. SINGLE PURCHASE PAYMENT

You may make a single purchase payment to buy the Contract. This payment is
subject to a $75,000 minimum. The maximum single purchase payment is $5,000,000
without our prior approval. No additional payments may be made.

The Company issues the Contract when its underwriting requirements are met.
These requirements include receipt of the payment and allocation instructions by
the Company at its Principal Office. These requirements also may include the
proper completion of an application; however, where permitted, the Company may
issue a Contract without completion of an application and/or signature for
certain classes of Contracts.

Payments are to be made payable to the Company. The Net Payment is credited to
the Contract and allocated as requested as of the date that all issue
requirements are properly met. If all issue requirements are not completed
within five business days of the Company's receipt of the single purchase
payment, the payment will be returned immediately unless the Owner specifically
consents to the holding of it pending completion of the outstanding issue
requirements.

B. RIGHT TO CANCEL

If you return the Contract to the Company within 90 days of receipt, the
Contract will be cancelled.

If you purchase a Contract intended to qualify as an IRA or if you purchase the
Contract in a state that requires a full refund, you may cancel the Contract and
receive a refund as specified below.

REFUND WITHIN TEN DAYS OF RECEIPT. If you return the Contract within ten
days (or longer if required by law) after you have received it, we will
refund the Single Purchase Payment less the total amount of all annuity
payments made or withdrawals taken.

REFUND AFTER TEN DAYS BUT WITHIN NINETY DAYS. If you return the Contract
after ten days but within ninety days after the Issue Date, we will pay to
you the Contract Value as of the date the Contract is returned to us plus
any premium tax deducted on the Issue Date.

18
<PAGE>
If you purchase a Contract that is not intended to qualify as an IRA or if you
purchase the Contract in a state that does not require a full refund, you may
cancel the Contract at any time within 90 days after receipt of the Contract and
receive a refund. If you return the Contract, we will pay to you the Contract
Value as of the date the Contract is returned to us plus any premium tax
deducted on the Issue Date. This amount may be more or less than the Single
Purchase Payment.

At the time the Contract is issued, the "Right to Examine" provision on the
cover of the Contract will specifically indicate what the refund will be and the
time period allowed to exercise the right to cancel.

In order to cancel the contract, you must mail or deliver the Contract to the
agent through whom it was purchased, to our Principal Office at 440 Lincoln
Street, Worcester, MA 01653, or to any local agent of the Company. Mailing or
delivery must occur within ten or ninety days, as applicable, after receipt of
the Contract for cancellation to be effective. We ordinarily will send you a
refund within seven days.

C. ELECTING THE ANNUITY INCOME DATE

Annuity payments under the Contract will begin on the Annuity Income Date. You
select the Annuity Income Date at the time of issue. The Annuity Income Date
must be within twelve months of the Contract's Issue Date. You may not select
the 29th, 30th or 31st day of the month for the Annuity Income Date.

The Internal Revenue Code (the "Code") and/or the terms of qualified plans may
impose limitations on the age at which annuity payments may commence and the
type of annuity benefit option that may be elected. You should carefully review
the Annuity Income Date and the annuity benefit options with your tax advisor.
See also FEDERAL TAX CONSIDERATIONS for further information.

D. CHOOSING AN INCOME OPTION

You may choose a Fixed Income Option, a Variable Income Option or a combination
of Fixed and Variable.

If you select a Fixed Income Option, each monthly annuity payment will be equal
to the first (unless a withdrawal is made or as a result of the death of the
first Joint Annuitant). Any portion of the Net Payment allocated to the Fixed
Income Option will become part of our General Account.

If you select a Variable Income Option, you will receive monthly annuity
payments based on the value of the Annuity Units in the chosen Sub-Account(s).
Since the value of an Annuity Unit in a Sub-Account reflects the investment
performance of the Sub-Account, the amount of annuity payments will vary. Under
this Contract, you may choose the frequency with which you want annuity payments
to vary (the Change Frequency), which may be monthly, quarterly, semi-annually,
or annually. The Change Frequency is the frequency that changes due to the
Sub-Account's investment performance will be reflected in the dollar value of a
variable annuity payment. For example, if a monthly Change Frequency is in
effect, payments may vary on a monthly basis. If a quarterly Change Frequency is
selected, the amount of each monthly payment may change every three months and
will be level within each three month cycle.

The amount of your annuity payment will change for the first time one Change
Frequency Cycle after the Issue Date. (For example, if a quarterly Change
Frequency is chosen, your annuity payments will change for the first time three
months after the Annuity Income Date.) However, if you would like the amount of
the payment to change sooner, you can indicate the desired month.

The income option selected must result in an initial payment of at least $100 (a
lower amount may be required in certain jurisdictions.) We reserve the right to
increase this minimum amount. If the income option selected does not produce an
initial payment which meets this minimum, a single payment may be made.

19
<PAGE>
E. DESCRIPTION OF ANNUITY BENEFIT OPTIONS

The Company currently provides the following annuity benefit options:

LIFE ANNUITY OPTIONS

- - SINGLE LIFE ANNUITY -- Monthly payments during the Annuitant's life. Payments
cease with the last annuity payment due prior to the Annuitant's death.

- - JOINT LIFE ANNUITY WITH SURVIVOR BENEFIT -- Monthly payments during the Joint
Annuitants' lifetimes. Upon the first death, payments will continue to you or
the Beneficiary (whichever is applicable) for the survivor's remaining
lifetime based on the previously elected level of 100%, two-thirds (66.67%) or
one-half (50%) of the total number of Annuity Units for a Variable Income
Option or the annuity payment for a Fixed Income Option.

LIFE ANNUITY WITH PAYMENT FOR A CERTAIN NUMBER OF YEARS OPTIONS

- - SINGLE LIFE ANNUITY -- Monthly payments guaranteed for a specified number of
years and continuing thereafter during the Annuitant's lifetime. If the
Annuitant dies before all guaranteed payments have been made, the remaining
payments continue to you or the Beneficiary (whichever is applicable).

- - JOINT LIFE ANNUITY WITH SURVIVOR BENEFIT -- Monthly payments guaranteed for a
specified number of years and continuing during the Joint Annuitants'
lifetimes. Upon the first death, payments continue for the survivor's
remaining lifetime based on the previously elected level of 100%, two-thirds
(66.67%) or one-half (50%) of the total number of Annuity Units for a Variable
Income Option or the annuity payment for a Fixed Income Option. If the
surviving Annuitant dies before all guaranteed payments have been made, the
remaining payments continue to you or the Beneficiary (whichever is
applicable).

LIFE ANNUITY WITH CASH BACK OPTIONS

- - SINGLE LIFE ANNUITY -- Monthly payments during the Annuitant's life. At the
Annuitant's death, any excess of the Net Payment, over the total amount of
annuity payments made and withdrawals taken, will be paid to you or the
Beneficiary (whichever is applicable).

- - JOINT LIFE ANNUITY WITH SURVIVOR BENEFIT -- Monthly payments during the Joint
Annuitants' lifetimes. Upon the first death, payments continue for the
survivor's remaining lifetime based on the previously elected level of 100%,
two-thirds (66.67%) or one-half (50%) of the total number of Annuity Units for
a Variable Income Option or the annuity payment for a Fixed Income Option. At
the surviving Annuitant's death, any excess of the Net Payment, over the total
amount of annuity payments made and withdrawals taken, will be paid to you or
the Beneficiary (whichever is applicable).

PAYMENT FOR A CERTAIN NUMBER OF YEARS OPTION

Monthly annuity payments for a chosen number of years ranging from five to
thirty are paid. The Payment for a Certain Number of Years option does not
involve a life contingency. In the computation of the annuity payments under
this option, the charge for annuity rate guarantees, which includes a factor for
mortality risks, is made.

F. VARIABLE ANNUITY PAYMENTS

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

20
<PAGE>
(1) is the investment income of a Sub-Account for the Valuation Period,
including realized or unrealized capital gains and losses during the
Valuation Period, adjusted for provisions made for taxes, if any;

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

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

(4) is an administrative charge equal to 0.20% on an annual basis of the
daily value of the Sub-Account's assets.

THE ANNUITY UNIT AND ANNUITY UNIT VALUE. The Annuity Unit is a measure used to
value the monthly annuity payments under a Variable Income Option. The value of
an Annuity Unit in each Sub-Account on its inception date was set at $1.00. The
value of an Annuity Unit under a Sub-Account on any Valuation Date thereafter is
equal to the value of the Annuity Unit on the immediately preceding Valuation
Date multiplied by the product of:

(1) a discount factor equivalent to the Assumed Investment Return ("AIR") and

(2) the Net Investment Factor of the Sub-Account funding the annuity payments
for the applicable Valuation Period.

Subject to the chosen Change Frequency, annuity payments will increase if the
annualized Net Investment Factor during that period is greater than the AIR and
will decrease if it is less than the AIR. Where permitted by law, the Owner may
select an AIR of 3%, 5%, or 7%. A higher AIR will result in a higher initial
payment. However, subsequent payments will increase more slowly during periods
when actual investment performance exceeds the AIR and will decrease more
rapidly during periods when investment performance is less than the AIR.

DETERMINATION OF FIRST ANNUITY PAYMENT. The amount of the first periodic
variable annuity payment depends on the:

- - annuity benefit option chosen;

- - length of the annuity benefit option elected;

- - age of the Annuitant;

- - gender of the Annuitant (if applicable, see "M. NORRIS Decision"):

- - value of the amount applied under the annuity benefit option;

- - applicable annuity benefit option rates based on the Annuity 2000 Mortality
Table; and

- - AIR selected.

DETERMINATION OF THE NUMBER OF ANNUITY UNITS. We have Variable Income Option
Rates that determine the dollar amount of the first monthly payment under each
Variable Income Option for each $1,000 of Net Payment. We calculate this amount
assuming there is no change in the Annuity Unit Value. We then divide the amount
of the first annuity payment attributable to a particular Sub-Account by the
Annuity Unit Value of that Sub-Account to determine the number of Annuity Units
credited to your Contract. This number of Annuity Units remains fixed under all
annuity benefit options, except Joint and Survivor annuity benefit options that
reduce the number of Annuity Units upon the first death. However, the number of
variable annuity units under any annuity benefit option could change if
transfers or withdrawals are made.

21
<PAGE>
DOLLAR AMOUNT OF FIRST VARIABLE ANNUITY PAYMENT. The dollar amount of the first
variable annuity payment will equal the number of Annuity Units of each
Sub-Account multiplied by the value of an Annuity Unit of that Sub-Account on
the applicable Valuation Date.

DOLLAR AMOUNT OF SUBSEQUENT VARIABLE ANNUITY PAYMENTS. The dollar amount of
subsequent variable annuity payments will vary with the Annuity Unit Value of
the selected Sub-Account(s) on certain dates. The dollar amount of variable
annuity payments remains level until the Date of First Change and within each
Change Frequency cycle. On the Date of First Change and as of the start of each
Change Frequency cycle, the dollar amount of the variable annuity payment is
determined by multiplying the number of Annuity Units of each Sub-Account by the
Annuity Unit Value of that Sub-Account on the applicable Valuation Date.

For an illustration of the calculation of a variable annuity payment using a
hypothetical example, see "Annuity Payments" in the SAI.

PAYMENT OF ANNUITY PAYMENTS. You will receive the annuity payments unless you
request in writing that payments be made to another person, persons, or entity.
If you (or, if there are Joint Owners, the surviving Joint Owner) die on or
after the Annuity Income Date, the Beneficiary will become the Owner of the
Contract. Any remaining guaranteed annuity payments will continue to the
Beneficiary in accordance with the terms of the annuity benefit option selected.
If there are Joint Owners on or after the Annuity Income Date, upon the first
Owner's death, any remaining guaranteed annuity payments will continue to the
surviving Joint Owner in accordance with the terms of the annuity benefit option
selected.

If the Annuitant dies on or after the Annuity Income Date, but before all
guaranteed annuity payments have been made, any remaining guaranteed payments
will continue to be paid to you or the payee you have designated. Upon the death
of the Owner, the Beneficiary will become the Owner. The Beneficiary may elect
to receive in a single sum the Present Value of any remaining guaranteed annuity
payments. For discussion of Present Value calculation, see "Calculation of
Present Value" below.

G. TRANSFERS OF ANNUITY UNITS

You may transfer among the available Sub-Accounts upon written or telephone
request to us. Transfers may be made (a) before the Annuity Income Date and
before the death of an Owner or an Annuitant; or (b) after the Annuity Income
Date and as long as annuity payments are payable under the annuity benefit
option selected. A properly completed authorization form must be on file before
telephone requests will be honored. See "K. Telephone Authorization" under
DESCRIPTION OF THE CONTRACT for more information. A designated number of Annuity
Units equal to the dollar amount of the transfer requested will be exchanged for
an equivalent dollar amount of Annuity Units of another Sub-Account. Transfer
values will be based on the Annuity Unit Value next computed after receipt of
the transfer request.

Currently, we do not charge for transfers. The first 12 transfers in a Contract
year are guaranteed to be free of any transfer charge. For each subsequent
transfer in a Contract year, we reserve the right to assess a charge, guaranteed
never to exceed $25, to reimburse us for the expense of processing transfers.
The automatic rebalancing under an Automatic Account Rebalancing program counts
as one transfer for purposes of the 12 transfers guaranteed to be free of
transfer charge in each Contract year. Each subsequent automatic rebalancing is
without charge and does not reduce the remaining number of transfers which may
be made free of charge in that Contract year.

Any transfer made because of a material change in the investment objective of a
Sub-Account will not count towards the 12 free transfers, nor will we charge you
a transfer fee. As of the date of this Prospectus, transfers may be made to all
of the Sub-Accounts. However, we reserve the right to establish and impose
reasonable rules restricting transfers. All transfers are subject to our
consent.

22
<PAGE>
AUTOMATIC ACCOUNT REBALANCING. You may request automatic rebalancing of
Sub-Account allocations on a monthly, bi-monthly, quarterly, semi-annual or
annual basis in accordance with your specified percentage allocations. Each
rebalancing will result in a change in the number of Annuity Units. As
frequently as you elect, we will review the percentage allocations in the Funds
and, if necessary, transfer amounts to ensure conformity with the designated
percentage allocation mix. If the amount necessary to re-establish the mix on
any scheduled date is less than $100, no transfer will be made.

Automatic Account Rebalancing will continue until we receive and record your
request to terminate.

H. WITHDRAWALS

WITHDRAWALS AFTER THE ANNUITY INCOME DATE FROM QUALIFIED AND NON-QUALIFIED
CONTRACTS MAY HAVE ADVERSE TAX CONSEQUENCES. BEFORE MAKING A WITHDRAWAL, PLEASE
CONSULT WITH YOUR TAX ADVISOR AND SEE FEDERAL TAX CONSIDERATION, "C. TAX ON
WITHDRAWALS."

You have the right, based on the annuity benefit option selected, to make
withdrawals. Withdrawals may be made (a) before the Annuity Income Date and
before the death of an Owner or an Annuitant, or (b) after the Annuity Income
Date and as long as annuity payments are payable under the annuity benefit
option selected. Two withdrawal options may be available to you: a Payment
Withdrawal Amount option or a Present Value Withdrawal option.

The Owner must submit to the Principal Office a signed, written request
indicating the desired dollar amount of the withdrawal. If the amount requested
is greater than the maximum amount that may be withdrawn at that time, the
Company will allow the withdrawal only up to the maximum amount. The minimum
amount of a withdrawal is $100. Any withdrawal is normally payable within seven
days following our receipt of the withdrawal request.

The type of withdrawal and the number of withdrawals that may be made each
calendar year depends upon whether the annuity benefit option is based upon the
life of one or more Annuitants with no guaranteed payments (a "Life Annuity"
option), under a life annuity benefit option that in part provides for a
guaranteed number of payments (a "Life Annuity with Payment for a Certain Number
of Years" or Life Annuity with Cash Back" option), or an annuity benefit option
based on a guaranteed number of payments (a "Payment for a Certain Number of
Years" option).

- -WITHDRAWALS UNDER LIFE ANNUITY OPTIONS

The Owner may make one Payment Withdrawal in each calendar year. A Payment
Withdrawal cannot exceed the previous monthly annuity payment multiplied by ten
(10). The amount of each Payment Withdrawal represents a percentage of the
present value of the remaining annuity payments.

- -WITHDRAWALS UNDER LIFE ANNUITY WITH PAYMENT FOR A CERTAIN NUMBER OF YEARS OR
LIFE ANNUITY WITH CASH BACK OPTIONS

The Owner may make one Present Value Withdrawal in each calendar year, if there
are remaining GUARANTEED annuity payments. The amount of each Present Value
Withdrawal represents a percentage of the present value of the remaining
guaranteed annuity payments. Each year a Present Value Withdrawal is taken, the
Company records the percentage of the present value of the then remaining
guaranteed annuity payments that was withdrawn. The total percentage withdrawn
over the life of the Contract cannot exceed 75%. This means that each Present
Value Withdrawal is limited by the REMAINING AVAILABLE PERCENTAGE. (For
example, assume that in year three the Owner withdraws 15% of the then current
present value of the

23
<PAGE>

remaining guaranteed annuity payments. In year seven, the Owner withdraws 20%
of the then present value of the remaining guaranteed annuity payments. After
year seven, the Owner may make Present Value Withdrawal(s) of up to 40%
(75%-35%) of the present value of any remaining guaranteed annuity payments.)

Under a Life Annuity with Payment for a Certain Number of Years or Life Annuity
with Cash Back option, if the Annuitant is still living after the guaranteed
annuity payments have been made, the number of Annuity Units or dollar amount
applied to future annuity payments will be restored as if no Present Value
Withdrawal(s) had taken place. See "Calculation of Proportionate Reduction--
Present Value Withdrawals," below.

- -WITHDRAWALS UNDER PAYMENT FOR CERTAIN NUMBER OF YEARS OPTIONS

The Owner may make multiple Present Value Withdrawals in each calendar year, up
to 100% of the present value of the guaranteed annuity payments. Withdrawal of
100% of the present value of the guaranteed annuity payments will result in
termination of the Contract.

The amount of each Payment Withdrawal or Present Value Withdrawal represents a
portion of the present value of the remaining annuity payments or remaining
guaranteed annuity payments, respectively, and proportionately reduces the
number of Annuity Units (under a variable income option) or dollar amount (under
a fixed income option) applied to future annuity payments. Because each variable
annuity payment is determined by multiplying the number of Annuity Units by the
value of an Annuity Unit, the reduction in the number of Annuity Units will
result in lower future variable annuity payments. See "Calculation of
Proportionate Reduction," below. The present value is calculated with a discount
rate that will include an additional charge if a withdrawal is taken within 5
years of the Issue Date. See "Calculation of Present Value," below.

CALCULATION OF PROPORTIONATE REDUCTION. Each Payment Withdrawal proportionately
reduces the number of Annuity Units applied to each future variable annuity
payment or the dollar amount applied to each future fixed annuity payment. Each
Present Value Withdrawal proportionately reduces the number of Annuity Units
applied to each future guaranteed variable annuity payment or the dollar amount
applied to each future guaranteed fixed annuity payment. Because each variable
annuity payment is determined by multiplying the number of Annuity Units by the
value of an Annuity Unit, the reduction in the number of Annuity Units will
result in lower future variable annuity payments.

- - PAYMENT WITHDRAWALS. Payment Withdrawals are available under Life Annuity,
Life Annuity with Payment for a Certain Number of Years, or Life Annuity with
Cash Back options. The Owner may make one Payment Withdrawal in each calendar
year.

Under a variable income option, the proportionate reduction in Annuity Units
is calculated by multiplying the number of Annuity Units in each future
variable annuity payment (determined immediately prior to the withdrawal) by
the following fraction:

Amount of the variable withdrawal
------------------------------------------
Present Value of all remaining variable annuity
payments immediately prior to the withdrawal

Under a fixed income option, the proportionate reduction is calculated by
multiplying the dollar amount of each future fixed annuity payment by a
similar fraction, which is based on the amount of the fixed withdrawal and
present value of remaining fixed annuity payments.

If a withdrawal is taken within 5 years of the Issue Date, the discount rate
used to calculate the present value will include an additional charge. See
"Calculation of Present Value," below.

24
<PAGE>

- - PRESENT VALUE WITHDRAWALS. Present Value Withdrawals are available under Life
Annuity with Payment for a Certain Number of Years or Life Annuity with Cash
Back options (the Owner may make one Present Value Withdrawal in each calendar
year, if there are remaining guaranteed annuity payments) and under Payment
for a Certain Number of Years options (the Owner may make multiple Present
Value Withdrawals in each calendar year).

Under a variable income option, the proportionate reduction in Annuity Units
is calculated by multiplying the number of Annuity Units in each future
variable guaranteed annuity payment (determined immediately prior to the
withdrawal) by the following fraction:

Amount of the variable withdrawal
------------------------------------------
Present value of remaining guaranteed variable
annuity payments immediately prior to the
withdrawal

Because each variable annuity payment is determined by multiplying the number
of Annuity Units by the value of an Annuity Unit, the reduction in the number
of Annuity Units will result in lower variable annuity payments with respect
to the guaranteed payments. Under a fixed income option, the proportionate
reduction will result in lower fixed annuity payments with respect to the
guaranteed payments. However, under a Life Annuity with Payments for a Certain
Number of Years option or Life Annuity with Cash Back option, if the Annuitant
is still living after the guaranteed number of annuity payments has been made,
the number of Annuity Units or dollar amount of future annuity payments will
be restored as if no Present Value Withdrawal(s) had taken place.

If a withdrawal is taken within 5 years of the Issue Date, the discount rate
used to calculate the present value will include an additional charge. See
"Calculation of Present Value," below.

CALCULATION OF PRESENT VALUE. When a withdrawal is taken, the present value of
future annuity payments is calculated based an assumed mortality table and a
discount rate. The mortality table that is used will be equal to the mortality
table used at the time of annuitization to determine the annuity payments
(currently the Annuity 2000 Mortality Table with male, female, or unisex rates,
as appropriate). The discount rate is the AIR (for a variable income option) or
the interest rate (for a fixed income option) that was used at the time of
annuitization to determine the annuity payments. If a withdrawal is made within
5 years of the Issue Date, the discount rate is increased by one of the
following charges ("Withdrawal Adjustment Charge"):

- - 15 or more years of annuity payments being valued -- 1.00%

- - 10-14 years of annuity payments being valued -- 1.50%

- - Less than 10 years of annuity payments being valued -- 2.00%

The Withdrawal Adjustment Charge does not apply if a withdrawal is made in
connection with the death of an Annuitant or if a withdrawal is made 5 or more
years after the Issue Date.

For each Payment Withdrawal, the number of years of annuity payments being
valued depends upon the life expectancy of the Annuitant at the time of the
withdrawal. The life expectancy will be determined by a mortality table that
will be equal to the mortality table used at the time of annuitization to
determine the annuity payments (currently the Annuity 2000 Mortality Table).

25
<PAGE>

Because the impact of the Withdrawal Adjustment Charge will depend on the type
of the withdrawal taken, you should carefully consider the following before
making a withdrawal (especially if you are making the withdrawal under a Life
with Payment for a Certain Number of Years or Life Annuity with Cash Back
option):

- - For a Payment Withdrawal, the present value calculation (including any
applicable adjustments to the discount rate) affects the proportionate
reduction of the remaining number of Annuity Units (under a variable income
option) or dollar amount (under a fixed income option), applied to each future
annuity payment, as explained in "Calculation of Proportionate Reduction --
Payment Withdrawals," above. If a Withdrawal Adjustment Charge applies, there
will be a larger proportionate reduction in the number of Annuity Units or the
dollar amount applied to each future annuity payment. This will result in
lower future annuity payments, all other things being equal.

- - For a Present Value Withdrawal, the discount factor is used in determining the
maximum amount that can be withdrawn under the present value calculation. If a
Withdrawal Adjustment Charge applies, the discount factor will be higher, and
the maximum amount that can be withdrawn will be lower. In addition, there
will be a larger proportionate reduction in the number of Annuity Units or the
dollar amount applied to each future guaranteed annuity payment. This will
result in lower future annuity payments with respect to the guaranteed
payments, all other things being equal. See "Calculation of Proportionate
Reduction -- Present Value Withdrawals," above.

For examples comparing a Payment Withdrawal and a Present Value Withdrawal, see
APPENDIX B -- EXAMPLES OF PRESENT VALUE WITHDRAWALS AND PAYMENT WITHDRAWALS.

I. DEATH BENEFIT

DEATH OF AN OWNER OR AN ANNUITANT BEFORE THE ANNUITY INCOME DATE

If an Owner or an Annuitant dies before the Annuity Income Date, we will pay a
death benefit equal to the Contract Value determined as of the Valuation Date on
which we receive due proof of death. The death benefit will be paid to the Owner
of the Contract. If there is no Owner or Joint Owner, we will pay the death
benefit to the Beneficiary.

PAYMENT OF THE DEATH BENEFIT

Unless you have specified otherwise, the death benefit generally will be paid in
one lump sum after receipt at the Principal Office of due proof of death.
Instead of payment in one lump sum, the person entitled to the death benefit
may, by written request, elect to receive a life annuity or an annuity for a
certain number of years not extending beyond such person's life expectancy with
annuity payments beginning no later than one year from the date of death.

THE SPOUSE OF THE DECEASED OWNER AS BENEFICIARY

The deceased Owner's spouse, if named as the sole Beneficiary, may by written
request continue the Contract in lieu of receiving the death benefit upon the
death of the Owner. Upon such election, the spouse becomes the Owner and
Annuitant. As of the date of such election, annuity payments will be adjusted to
reflect any change of Annuitant and Annuity Income Date. The new Annuity Income
Date must be within twelve months of the Issue Date. Any subsequent spouse of
the new Owner, if named as the Beneficiary, may not continue this Contract.

DEATH OF THE OWNER OR THE ANNUITANT AFTER THE ANNUITY INCOME DATE

If the Owner or the Annuitant dies after the Annuity Income Date, we will pay
the remaining annuity payments, if any, in accordance with the terms of the
annuity benefit option selected. Any remaining annuity

26
<PAGE>
payments will be paid to the Owner of the Contract. If there is no Owner or
Joint Owner, then the Beneficiary will receive the payments and become the Owner
of the Contract. The Beneficiary may elect to receive the Present Value of any
remaining payments in one lump sum.

J. GENERAL RESTRICTIONS ON PAYMENTS

For purposes of making annuity payments or payment of other benefits based on
the value of a Sub-Account, the value of an Annuity Unit is determined as of the
end of a Valuation Date, which is currently 4:00 p.m., Eastern time.
Withdrawals, transfers, or payment of a death benefit from amounts under a
Variable Income Option are usually paid within seven days of a request in proper
form or, in the case of a death benefit, after we have received all necessary
documentation. We reserve the right to defer withdrawals or transfers of amounts
allocated to the Company's General Account for a period not to exceed six
months. Deferred amounts will receive interest during the deferral period at a
rate of at least 3%.

We reserve the right to defer payment on withdrawals, transfers, or payment of a
death benefit from amounts in each Sub-Account in any period during which:

- - trading on the New York Stock Exchange is restricted as determined by the SEC
or such Exchange is closed for other than weekends and holidays;

- - the SEC has by order permitted such suspension; or

- - an emergency, as determined by the SEC, exists such that disposal of portfolio
securities or valuation of assets of a Sub-Account is not reasonably
practicable.

K. TELEPHONE AUTHORIZATION

In order for the Owner to be able to initiate transactions over the telephone, a
properly completed authorization must be on file before telephone requests will
be honored. The policy of the Company and its agents and affiliates is that we
will not be responsible for losses resulting from acting upon telephone requests
reasonably believed to be genuine. The Company will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine; otherwise,
the Company may be liable for any losses due to unauthorized or fraudulent
instructions. Such procedures may include, among others, requiring some form of
personal identification prior to acting upon instructions received by telephone.
All telephone instructions are tape-recorded.

L. ASSIGNMENT

The Contract may not be assigned.

M. NORRIS DECISION

In the case of ARIZONA GOVERNING COMMITTEE V. NORRIS, the United States Supreme
Court ruled that, in connection with retirement benefit options offered under
certain employer-sponsored employee benefit plans, annuity options based on
sex-distinct actuarial tables are not permissible under Title VII of the Civil
Rights Act of 1964. The ruling requires that benefits derived from contributions
paid into a plan after August 1, 1983 be calculated without regard to the sex of
the employee. Annuity benefits attributable to payments received by the Company
under a Contract issued in connection with an employer-sponsored benefit plan
affected by the NORRIS decision will be based on unisex rates.

27
<PAGE>
CHARGES AND DEDUCTIONS

Deductions under the Contract and charges against the assets of the Sub-Accounts
are described below. Other deductions and expenses paid out of the assets of the
Underlying Funds are described in the prospectuses and SAIs of the Trust,
Fidelity VIP, Fidelity VIP II, T. Rowe Price and DGPF.

A. VARIABLE ACCOUNT DEDUCTIONS

MORTALITY AND EXPENSE RISK CHARGE. We assess a charge against the assets of
each Sub-Account to compensate for certain mortality and expense risks we have
assumed. The mortality risk arises from our guarantee that we will make annuity
payments in accordance with annuity rate provisions established at the time the
Contract is issued for the life of the Annuitant (or in accordance with the
annuity benefit option selected), no matter how long the Annuitant lives and no
matter how long all Annuitants as a class live. The mortality charge is deducted
for any annuity benefit option selected on all Contracts, including those that
do not involve a life contingency, even though we do not bear direct mortality
risk with respect to variable annuity settlement options that do not involve
life contingencies. The expense risk arises from our guarantee that the charges
we make will not exceed the limits described in the Contract and in this
Prospectus.

If the charge for mortality and expense risks is not sufficient to cover actual
mortality experience and expenses, we will absorb the losses. To the extent this
charge results in a profit to us, such profit will be available for use by us
for, among other things, the payment of distribution, sales and other expenses.

The mortality and expense risk charge is assessed daily at an annual rate of
1.25% of each Sub-Account's assets. This charge may not be increased.

ADMINISTRATIVE EXPENSE CHARGE. We assess each Sub-Account with a daily charge
at an annual rate of 0.20% of the average daily net assets of the Sub-Account.
The daily Administrative Expense Charge is assessed to help defray
administrative expenses incurred in the administration of the Sub-Account.

Deductions for the Administrative Expense Charge are designed to reimburse us
for the cost of administration and related expenses. The administrative
functions and expense assumed by us in connection with the Variable Account and
the Contract include, but are not limited to, clerical, accounting, actuarial
and legal services, rent, postage, telephone, office equipment and supplies,
expenses of preparing and printing registration statements, expense of preparing
and typesetting prospectuses and the cost of printing prospectuses not allocable
to sales expense, filing and other fees.

EXPENSES OF THE UNDERLYING FUNDS. Because the Sub-Accounts purchase shares of
the Underlying Funds, the value of the net assets of the Sub-Accounts will
reflect the investment advisory fee and other expenses incurred by the
Underlying Funds. These fees and expenses may vary each year. They are not fixed
or specified under the terms of the Contract, and they are not the
responsibility of the Company. The prospectuses and SAI's of the Trust, Fidelity
VIP, Fidelity VIP II, T. Rowe Price and DGPF contain additional information
concerning expenses of the Underlying Funds.

B. PREMIUM TAXES

Some states and municipalities impose a premium tax on variable annuity
contracts. State premium taxes currently range up to 3.5%. We assess a charge
for state and municipal premium taxes, when applicable, and deduct the amount
paid as a premium tax charge. Our current practice is to deduct the premium tax
charge when the Single Purchase Payment is received.

28
<PAGE>
C. TRANSFER CHARGE

We currently do not charge for processing transfers. We guarantee that the first
12 transfers in a Contract year will be free of transfer charge, but reserve the
right to assess a charge, guaranteed never to exceed $25, for each subsequent
transfer in a Contract year to reimburse us for the expense of processing
transfers. For more information, see "G. Transfers of Annuity Units" under
DESCRIPTION OF THE CONTRACT.

D. WITHDRAWAL ADJUSTMENT CHARGE

After the Issue Date, each calendar year the Owner may withdraw a portion of the
present value of either all future annuity payments or future guaranteed annuity
payments. If a withdrawal is made within 5 years of the Issue Date, the AIR or
interest rate used to determine the annuity payments is increased by one of the
following adjustments:

15 or more years of annuity payments being valued -- 1.00%
10-14 years of annuity payments being valued -- 1.50%
Less than 10 years of annuity payments being valued -- 2.00%

The adjustment to the AIR or interest rate used to determine the present value
results in lower future annuity payments, and may be viewed as a charge under
the Contract. The Withdrawal Adjustment Charge does not apply if a withdrawal is
made in connection with the death of an Annuitant or if a withdrawal is made 5
or more years after the Issue Date.

For more information see "H. Withdrawals", under DESCRIPTION OF THE CONTRACT.

29
<PAGE>
FEDERAL TAX CONSIDERATIONS

The following is a general discussion of the federal income tax consequences of
investing in this Contract. It is based upon the Company's understanding of
current U.S. federal tax laws and does not address any state or local tax
issues. THE DISCUSSION IS NOT INTENDED TO BE COMPLETE, NOR IS IT INTENDED AS TAX
ADVICE TO ANY INDIVIDUAL. YOU SHOULD CONSULT YOUR TAX ADVISOR ABOUT YOUR OWN
CIRCUMSTANCES, INCLUDING ANY POSSIBLE APPLICATION OF SPECIAL RULES NOT DISCUSSED
HERE.

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

A. ANNUITY CONTRACTS IN GENERAL

Annuity contracts are a means of setting aside money for future needs and for
providing a series of periodic payments for life or a fixed number of years.
Congress has provided special rules in the Internal Revenue Code ("Code") for
how you will be taxed on these periodic payments. There are also special rules
for withdrawals from an annuity that are not in the form of periodic payments.
The rules may apply differently to Qualified Contracts (a retirement plan which
meets the requirements of Code Sections 401, 403, 408 or 408A) and to
Non-Qualified Contracts.

As the Contract Owner, you may be taxed when a distribution occurs, either as an
annuity payment or as a withdrawal.

B. TAX ON ANNUITY PAYMENTS

When amounts are received as annuity payments, a portion of each annuity payment
is treated as a partial return of your single purchase payment and will not be
taxed. The remaining portion of the annuity payment will be treated as ordinary
income. How the annuity payment is divided between taxable and non-taxable
portions depends upon the period over which the annuity payments are expected to
be made. Annuity payments received after you have received all of your single
purchase payment are fully includible in income.

The Code imposes a penalty tax of 10% of the amount includible in income upon
certain distributions from annuity contracts occurring before the owner reaches
age 59 1/2. One of the exceptions from this penalty applies to amounts received
as annuity payments under an immediate annuity. To qualify as an immediate
annuity, a contract must, among other things, provide for a series of
substantially equal periodic payments during the annuity period, and must have
an annuity starting date (that is, the Annuity Income Date) that is no later
than one year from the contract's issue date. We believe that the Contract
should be treated as an immediate annuity, so there should be no penalty
applicable to amounts paid as annuity payments, regardless of the age of the
Contract Owner.

C. TAX ON WITHDRAWALS

WITHDRAWALS BEFORE THE ANNUITY INCOME DATE

When you make a withdrawal, the amount you receive will not be divided into
taxable and non-taxable portions in the same way as an annuity payment.
Withdrawals will be includible to the extent of the earnings in your Contract.
These distributions may also be subject to a penalty tax equal to 10% of the
amount that is includible in income. Some distributions are exempt from the 10%
penalty tax, including: (1) distributions paid on or after you reach age 59 1/2;
(2) distributions paid on or after your death; and (3) distributions paid if

30
<PAGE>

you become disabled (as defined in the Code). All Non-Qualified contracts issued
by the Company to you during the same calendar year will be aggregated to
determine the taxable amount of any withdrawal.

WITHDRAWALS AFTER THE ANNUITY INCOME DATE

The Code does not specifically address refunds or withdrawals from immediate
annuity contracts. The Internal Revenue Service ("IRS") has issued one private
letter ruling concluding that the right to make these withdrawals does not
prevent an annuity contract from qualifying as an immediate annuity. However,
the ruling does not clearly state the effect of an actual withdrawal on the tax
treatment of annuity payments made before and after the withdrawal. If, as a
result of a withdrawal, distributions from a Contract after the annuity starting
date were not substantially equal, there is a risk that the Contract could fail
to qualify as an immediate annuity. In that case, the portion includible in
income of each annuity payment received prior to your attaining age 59 1/2 would
be subject to a 10% penalty tax (unless another exception to the penalty tax is
applied). While we currently believe that a withdrawal will not adversely affect
the favorable tax treatment of annuity payments received before or after the
withdrawal and we intend to perform our tax reporting functions accordingly,
there can be no assurance that the IRS will not take a contrary position. You
should obtain competent tax advice prior to making a withdrawal from your
Contract.

It is possible that the IRS will take the view that when withdrawals are taken
after the Annuity Income Date, all amounts received by the taxpayer are taxable
at ordinary income rates as amounts "not received as an annuity." In addition,
such amounts may be taxable to the recipient without regard to the Owner's
investment in the Contract or any investment gain that might be present in the
current annuity value.

For example, assume that a Contract Owner with a Contract Value of $100,000 of
which $90,000 is comprised of investment in the Contract and $10,000 is
investment gain, makes a withdrawal of $20,000 after the Annuity Income Date.
Under this view, the Contract Owner would pay income taxes on the entire $20,000
amount in that tax year. For some taxpayers, additional tax penalties may also
apply.

These distributions may also be subject to a penalty tax equal to 10% of the
amount that is includible in income. Some distributions are exempt from the 10%
penalty tax, including: (1) distributions paid on or after you reach age 59 1/2;
(2) distributions paid on or after your death; and (3) distributions paid if you
become disabled (as defined in the Code).

OWNERS OF QUALIFIED AND NON-QUALIFIED CONTRACTS SHOULD CONSIDER CAREFULLY THE
TAX IMPLICATIONS OF ANY WITHDRAWAL REQUESTS AND THEIR NEED FOR CONTRACT FUNDS
PRIOR TO THE EXERCISE OF THE WITHDRAWAL RIGHT. CONTRACT OWNERS SHOULD ALSO
CONTACT THEIR TAX ADVISORS PRIOR TO MAKING ANY WITHDRAWALS.

D. EXCHANGES

You may exchange another annuity contract to acquire a Contract. For tax
purposes, the contract Issue Date will be the purchase date of the annuity
contract you exchange. Accordingly, in order for your Contract to qualify as an
immediate annuity, your Annuity Income Date must be no later than one year after
the purchase date of the contract you are exchanging.

If you exchange your Contract in exchange for another annuity contract with the
same Annuitant and Owner, the exchange will generally be treated as a tax-free
exchange. An exchange for a contract with a different Annuitant or Owner would
generally be treated as a taxable exchange.

E. TAX WITHHOLDING

The Company is required to withhold taxes from any payment made from
Non-Qualified and Qualified Contracts, including IRAs, unless you direct
otherwise. You may not direct the Company to refrain from withholding taxes on
certain distributions from a Qualified Contract that is part of a retirement
plan under

31
<PAGE>
Code Section 401 or 403. In addition, the Company is required to report
distributions from both Qualified and Non-Qualified Contracts to the IRS.

F. DIVERSIFICATION AND CONTROL OF UNDERLYING ASSETS

The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order for the contract to be
treated as an annuity contract. The Underlying Funds have committed to us that
they will comply with these requirements.

In addition, Treasury regulations provide that a contract may not be treated as
an annuity contract for tax purposes if the contract owner has control over the
assets underlying the contract. The IRS has not yet issued guidance on whether
the degree of control you exercise over the underlying investments could cause
you to be considered the owner of the Fund shares. If you, rather than the
Company, were considered the owner of the Fund shares, your Contract would not
be treated as an annuity. We believe that we will be the owner of the Fund
shares for tax purposes; however, future IRS guidance may affect this conclusion
and may have retroactive effect. This may affect whether the Underlying Funds
will be able to continue to operate as described in the Funds' prospectus.
Moreover, we reserve the right, but have no obligation, to modify the Contracts
as we deem necessary or appropriate to ensure that the Contracts continue to
qualify as annuities for tax purposes.

STATEMENTS AND REPORTS

You are sent a report semi-annually which provides certain financial information
about the Underlying Funds. At least annually, but possibly as frequent as
quarterly, we will furnish a statement to you containing information about your
Contract, including information as required by applicable law, rules and
regulations. We will also send a confirmation statement to you each time a
transaction is made. (Certain transactions made under recurring payment plans
such as Automatic Account Rebalancing may in the future be confirmed quarterly
rather than by immediate confirmations.) You should review the information in
all statements carefully. All errors or corrections must be reported to us
immediately to assure proper crediting to the Contract. We will assume that all
transactions are accurately reported on confirmation statements and
quarterly/annual statements unless you notify the Principal Office in writing
within 30 days after receipt of the statement.

LOANS

Loans will not be permitted under this contract.

ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS

We reserve the right, subject to compliance with applicable law, to: (1)
transfer assets from the Variable Account or any of its Sub-Accounts to another
of our separate accounts or sub-accounts having assets of the same class; (2) to
operate the Variable Account or any Sub-Account as a management investment
company under the 1940 Act or in any other form permitted by law; (3) to
deregister the Variable Account under the 1940 Act in accordance with the
requirements of the 1940 Act; (4) to substitute the shares of any other
registered investment company or other investment medium for the Underlying Fund
shares held by a Sub-Account, in the event that Underlying Fund shares are
unavailable for investment, or if we determine that further investment in such
Underlying Fund shares is inappropriate in view of the purpose of the Sub-
Account; (5) to change the methodology for determining the Net Investment
Factor; and (6) to change the names of the Variable Account or of the
Sub-Accounts. In no event will the changes described above be made without
notice to you in accordance with the 1940 Act.

We also reserve the right to establish additional sub-accounts of the Variable
Account, each of which would invest in shares corresponding to a new underlying
fund or in shares of another investment company having a

32
<PAGE>
specified investment objective. Subject to applicable law and any required SEC
approval, we may, in our sole discretion, establish new sub-accounts or
eliminate one or more Sub-Accounts if marketing needs, tax considerations or
investment conditions warrant. Any new sub-accounts may be made available to
existing Owners on a basis which we will determine.

Shares of the Underlying Funds also are issued to the separate accounts of the
Company and our affiliates which issue variable life contracts ("mixed
funding"). Shares of the Funds also are issued to other unaffiliated insurance
companies ("shared funding"). It is conceivable that in the future such mixed
funding or shared funding may be disadvantageous for variable life owners or
variable annuity owners. Although neither we nor any of the underlying
investment companies currently foresee any such disadvantages to either variable
life owners or variable annuity owners, we and the respective trustees intend to
monitor events in order to identify any material conflicts between such owners,
and to determine what action, if any, should be taken in response thereto. If
the trustees were to conclude that separate funds should be established for
variable life and variable annuity separate accounts, we will bear the attendant
expenses.

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

CHANGES TO COMPLY WITH LAW AND AMENDMENTS

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

VOTING RIGHTS

We will vote Underlying Fund shares held by each Sub-Account in accordance with
instructions received from you. Each person having a voting interest in a
Sub-Account will be provided with proxy materials of the Underlying Fund,
together with a form with which to give voting instructions to us. Shares for
which no timely instructions are received will be voted in proportion to the
instructions that are received. We also will vote shares in a Sub-Account that
we own and which are not attributable to the Contract in the same proportion. If
the 1940 Act or any rules thereunder should be amended or if the present
interpretation of the 1940 Act or such rules should change, and as a result we
determine that we are permitted to vote shares in our own right, whether or not
such shares are attributable to the Contract, we reserve the right to do so.

The number of votes that you may cast will be determined by us as of the record
date established by the Underlying Fund. The number of Underlying Fund shares
will be determined by dividing the reserve held in each Sub-Account for the
Variable Annuity by the net asset value of one Underlying Fund share.
Ordinarily, voting interest in the Underlying Fund will decrease as the reserve
for the Variable Annuity is depleted.

DISTRIBUTION

The Contracts offered by this Prospectus may be purchased from representatives
of Allmerica Investments, Inc., a registered broker-dealer under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc. ("NASD"). Allmerica Investments, Inc., 440 Lincoln Street,
Worcester, MA 01653, is also the principal underwriter and distributor and is an
indirect wholly owned

33
<PAGE>
subsidiary of First Allmerica. The Contract also may be purchased from certain
independent broker-dealers that are NASD members.

We pay commissions, not to exceed 5.0% of payments, to registered
representatives of Allmerica Investments, Inc. Alternative commission schedules
are available with varying initial commission amounts based on the Single
Purchase Payment, plus ongoing annual compensation of up to 4% of annuity
payments.

We intend to recoup commissions and other sales expenses through anticipated
profits from our General Account, which may include amounts derived from
mortality and expense risk charges. Commissions paid on the Contract, including
additional incentives or payments, do not result in any additional charge to you
or to the Variable Account. You may direct any inquiries to your financial
representative or to Annuity Client Services, Allmerica Financial Life Insurance
and Annuity Company, 440 Lincoln Street, Worcester, MA 01653, telephone
1-800-723-6550.

SERVICES

We receive fees from the investment advisers or other service providers of
certain Funds in return for providing certain services to Owners. Currently, we
receive service fees with respect to the Fidelity VIP Overseas Portfolio,
Fidelity VIP Equity-Income Portfolio, Fidelity VIP Growth Portfolio, Fidelity
VIP High Income Portfolio, and Fidelity VIP II Asset Manager Portfolio, at an
annual rate of 0.10% of the aggregate net asset value, respectively, of the
shares of such Funds held by the Variable Account. With respect to the T. Rowe
Price International Stock Portfolio, we receive service fees at an annual rate
of 0.15% of the aggregate net asset value of shares held by the Variable
Account. We may in the future render services for which we will receive
compensation from the investment advisers or other service providers of other
Funds.

LEGAL MATTERS

There are no legal proceedings pending to which the Variable Account is a party,
or to which the assets of the Variable Account are subject. The Company and the
Principal Underwriter are not involved in any litigation that is of material
importance in relation to their total assets or that relates to the Variable
Account.

YEAR 2000 COMPLIANCE

The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of our 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.

Based on a third party assessment, we determined that significant portions of
its software required modification or replacement to enable its computer systems
to properly process dates beyond December 31, 1999. We have completed the
process of modifying or replacing existing software and believes that this
action will resolve the Year 2000 issue. However, should there be serious
unanticipated interruptions from unknown sources, the Year 2000 issue could have
a material adverse impact on our operations. Specifically, we could experience,
among other things, an interruption in our ability to collect and process
premiums, process claim payments, safeguard and manage our invested assets,
accurately maintain policyholder information, accurately maintain accounting
records, and perform customer service. Any of these specific events, depending
on duration, could have a material adverse impact on the results of operations
and our financial position.

We are engaged in formal communications with all of our suppliers to determine
the extent to which we are vulnerable to those third parties' failure to
remediate their own Year 2000 issue. Our total Year 2000 project cost and
estimates to complete the project include the estimated costs and time
associated with our involvement on a third party's Year 2000 issue, and are
based on presently available information. However, there can

34
<PAGE>
be no guarantee that the systems of other companies on which our systems rely
will be timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with our systems, would not have material
adverse effect on us. We do not believe that we have material exposure to
contingencies related to the Year 2000 issue for the products we have sold.
Although we do not believe that there is a material contingency associated with
the Year 2000 project, there can be no assurance that exposure for material
contingencies will not arise.

The cost of the Year 2000 project is being expensed as incurred and is being
funded primarily through a reallocation of resources from discretionary projects
and a reduction in systems maintenance and support costs. Therefore, the Year
2000 project is not expected to result in any significant incremental technology
cost and is not expected to have a material effect on the results of operations.
We and our affiliates have incurred and expensed approximately $59 million
related to the assessment, plan development and substantial completion of the
Year 2000 project, through June 30, 1999. The total remaining cost of the
project is estimated between $10-20 million.

FURTHER INFORMATION

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

35
<PAGE>
APPENDIX A
CONDENSED FINANCIAL INFORMATION
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SEPARATE ACCOUNT VA-K

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
SUB-ACCOUNTS 1998 1997 1996 1995 1994 1993 1992
- -------------------------------------- ---------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECT INTERNATIONAL EQUITY FUND
Accumulation Unit Value:
Beginning of Period................. 1.398 1.355 1.127 0.956 1.000 N/A N/A
End of Period....................... 1.605 1.398 1.355 1.127 0.956 N/A N/A
Units Outstanding at End of Period (in
thousands).......................... 130,011 115,585 77,485 37,680 12,530 N/A N/A
DGPF INTERNATIONAL EQUITY SERIES
Accumulation Unit Value:
Beginning of Period................. 1.596 1.519 1.284 1.143 1.129 1.000 N/A
End of Period....................... 1.736 1.596 1.519 1.284 1.143 1.129 N/A
Units Outstanding at End of Period (in
thousands).......................... 68,279 62,134 44,416 34,692 26,924 6,681 N/A
FIDELITY VIP OVERSEAS PORTFOLIO
Accumulation Unit Value:
Beginning of Period................. 1.632 1.484 1.330 1.230 1.226 0.906 1.030
End of Period....................... 1.814 1.632 1.484 1.330 1.230 1.226 0.906
Units Outstanding at End of Period (in
thousands).......................... 59,052 56,689 63,050 65,256 59,774 25,395 6,728
T. ROWE PRICE INTERNATIONAL STOCK
PORTFOLIO
Accumulation Unit Value:
Beginning of Period................. 1.222 1.203 1.064 1.000 N/A N/A N/A
End of Period....................... 1.396 1.222 1.203 1.064 N/A N/A N/A
Units Outstanding at End of Period (in
thousands).......................... 68,367 59,832 35,915 10,882 N/A N/A N/A
SELECT AGGRESSIVE GROWTH FUND
Accumulation Unit Value:
Beginning of Period................. 2.305 1.970 1.686 1.292 1.342 1.139 1.000
End of Period....................... 2.513 2.305 1.970 1.686 1.292 1.342 1.139
Units Outstanding at End of Period (in
thousands).......................... 125,758 106,790 89,974 70,349 54,288 26,158 2,019
SELECT CAPITAL APPRECIATION FUND
Accumulation Unit Value:
Beginning of Period................. 1.670 1.482 1.383 1.000 N/A N/A N/A
End of Period....................... 1.875 1.670 1.482 1.383 N/A N/A N/A
Units Outstanding at End of Period (in
thousands).......................... 80,048 70,932 52,927 16,096 N/A N/A N/A
SELECT VALUE OPPORTUNITY FUND
Accumulation Unit Value:
Beginning of Period................. 1.945 1.580 1.249 1.075 1.167 1.000 N/A
End of Period....................... 2.011 1.945 1.580 1.249 1.075 1.167 N/A
Units Outstanding at End of Period (in
thousands).......................... 99,750 85,126 60,145 43,433 33,049 9,902 N/A
</TABLE>

A-1
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
SUB-ACCOUNTS 1998 1997 1996 1995 1994 1993 1992
- -------------------------------------- ---------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECT GROWTH FUND
Accumulation Unit Value:
Beginning of Period................. 2.001 1.514 1.259 1.024 1.055 1.058 1.000
End of Period....................... 2.671 2.001 1.514 1.259 1.024 1.055 1.058
Units Outstanding at End of Period (in
thousands).......................... 121,005 96,643 62,633 47,078 38,415 26,064 3,039
GROWTH FUND
Accumulation Unit Value:
Beginning of Period................. 2.336 1.894 1.599 1.221 1.236 1.175 1.111
End of Period....................... 2.748 2.336 1.894 1.599 1.221 1.236 1.175
Units Outstanding at End of Period (in
thousands).......................... 164,914 156,173 135,573 116,008 102,399 72,609 34,373
FIDELITY VIP GROWTH PORTFOLIO
Accumulation Unit Value:
Beginning of Period................. 2.608 2.143 1.895 1.419 1.440 1.224 1.135
End of Period....................... 3.586 2.608 2.143 1.895 1.419 1.440 1.224
Units Outstanding at End of Period (in
thousands).......................... 149,009 148,211 142,450 116,485 90,717 49,136 18,253
EQUITY INDEX FUND
Accumulation Unit Value:
Beginning of Period................. 2.581 1.977 1.640 1.221 1.266 1.135 1.074
End of Period....................... 3.265 2.581 1.977 1.640 1.221 1.226 1.135
Units Outstanding at End of Period (in
thousands).......................... 107,625 85,344 57,428 39,534 29,176 22,466 9,535
SELECT GROWTH AND INCOME FUND
Accumulation Unit Value:
Beginning of Period................. 1.978 1.638 1.370 1.066 1.074 0.987 1.000
End of Period....................... 2.270 1.978 1.638 1.370 1.066 1.074 0.987
Units Outstanding at End of Period (in
thousands).......................... 119,107 103,543 82,434 63,841 51,098 31,846 4,711
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Accumulation Unit Value:
Beginning of Period................. 2.824 2.236 1.185 1.490 1.412 1.211 1.051
End of Period....................... 3.107 2.824 2.236 1.185 1.490 1.412 1.211
Units Outstanding at End of Period (in
thousands).......................... 187,989 180,001 167,000 139,145 104,356 61,264 17,855
FIDELITY VIP II ASSET MANAGER
PORTFOLIO
Accumulation Unit Value:
Beginning of Period................. 1.514 1.273 1.127 0.977 1.000 N/A N/A
End of Period....................... 1.717 1.514 1.273 1.127 0.977 N/A N/A
Units Outstanding at End of Period (in
thousands).......................... 69,704 55,551 42,415 33,444 20,720 N/A N/A
</TABLE>

A-2
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
SUB-ACCOUNTS 1998 1997 1996 1995 1994 1993 1992
- -------------------------------------- ---------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
FIDELITY VIP HIGH INCOME PORTFOLIO
Accumulation Unit Value:
Beginning of Period................. 2.272 1.958 1.743 1.465 1.510 1.270 1.047
End of Period....................... 2.142 2.272 1.958 1.743 1.465 1.510 1.270
Units Outstanding at End of Period (in
thousands).......................... 97,829 76,343 53,956 38,042 27,041 13,583 3,625
INVESTMENT GRADE INCOME FUND
Accumulation Unit Value:
Beginning of Period................. 1.530 1.418 1.390 1.073 1.250 1.145 1.073
End of Period....................... 1.629 1.530 1.418 1.390 1.196 1.250 1.145
Units Outstanding at End of Period (in
thousands).......................... 102,088 86,816 79,054 69,168 57,454 48,488 15,428
GOVERNMENT BOND FUND
Accumulation Unit Value:
Beginning of Period................. 1.384 1.311 1.285 1.152 1.179 1.112 1.075
End of Period....................... 1.469 1.384 1.311 1.285 1.152 1.179 1.112
Units Outstanding at End of Period (in
thousands).......................... 48,930 35,261 30,921 31,710 32,519 60,265 29,844
MONEY MARKET FUND
Accumulation Unit Value:
Beginning of Period................. 1.214 1.167 1.124 1.077 1.051 1.035 1.013
End of Period....................... 1.262 1.214 1.167 1.124 1.077 1.051 1.035
Units Outstanding at End of Period (in
thousands).......................... 128,730 91,676 92,354 69,311 37,668 30,815 30,778
</TABLE>

No information is shown above for Select Strategic Growth Fund and Select
Emerging Markets Fund because these Sub-Accounts commenced operations after
December 31, 1998.

A-3
<PAGE>
CONDENSED FINANCIAL INFORMATION
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VA-K

<TABLE>
<CAPTION>
SUB-ACCOUNTS 1998 1997 1996 1995 1994
- -------------------------------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SELECT INTERNATIONAL EQUITY FUND
Accumulation Unit Value:
Beginning of Period............................................... 1.398 1.355 1.128 0.956 1.000
End of Period..................................................... 1.605 1.398 1.355 1.128 0.956
Number of Units Outstanding at End of Period (in thousands)......... 9,713 8,076 5,068 2,093 446
DGPF INTERNATIONAL EQUITY SERIES
Accumulation Unit Value:
Beginning of Period............................................... 1.387 1.319 1.115 0.993 1.000
End of Period..................................................... 1.508 1.387 1.319 1.115 0.993
Number of Units Outstanding at End of Period (in thousands)......... 4,148 3,266 2,023 1,304 667
FIDELITY VIP OVERSEAS PORTFOLIO
Accumulation Unit Value:
Beginning of Period............................................... 1.298 1.180 1.058 0.978 1.000
End of Period..................................................... 1.443 1.298 1.180 1.058 0.978
Number of Units Outstanding at End of Period (in thousands)......... 4,358 3,601 3,114 2,804 1,697
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO
Accumulation Unit Value:
Beginning of Period............................................... 1.222 1.203 1.064 1.000 N/A
End of Period..................................................... 1.396 1.222 1.203 1.064 N/A
Number of Units Outstanding at End of Period (in thousands)......... 5,670 4,536 2,506 542 N/A
SELECT AGGRESSIVE GROWTH FUND
Accumulation Unit Value:
Beginning of Period............................................... 1.825 1.560 1.335 1.023 1.000
End of Period..................................................... 1.989 1.825 1.560 1.335 1.023
Number of Units Outstanding at End of Period (in thousands)......... 10,282 7,947 5,681 2,907 1,211
SELECT CAPITAL APPRECIATION FUND
Accumulation Unit Value:
Beginning of Period............................................... 1.670 1.482 1.115 1.000 N/A
End of Period..................................................... 1.875 1.670 1.482 1.115 N/A
Number of Units Outstanding at End of Period (in thousands)......... 5,947 5,197 3,849 1,069 N/A
SELECT VALUE OPPORTUNITY FUND
Accumulation Unit Value:
Beginning of Period............................................... 1.764 1.433 1.131 0.975 1.000
End of Period..................................................... 1.823 1.764 1.433 1.131 0.975
Number of Units Outstanding at End of Period (in thousands)......... 7,243 5,466 3,037 1,614 795
SELECT GROWTH FUND
Accumulation Unit Value:
Beginning of Period............................................... 2.064 1.562 1.229 1.057 1.000
End of Period..................................................... 2.756 2.064 1.562 1.229 1.057
Number of Units Outstanding at End of Period (in thousands)......... 8,389 5,589 2,645 1,278 406
GROWTH FUND
Accumulation Unit Value:
Beginning of Period............................................... 1.986 1.610 1.359 1.037 1.000
End of Period..................................................... 2.336 1.986 1.610 1.359 1.037
Number of Units Outstanding at End of Period (in thousands)......... 9,224 7,404 4,652 2,436 947
</TABLE>

A-4
<PAGE>
<TABLE>
<CAPTION>
SUB-ACCOUNTS 1998 1997 1996 1995 1994
- -------------------------------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
FIDELITY VIP GROWTH PORTFOLIO
Accumulation Unit Value:
Beginning of Period............................................... 1.972 1.620 1.433 1.073 1.073
End of Period..................................................... 2.712 1.972 1.620 1.433 1.073
Number of Units Outstanding at End of Period (in thousands)......... 13,035 11,575 9,342 4,952 1,944
EQUITY INDEX FUND
Accumulation Unit Value:
Beginning of Period............................................... 2.187 1.675 1.390 1.035 1.000
End of Period..................................................... 2.766 2.187 1.675 1.390 1.035
Number of Units Outstanding at End of Period (in thousands)......... 8,479 5,712 2,417 947 189
SELECT GROWTH AND INCOME FUND
Accumulation Unit Value:
Beginning of Period............................................... 1.911 1.582 1.324 1.030 1.000
End of Period..................................................... 2.193 1.911 1.582 1.324 1.030
Number of Units Outstanding at End of Period (in thousands)......... 7,519 6,124 3,759 2,173 832
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Accumulation Unit Value:
Beginning of Period............................................... 2.034 1.610 1.430 1.073 1.000
End of Period..................................................... 2.238 2.034 1.610 1.430 1.073
Number of Units Outstanding at End of Period (in thousands)......... 16,111 12,959 9,957 5,738 2,214
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Accumulation Unit Value:
Beginning of Period............................................... 1.527 1.284 1.137 0.985 1.000
End of Period..................................................... 1.732 1.527 1.284 1.137 0.985
Number of Units Outstanding at End of Period (in thousands)......... 3,514 3,125 2,735 2,025 1,240
FIDELITY VIP HIGH INCOME PORTFOLIO
Accumulation Unit Value:
Beginning of Period............................................... 1.543 1.330 1.184 0.995 1.000
End of Period..................................................... 1.455 1.543 1.330 1.184 0.995
Number of Units Outstanding at End of Period (in thousands)......... 14,203 9,794 5,635 2,530 985
INVESTMENT GRADE INCOME FUND
Accumulation Unit Value:
Beginning of Period............................................... 1.267 1.174 1.151 0.990 1.000
End of Period..................................................... 1.348 1.267 1.174 1.151 0.990
Number of Units Outstanding at End of Period (in thousands)......... 5,160 3,889 2,854 1,677 1,677
GOVERNMENT BOND FUND
Accumulation Unit Value:
Beginning of Period............................................... 1.199 1.136 1.113 0.998 1.000
End of Period..................................................... 1.273 1.199 1.136 1.113 0.998
Number of Units Outstanding at End of Period (in thousands)......... 2,605 1,694 1,629 1,098 363
MONEY MARKET FUND
Accumulation Unit Value:
Beginning of Period............................................... 1.149 1.105 1.064 1.020 1.000
End of Period..................................................... 1.195 1.149 1.105 1.064 1.020
Number of Units Outstanding at End of Period (in thousands)......... 8,683 8,628 7,379 4,194 1,837
</TABLE>

No information is shown above for Select Strategic Growth Fund and Select
Emerging Markets Fund because these Sub-Accounts commenced operations after
December 31, 1998.

A-5
<PAGE>

APPENDIX B
EXAMPLES OF PRESENT VALUE WITHDRAWALS AND PAYMENT WITHDRAWALS

Assume in the examples below that a 64 year old male purchases a contract and
selects a variable annuity payout option of Single Life Annuity with Payments
Guaranteed for 10 Years, annuity payments begin in 12 months, an Assumed
Investment Return ("AIR") of 3%, and an annual Change Frequency. Assume that the
net single payment purchases 1,370 Annuity Units. The following examples assume
the Annuity Unit Value is 1.000000 on the date payments begin and a net return
of 8% (gross return of 9.45%).

PRESENT VALUE WITHDRAWALS

EXAMPLE 1. Assume that the Owner has taken no previous withdrawals and would
like to take the maximum Present Value Withdrawal available at the beginning of
the fourth contract year (the third year of the Annuity Payout phase).

Annuity Units prior to withdrawal = 1,370
Annuity Unit Value on the date of withdrawal = 1.09944
Monthly Annuity Payment prior to withdrawal = $1,506.24

Rate used in Calculation of Present Value = 5% (3% AIR plus 2% Withdrawal
Adjustment Charge)
Present Value of Future Guaranteed Annuity Payments = $119,961.92

Maximum Present Value Withdrawal Amount = $89,971.44 ($119,961.92 * 75%)

Annuity Units after withdrawal = 342.50 (1,370 * (1 -
(89,971.44/119,961.92)))
Annuity Unit Value on the date of withdrawal = 1.09944
Monthly Annuity Payment after withdrawal = $376.56

Because the withdrawal is being made within 5 years of the Issue Date, the rate
used in the Calculation of Present Value is increased by a Withdrawal Adjustment
Charge. Since less than 10 years of guaranteed annuity payments are being
valued, the Withdrawal Adjustment Charge is 2%. Because this is a Present Value
Withdrawal, the number of Annuity Units will increase to 1,370 after the end of
the 10-year period during which the Company guaranteed to make payments.

EXAMPLE 2. Assume that the Owner has taken no previous withdrawals and would
like to take the maximum Present Value Withdrawal available at the beginning of
the ninth contract year (eighth year of the Annuity Payout phase).

Annuity Units prior to withdrawal = 1,370
Annuity Unit Value on the date of withdrawal = 1.39350
Monthly Annuity Payment prior to withdrawal = $1,909.09

Rate used in Calculation of Present Value = 3% (3% AIR)
Present Value of Future Guaranteed Annuity Payments = $65,849.08

Maximum Present Value Withdrawal Amount = $49,386.81 ($65,849.08 * 75%)

Annuity Units after withdrawal = 342.50 (1,370 * (1 -
(49,386.81/65,849.08)))
Annuity Unit Value on the date of withdrawal = 1.39350
Monthly Annuity Payment after withdrawal = $477.27

Because the withdrawal is being made more than 5 years after the Issue Date, the
rate used in the Calculation of Present Value is not increased by a Withdrawal
Adjustment Charge. Because this is a Present Value Withdrawal, the number of
Annuity Units will increase to 1,370 after the end of the 10-year period during
which the Company guaranteed to make payments.

B-1
<PAGE>

PAYMENT WITHDRAWALS

EXAMPLE 3. Assume that the Owner has taken no previous withdrawals and would
like to take the maximum Payment Withdrawal of 10 monthly annuity benefit
payments at the beginning of the fourth contract year (the third year of the
Annuity Payout phase). At that time, the Annuitant's life expectancy is greater
than 15 years.

Last Monthly Annuity Payment = 1,436.50
Withdrawal Amount = $14,365.00 (10 * 1,436.50)

Annuity Units prior to withdrawal = 1,370
Annuity Unit Value on the date of withdrawal = 1.09944
Monthly Annuity Payment prior to withdrawal = $1,506.24

Rate used in Calculation of Present Value = 4% (3% AIR plus 1% Withdrawal
Adjustment Charge)
Present Value of Future Annuity Benefit Payments = $234,482.77

Annuity Units after withdrawal = 1,286.07 (1,370 * (1 -
(14,365.00/234,482.77)))
Annuity Unit Value on the date of withdrawal = 1.09944
Monthly Annuity Payment after withdrawal = $1,413.96

Because the withdrawal is being made within 5 years of the Issue Date, the rate
used in the Calculation of Present Value is increased by a Withdrawal Adjustment
Charge. Since there are more than 15 years of annuity payments being valued (the
Annuitant's life expectancy is more than 15 years), the Withdrawal Adjustment
Charge is 1%. Because this is a Payment Withdrawal, the number of Annuity Units
will not increase after the end of the 10-year period during which the Company
guaranteed to make payments.

EXAMPLE 4. Assume that the Owner has taken no previous withdrawals and would
like to take the maximum Payment Withdrawal of 10 monthly annuity benefit
payments at the beginning of the ninth contract year (eighth year of the Annuity
Payout phase).

Last Monthly Annuity Payment = $1,820.71
Withdrawal Amount = $18,207.10 (10 * 1,820.71)

Annuity Units prior to withdrawal = 1,370
Annuity Unit Value on the date of withdrawal = 1.39350
Monthly Annuity Payment prior to withdrawal = $1,909.09

Rate used in Calculation of Present Value = 3% (3% AIR)
Present Value of Future Annuity Payments = $268,826.18

Annuity Units after withdrawal = 1,272.71 (1,370 * (1 -
(18,207.10/268,826.18)))
Annuity Unit Value on the date of withdrawal = 1.39350
Monthly Annuity Payment after withdrawal = $1,779.80

Because the withdrawal is being made more than 5 years after the Issue Date, the
rate used in the Calculation of Present Value is not increased by a Withdrawal
Adjustment Charge. Because this is a Payment Withdrawal, the number of Annuity
Units will not increase after the end of the 10-year period during which the
Company guaranteed to make payments.

B-2
<PAGE>

PRESENT VALUE WITHDRAWAL VERSUS PAYMENT WITHDRAWAL

EXAMPLE 5. Assume that the Owner has taken no previous withdrawals and would
like to take a $10,000 withdrawal at the beginning of the fourth contract year
(the third year of the Annuity Payout phase). At that time, the Annuitant's life
expectancy is greater than 15 years. The following examples show the impact of
taking the withdrawal under the Present Value Withdrawal Option and the Payment
Withdrawal Option.

PRESENT VALUE WITHDRAWAL

Annuity Units prior to withdrawal = 1,370
Annuity Unit Value on the date of withdrawal = 1.09944
Monthly Annuity Payment prior to withdrawal = $1,506.24

Rate used in Calculation of Present Value = 5% (3% AIR plus 2% Withdrawal
Adjustment Charge)
Present Value of future Guaranteed Annuity Payments = $119,961.92

Withdrawal = $10,000

Annuity Units after withdrawal = 1,255.80 (1,370 * (1 -
(10,000/119,961.92)))
Annuity Unit Value on the date of withdrawal = 1.09944
Monthly Annuity Payment after withdrawal = $1,380.67

Because the withdrawal is being made within 5 years of the Issue Date, the rate
used in the Calculation of Present Value is increased by a Withdrawal Adjustment
Charge. Since less than 10 years of guaranteed annuity payments are being
valued, the Withdrawal Adjustment Charge is 2%. Because this is a Present Value
Withdrawal, the number of Annuity Units will increase to 1,370 at the end of the
10-year period during which the Company guaranteed to make payments.

PAYMENT WITHDRAWAL

Annuity Units prior to withdrawal = 1,370
Annuity Unit Value on the date of withdrawal = 1.09944
Monthly Annuity Payment prior to withdrawal = $1,506.24

Rate used in Calculation of Present Value = 4% (3% AIR plus 1% Withdrawal
Adjustment Charge)
Present Value of future Annuity Payments = $234,482.77

Withdrawal = $10,000

Annuity Units after withdrawal = 1,311.57 (1,370 * (1 -
(10,000/$234,482.77)))
Annuity Unit Value on the date of withdrawal = 1.09944
Monthly Annuity Payment after withdrawal = $1,442.00

Because the withdrawal is being made within 5 years of the Issue Date, the rate
used in the Calculation of Present Value is increased by a Withdrawal Adjustment
Charge. Since there are more than 15 years of annuity payments being valued (the
Annuitant's life expectancy is more than 15 years), the Withdrawal Adjustment
Charge is 1%. Because this is a Payment Withdrawal, the number of Annuity Units
will not increase at the end of the 10-year period during which the Company
guaranteed to make payments.

B-3
<PAGE>

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

STATEMENT OF ADDITIONAL INFORMATION

INDIVIDUAL AND GROUP VARIABLE ANNUITY CONTRACTS FUNDED THROUGH

SUB-ACCOUNTS OF

SEPARATE ACCOUNT VA-K

INVESTING IN SHARES OF ALLMERICA INVESTMENT TRUST, FIDELITY VARIABLE INSURANCE
PRODUCTS FUND, FIDELITY VARIABLE INSURANCE PRODUCTS FUND II,
T. ROWE PRICE INTERNATIONAL SERIES, INC., AND
DELAWARE GROUP PREMIUM FUND, INC.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE
READ IN CONJUNCTION WITH THE ALLMERICA IMMEDIATE ADVANTAGE VARIABLE ANNUITY
PROSPECTUS FOR THE ABOVE SUB-ACCOUNTS OF SEPARATE ACCOUNT VA-K (EXECANNUITY
PLUS/ALLMERICA ADVANTAGE) DATED ________, 1999 ("THE PROSPECTUS"). THE
PROSPECTUS MAY BE OBTAINED FROM ANNUITY CLIENT SERVICES, ALLMERICA FINANCIAL
LIFE INSURANCE AND ANNUITY COMPANY, 440 LINCOLN STREET, WORCESTER,
MASSACHUSETTS 01653, TELEPHONE 1-800-723-6550.

DATED ______, 1999

<PAGE>

TABLE OF CONTENTS

GENERAL INFORMATION AND HISTORY . . . . . . . . . . . . . . . . . . . 2

THE VARIABLE ACCOUNT
AND THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . 3

SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

UNDERWRITERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

ANNUITY BENEFIT PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . 5

EXCHANGE OFFER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 6

FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . F-1

GENERAL INFORMATION AND HISTORY

Separate Account VA-K (the "Variable Account") is a separate investment account
of Allmerica Financial Life Insurance and Annuity Company (the "Company")
established by vote of its Board of Directors on November 1, 1990. The Company
is a life insurance company organized under the laws of Delaware in July 1974.
Its principal office (the "Principal Office") is located at 440 Lincoln Street,
Worcester, Massachusetts 01653, telephone (508) 855-1000. The Company is
subject to the laws of the State of Delaware governing insurance companies and
to regulation by the Commissioner of Insurance of Delaware. In addition, the
Company is subject to the insurance laws and regulations of other states and
jurisdictions in which it is licensed to operate. As of December 31, 1998, the
Company had over $14 billion in assets and over $26 billion of life insurance in
force.

Effective October 1, 1995, the Company changed its name from SMA Life Assurance
Company to Allmerica Financial Life Insurance and Annuity Company. The Company
is an indirectly wholly owned subsidiary of First Allmerica Financial Life
Insurance Company ("First Allmerica") which, in turn, is a wholly owned
subsidiary of Allmerica Financial Corporation ("AFC"). First Allmerica,
originally organized under the laws of Massachusetts in 1844 as a mutual life
insurance company, and known as State Mutual Life Assurance Company of America,
converted to a stock life insurance company and adopted its present name on
October 16, 1995. First Allmerica is among the five oldest life insurance
companies in America. As of December 31, 1998, First Allmerica and its
subsidiaries (including the Company) had over $27 billion in combined assets and
over $48 billion in life insurance in force.

Currently, 20 Sub-Accounts of the Variable Account are available under the
Allmerica Immediate Advantage Variable Annuity contract (the "Contract").
Each Sub-Account invests in a corresponding investment portfolio of Allmerica
Investment Trust ("Trust"), Fidelity Variable Insurance Products Fund
("Fidelity VIP"), Fidelity Variable Insurance Products Fund II ("Fidelity VIP
II"), T. Rowe Price International Series, Inc. ("T. Rowe Price"), or Delaware
Group Premium Fund, Inc. ("DGPF").

<PAGE>

The Trust is managed by Allmerica Financial Investment Management Services,
Inc. Fidelity VIP and Fidelity VIP II are managed by Fidelity Management &
Research Company ("FMR"). The T. Rowe Price International Stock Portfolio of
T. Rowe Price is managed by Rowe Price-Fleming International, Inc.
("Price-Fleming"). The International Equity Series of DGPF is managed by
Delaware International Advisers Ltd. ("International Advisers").

The Trust, Fidelity VIP, Fidelity VIP II, T. Rowe Price and DGPF are
open-end, diversified management investment companies. Thirteen different
funds of the Trust are available under the Contract: the Select Emerging
Markets Fund, Growth Fund, Select Strategic Growth Fund, Investment Grade
Income Fund, Money Market Fund, Equity Index Fund, Government Bond Fund,
Select International Growth Fund, Select Aggressive Growth Fund, Select
Capital Appreciation Fund, Select Growth Fund, Select Growth and Income Fund
and Select Value Opportunity Fund. Certain of these Funds may not be
available in all states. Four portfolios of Fidelity VIP are available under
the Contract: the Fidelity VIP High Income Portfolio, Fidelity VIP
Equity-Income Portfolio, Fidelity VIP Growth Portfolio, and Fidelity VIP
Overseas Portfolio. One portfolio of Fidelity VIP II is available under the
Contract: the Fidelity VIP II Asset Manager Portfolio. One portfolio of T.
Rowe Price is available under the Contract: the T. Rowe Price International
Stock Portfolio. The International Equity Series is the only Series of DGPF
available under the Contract. Each Fund, Portfolio and Series available
under the Contract (together, the "Underlying Funds") has its own investment
objectives and certain attendant risks.

TAXATION OF THE CONTRACT, THE VARIABLE
ACCOUNT AND THE COMPANY

The Company currently imposes no charge for taxes payable in connection with the
contracts, other than for state and local premium taxes and similar assessments
when applicable. The Company reserves the right to impose a charge for any
other taxes that may become payable in the future in connection with the
contracts or the Variable Account.

The Variable Account is considered to be a part of and taxed with the operations
of the Company. The Company is taxed as a life insurance company under
subchapter L of the Internal Revenue Code (the "Code"), and files a consolidated
tax return with its parent and affiliated companies.

The Company reserves the right to make a charge for any effect which the income,
assets or existence of the Contract or the Variable Account may have upon its
tax. Such charge for taxes, if any, will be assessed on a fair and equitable
basis in order to preserve equity among classes of Contract Owners ("Owners").
The Variable Account presently is not subject to tax.

SERVICES

CUSTODIAN OF SECURITIES. The Company serves as custodian of the assets of the
Variable Account. Underlying Fund shares owned by the Sub-Accounts are held on
an open account basis. A Sub-Account's ownership of Underlying Fund shares is
reflected on the records of the Underlying Fund and is not represented by any
transferable stock certificates.

EXPERTS. The financial statements of the Company as of December 31, 1998 and
1997 and for each of the three years in the period ended December 31, 1998, and
the financial statements of Separate Account VA-K Allmerica Advantage Variable
Annuity and ExecAnnuity Plus Variable Annuity of the Company as of December 31,
1998 and for the periods indicated, included in this Statement of Additional
Information constituting part of this Registration Statement, have been so
included in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

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

3
<PAGE>

UNDERWRITERS

Allmerica Investments, Inc. ("Allmerica Investments"), a registered
broker-dealer under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc. ("NASD"), serves as
principal underwriter and general distributor for the Contract pursuant to a
contract with Allmerica Investments, the Company and the Variable Account.
Allmerica Investments distributes the Contract on a best-efforts basis.
Allmerica Investments, Inc., 440 Lincoln Street, Worcester, Massachusetts
01653, was organized in 1969 as a wholly owned subsidiary of the Company, and
presently is indirectly wholly owned by First Allmerica.

The Contract offered by this Prospectus is offered continuously, and may be
purchased from NASD registered representatives of Allmerica Investments and from
certain independent broker-dealers which are NASD members and whose
representatives are authorized by applicable law to sell variable annuity
contracts.

Commissions are paid by the Company to its licensed insurance agents on sales
of the Contract. The Company intends to recoup the commission and other
sales expense through a combination of anticipated withdrawal and/or
annuitization charges, profits from the Company's general account, including
the investment earnings on amounts allocated to accumulate on a fixed basis
in excess of the interest credited on fixed accumulations by the Company, and
the profit, if any, from the mortality and expense risk charge.

All persons selling the Contract are required to be licensed by their respective
state insurance authorities for the sale of variable annuity policies.
Registered representatives of Allmerica Investments receive commissions equal to
5% (4% on contracts originally issued as part of a 401(k) plan) of purchase
payments. Independent broker-dealers receive commissions of 5%, of which a
portion is paid to their registered representatives.

The aggregate amounts of commissions paid to representatives of Allmerica
Investments, Inc. with respect to sales of contracts A3018-91, A3021-93, and
A3025-96 were $36,853,600.78 in 1998, $34,693,060.08 in 1997 and
$32,954,782.25 in 1996.

No commissions were paid for sales of Contract A3027-98 since it was not
offered until _____________.

Commissions are paid by the Company, and do not result in any charge to Owners
or to the Variable Account in addition to the charges described under "CHARGES
AND DEDUCTIONS" in the Prospectus.

<PAGE>

ANNUITY PAYMENTS

ILLUSTRATION OF VARIABLE ANNUITY PAYMENT CALCULATION USING
HYPOTHETICAL EXAMPLE. The determination of the Annuity Unit Value and the
variable annuity payment may be illustrated by the following
hypothetical example: Assume an Owner has 40,000 Accumulation Units in a
Variable Account, and that the value of an Accumulation Unit on the Valuation
Date used to determine the amount of the first variable annuity benefit
payment is $1.120000. Therefore, the Accumulated Value of the Contract is
$44,800 (40,000 x $1.120000). Assume also that the Owner elects an option
for which the first monthly payment is $6.57 per $1,000 of Accumulated Value
applied. Assuming no premium tax, the first monthly payment would be 44.800
multiplied by $6.57, or $294.34.

Next, assume that the Annuity Unit Value for the assumed investment return of
3.0% per annum for the Valuation Date as of which the first payment was
calculated was $1.100000. When the Annuity Unit Value of $1.100000 is divided
into the first monthly payment the number of Annuity Units represented by
that payment is determined to be 267.5818. The value of this same number of
Annuity Units will be paid in each subsequent month under most options.
Assume further that the net investment factor for the Valuation Period
applicable to the next annuity benefit payment is 1.000190. Multiplying this
factor by .999919 (the one-day adjustment factor for the assumed investment
return of 3.0% per annum) produces a factor of 1.000109. This then is
multiplied by the Annuity Unit Value on the immediately preceding Valuation
Date (assumed here to be $1.105000). The result is an Annuity Unit Value of
$1.105120 for the current monthly payment. The current monthly payment then
is determined by multiplying the number of Annuity Units by the current
Annuity Unit Value, or 267.5818 times $1.105120, which produces a current
monthly payment of $295.71.

5
<PAGE>

EXCHANGE OFFER

The Company will permit Owners of certain variable annuity contracts,
described below, to exchange their contracts at net asset value for the
variable annuity contract described in the Prospectus, which is issued on
Form No. A3029-99 or state variations thereof ("new Contract"). The Company
reserves the right to suspend this exchange offer at any time.

This offer applies to the exchange of the Company's Flexible Payment Deferred
Variable Annuity contracts issued on Forms A3025-96, 3021-93 and 3018-91.
These contracts are referred to collectively as "Exchanged Contracts". To
effect a change, the Company should receive (1) a completed application for
the new Contract, (2) the contract being exchanged, and (3) a signed Letter
of Awareness.

There are inherent differences between a Flexible Payment Deferred Variable
Annuity and an Immediate Variable Annuity. You should consult your financial
planner to discuss these differences.

No surrender charge will be applicable to the Exchanged Contract as a result
of the Exchange.

Persons who, under the terms of this exchange offer, exchange their contract
for the new Contract and subsequently cancel the new Contract within the time
permitted, will have the Contract Value of the new Contract applied to
reinstate the Exchanged Contract. The refunded amount will be allocated
initially among the Fixed Account and Sub-Accounts of the reinstated contract
in the same proportion that the values of such allocation bore on the date
the exchange of the Contract for the new Contract took place. For purposes of
calculating any surrender charge under the reinstated Contract the reinstated
Contract will be deemed to have been issued as if there had been no exchange.

The Table below illustrates the differences between the new Contract and the
Exchanged Contract after the Annuity Income Date. There may be additional
differences important for a person to consider prior to making an exchange.
The Prospectuses for the new Contract and the Exchanged Contract should be
reviewed carefully before the exchange request is submitted to the Company.

<TABLE>
<CAPTION>
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
ALLMERICA IMMEDIATE ALLMERICA ADVANTAGE EXEC ANNUITY PLUS '93 EXEC ANNUITY PLUS '91
ADVANTAGE (A3029-99) (A3025-96) (3021-93) (3018-91)
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
What are the Rates are current only - The first payment is The first payment is The first payment is
Annuitization Rates no guarantee rates. based on the greater of based on the greater of based on the greater of
that apply to variable the rates guaranteed in the rates guaranteed in the rates guaranteed in
annuity payments? the contract or the the contract or the the contract or the
current rates. current rates. current rates.
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
What is the Assumed The owner has a choice The Assumed Investment The Assumed Investment The Assumed Investment
Investment Return (AIR)? of 3%, 5% or 7% * Return is 3.5% Return is 3.5% Return is 3.5%
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
If my contract has joint The surviving owner is After the Annuity After the Annuity After the Annuity
owners, who is the always the primary Income Date, the Income Date, the Income Date, the
primary beneficiary on beneficiary. beneficiary is as beneficiary is as beneficiary is as
the death of the first selected by the selected by the selected by the
owner? Annuitant (who at that Annuitant (who at that Annuitant (who at that
point is also the point is also the point is also the
Owner). Owner). Owner).
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
Can I take withdrawals? Yes No No No
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
Will a surrender charge No Yes, for any commutable Yes, for any commutable Yes, for any commutable
be assessed when I period certain options period certain options period certain options
annuitize? and any period certain and any period certain and any period certain
option under 10 years. option under 10 years. option under 10 years.
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
Is a life with cash back Yes No No No
annuity benefit option
available?
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
Is a unit refund annuity No Yes No No
benefit option available?
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
How many investment 20 4 4 4
choices (Sub-Accounts)
do I have?
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
Can I make transfers? Yes No No No
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
Is Automatic Account Yes No No No
Rebalancing (AAR)
available?
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
Are commutable annuity Yes. For the Payment for Commutable period Commutable period Commutable period
options available? a Certain Number of certain options are certain options are certain options are
Years Option. Limited available. available. available.
Commutation is also
available for certain
other options. (see
"E. Description of
Annuity Benefit Options"
under DESCRIPTION OF THE
CONTRACT.)
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
</TABLE>

* These rates may not be available in all states.

6
<PAGE>

<TABLE>
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Are liquidity options For all benefit options: Commutable period Commutable period Commutable period
available? 10 times the previous certain options are certain options are certain options are
annuity payment. For available. available. available.
Life with Payment for
A Certain Number of
Years and Life with
Cash Back Options: 75%
of the present value of
the remaining guaranteed
annuity payments. For
Payments for Certain
Number of Years Option,
100% is available. For
either liquidity option,
withdrawals during the
first five years there
is an adjustment to the
present value calculation.
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
Can I choose to have my Yes (see "D. Choosing an No No No
variable annuity payments Income Option" under
level for a certain DESCRIPTION OF THE
period of time? CONTRACT.)
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
Can I choose when I Yes (see "D. Choosing an No No No
would like the value of Income Option" under
my variable annuity DESCRIPTION OF THE
payments to change for CONTRACT.)
the first time?
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
What period certain 5-30 years 1-30 years 1-30 years 1-30 years
annuity options are
available?
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
Can I reverse my decision Yes. For 90 days after No No No
to annuitize? you have received your
contract you reverse
your decision to
annuitize. (see "B.
Right to Cancel" under
DESCRIPTION OF THE
CONTRACT.)
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
Does the annuitant become No Yes Yes Yes
the owner of the contract
on the Annuity Date?
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
What is the minimum $100 (see "D. Choosing $50 $50 $50
annuity payment? an Income Option" under
DESCRIPTION OF THE
CONTRACT.)
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
Who will receive the The owner The annuitant The annuitant The annuitant
annuity payments?
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
How frequently will I Monthly Monthly, Quarterly, Monthly, Quarterly, Monthly, Quarterly,
receive annuity Semi-annually, Annually Semi-annually, Annually Semi-annually, Annually
payments?
- ------------------------- ------------------------ ----------------------- ----------------------- -----------------------
</TABLE>

7
<PAGE>

PERFORMANCE INFORMATION

The Contract was first offered to the public in 1999. However, in order to
help people understand how investment performance can affect money invested
in the Sub-Accounts, the Company may advertise "total return" and "average
annual total return" performance information based on (1) the periods that
the Sub-Accounts have been in existence and (2) the periods that the
Underlying Funds have been in existence. Performance results in Tables 1 and
2 are calculated with all charges assumed to be those applicable to the
Contract, the Sub-Accounts and the Underlying Funds. Both the total return
and yield figures are based on historical earnings and are not intended to
indicate future performance.

The "total return" of a Sub-Account refers to the total of the income
generated by an investment in the Sub-Account and of the changes in the value
of the principal (due to realized and unrealized capital gains or losses) for
a specified period, reduced by Variable Account charges, and expressed as a
percentage. The "average annual total return" represents the average annual
percentage change in the value of an investment in the Sub-Account over a
given period of time. It represents averaged figures as opposed to the actual
performance of a Sub-Account, which will vary from year to year.

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

Quotations of average annual total return as shown in Table 1A and 2A are
calculated in the manner prescribed by the SEC and show the percentage rate
of return of a hypothetical initial investment of $1,000 for the most recent
one, five and ten year period or for a period covering the time the
Sub-Account has been in existence, if less than the prescribed periods. The
calculation is adjusted to reflect the deduction of the annual Sub-Account
asset charge of 1.45% and the Underlying Fund charges which would be assessed
if the investment were completely withdrawn at the end of the specified
period.

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

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

8
<PAGE>

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

At times, we may also advertise the ratings and other information assigned to
it by independent rating organizations such as A.M. Best Company ("A.M.
Best"), Moody's Investors Service ("Moody's"), Standard & Poor's Insurance
Rating Services ("S&P") and Duff & Phelps. A.M. Best's and Moody's ratings
reflect their current opinion of our relative financial strength and
operating performance in comparison to the norms of the life/health insurance
industry. S&P's and Duff & Phelps' ratings measure the ability of an
insurance company to meet its obligations under insurance policies it issues
and do not measure the ability of such companies to meet other non-policy
obligations. The ratings also do not relate to the performance of the
Underlying Funds.

TOTAL RETURN

"Total Return" refers to the total of the income generated by an investment
in a Sub-Account and of the changes of value of the principal invested (due
to realized and unrealized capital gains or losses) for a specified period,
reduced by the Sub-Account's asset charge.

Total Return figures are calculated by standardized methods prescribed by
rules of the Securities and Exchange Commission (the "SEC"). The quotations
are computed by finding the average annual compounded rates of return over
the specified periods that would equate the initial amount invested to the
ending redeemable values, according to the following formula:

(n)
P(1 + T) = ERV

Where: P = a hypothetical initial payment to the Variable Account
of $1,000

T = average annual total return

n = number of years

ERV = the ending redeemable value of the $1,000 payment at
the end of the specified period

The calculation of Total Return includes the annual charges against the assets
of the Sub-Account. This charge is 1.45% on an annual basis. The calculation
of ending redeemable value assumes (1) the Contract was issued at the beginning
of the period, and (2) a complete surrender of the Contract at the end of the
period.

9
<PAGE>

PERFORMANCE TABLES
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

TABLE 1
AVERAGE ANNUAL TOTAL RETURNS OF SUB-ACCOUNT
FOR PERIODS ENDING DECEMBER 31, 1998
SINCE INCEPTION OF SUB-ACCOUNT

<TABLE>
<CAPTION>
FOR YEAR SINCE
SUB-ACCOUNT ENDED INCEPTION OF
SUB-ACCOUNT INVESTING IN UNDERLYING FUND INCEPTION DATE 12/31/98 5 YEARS SUB-ACCOUNT
- ---------------------------------------- -------------- -------- ------- ------------
<S> <C> <C> <C> <C>
Select Emerging Markets Fund ....................... N/A N/A N/A N/A
Select International Equity Fund ................... 5/3/94 14.82% N/A 10.67%
DGPF International Equity Series ................... 5/6/93 8.75% 8.97% 10.24%
Fidelity VIP Overseas Portfolio .................... 9/5/91 11.14% 8.14% 8.47%
T. Rowe Price International Stock Portfolio ........ 5/1/95 14.20% N/A 9.51%
Select Aggressive Growth Fund ...................... 9/16/92 8.98% 13.36% 15.77%
Select Capital Appreciation Fund ................... 4/28/95 12.25% N/A 18.65%
Select Value Opportunity Fund ...................... 5/2/93 3.37% 11.49% 13.13%
Select Growth Fund ................................. 9/16/92 33.51% 20.41% 16.90%
Select Strategic Growth Fund ....................... N/A N/A N/A N/A
Growth Fund ........................................ 9/4/91 17.62% 17.31% 14.79%
Fidelity VIP Growth Portfolio ...................... 9/5/91 37.50% 20.01% 19.04%
Equity Index Fund .................................. 9/4/91 26.50% 21.63% 17.52%
Select Growth and Income Fund ...................... 9/16/92 14.77% 16.15% 13.91%
Fidelity VIP Equity-Income Portfolio ............... 9/5/91 10.03% 17.09% 16.73%
Fidelity VIP II Asset Manager Portfolio ............ 5/4/94 13.41% N/A 12.29%
Fidelity VIP High Income Portfolio ................. 9/24/91 -5.69% 7.25% 11.04%
Investment Grade Income Fund ...................... 9/5/91 6.43% 5.43% 6.89%
Government Bond Fund ............................... 9/8/91 6.14% 4.48% 5.39%
Money Market Fund .................................. 9/9/91 4.00% 3.72% 3.24%
</TABLE>

TABLE 2
AVERAGE ANNUAL TOTAL RETURNS OF SUB-ACCOUNT
FOR PERIODS ENDING DECEMBER 31, 1998
SINCE INCEPTION OF UNDERLYING FUND

<TABLE>
<CAPTION>
FOR YEAR 10 YEARS OR
UNDERLYING FUND ENDED SINCE INCEPTION
SUB-ACCOUNT INVESTING IN UNDERLYING FUND INCEPTION DATE 12/31/98 5 YEARS IF LESS
- ---------------------------------------- -------------- -------- ------- --------
<S> <C> <C> <C> <C>
Select Emerging Markets Fund ........................ 2/20/98 N/A N/A -22.43%
Select International Equity Fund .................... 5/2/94 14.82% N/A 10.67%
DGPF International Equity Series .................... 10/29/92 8.75% 8.97% 9.54%
Fidelity VIP Overseas Portfolio ..................... 1/28/87 11.14% 8.14% 8.52%
T. Rowe Price International Stock Portfolio ......... 3/31/94 14.20% N/A 8.09%
Select Aggressive Growth Fund ....................... 8/21/92 8.98% 13.36% 16.41%
Select Capital Appreciation Fund .................... 4/28/95 12.25% N/A 18.62%
Select Value Opportunity Fund ....................... 4/30/93 3.37% 11.49% 13.10%
Select Growth Fund .................................. 8/21/92 33.51% 20.41% 17.46%
Select Strategic Growth Fund ........................ 2/20/98 N/A N/A -3.67%
Growth Fund ......................................... 4/29/85 17.62% 17.31% 15.35%
Fidelity VIP Growth Portfolio ....................... 10/9/86 37.50% 20.01% 17.72%
Equity Index Fund ................................... 9/28/90 26.50% 21.63% 18.97%
Select Growth and Income Fund ....................... 8/21/92 14.77% 16.15% 13.87%
Fidelity VIP Equity-Income Portfolio ................ 10/9/86 10.03% 17.09% 13.98%
Fidelity VIP II Asset Manager Portfolio ............. 9/6/89 13.41% 10.22% 11.37%
Fidelity VIP High Income Portfolio .................. 9/19/85 -5.69% 7.25% 9.50%
Investment Grade Income Fund ....................... 4/29/85 6.43% 5.43% 7.61%
Government Bond Fund ................................ 8/26/91 6.14% 4.48% 5.18%
Money Market Fund ................................... 4/29/85 4.00% 3.72% 4.11%
</TABLE>

10
<PAGE>

YIELD AND EFFECTIVE YIELD - THE MONEY MARKET SUB-ACCOUNT

Set forth below is yield and effective yield information for the Money Market
Sub-Account for the seven-day period ended December 31, 1998:

Yield 3.67%
Effective Yield 3.74%

The yield and effective yield figures are calculated by standardized methods
prescribed by rules of the SEC. Under those methods, the yield quotation is
computed by determining the net change (exclusive of capital changes) in the
value of a hypothetical pre-existing account having a balance of one
accumulation unit of the Sub-Account at the beginning of the period, dividing
the difference by the value of the account at the beginning of the same
period to obtain the base period return, and then multiplying the return for
a seven-day base period by (365/7), with the resulting yield carried to the
nearest hundredth of one percent.

The Money Market Sub-Account computes effective yield by compounding the
unannualized base period return by using the formula:

(365/7)
Effective Yield = [ (base period return + 1) ] - 1

FINANCIAL STATEMENTS

Financial Statements are included for Allmerica Financial Life Insurance and
Annuity Company and for its Separate Account VA-K.

11
<PAGE>
ALLMERICA FINANCIAL
LIFE INSURANCE AND
ANNUITY COMPANY

CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
<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, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

/s/PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Boston, Massachusetts
February 2, 1999, except for paragraph 2 of Note 12,
which is as of March 19, 1999
<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) 1998 1997 1996
----------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
REVENUES
Premiums................................... $ 0.5 $ 22.8 $ 32.7
Universal life and investment product
policy fees.............................. 267.4 212.2 176.2
Net investment income...................... 151.3 164.2 171.7
Net realized investment gains (losses)..... 20.0 2.9 (3.6)
Other income............................... 0.6 1.4 0.9
------- ------- -------
Total revenues......................... 439.8 403.5 377.9
------- ------- -------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss
adjustment expenses...................... 153.9 187.8 192.6
Policy acquisition expenses................ 64.6 2.8 49.9
Sales practice litigation.................. 21.0 -- --
Loss from cession of disability income
business................................. -- 53.9 --
Other operating expenses................... 104.1 101.3 86.6
------- ------- -------
Total benefits, losses and expenses.... 343.6 345.8 329.1
------- ------- -------
Income before federal income taxes............. 96.2 57.7 48.8
------- ------- -------
FEDERAL INCOME TAX EXPENSE (BENEFIT)
Current.................................... 22.1 13.9 26.9
Deferred................................... 11.8 7.1 (9.8)
------- ------- -------
Total federal income tax expense....... 33.9 21.0 17.1
------- ------- -------
Net income..................................... $ 62.3 $ 36.7 $ 31.7
------- ------- -------
------- ------- -------
</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) 1998 1997
-------------------------------------------------------- ---------- ----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities at fair value (amortized cost of
$1,284.6 and $1,340.5)............................ $ 1,330.4 $ 1,402.5
Equity securities at fair value (cost of $27.4 and
$34.4)............................................ 31.8 54.0
Mortgage loans...................................... 230.0 228.2
Real estate......................................... 14.5 12.0
Policy loans........................................ 151.5 140.1
Other long-term investments......................... 9.1 20.3
---------- ----------
Total investments............................... 1,767.3 1,857.1
---------- ----------
Cash and cash equivalents............................. 217.9 31.1
Accrued investment income............................. 33.5 34.2
Deferred policy acquisition costs..................... 950.5 765.3
Reinsurance receivables on paid and unpaid losses,
future policy benefits and unearned premiums........ 308.0 251.1
Other assets.......................................... 46.9 10.7
Separate account assets............................... 11,020.4 7,567.3
---------- ----------
Total assets.................................... $ 14,344.5 $ 10,516.8
---------- ----------
---------- ----------
LIABILITIES
Policy liabilities and accruals:
Future policy benefits.............................. $ 2,284.8 $ 2,097.3
Outstanding claims, losses and loss adjustment
expenses.......................................... 17.9 18.5
Unearned premiums................................... 2.7 1.8
Contractholder deposit funds and other policy
liabilities....................................... 38.1 32.5
---------- ----------
Total policy liabilities and accruals........... 2,343.5 2,150.1
---------- ----------
Expenses and taxes payable............................ 146.2 77.6
Reinsurance premiums payable.......................... 45.7 4.9
Deferred federal income taxes......................... 78.8 75.9
Separate account liabilities.......................... 11,020.4 7,567.3
---------- ----------
Total liabilities............................... 13,634.6 9,875.8
---------- ----------
Commitments and contingencies (Note 12)
SHAREHOLDER'S EQUITY
Common stock, $1,000 par value, 10,000 shares
authorized, 2,524 and 2,521 shares issued and
outstanding......................................... 2.5 2.5
Additional paid-in capital............................ 407.9 386.9
Accumulated other comprehensive income................ 24.1 38.5
Retained earnings..................................... 275.4 213.1
---------- ----------
Total shareholder's equity...................... 709.9 641.0
---------- ----------
Total liabilities and shareholder's equity...... $ 14,344.5 $ 10,516.8
---------- ----------
---------- ----------
</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) 1998 1997 1996
----------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
COMMON STOCK................................... $ 2.5 $ 2.5 $ 2.5
-------- -------- --------

ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period............. 386.9 346.3 324.3
Issuance of common stock................... 21.0 40.6 22.0
-------- -------- --------
Balance at end of period................... 407.9 386.9 346.3
-------- -------- --------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Net unrealized appreciation on investments:
Balance at beginning of period............. 38.5 20.5 23.8
Appreciation (depreciation) during the
period:
Net (depreciation) appreciation on
available-for-sale securities........ (23.4) 27.0 (5.1)
Benefit (provision) for deferred
federal income taxes................. 9.0 (9.0) 1.8
-------- -------- --------
(14.4) 18.0 (3.3)
-------- -------- --------
Balance at end of period................... 24.1 38.5 20.5
-------- -------- --------
RETAINED EARNINGS
Balance at beginning of period............. 213.1 176.4 144.7
Net income................................. 62.3 36.7 31.7
-------- -------- --------
Balance at end of period................... 275.4 213.1 176.4
-------- -------- --------
Total shareholder's equity............. $ 709.9 $ 641.0 $ 545.7
-------- -------- --------
-------- -------- --------
</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) 1998 1997 1996
-------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Net income.................................. $ 62.3 $ 36.7 $ 31.7
Other comprehensive income:
Net (depreciation) appreciation on
available-for-sale securities......... (23.4) 27.0 (5.1)
Benefit (provision) for deferred federal
income taxes.......................... 9.0 (9.0) 1.8
------- ------- -------
Other comprehensive income.......... (14.4) 18.0 (3.3)
------- ------- -------
Comprehensive income.................... 47.9 $ 54.7 $ 28.4
------- ------- -------
------- ------- -------
</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) 1998 1997 1996
-------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.............................. $ 62.3 $ 36.7 $ 31.7
Adjustments to reconcile net income to
net cash used in operating activities:
Net realized gains.................. (20.0) (2.9) 3.6
Net amortization and depreciation... (7.1) -- 3.5
Sales practice litigation expense... 21.0
Loss from cession of disability
income business................... -- 53.9 --
Deferred federal income taxes....... 11.8 7.1 (9.8)
Payment related to cession of
disability income business........ -- (207.0) --
Change in deferred acquisition
costs............................. (177.8) (181.3) (66.8)
Change in reinsurance premiums
payable........................... 40.8 3.9 (0.2)
Change in accrued investment
income............................ 0.7 3.5 1.2
Change in policy liabilities and
accruals, net..................... 193.1 (72.4) (39.9)
Change in reinsurance receivable.... (56.9) 22.1 (1.5)
Change in expenses and taxes
payable........................... 55.4 0.2 32.3
Separate account activity, net...... (0.5) 1.6 8.0
Other, net.......................... (28.0) (8.7) 2.3
-------- -------- --------
Net cash provided by (used in)
operating activities.......... 94.8 (343.3) (35.6)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposals and maturities
of available-for-sale fixed
maturities............................ 187.0 909.7 809.4
Proceeds from disposals of equity
securities............................ 53.3 2.4 1.5
Proceeds from disposals of other
investments........................... 22.7 23.7 17.4
Proceeds from mortgages matured or
collected............................. 60.1 62.9 34.0
Purchase of available-for-sale fixed
maturities............................ (136.0) (579.7) (795.8)
Purchase of equity securities........... (30.6) (3.2) (13.2)
Purchase of other investments........... (22.7) (9.0) (13.9)
Purchase of mortgages................... (58.9) (70.4) (22.3)
Other investing activities, net......... (3.9) -- (2.0)
-------- -------- --------
Net cash provided by investing
activities........................ 71.0 336.4 15.1
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock and
capital paid in....................... 21.0 19.2 22.0
-------- -------- --------
Net cash provided by financing
activities........................ 21.0 19.2 22.0
-------- -------- --------
Net change in cash and cash equivalents..... 186.8 12.3 1.5
Cash and cash equivalents, beginning of
period..................................... 31.1 18.8 17.3
-------- -------- --------
Cash and cash equivalents, end of period.... $ 217.9 $ 31.1 $ 18.8
-------- -------- --------
-------- -------- --------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid........................... $ 0.6 $ -- $ 3.4
Income taxes paid....................... $ 36.2 $ 5.4 $ 16.5
</TABLE>

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

F-5
<PAGE>
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 SMA Financial Corporation ("SMAFCO"), which is wholly owned by
First Allmerica Financial Life Insurance Company ("FAFLIC"). FAFLIC is a wholly
owned subsidiary of Allmerica Financial Corporation ("AFC").

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 11 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.

Marketable equity securities and debt 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 to a plan to dispose of all real estate assets
by the end of 1998. As of December 31, 1998, there was 1 property remaining in
the Company's real estate portfolio, which is being actively marketed. As a
result of the Plan, real estate held by the Company and real estate joint
ventures were written down to the estimated fair value less cost of disposal.
Depreciation is not recorded on this asset while it is held for disposal.

F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 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 certain pension, 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

F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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% to 6% 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 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.

Individual disability income benefit liabilities for active lives are estimated
using the net level premium method, and assumptions as to future morbidity,
withdrawals 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, losses and loss adjustment expenses 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.

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 and individual 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
primarily consist of 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 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

F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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. 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
investment in foreign operations. This statement is effective for fiscal years
beginning after June 15, 1999. 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, 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 Company believes that the adoption of this statement will
not have a material effect on the results of operations or financial position.

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

F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

beginning after December 15, 1997. AFLIAC consists of one segment, Allmerica
Financial Services, which underwrites and distributes variable annuities and
variable universal life via retail channels.

In June 1997, the FASB also issued Statement No. 130, "Reporting Comprehensive
Income" ("Statement No. 130"), which established 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 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.

2. SIGNIFICANT TRANSACTIONS

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 does 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.

During 1998, 1997 and 1996 , SMAFCO contributed $21.0 million, $40.6 million and
$22.0 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.

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>
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>

F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
1997
----------------------------------------------
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....... $ 6.3 $ 0.5 $-- $ 6.8
States and political subdivisions....... 2.8 0.2 -- 3.0
Foreign governments..................... 50.1 2.0 -- 52.1
Corporate fixed maturities.............. 1,147.5 58.7 3.3 1,202.9
Mortgage-backed securities.............. 133.8 5.2 1.3 137.7
--------- ----- ----- --------
Total fixed maturities.................. $ 1,340.5 $66.6 $ 4.6 $1,402.5
--------- ----- ----- --------
--------- ----- ----- --------
Equity securities....................... $ 34.4 $19.9 $ 0.3 $ 54.0
--------- ----- ----- --------
--------- ----- ----- --------
</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, 1998, the amortized
cost and market value of these assets on deposit in New York were $268.5 million
and $284.1 million, respectively. At December 31, 1997, the amortized cost and
market value of assets on deposit were $276.8 million and $291.7 million,
respectively. In addition, fixed maturities, excluding those securities on
deposit in New York, with an amortized cost of $4.2 million were on deposit with
various state and governmental authorities at December 31, 1998 and 1997.

There were no contractual fixed maturity investment commitments at December 31,
1998 and 1997, respectively.

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>
1998
--------------------
DECEMBER 31, AMORTIZED FAIR
(IN MILLIONS) COST VALUE
- ------------------------------------------------------------ --------- --------
<S> <C> <C>
Due in one year or less..................................... $ 97.7 $ 98.9
Due after one year through five years....................... 269.1 278.3
Due after five years through ten years...................... 638.2 658.5
Due after ten years......................................... 279.6 294.7
--------- --------
Total....................................................... $ 1,284.6 $1,330.4
--------- --------
--------- --------
</TABLE>

F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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>
FOR THE YEARS ENDED DECEMBER 31, PROCEEDS FROM GROSS GROSS
(IN MILLIONS) VOLUNTARY SALES GAINS LOSSES
- ------------------------------------------------------------ --------------- ----- ------
<S> <C> <C> <C>
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 $ --

1996
Fixed maturities............................................ $496.6 $ 4.3 $ 8.3
Equity securities........................................... $ 1.5 $ 0.4 $ 0.1
</TABLE>

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>
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
---------- ------ -------
---------- ------ -------

1996
Net appreciation, beginning of year......................... $ 20.4 $ 3.4 $ 23.8
---------- ------ -------
Net (depreciation) appreciation on available-for-sale
securities................................................. (20.8) 6.7 (14.1)
Net appreciation from the effect on deferred policy
acquisition costs and on policy liabilities................ 9.0 -- 9.0
Benefit (provision) for deferred federal income taxes....... 4.1 (2.3) 1.8
---------- ------ -------
(7.7) 4.4 (3.3)
---------- ------ -------
Net appreciation, end of year............................... $ 12.7 $ 7.8 $ 20.5
---------- ------ -------
---------- ------ -------
</TABLE>

F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) Includes net appreciation on other investments of $.9 million, $1.3 million,
and $2.2 million in 1998, 1997, and 1996, respectively.

B. MORTGAGE LOANS AND REAL ESTATE

AFLIAC's mortgage loans and real estate are diversified by property type and
location. Real estate investments have been obtained primarily through
foreclosure. Mortgage loans are collateralized by the related properties and
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 real estate investments net of
applicable reserves were as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS) 1998 1997
- ------------------------------------------------------------ ------- -------
<S> <C> <C>
Mortgage loans.............................................. $ 230.0 $ 228.2
Real estate held for sale................................... 14.5 12.0
------- -------
Total mortgage loans and real estate........................ $ 244.5 $ 240.2
------- -------
------- -------
</TABLE>

Reserves for mortgage loans were $3.3 million and $9.4 million at December 31,
1998 and 1997, respectively.

During 1997, the Company committed to a plan to dispose of all real estate
assets by the end of 1998. At December 31, 1998, there was 1 property remaining
in the Company's real estate portfolio, which is being actively marketed. As a
result of the Plan, during 1997, real estate assets with a carrying amount of
$15.7 million were written down to the estimated fair value less cost to sell of
$12.0 million, and a net realized investment loss of $3.7 million was
recognized. Depreciation was not recorded on these assets while they were held
for disposal.

There were no non-cash investing activities, including real estate acquired
through foreclosure of mortgage loans, in 1998 and 1997. During 1996, non-cash
investing activities included real estate acquired through foreclosure of
mortgage loans, which had a fair value of $0.9 million.

There were no contractual commitments to extend credit under commercial mortgage
loan agreements at December 31, 1998. These commitments generally expire within
one year.

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

<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS) 1998 1997
- ------------------------------------------------------------ ------ ------
<S> <C> <C>
Property type:
Office building........................................... $129.2 $101.7
Residential............................................... 18.9 19.3
Retail.................................................... 37.4 42.2
Industrial/warehouse...................................... 59.2 61.9
Other..................................................... 3.1 24.5
Valuation allowances...................................... (3.3) (9.4)
------ ------
Total....................................................... $244.5 $240.2
------ ------
------ ------
</TABLE>

F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS) 1998 1997
- ------------------------------------------------------------ ------ ------
Geographic region:
<S> <C> <C>
South Atlantic............................................ $ 55.5 $ 68.7
Pacific................................................... 80.0 56.6
East North Central........................................ 41.4 61.4
Middle Atlantic........................................... 22.5 29.8
West South Central........................................ 6.7 6.9
New England............................................... 26.9 12.4
Other..................................................... 14.8 13.8
Valuation allowances...................................... (3.3) (9.4)
------ ------
Total....................................................... $244.5 $240.2
------ ------
------ ------
</TABLE>

At December 31, 1998, scheduled mortgage loan maturities were as follows: 1999
- -- $24.8 million; 2000 -- $43.5 million; 2001 -- $6.6 million; 2002 -- $11.5
million; 2003 -- $0.6 million; and $143.0 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 1998, the Company did not refinance any mortgage loans based
on terms which differed from those granted to new borrowers.

C. INVESTMENT VALUATION ALLOWANCES

Investment valuation allowances, which have been deducted in arriving at
investment carrying values as presented in the balance sheet 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>
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
----- ----- --- -----
----- ----- --- -----
1996
Mortgage loans.............................................. $12.5 $ 4.5 $7.5 $ 9.5
Real estate................................................. 2.1 -- 0.4 1.7
----- ----- --- -----
Total................................................... $14.6 $ 4.5 $7.9 $11.2
----- ----- --- -----
----- ----- --- -----
</TABLE>

Provisions on mortgages during 1998 reflect the release of redundant 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
cost to sell pursuant to the aforementioned 1997 plan of disposal.

The carrying value of impaired loans was $15.3 million and $20.6 million, with
related reserves of $1.5 million and $7.1 million as of December 31, 1998 and
1997, respectively. All impaired loans were reserved as of December 31, 1998 and
1997.

The average carrying value of impaired loans was $17.0 million, $19.8 million
and $26.3 million, with related interest income while such loans were impaired
of $2.0 million, $2.2 million and $3.4 million as of December 31, 1998, 1997 and
1996, respectively.

F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

D. OTHER

At December 31, 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) 1998 1997 1996
- ------------------------------------------------------------ ------ ------ ------
<S> <C> <C> <C>
Fixed maturities............................................ $107.7 $130.0 $137.2
Mortgage loans.............................................. 25.5 20.4 22.0
Equity securities........................................... 0.3 1.3 0.7
Policy loans................................................ 11.7 10.8 10.2
Real estate................................................. 3.3 3.9 6.2
Other long-term investments................................. 1.5 1.0 0.8
Short-term investments...................................... 4.2 1.4 1.4
------ ------ ------
Gross investment income..................................... 154.2 168.8 178.5
Less investment expenses.................................... (2.9) (4.6) (6.8)
------ ------ ------
Net investment income....................................... $151.3 $164.2 $171.7
------ ------ ------
------ ------ ------
</TABLE>

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 investment,
had no impact in 1998 and 1997, and reduced net income by $0.1 million in 1996.

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 $12.6 million, $21.1 million and $25.4 million at December 31,
1998, 1997 and 1996, respectively. Interest income on restructured mortgage
loans that would have been recorded in accordance with the original terms of
such loans amounted to $1.4 million, $1.9 million and $3.6 million in 1998,
1997, and 1996, respectively. Actual interest income on these loans included in
net investment income aggregated $1.8 million, $2.1 million and $2.2 million in
1998, 1997, and 1996, respectively.

There were no fixed maturities or mortgage loans which, were non-income
producing for the twelve months ended December 31, 1998.

B. REALIZED INVESTMENT GAINS AND LOSSES

Realized gains (losses) on investments were as follows:

F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

C. OTHER COMPREHENSIVE INCOME RECONCILIATION

The following table provides a reconciliation of gross unrealized gains to the
net balance shown in the Statement of Comprehensive income:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1998 1997 1996
- ------------------------------------------------------------ ------- ------- -------
<S> <C> <C> <C>
Unrealized gains on securities:
Unrealized holding gains arising during period (net of taxes
of $(5.6) million, $10.2 million and $(2.9) million in
1998, 1997 and 1996 respectively).......................... $ (8.2) $ 20.3 $ (5.3)
Less: reclassification adjustment for gains included in net
income (net of taxes of $3.4 million, $1.2 million and
$(1.0) million in 1998, 1997 and 1996 respectively)........ 6.2 2.3 (2.0)
------- ------- -------
Other comprehensive income.................................. $ (14.4) $ 18.0 $ (3.3)
------- ------- -------
------- ------- -------
</TABLE>

5. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS

Statement No. 107, "Disclosures about Fair Value of Financial Instruments"
("Statement No, 107"), 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

MORTGAGE LOANS

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

F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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.

INVESTMENT CONTRACTS (WITHOUT MORTALITY FEATURES)

Fair values for the Company's liabilities under investment type contracts are
estimated based on current surrender values.

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

<TABLE>
<CAPTION>
1998 1997
--------------------- ---------------------
DECEMBER 31, CARRYING FAIR CARRYING FAIR
(IN MILLIONS) VALUE VALUE VALUE VALUE
- ------------------------------------------------------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and cash equivalents................................. $ 217.9 $ 217.9 $ 31.1 $ 31.1
Fixed maturities.......................................... 1,330.4 1,330.4 1,402.5 1,402.5
Equity securities......................................... 31.8 31.8 54.0 54.0
Mortgage loans............................................ 230.0 241.9 228.2 239.8
Policy loans.............................................. 151.5 151.5 140.1 140.1
--------- --------- --------- ---------
$ 1,961.6 $ 1,973.5 $ 1,855.9 $ 1,867.5
--------- --------- --------- ---------
--------- --------- --------- ---------
FINANCIAL LIABILITIES
Individual fixed annuity contracts........................ $ 1,069.4 $ 1,034.6 $ 876.0 $ 850.6
Supplemental contracts without life Contingencies......... 16.6 16.6 15.3 15.3
--------- --------- --------- ---------
$ 1,086.0 $ 1,051.2 $ 891.3 $ 865.9
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

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
(benefit) in the statement of income is shown below:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1998 1997 1996
- ------------------------------------------------------------ ----- ----- -----
<S> <C> <C> <C>
Federal income tax expense (benefit)
Current................................................... $22.1 $13.9 $26.9
Deferred.................................................. 11.8 7.1 (9.8)
----- ----- -----
Total....................................................... $33.9 $21.0 $17.1
----- ----- -----
----- ----- -----
</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.

F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The deferred tax liabilities are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS) 1998 1997
- ------------------------------------------------------------ -------- --------
<S> <C> <C>
Deferred tax (assets) liabilities
Policy reserves........................................... $ (205.1) $ (175.8)
Deferred acquisition costs................................ 278.8 226.4
Investments, net.......................................... 12.5 27.0
Sales practice litigation................................. (7.4) --
Bad debt reserve.......................................... (0.4) (2.0)
Other, net................................................ 0.4 0.3
-------- --------
Deferred tax liability, net................................. $ 78.8 $ 75.9
-------- --------
-------- --------
</TABLE>

Gross deferred income tax liabilities totaled $291.7 million and $253.7 million
at December 31, 1998 and 1997, respectively. Gross deferred income tax assets
totaled $212.9 million and $177.8 at December 31, 1998 and 1997, 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 IRS, and
provisions are routinely made in the financial statements in anticipation of the
results of these audits. The IRS has examined the consolidated group's federal
income tax returns through 1994. The Company has appealed certain adjustments
proposed by the IRS with respect to the consolidated group's federal income tax
returns for 1992, 1993, and 1994. 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
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 $145.4 million and $124.1 million in 1998 and 1997. The
net amounts payable to FAFLIC and affiliates for accrued expenses and various
other liabilities and receivables were $16.4 million and $15.0 million at
December 31, 1998 and 1997, 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

F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 1998, 1997 and 1996. During
1999, AFLIAC could pay dividends of $26.1 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 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, 1998 and 1997 for the
disability income business were $230.8 million and $216.1 million, respectively,
traditional life were $11.4 million and $15.2 million, respectively, and
universal and variable universal life were $65.8 million and $19.8 million,
respectively.

The effects of reinsurance were as follows:

F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1998 1997 1996
- ------------------------------------------------------------ ------ ------ ------
Insurance and other individual policy benefits, claims,
losses and loss adjustment expenses:
<S> <C> <C> <C>
Direct.................................................... $204.0 $226.0 $206.4
Assumed................................................... -- 4.2 4.5
Ceded..................................................... (50.1) (42.4) (18.3)
------ ------ ------
Net policy benefits, claims, losses and loss adjustment
expenses................................................... $153.9 $187.8 $192.6
------ ------ ------
------ ------ ------
</TABLE>

10. DEFERRED POLICY ACQUISITION COSTS

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

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1998 1997 1996
- ------------------------------------------------------------ ------ ------ ------
<S> <C> <C> <C>
Balance at beginning of year................................ $765.3 $632.7 $555.7
Acquisition expenses deferred............................. 242.4 184.2 116.6
Amortized to expense during the year...................... (64.6) (53.1) (49.9)
Adjustment to equity during the year...................... 7.4 (10.2) 10.3
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...................................... $950.5 $765.3 $632.7
------ ------ ------
------ ------ ------
</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, losses and loss adjustment expenses as new
information becomes available and further events occur which may impact the
resolution of 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, losses and loss
adjustment expenses related to the Company's disability income business was
$233.3 million and $219.9 million at December 31, 1998 and 1997. 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 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

F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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, to which the court granted preliminary approval on
December 4, 1998. A hearing was held on March 19, 1999 to consider final
approval of the settlement agreement. A decision by the court is expected to be
rendered in the near future. Accordingly, 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, if
any, 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 of, based on the advice
of legal counsel, the ultimate resolution of these proceedings will not have a
material effect on the Company's financial statements. 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 is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.

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

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. Statutory net income and surplus are as follows:

<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1997 1996
- ------------------------------------------------------------ ------ ------ ------
<S> <C> <C> <C>
Statutory net income........................................ $ (8.2) $ 31.5 $ 5.4
Statutory shareholder's surplus............................. $309.7 $307.1 $234.0
</TABLE>

F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. EVENTS SUBSEQUENT TO DATE OF INDEPENDENT ACCOUNTANTS' REPORT (UNAUDITED)

AFC has made certain changes to its corporate structure effective July 1, 1999.
These changes include the transfer of FAFLIC's ownership of Allmerica Property &
Casualty Companies, Inc., as well as several non-insurance subsidiaries, from
FAFLIC to AFC. In addition, certain changes affected AFLIAC. SMAFCO transferred
its ownership in AFLIAC to FAFLIC. Hence, AFLIAC became a wholly owned
subsidiary of FAFLIC. Further, four non-insurance subsidiaries previously held
by SMAFCO were contributed to AFLIAC. Under an agreement with the Commonwealth
of Massachusetts Insurance Commissioner ("the Commissioner"), AFC has
contributed to FAFLIC capital of $125.0 million and agreed to maintain FAFLIC's
statutory surplus at specified levels during the following six years. In
addition, any dividend from FAFLIC to AFC during 2000 and 2001 would require the
prior approval of the Commissioner. This transaction was approved by the
Commissioner on May 24, 1999.

In 1998, the net income of the subsidiaries, which was reported in SMAFCO's
results of operations, to be transferred to AFLIAC from SMAFCO pursuant to the
aforementioned change in corporate structure was $18.8 million. As of December
31, 1998, the total assets and total shareholders' equity of these subsidiaries
were $16.8 million and $9.2 million, respectively.

On May 19, 1999, the Federal District Court in Worcester, Massachusetts issued
an order relating to the litigation mentioned in Note 12, above, certifying the
class for settlement purposes and granting final approval of the settlement
agreement.

F-22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of Allmerica Financial Life Insurance and Annuity
Company and the Contractowners of the Separate Account VA-K Allmerica Advantage
Variable Annuity and ExecAnnuity Plus Variable Annuity of Allmerica Financial
Life Insurance and Annuity Company

In our opinion, the accompanying statements of assets and liabilities, and the
related statements of operations and changes in net assets present fairly, in
all material respects, the financial position of each of the Sub-Accounts
constituting the Separate Account VA-K Allmerica Advantage Variable Annuity and
ExecAnnuity Plus Variable Annuity of Allmerica Financial Life Insurance and
Annuity Company at December 31, 1998, the results of each of their operations
and the changes in each of their net assets for each of the two years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of Allmerica Financial Life
Insurance and Annuity Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the Funds, provide a reasonable basis for the opinion
expressed above.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Boston, Massachusetts
March 26, 1999
<PAGE>
SEPARATE ACCOUNT VA-K ALLMERICA ADVANTAGE VARIABLE ANNUITY AND EXECANNUITY PLUS
VARIABLE ANNUITY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SELECT
INVESTMENT MONEY EQUITY GOVERNMENT AGGRESSIVE
GROWTH GRADE INCOME MARKET INDEX BOND GROWTH
------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in shares of Allmerica
Investment Trust........................... $453,329,914 $166,255,290 $162,581,881 $351,478,319 $71,863,194 $315,970,960
Investments in shares of Fidelity Variable
Insurance Products Funds (VIP)............. -- -- -- -- -- --
Investment in shares of T. Rowe Price
International Series, Inc.................. -- -- -- -- -- --
Investment in shares of Delaware Group
Premium Fund, Inc.......................... -- -- -- -- -- --
Receivable from Allmerica Financial Life
Insurance
and Annuity Company (Sponsor).............. -- 19,606 -- -- -- --
------------ ------------ ------------ ------------ ----------- ------------
Total assets.............................. 453,329,914 166,274,896 162,581,881 351,478,319 71,863,194 315,970,960

LIABILITIES:
Payable to Allmerica Financial Life
Insurance
and Annuity Company (Sponsor).............. 133,175 -- 88,289 83,355 106 1,660
------------ ------------ ------------ ------------ ----------- ------------
Net assets................................ $453,196,739 $166,274,896 $162,493,592 $351,394,964 $71,863,088 $315,969,300
------------ ------------ ------------ ------------ ----------- ------------
------------ ------------ ------------ ------------ ----------- ------------

Net asset distribution by category:
Qualified variable annuity contracts...... $314,229,248 $109,523,792 $109,330,421 $236,665,487 $46,647,495 $222,038,496
Non-qualified variable annuity
contracts............................... 138,967,491 56,751,104 53,163,171 114,729,477 25,215,593 93,930,804
------------ ------------ ------------ ------------ ----------- ------------
$453,196,739 $166,274,896 $162,493,592 $351,394,964 $71,863,088 $315,969,300
------------ ------------ ------------ ------------ ----------- ------------
------------ ------------ ------------ ------------ ----------- ------------

Qualified units outstanding, December 31,
1998....................................... 114,345,181 67,244,780 86,613,172 72,485,823 31,761,575 88,373,003
Net asset value per qualified unit, December
31, 1998................................... $ 2.748076 $ 1.628733 $ 1.262284 $ 3.264990 $ 1.468677 $ 2.512515
Non-qualified units outstanding, December
31, 1998................................... 50,569,014 34,843,711 42,116,646 35,139,331 17,168,917 37,385,172
Net asset value per non-qualified unit,
December 31, 1998.......................... $ 2.748076 $ 1.628733 $ 1.262284 $ 3.264990 $ 1.468677 $ 2.512515

<CAPTION>
SELECT
SELECT GROWTH SELECT VALUE
GROWTH AND INCOME OPPORTUNITY*
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments in shares of Allmerica
Investment Trust........................... $323,203,657 $270,427,710 $200,579,014
Investments in shares of Fidelity Variable
Insurance Products Funds (VIP)............. -- -- --
Investment in shares of T. Rowe Price
International Series, Inc.................. -- -- --
Investment in shares of Delaware Group
Premium Fund, Inc.......................... -- -- --
Receivable from Allmerica Financial Life
Insurance
and Annuity Company (Sponsor).............. -- -- --
------------ ------------ ------------
Total assets.............................. 323,203,657 270,427,710 200,579,014
LIABILITIES:
Payable to Allmerica Financial Life
Insurance
and Annuity Company (Sponsor).............. 2,311 31,536 1,862
------------ ------------ ------------
Net assets................................ $323,201,346 $270,396,174 $200,577,152
------------ ------------ ------------
------------ ------------ ------------
Net asset distribution by category:
Qualified variable annuity contracts...... $227,291,255 $180,022,112 $142,898,046
Non-qualified variable annuity
contracts............................... 95,910,091 90,374,062 57,679,106
------------ ------------ ------------
$323,201,346 $270,396,174 $200,577,152
------------ ------------ ------------
------------ ------------ ------------
Qualified units outstanding, December 31,
1998....................................... 85,096,800 79,298,223 71,065,129
Net asset value per qualified unit, December
31, 1998................................... $ 2.670973 $ 2.270191 $ 2.010804
Non-qualified units outstanding, December
31, 1998................................... 35,908,296 39,809,012 28,684,598
Net asset value per non-qualified unit,
December 31, 1998.......................... $ 2.670973 $ 2.270191 $ 2.010804
</TABLE>

* Name changed. See Note 1.

The accompanying notes are an integral part of these financial statements.

SA-1
<PAGE>
SEPARATE ACCOUNT VA-K ALLMERICA ADVANTAGE VARIABLE ANNUITY AND EXECANNUITY PLUS
VARIABLE ANNUITY
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SELECT SELECT DGPF
INTERNATIONAL CAPITAL INTERNATIONAL FIDELITY VIP FIDELITY VIP
EQUITY APPRECIATION EQUITY HIGH INCOME EQUITY-INCOME
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in shares of Allmerica
Investment Trust........................... $208,681,110 $150,062,155 $ -- $ -- $ --
Investments in shares of Fidelity Variable
Insurance Products Funds (VIP)............. -- -- -- 209,594,305 584,136,591
Investment in shares of T. Rowe Price
International Series, Inc.................. -- -- -- -- --
Investment in shares of Delaware Group
Premium Fund, Inc.......................... -- -- 118,501,386 -- --
Receivable from Allmerica Financial Life
Insurance
and Annuity Company (Sponsor).............. -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Total assets.............................. 208,681,110 150,062,155 118,501,386 209,594,305 584,136,591

LIABILITIES:
Payable to Allmerica Financial Life
Insurance
and Annuity Company (Sponsor).............. 1,913 1,006 1,071 256 4,816
------------- ------------- ------------- ------------- -------------
Net assets................................ $208,679,197 $150,061,149 $118,500,315 $209,594,049 $584,131,775
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------

Net asset distribution by category:
Qualified variable annuity contracts...... $146,629,320 $104,737,980 $ 82,843,189 $138,969,164 $391,512,849
Non-qualified variable annuity
contracts............................... 62,049,877 45,323,169 35,657,126 70,624,885 192,618,926
------------- ------------- ------------- ------------- -------------
$208,679,197 $150,061,149 $118,500,315 $209,594,049 $584,131,775
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------

Qualified units outstanding, December 31,
1998....................................... 91,352,709 55,871,132 47,733,352 64,864,268 125,999,304
Net asset value per qualified unit, December
31, 1998................................... $ 1.605090 $ 1.874635 $ 1.735541 $ 2.142461 $ 3.107262
Non-qualified units outstanding, December
31, 1998................................... 38,658,192 24,177,063 20,545,251 32,964,373 61,989,921
Net asset value per non-qualified unit,
December 31, 1998.......................... $ 1.605090 $ 1.874635 $ 1.735541 $ 2.142461 $ 3.107262

<CAPTION>
T. ROWE
FIDELITY VIP PRICE
FIDELITY VIP FIDELITY VIP II INTERNATIONAL
GROWTH OVERSEAS ASSET MANAGER STOCK
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in shares of Allmerica
Investment Trust........................... $ -- $ -- $ -- $ --
Investments in shares of Fidelity Variable
Insurance Products Funds (VIP)............. 534,372,318 107,144,689 119,652,554 --
Investment in shares of T. Rowe Price
International Series, Inc.................. -- -- -- 95,438,404
Investment in shares of Delaware Group
Premium Fund, Inc.......................... -- -- -- --
Receivable from Allmerica Financial Life
Insurance
and Annuity Company (Sponsor).............. -- -- -- --
------------- ------------- ------------- ------------
Total assets.............................. 534,372,318 107,144,689 119,652,554 95,438,404
LIABILITIES:
Payable to Allmerica Financial Life
Insurance
and Annuity Company (Sponsor).............. 5,144 2,512 703 1,080
------------- ------------- ------------- ------------
Net assets................................ $ 534,367,174 $ 107,142,177 $119,651,851 $95,437,324
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
Net asset distribution by category:
Qualified variable annuity contracts...... $ 373,220,162 $ 77,463,381 $ 79,681,761 $67,381,222
Non-qualified variable annuity
contracts............................... 161,147,012 29,678,796 39,970,090 28,056,102
------------- ------------- ------------- ------------
$ 534,367,174 $ 107,142,177 $119,651,851 $95,437,324
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
Qualified units outstanding, December 31,
1998....................................... 104,072,745 42,694,627 46,419,390 48,268,596
Net asset value per qualified unit, December
31, 1998................................... $ 3.586147 $ 1.814359 $ 1.716562 $ 1.395964
Non-qualified units outstanding, December
31, 1998................................... 44,935,976 16,357,730 23,284,967 20,098,011
Net asset value per non-qualified unit,
December 31, 1998.......................... $ 3.586147 $ 1.814359 $ 1.716562 $ 1.395964
</TABLE>

The accompanying notes are an integral part of these financial statements.

SA-2
<PAGE>
SEPARATE ACCOUNT VA-K ALLMERICA ADVANTAGE VARIABLE ANNUITY AND EXECANNUITY PLUS
VARIABLE ANNUITY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH INVESTMENT GRADE INCOME MONEY MARKET
-------------------------- -------------------------- --------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1998 1997 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends.................................. $ 4,406,557 $ 4,677,303 $ 9,136,667 $ 7,765,722 $ 6,950,244 $ 5,864,394
Mortality and expense risk fees............ (5,038,572) (3,908,676) (1,884,657) (1,459,800) (1,609,169) (1,353,573)
Administrative expense fees................ (820,233) (636,296) (306,804) (237,642) (261,957) (220,349)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss)............. (1,452,248) 132,331 6,945,206 6,068,280 5,079,118 4,290,472
------------ ------------ ------------ ------------ ------------ ------------

REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................. 4,179,288 58,607,134 -- -- -- --
Net realized gain (loss) from sales of
investments.............................. 1,604,114 731,664 309,825 (44,567) -- --
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss)................... 5,783,402 59,338,798 309,825 (44,567) -- --
Net unrealized gain (loss)................. 61,966,017 3,870,618 2,193,617 3,131,133 -- --
------------ ------------ ------------ ------------ ------------ ------------
Net realized and unrealized gain
(loss)................................. 67,749,419 63,209,416 2,503,442 3,086,566 -- --
------------ ------------ ------------ ------------ ------------ ------------

Net increase (decrease) in net assets from
operations............................... 66,297,171 63,341,747 9,448,648 9,154,846 5,079,118 4,290,472
------------ ------------ ------------ ------------ ------------ ------------

CONTRACT TRANSACTIONS:
Net purchase payments...................... 23,152,380 23,594,450 10,363,995 8,429,192 388,698,585 333,708,420
Withdrawals................................ (22,500,816) (14,324,472) (9,709,421) (7,610,810) (15,069,288) (10,554,703)
Contract benefits.......................... (2,796,974) (1,922,040) (929,739) (604,277) (1,010,367) (909,248)
Contract charges........................... (147,854) (133,594) (42,918) (43,383) (24,514) (23,086)
Transfers between sub-accounts (including
fixed account), net...................... 20,863,894 28,600,309 22,142,688 9,492,754 (364,921,954) (344,087,104)
Other transfers from (to) the General
Account.................................. 3,452,255 8,871,794 2,166,365 1,855,856 38,477,265 21,015,281
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets from
contract transactions.................... 22,022,885 44,686,447 23,990,970 11,519,332 46,149,727 (850,440)
------------ ------------ ------------ ------------ ------------ ------------

Net increase (decrease) in net assets...... 88,320,056 108,028,194 33,439,618 20,674,178 51,228,845 3,440,032

NET ASSETS:
Beginning of year.......................... 364,876,683 256,848,489 132,835,278 112,161,100 111,264,747 107,824,715
------------ ------------ ------------ ------------ ------------ ------------
End of year................................ $453,196,739 $364,876,683 $166,274,896 $132,835,278 $162,493,592 $111,264,747
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------

<CAPTION>
EQUITY INDEX
--------------------------

YEAR ENDED DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends.................................. $ 3,345,195 $ 2,257,717
Mortality and expense risk fees............ (3,473,180) (2,067,797)
Administrative expense fees................ (565,402) (336,618)
------------ ------------
Net investment income (loss)............. (693,387) (146,698)
------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................. 8,462,654 5,924,374
Net realized gain (loss) from sales of
investments.............................. 3,042,914 891,735
------------ ------------
Net realized gain (loss)................... 11,505,568 6,816,109
Net unrealized gain (loss)................. 55,881,208 35,286,956
------------ ------------
Net realized and unrealized gain
(loss)................................. 67,386,776 42,103,065
------------ ------------
Net increase (decrease) in net assets from
operations............................... 66,693,389 41,956,367
------------ ------------
CONTRACT TRANSACTIONS:
Net purchase payments...................... 25,436,203 20,271,093
Withdrawals................................ (13,594,962) (6,948,755)
Contract benefits.......................... (2,098,286) (1,317,585)
Contract charges........................... (84,863) (54,416)
Transfers between sub-accounts (including
fixed account), net...................... 47,344,643 42,716,321
Other transfers from (to) the General
Account.................................. 7,492,994 9,939,409
------------ ------------
Net increase (decrease) in net assets from
contract transactions.................... 64,495,729 64,606,067
------------ ------------
Net increase (decrease) in net assets...... 131,189,118 106,562,434
NET ASSETS:
Beginning of year.......................... 220,205,846 113,643,412
------------ ------------
End of year................................ $351,394,964 $220,205,846
------------ ------------
------------ ------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

SA-3
<PAGE>
SEPARATE ACCOUNT VA-K ALLMERICA ADVANTAGE VARIABLE ANNUITY AND EXECANNUITY PLUS
VARIABLE ANNUITY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
SELECT
GOVERNMENT BOND AGGRESSIVE GROWTH SELECT GROWTH
------------------------ -------------------------- --------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1998 1997 1998 1997
----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends.................................. $ 3,358,913 $ 2,535,091 $ -- $ -- $ 207,168 $ 546,016
Mortality and expense risk fees............ (744,074) (524,714) (3,432,518) (2,622,781) (3,058,313) (1,741,645)
Administrative expense fees................ (121,128) (85,419) (558,782) (426,964) (497,865) (283,523)
----------- ----------- ------------ ------------ ------------ ------------
Net investment income (loss)............. 2,493,711 1,924,958 (3,991,300) (3,049,745) (3,349,010) (1,479,152)
----------- ----------- ------------ ------------ ------------ ------------

REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................. -- -- -- 19,360,712 2,488,257 9,673,224
Net realized gain (loss) from sales of
investments.............................. 79,202 (121,227) 1,315,125 2,017,143 1,422,656 313,313
----------- ----------- ------------ ------------ ------------ ------------
Net realized gain (loss)................... 79,202 (121,227) 1,315,125 21,377,855 3,910,913 9,986,537
Net unrealized gain (loss)................. 920,202 550,499 28,554,242 15,604,997 73,132,113 29,255,432
----------- ----------- ------------ ------------ ------------ ------------
Net realized and unrealized gain
(loss)................................. 999,404 429,272 29,869,367 36,982,852 77,043,026 39,241,969
----------- ----------- ------------ ------------ ------------ ------------

Net increase (decrease) in net assets from
operations............................... 3,493,115 2,354,230 25,878,067 33,933,107 73,694,016 37,762,817
----------- ----------- ------------ ------------ ------------ ------------

CONTRACT TRANSACTIONS:
Net purchase payments...................... 9,387,842 5,942,847 21,281,666 20,169,980 22,206,826 16,019,651
Withdrawals................................ (4,327,463) (3,481,815) (15,897,301) (10,807,027) (10,783,834) (5,353,128)
Contract benefits.......................... (646,947) (178,244) (842,853) (526,406) (896,543) (391,982)
Contract charges........................... (14,294) (15,235) (115,070) (101,719) (77,520) (48,587)
Transfers between sub-accounts (including
fixed account), net...................... 13,782,410 2,892,959 35,552,684 19,497,013 43,402,629 39,243,670
Other transfers from (to) the General
Account.................................. 1,396,680 755,654 3,919,867 6,766,308 6,310,988 7,296,335
----------- ----------- ------------ ------------ ------------ ------------
Net increase (decrease) in net assets from
contract transactions.................... 19,578,228 5,916,166 43,898,993 34,998,149 60,162,546 56,765,959
----------- ----------- ------------ ------------ ------------ ------------

Net increase (decrease) in net assets...... 23,071,343 8,270,396 69,777,060 68,931,256 133,856,562 94,528,776

NET ASSETS:
Beginning of year.......................... 48,791,745 40,521,349 246,192,240 177,260,984 189,344,784 94,816,008
----------- ----------- ------------ ------------ ------------ ------------
End of year................................ $71,863,088 $48,791,745 $315,969,300 $246,192,240 $323,201,346 $189,344,784
----------- ----------- ------------ ------------ ------------ ------------
----------- ----------- ------------ ------------ ------------ ------------

<CAPTION>
SELECT
GROWTH AND INCOME
--------------------------

YEAR ENDED DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends.................................. $ 2,954,575 $ 2,261,128
Mortality and expense risk fees............ (2,918,081) (2,108,661)
Administrative expense fees................ (475,036) (343,271)
------------ ------------
Net investment income (loss)............. (438,542) (190,804)
------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................. 849,325 17,526,962
Net realized gain (loss) from sales of
investments.............................. 1,103,007 324,268
------------ ------------
Net realized gain (loss)................... 1,952,332 17,851,230
Net unrealized gain (loss)................. 30,548,177 13,743,540
------------ ------------
Net realized and unrealized gain
(loss)................................. 32,500,509 31,594,770
------------ ------------
Net increase (decrease) in net assets from
operations............................... 32,061,967 31,403,966
------------ ------------
CONTRACT TRANSACTIONS:
Net purchase payments...................... 15,264,363 14,721,001
Withdrawals................................ (11,976,840) (7,632,571)
Contract benefits.......................... (2,094,743) (1,069,129)
Contract charges........................... (65,775) (54,866)
Transfers between sub-accounts (including
fixed account), net...................... 26,940,573 24,504,584
Other transfers from (to) the General
Account.................................. 5,446,574 7,823,859
------------ ------------
Net increase (decrease) in net assets from
contract transactions.................... 33,514,152 38,292,878
------------ ------------
Net increase (decrease) in net assets...... 65,576,119 69,696,844
NET ASSETS:
Beginning of year.......................... 204,820,055 135,123,211
------------ ------------
End of year................................ $270,396,174 $204,820,055
------------ ------------
------------ ------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

SA-4
<PAGE>
SEPARATE ACCOUNT VA-K ALLMERICA ADVANTAGE VARIABLE ANNUITY AND EXECANNUITY PLUS
VARIABLE ANNUITY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
SELECT VALUE SELECT SELECT CAPITAL
OPPORTUNITY* INTERNATIONAL EQUITY APPRECIATION
-------------------------- -------------------------- --------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1998 1997 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends.................................. $ 1,687,684 $ 908,127 $ 2,621,728 $ 3,685,822 $ -- $ --
Mortality and expense risk fees............ (2,273,384) (1,575,698) (2,307,959) (1,703,767) (1,566,368) (1,185,389)
Administrative expense fees................ (370,086) (256,508) (375,715) (277,358) (254,990) (192,970)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss)............. (955,786) (924,079) (61,946) 1,704,697 (1,821,358) (1,378,359)
------------ ------------ ------------ ------------ ------------ ------------

REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................. 655,973 21,872,379 -- 5,123,796 22,715,912 --
Net realized gain (loss) from sales of
investments.............................. 420,110 124,769 463,309 355,498 922,786 166,549
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss)................... 1,076,083 21,997,148 463,309 5,479,294 23,638,698 166,549
Net unrealized gain (loss)................. 5,479,539 5,647,860 24,779,920 (4,095,030) (5,203,690) 14,907,829
------------ ------------ ------------ ------------ ------------ ------------
Net realized and unrealized gain
(loss)................................. 6,555,622 27,645,008 25,243,229 1,384,264 18,435,008 15,074,378
------------ ------------ ------------ ------------ ------------ ------------

Net increase (decrease) in net assets from
operations............................... 5,599,836 26,720,929 25,181,283 3,088,961 16,613,650 13,696,019
------------ ------------ ------------ ------------ ------------ ------------

CONTRACT TRANSACTIONS:
Net purchase payments...................... 12,662,724 12,525,397 13,306,352 15,822,978 9,353,854 10,932,867
Withdrawals................................ (8,295,446) (4,937,439) (7,314,601) (5,740,190) (5,713,842) (4,048,564)
Contract benefits.......................... (575,288) (390,911) (685,709) (349,685) (419,195) (326,931)
Contract charges........................... (59,441) (45,532) (64,103) (50,179) (46,233) (38,655)
Transfers between sub-accounts (including
fixed account), net...................... 22,459,345 30,274,306 14,347,051 36,530,634 9,998,422 13,171,289
Other transfers from (to) the General
Account.................................. 3,197,294 6,384,929 2,330,088 7,275,661 1,818,486 6,607,194
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets from
contract transactions.................... 29,389,188 43,810,750 21,919,078 53,489,219 14,991,492 26,297,200
------------ ------------ ------------ ------------ ------------ ------------

Net increase (decrease) in net assets...... 34,989,024 70,531,679 47,100,361 56,578,180 31,605,142 39,993,219

NET ASSETS:
Beginning of year.......................... 165,588,128 95,056,449 161,578,836 105,000,656 118,456,007 78,462,788
------------ ------------ ------------ ------------ ------------ ------------
End of year................................ $200,577,152 $165,588,128 $208,679,197 $161,578,836 $150,061,149 $118,456,007
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------

<CAPTION>
DGPF
INTERNATIONAL EQUITY
-------------------------

YEAR ENDED DECEMBER 31,
1998 1997
------------ -----------
<S> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends.................................. $ 3,818,720 $ 2,511,425
Mortality and expense risk fees............ (1,364,199) (1,067,089)
Administrative expense fees................ (222,079) (173,712)
------------ -----------
Net investment income (loss)............. 2,232,442 1,270,624
------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................. -- --
Net realized gain (loss) from sales of
investments.............................. 524,782 363,002
------------ -----------
Net realized gain (loss)................... 524,782 363,002
Net unrealized gain (loss)................. 6,030,154 1,321,628
------------ -----------
Net realized and unrealized gain
(loss)................................. 6,554,936 1,684,630
------------ -----------
Net increase (decrease) in net assets from
operations............................... 8,787,378 2,955,254
------------ -----------
CONTRACT TRANSACTIONS:
Net purchase payments...................... 6,454,592 7,830,705
Withdrawals................................ (5,616,866) (3,857,969)
Contract benefits.......................... (369,791) (207,583)
Contract charges........................... (34,104) (29,701)
Transfers between sub-accounts (including
fixed account), net...................... 8,564,109 20,741,571
Other transfers from (to) the General
Account.................................. 1,556,191 4,277,465
------------ -----------
Net increase (decrease) in net assets from
contract transactions.................... 10,554,131 28,754,488
------------ -----------
Net increase (decrease) in net assets...... 19,341,509 31,709,742
NET ASSETS:
Beginning of year.......................... 99,158,806 67,449,064
------------ -----------
End of year................................ $118,500,315 $99,158,806
------------ -----------
------------ -----------
</TABLE>

* Name changed. See note 1.

The accompanying notes are an integral part of these financial statements.

SA-5
<PAGE>
SEPARATE ACCOUNT VA-K ALLMERICA ADVANTAGE VARIABLE ANNUITY AND EXECANNUITY PLUS
VARIABLE ANNUITY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)

<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP FIDELITY VIP
HIGH INCOME EQUITY-INCOME GROWTH
-------------------------- -------------------------- --------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1998 1997 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends.................................. $ 12,578,810 $ 7,884,412 $ 7,149,010 $ 6,423,548 $ 1,980,389 $ 2,066,887
Mortality and expense risk fees............ (2,432,246) (1,720,161) (6,788,549) (5,445,301) (5,516,150) (4,299,523)
Administrative expense fees................ (395,947) (280,026) (1,105,112) (886,444) (897,978) (699,922)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss)............. 9,750,617 5,884,225 (744,651) 91,803 (4,433,739) (2,932,558)
------------ ------------ ------------ ------------ ------------ ------------

REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................. 7,992,786 974,478 25,442,066 32,296,170 51,802,813 9,251,781
Net realized gain (loss) from sales of
investments.............................. (46,537) 203,134 4,980,239 2,786,309 6,211,181 3,287,677
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss)................... 7,946,249 1,177,612 30,422,305 35,082,479 58,013,994 12,539,458
Net unrealized gain (loss)................. (29,941,145) 13,667,456 21,541,366 66,391,863 92,401,524 57,841,299
------------ ------------ ------------ ------------ ------------ ------------
Net realized and unrealized gain
(loss).................................. (21,994,896) 14,845,068 51,963,671 101,474,342 150,415,518 70,380,757
------------ ------------ ------------ ------------ ------------ ------------

Net increase (decrease) in net assets from
operations............................... (12,244,279) 20,729,293 51,219,020 101,566,145 145,981,779 67,448,199
------------ ------------ ------------ ------------ ------------ ------------

CONTRACT TRANSACTIONS:
Net purchase payments...................... 16,334,143 15,736,449 31,978,182 31,711,858 24,189,477 25,916,377
Withdrawals................................ (10,795,966) (6,766,607) (31,513,789) (23,477,780) (27,468,965) (18,451,418)
Contract benefits.......................... (1,097,609) (424,758) (2,356,266) (1,600,308) (2,039,146) (971,009)
Contract charges........................... (58,071) (51,854) (203,860) (195,262) (191,465) (181,070)
Transfers between sub-accounts (including
fixed account), net...................... 38,988,866 33,013,744 24,052,204 17,682,680 5,764,814 1,235,885
Other transfers from (to) the General
Account.................................. 5,027,099 5,515,208 2,652,365 9,212,572 1,580,856 6,354,543
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets from
contract transactions.................... 48,398,462 47,022,182 24,608,836 33,333,761 1,835,571 13,903,308
------------ ------------ ------------ ------------ ------------ ------------

Net increase (decrease) in net assets...... 36,154,183 67,751,475 75,827,856 134,899,906 147,817,350 81,351,507

NET ASSETS:
Beginning of year.......................... 173,439,866 105,688,391 508,303,919 373,404,013 386,549,824 305,198,317
------------ ------------ ------------ ------------ ------------ ------------
End of year................................ $209,594,049 $173,439,866 $584,131,775 $508,303,919 $534,367,174 $386,549,824
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

SA-6
<PAGE>
SEPARATE ACCOUNT VA-K ALLMERICA ADVANTAGE VARIABLE ANNUITY AND EXECANNUITY PLUS
VARIABLE ANNUITY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)

<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP II T. ROWE PRICE
OVERSEAS ASSET MANAGER INTERNATIONAL STOCK
------------------------- ------------------------- ------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1998 1997 1998 1997
------------ ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends.................................. $ 1,818,875 $ 1,593,893 $ 2,716,853 $ 1,921,322 $ 1,097,794 $ 672,911
Mortality and expense risk fees............ (1,262,186) (1,150,997) (1,241,535) (840,972) (1,054,718) (750,999)
Administrative expense fees................ (205,472) (187,372) (202,110) (136,902) (171,698) (122,256)
------------ ----------- ------------ ----------- ----------- -----------
Net investment income (loss)............. 351,217 255,524 1,273,208 943,448 (128,622) (200,344)
------------ ----------- ------------ ----------- ----------- -----------

REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................. 5,360,896 6,327,269 8,150,559 4,819,590 387,457 953,290
Net realized gain (loss) from sales of
investments.............................. 856,760 2,767,486 160,609 227,627 237,516 161,070
------------ ----------- ------------ ----------- ----------- -----------
Net realized gain (loss)................... 6,217,656 9,094,755 8,311,168 5,047,217 624,973 1,114,360
Net unrealized gain (loss)................. 3,731,753 (571,995) 3,240,712 5,671,077 10,425,832 (909,997)
------------ ----------- ------------ ----------- ----------- -----------
Net realized and unrealized gain
(loss).................................. 9,949,409 8,522,760 11,551,880 10,718,294 11,050,805 204,363
------------ ----------- ------------ ----------- ----------- -----------

Net increase (decrease) in net assets from
operations............................... 10,300,626 8,778,284 12,825,088 11,661,742 10,922,183 4,019
------------ ----------- ------------ ----------- ----------- -----------

CONTRACT TRANSACTIONS:
Net purchase payments...................... 6,122,888 5,580,597 8,512,565 6,136,311 5,708,803 7,087,778
Withdrawals................................ (6,424,320) (5,698,045) (5,321,586) (3,519,671) (3,090,733) (2,318,926)
Contract benefits.......................... (413,395) (310,083) (653,162) (111,937) (234,511) (302,518)
Contract charges........................... (46,447) (50,533) (23,772) (18,363) (21,793) (16,117)
Transfers between sub-accounts (including
fixed account), net...................... 4,525,206 (10,194,522) 18,036,934 12,603,408 7,450,376 20,482,835
Other transfers from (to) the General
Account.................................. 534,379 847,013 2,193,311 3,355,998 1,566,892 5,001,709
------------ ----------- ------------ ----------- ----------- -----------
Net increase (decrease) in net assets from
contract transactions.................... 4,298,311 (9,825,573) 22,744,290 18,445,746 11,379,034 29,934,761
------------ ----------- ------------ ----------- ----------- -----------

Net increase (decrease) in net assets...... 14,598,937 (1,047,289) 35,569,378 30,107,488 22,301,217 29,938,780

NET ASSETS:
Beginning of year.......................... 92,543,240 93,590,529 84,082,473 53,974,985 73,136,107 43,197,327
------------ ----------- ------------ ----------- ----------- -----------
End of year................................ $107,142,177 $92,543,240 $119,651,851 $84,082,473 $95,437,324 $73,136,107
------------ ----------- ------------ ----------- ----------- -----------
------------ ----------- ------------ ----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

SA-7
<PAGE>
SEPARATE ACCOUNT VA-K (ALLMERICA ADVANTAGE VARIABLE ANNUITY
AND EXECANNUITY PLUS VARIABLE ANNUITY)

NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- ORGANIZATION

Separate Account VA-K, which funds the Allmerica Advantage and ExecAnnuity
Plus variable annuity contracts, in addition to other contracts (the Delaware
Medallion variable annuity contracts), is a separate investment account of
Allmerica Financial Life Insurance and Annuity Company (the Company),
established on November 1, 1990 for the purpose of separating from the general
assets of the Company those assets used to fund certain variable annuity
contracts issued by the Company. The Company is a wholly-owned subsidiary of
First Allmerica Financial Life Insurance Company (First Allmerica). First
Allmerica is a wholly-owned subsidiary of Allmerica Financial Corporation (AFC).
Under applicable insurance law, the assets and liabilities of Separate Account
VA-K are clearly identified and distinguished from the other assets and
liabilities of the Company. Separate Account VA-K cannot be charged with
liabilities arising out of any other business of the Company.

Separate Account VA-K is registered as a unit investment trust under the
Investment Company Act of 1940, as amended (the 1940 Act). Separate Account VA-K
currently offers eighteen Sub-Accounts under the Allmerica Advantage and
ExecAnnuity Plus variable annuity contracts. Each Sub-Account invests
exclusively in a corresponding investment portfolio of the Allmerica Investment
Trust (the Trust) managed by Allmerica Financial Investment Management Services,
Inc. (AFIMS) (successor to Allmerica Investment Management Company, Inc.), a
wholly-owned subsidiary of First Allmerica; or of the Variable Insurance
Products Fund (Fidelity VIP) or the Variable Insurance Products Fund II
(Fidelity VIP II) managed by Fidelity Management & Research Company (FMR); or of
the Delaware Group Premium Fund, Inc. (DGPF) managed by Delaware International
Advisers Ltd.; or of the T. Rowe Price International Series, Inc. (T. Rowe
Price) managed by T. Rowe Price-Fleming International, Inc. The Trust, Fidelity
VIP, Fidelity VIP II, DGPF, and T. Rowe Price (the Funds) are open-end,
management investment companies registered under the 1940 Act.

Separate Account VA-K funds two types of variable annuity contracts,
"qualified" contracts and "non-qualified" contracts. A qualified contract is one
that is purchased in connection with a retirement plan which meets the
requirements of Section 401, 403, or 408 of the Internal Revenue Code (the
Code), while a non-qualified contract is one that is not purchased in connection
with one of the indicated retirement plans. The tax treatment for certain
withdrawals or surrenders will vary according to whether they are made from a
qualified contract or a non-qualified contract.

Effective January 9, 1998, Small-Mid Cap Value Fund was renamed Select Value
Opportunity Fund.

Certain prior year balances have been reclassified to conform with current
year presentation.

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

INVESTMENTS -- Security transactions are recorded on the trade date.
Investments held by the Sub-Accounts are stated at the net asset value per share
of the respective investment portfolio of the Funds. Net realized gains and
losses on securities sold are determined using the average cost method.
Dividends and capital gain distributions are recorded on the ex-dividend date
and are reinvested in additional shares of the respective investment portfolio
of the Funds at net asset value.

FEDERAL INCOME TAXES -- The Company is taxed as a "life insurance company"
under Subchapter L of the Code and files a consolidated federal income tax
return with First Allmerica. The Company anticipates no tax

SA-8
<PAGE>
SEPARATE ACCOUNT VA-K (ALLMERICA ADVANTAGE VARIABLE ANNUITY
AND EXECANNUITY PLUS VARIABLE ANNUITY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

liability resulting from the operations of Separate Account VA-K. Therefore, no
provision for income taxes has been charged against Separate Account VA-K.

NOTE 3 -- INVESTMENTS

The number of shares owned, aggregate cost, and net asset value per share of
each Sub-Account's investment in the Funds at December 31, 1998 were as follows:

<TABLE>
<CAPTION>
PORTFOLIO INFORMATION
-------------------------------------
NET ASSET
NUMBER OF AGGREGATE VALUE
INVESTMENT PORTFOLIO SHARES COST PER SHARE
- ---------------------------------------- ------------ ------------ ---------
<S> <C> <C> <C>
Growth.................................. 160,470,766 $359,758,297 $ 2.825
Investment Grade Income................. 146,868,630 162,430,235 1.132
Money Market............................ 162,581,881 162,581,881 1.000
Equity Index............................ 103,133,310 235,122,783 3.408
Government Bond......................... 67,287,635 71,294,360 1.068
Select Aggressive Growth................ 128,443,479 234,368,079 2.460
Select Growth........................... 133,115,179 211,148,273 2.428
Select Growth and Income................ 152,011,079 203,910,122 1.779
Select Value Opportunity*............... 119,037,991 172,188,592 1.685
Select International Equity............. 135,331,459 171,518,089 1.542
Select Capital Appreciation............. 91,501,314 136,667,046 1.640
DGPF International Equity............... 7,190,618 98,679,065 16.480
Fidelity VIP High Income................ 18,178,170 216,072,648 11.530
Fidelity VIP Equity-Income.............. 22,979,410 408,931,468 25.420
Fidelity VIP Growth..................... 11,909,345 311,766,409 44.870
Fidelity VIP Overseas................... 5,343,875 86,946,809 20.050
Fidelity VIP II Asset Manager........... 6,588,797 103,227,773 18.160
T. Rowe Price International Stock....... 6,572,893 82,587,256 14.520
</TABLE>

* Name changed. See Note 1.

NOTE 4 -- RELATED PARTY TRANSACTIONS

The Company makes a charge of 1.25% per annum based on the average daily net
assets of such Sub-Account at each valuation date for mortality and expense
risks. The Company also charges each Sub-Account 0.20% per annum based on the
average daily net assets of each Sub-Account for administrative expenses. These
charges are deducted from the daily value of each Sub-Account and are paid to
the Company on a daily basis.

For contracts issued on Forms A3018-91 and A3021-93 (ExecAnnuity Plus 91 and
ExecAnnuity Plus 93), a contract fee is deducted on the contract anniversary and
upon full surrender of the contract when the accumulated value is $50,000 or
less. The fee is the lesser of $30 or 3% of the accumulated value on the
contract anniversary or full surrender date. For contracts issued on Form
A3025-96 (Allmerica Advantage), a

SA-9
<PAGE>
SEPARATE ACCOUNT VA-K (ALLMERICA ADVANTAGE VARIABLE ANNUITY
AND EXECANNUITY PLUS VARIABLE ANNUITY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 4 -- RELATED PARTY TRANSACTIONS (CONTINUED)

contract fee of $30 is deducted on the contract anniversary and upon full
surrender when the accumulated value is less than $50,000. The fee is currently
waived for all contracts (ExecAnnuity Plus and Allmerica Advantage) issued to
and maintained by the trustee of a 401(k) plan.

Allmerica Investments, Inc. (Allmerica Investments), a wholly-owned
subsidiary of First Allmerica, is principal underwriter and general distributor
of Separate Account VA-K, and does not receive any compensation for sales of the
contracts. Commissions are paid to registered representatives of Allmerica
Investments by the Company. The current series of contracts have a contingent
deferred sales charge and no deduction is made for sales charges at the time of
the sale. For the years ended December 31, 1998 and 1997, the Company received
$3,200,685 and $3,189,265, respectively, for contingent deferred sales charges
applicable to Separate Account VA-K.

NOTE 5 -- CONTRACTOWNERS AND SPONSOR TRANSACTIONS

Transactions from contractowners and sponsor were as follows:

SA-10
<PAGE>
SEPARATE ACCOUNT VA-K (ALLMERICA ADVANTAGE VARIABLE ANNUITY
AND EXECANNUITY PLUS VARIABLE ANNUITY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 5 -- CONTRACTOWNERS AND SPONSOR TRANSACTIONS (CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
--------------------------- ----------------------------
UNITS AMOUNT UNITS AMOUNT
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Select Aggressive Growth
Issuance of Units.......................... 41,209,415 $ 96,835,317 39,273,921 $ 83,733,189
Redemption of Units........................ (22,240,992) (52,936,324) (22,457,833) (48,735,040)
------------ ------------ ------------ -------------
Net increase (decrease).................. 18,968,423 $ 43,898,993 16,816,088 $ 34,998,149
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Select Growth
Issuance of Units.......................... 50,148,994 $113,239,811 48,217,022 $ 84,427,107
Redemption of Units........................ (23,786,903) (53,077,265) (16,210,356) (27,661,148)
------------ ------------ ------------ -------------
Net increase (decrease).................. 26,362,091 $ 60,162,546 32,006,666 $ 56,765,959
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Select Growth and Income
Issuance of Units.......................... 37,081,023 $ 77,642,713 35,766,602 $ 63,156,211
Redemption of Units........................ (21,516,678) (44,128,561) (14,723,868) (24,863,333)
------------ ------------ ------------ -------------
Net increase (decrease).................. 15,564,345 $ 33,514,152 21,042,734 $ 38,292,878
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Select Value Opportunity*
Issuance of Units.......................... 32,164,349 $ 63,580,221 37,678,681 $ 65,123,255
Redemption of Units........................ (17,540,671) (34,191,033) (12,696,975) (21,312,505)
------------ ------------ ------------ -------------
Net increase (decrease).................. 14,623,678 $ 29,389,188 24,981,706 $ 43,810,750
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Select International Equity
Issuance of Units.......................... 37,484,996 $ 56,306,351 57,085,507 $ 78,522,937
Redemption of Units........................ (23,060,019) (34,387,273) (18,985,695) (25,033,718)
------------ ------------ ------------ -------------
Net increase (decrease).................. 14,424,977 $ 21,919,078 38,099,812 $ 53,489,219
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Select Capital Appreciation
Issuance of Units.......................... 25,808,681 $ 42,819,894 35,616,682 $ 51,985,258
Redemption of Units........................ (16,692,015) (27,828,402) (17,612,505) (25,688,058)
------------ ------------ ------------ -------------
Net increase (decrease).................. 9,116,666 $ 14,991,492 18,004,177 $ 26,297,200
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
DGPF International Equity
Issuance of Units.......................... 19,548,692 $ 32,754,499 28,045,942 $ 44,814,323
Redemption of Units........................ (13,404,183) (22,200,368) (10,328,017) (16,059,835)
------------ ------------ ------------ -------------
Net increase (decrease).................. 6,144,509 $ 10,554,131 17,717,925 $ 28,754,488
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Fidelity VIP High Income
Issuance of Units.......................... 41,047,554 $ 91,158,751 34,859,555 $ 72,871,648
Redemption of Units........................ (19,562,695) (42,760,289) (12,480,024) (25,849,466)
------------ ------------ ------------ -------------
Net increase (decrease).................. 21,484,859 $ 48,398,462 22,379,531 $ 47,022,182
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
* Name changed. See Note 1.
</TABLE>

SA-11
<PAGE>
SEPARATE ACCOUNT VA-K (ALLMERICA ADVANTAGE VARIABLE ANNUITY
AND EXECANNUITY PLUS VARIABLE ANNUITY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 5 -- CONTRACTOWNERS AND SPONSOR TRANSACTIONS (CONTINUED)

NOTE 6 -- DIVERSIFICATION REQUIREMENTS

Under the provisions of Section 817(h) of the Code, a variable annuity
contract, other than a contract issued in connection with certain types of
employee benefit plans, will not be treated as an annuity contract for federal
income tax purposes for any period for which the investments of the segregated
asset account on which the contract is based are not adequately diversified. The
Code provides that the "adequately diversified" requirement may be met if the
underlying investments satisfy either a statutory safe harbor test or
diversification requirements set forth in regulations issued by the Secretary of
The Treasury.

The Internal Revenue Service has issued regulations under Section 817(h) of
the Code. The Company believes that Separate Account VA-K satisfies the current
requirements of the regulations, and it intends that Separate Account VA-K will
continue to meet such requirements.

SA-12
<PAGE>
SEPARATE ACCOUNT VA-K (ALLMERICA ADVANTAGE VARIABLE ANNUITY
AND EXECANNUITY PLUS VARIABLE ANNUITY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 -- PURCHASES AND SALES OF SECURITIES

Cost of purchases and proceeds from sales of shares of the Funds by Separate
Account VA-K during the year ended December 31, 1998 were as follows:

<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO PURCHASES SALES
- ------------------------------------------------------- ------------ ------------
<S> <C> <C>
Growth................................................. $ 36,804,762 $ 11,937,216
Investment Grade Income................................ 42,211,202 11,313,870
Money Market........................................... 160,141,982 108,831,461
Equity Index........................................... 82,436,216 10,164,360
Government Bond........................................ 29,409,316 7,337,184
Select Aggressive Growth............................... 45,055,514 5,146,364
Select Growth.......................................... 64,871,281 5,566,271
Select Growth and Income............................... 41,475,097 7,518,994
Select Value Opportunity*.............................. 33,491,083 4,399,149
Select International Equity............................ 25,186,102 3,326,388
Select Capital Appreciation............................ 41,473,637 5,586,634
DGPF International Equity.............................. 16,911,124 4,123,154
Fidelity VIP High Income............................... 73,084,617 6,941,557
Fidelity VIP Equity-Income............................. 69,378,741 20,066,859
Fidelity VIP Growth.................................... 68,678,529 19,469,351
Fidelity VIP Overseas.................................. 15,148,901 5,136,519
Fidelity VIP II Asset Manager.......................... 34,770,297 2,601,402
T. Rowe Price International Stock...................... 14,451,395 2,812,197
------------ ------------
Totals................................................. $894,979,796 $242,278,930
------------ ------------
------------ ------------
</TABLE>

* Name changed. See Note 1.

SA-13
<PAGE>
PART C. OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) FINANCIAL STATEMENTS

Financial Statements Included in Part A
None

Financial Statements Included in Part B
Financial Statements for Allmerica Financial Life Insurance and
Annuity Company
Financial Statements for Separate Account VA-K of Allmerica Financial
Life Insurance and Annuity Company

Financial Statements Included in Part C
None

(b) EXHIBITS

EXHIBIT 1 Vote of Board of Directors Authorizing Establishment of
Registrant dated November 1, 1990 was previously filed
on April 24, 1998 in Registration Statement No.
33-39702/811-6293, Post-Effective Amendment No. 14,
and is incorporated by reference herein.

EXHIBIT 2 Not Applicable. Pursuant to Rule 26a-2, the Insurance
Company may hold the assets of the Registrant NOT
pursuant to a trust indenture or other such instrument.

EXHIBIT 3 (a) Underwriting and Administrative Service Agreement
was previously filed on April 24, 1998 in
Registration Statement No. 33-39702/811-6293,
Post-Effective Amendment No. 14 and is
incorporated by reference herein.

(b) Sales Agreements were previously filed on April
24, 1998 in Registration Statement No. 33-39702/
811-6293, Post-Effective Amendment No. 14, and
are incorporated by reference herein.

(c) General Agent's Agreement was previously filed on
April 24, 1998 in Registration Statement No.
33-39702/811-6293, Post-Effective Amendment
No. 14, and is incorporated by reference herein.

(d) IVA Commission Schedule was previously filed on
June 29, 1999 in Registrant's initial Registration
Statement No. 333-81861/811-6293 and is
incorporated by reference herein. Career Agent
Agreement with Commission Schedule was previously
filed on April 24, 1998 in Registration Statement
No. 33-39702/811-6293, Post-Effective Amendment
No. 14, and is incorporated by reference herein.

(e) Registered Representative's Agreement was
previously filed on April 24, 1998 in
Registration Statement No. 33-39702/811-6293,
Post-Effective Amendment No. 14, and is
incorporated by reference herein.

EXHIBIT 4 Contract Form A3029-99 is filed herewith.

<PAGE>

EXHIBIT 5 Application Form 10999 was previously filed on June 29,
1999 in Registrant's initial Registration Statement
No. 333-81861/811-6293 and is incorporated by reference
herein.

EXHIBIT 6 The Depositor's Articles of Incorporation and Bylaws,
as amended to reflect its name change, were previously
filed on September 28, 1995 in Registration Statement
No. 33-39702/811-6293, Post-Effective Amendment No. 9,
and are incorporated by reference herein.

EXHIBIT 7 Not Applicable.

EXHIBIT 8 (a) Fidelity Service Agreement was previously filed on
April 30, 1996 in Registration Statement No.
33-39702/811-6293, Post-Effective Amendment No.
11, and is incorporated by reference herein.

(b) An Amendment to the Fidelity Service Agreement,
effective as of January 1, 1997, was previously
filed on April 2, 1997 in Registration Statement
No. 33-39702/811-6293, Post-Effective Amendment
No. 12, and is incorporated by reference herein.

(c) Fidelity Service Contract, effective as of January
1, 1997, was previously filed on April 2, 1997 in
Registration Statement No. 33-39702/811-6293,
Post-Effective Amendment No. 12, and is
incorporated by reference herein.

(d) T. Rowe Price Service Agreement was previously
filed on April 24, 1998 in Registration Statement
No. 33-39702/811-6293, Post-Effective Amendment
No. 14, and is incorporated by reference herein.

(e) BFDS Agreements for lockbox and mailroom services
were previously filed on April 24, 1998 in
Registration Statement No. 33-39702/811-6293,
Post-Effective Amendment No. 14, and are
incorporated by reference herein.

(f) Directors' Power of Attorney is filed herewith.

EXHIBIT 9 Opinion of Counsel is filed herewith.

EXHIBIT 10 Consent of Independent Accountants is filed herewith.

EXHIBIT 11 None.

EXHIBIT 12 None.

EXHIBIT 13 Schedule for Computation of Performance Quotations is
filed herewith.

EXHIBIT 14 Not Applicable.

EXHIBIT 15 (a) Participation Agreement with Allmerica Investment
Trust was previously filed on April 24, 1998 in
Registration Statement No. 33-39702/811-6293,
Post-Effective Amendment No. 14, and is
incorporated by reference herein.

(b) Participation Agreement, as amended, with Variable
Insurance Products Fund was previously filed on
April 24, 1998 in Registration Statement No.
33-39702/811-6293, Post-Effective Amendment No.
14, and is incorporated by reference herein.

<PAGE>
(c) Participation Agreement, as amended, with Variable
Insurance Products Fund II was previously filed on
April 24, 1998 in Registration Statement No.
33-39702/811-6293, Post-Effective Amendment No.
14, and is incorporated by reference herein.

(d) Participation Agreement with Delaware Group
Premium Fund, Inc. and Amendment was previously
filed on April 24, 1998 in Registration Statement
No. 33-39702/811-6293, Post-Effective
Amendment No. 14, and is incorporated by
reference herein.

(e) Participation Agreement with T. Rowe Price
International Series, Inc. was previously filed on
April 24, 1998 in Registration Statement No.
33-39702/811-6293, Post-Effective Amendment No.
14, and is incorporated by reference herein.

ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR

The principal business address of all the following Directors and
Officers is:
440 Lincoln Street
Worcester, Massachusetts 01653

DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY

NAME AND POSITION WITH
COMPANY PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------------------------ -----------------------------------------------
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 Controller (since 1998) of First Allmerica
Corporate Controller

Robert E. Bruce Director and Chief Information Officer (since 1997)
Director and Chief and Vice President (since 1995) of First Allmerica;
Information and Corporate Manager (1979 to 1995) of Digital
Officer Equipment Corporation

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.

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

John F. Kelly Director (since 1996), Senior Vice President (since
Director, Vice 1986), General Counsel (since 1981) and Assistant
President and Secretary (since 1991) of First Allmerica; Director
General Counsel (since 1985) of Allmerica Investments, Inc.; and
Director (since 1990) of Allmerica Financial
Investment Management Services, Inc.

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

<PAGE>

James R. McAuliffe Director (since 1996) of First Allmerica; Director
Director (since 1992), President (since 1994) and Chief
Executive Officer (since 1996) of Citizens
Insurance Company of America

John F. O'Brien Director, President and Chief Executive Officer
Director and Chairman of (since 1989) of First Allmerica; Director (since
the Board 1989) of Allmerica Investments, Inc.; and Director
and Chairman of the Board (since 1990) of Allmerica
Financial Investment Management Services, Inc.

Edward J. Parry, III Director and Chief Financial Officer (since 1996)
Director, Vice and Vice President and Treasurer (since 1993) of
President, First Allmerica; Treasurer (since 1993) of
Chief Financial Officer Allmerica Investments, Inc.; and Treasurer (since
and 1993) of Allmerica Financial Investment Management
Treasurer Services, Inc.

Richard M. Reilly Director (since 1996) and Vice President (since
Director, President and 1990) of First Allmerica; Director (since 1990) of
Chief Executive Officer 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; 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 1990) of First Allmerica; Director (since 1991) of
President Allmerica Investments, Inc.; and Director (since
1991) of Allmerica Financial Investment Management
Services, Inc.

Phillip E. Soule Director (since 1996) and Vice President (since
Director 1987) of First Allmerica

<PAGE>

ITEM 26. PERSONS UNDER COMMON CONTROL WITH REGISTRANT

<TABLE>
<S><C>
Allmerica Financial Corporation

Delaware

| | | | | | | |
________________________________________________________________________________________________________________________________
100% 100% 100% 100% 100% 100% 100% 100%
Allmerica Financial Allmerica, Allmerica First Allmerica AFC Capital Allmerica First Sterling
Asset Profiles, Inc. Inc. Funding Financial Life Trust I Services Limited
Management, Inc. Corp. Insurance Corporation
Company

Massachusetts California Massachusetts Massachusetts Massachusetts Delaware Massachusetts Bermuda
| | |
| ___________________________________________________________ ________________
| | | | |
| 100% 99.2% 100% 100%
| Advantage Allmerica Allmerica First Sterling
| Insurance Trust Financial Life Reinsurance
| Network, Inc. Company, N.A. Insurance and Company
| Annuity Company Limited
|
| Delaware Federally Chartered Delaware Bermuda
| |
| ________________________________________________________________
| | | | |
| 100% 100% 100% 100%
| Allmerica Allmerica Allmerica Allmerica
| Investments, Investment Financial Financial
| Inc. Management Investment Services
| Company, Inc. Management Insurance
| Services, Inc. Agency, Inc.
|
| Massachusetts Massachusetts Massachusetts Massachusetts
|
________________________________________________________________
| | | |
100% 100% 100% 100%
Allmerica Sterling Risk Allmerica Allmerica
Property Management Benefits, Inc. Asset
& Casualty Services, Inc. Management,
Companies, Inc. Limited

Delaware Delaware Florida Bermuda
|
________________________________________________
| | |
100% 100% 100%
The Hanover Allmerica Citizens
Insurance Financial Insurance
Company Insurance Company
Brokers, Inc. of Illinois

New Hampshire Massachusetts Illinois
|
________________________________________________________________________________________________________________________________
| | | | | | | |
100% 100% 100% 100% 100% 100% 100% 100%
Allmerica Allmerica The Hanover Hanover Texas Citizens Massachusetts Allmerica AMGRO
Financial Plus American Insurance Corporation Bay Insurance Financial Inc.
Benefit Insurance Insurance Management Company Alliance
Insurance Agency, Inc. Company Company, Inc. Insurance
Company Company

Pennsylvania Massachusetts New Hampshire Texas Delaware New Hampshire New Hampshire Massachusetts
| |
________________________________________________ ________________
| | | |
100% 100% 100% 100%
Citizens Citizens Citizens Lloyds Credit
Insurance Insurance Insurance Corporation
Company Company Company
of Ohio of America of the
Midwest

Ohio Michigan Indiana Massachusetts
|
_________________
|
100%
Citizens
Management
Inc.

Michigan

_______________ ---------------- ----------------
Allmerica Greendale AAM
Equity Special Equity Fund
Index Pool Placements
Fund

Massachusetts Massachusetts Massachusetts

- -------- Grantor Trusts established for the benefit of First Allmerica,
Allmerica Financial Life, Hanover and Citizens

--------------- ----------------
Allmerica Allmerica
Investment Trust Securities
Trust

Massachusetts Massachusetts

- -------- Affiliated Management Investment Companies

...............
Hanover Lloyd's
Insurance
Company

Texas

- -------- Affiliated Lloyd's plan company, controlled by Underwriters
for the benefit of The Hanover Insurance Company

_______________ ________________
AAM Growth AAM High Yield
& Income Fund, L.L.C.
Fund L.P.

Delaware Massachusetts

________ L.P. or L.L.C. established for the benefit of First Allmerica,
Allmerica Financial Life, Hanover and Citizens
</TABLE>

<PAGE>

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

NAME ADDRESS TYPE OF BUSINESS
---- ------- ----------------

AAM Equity Fund 440 Lincoln Street Massachusetts Grantor
Worcester MA 01653 Trust

AAM Growth & Income Fund, 440 Lincoln Street Limited Partnership
L.P. Worcester MA 01653

Advantage Insurance 440 Lincoln Street Insurance Agency
Network, Inc. Worcester MA 01653

AFC Capital Trust I 440 Lincoln Street Statutory Business Trust
Worcester MA 01653

Allmerica Asset Management 440 Lincoln Street Investment advisory
Limited Worcester MA 01653 services

Allmerica Asset Management, 440 Lincoln Street Investment advisory
Inc. Worcester MA 01653 services

Allmerica Benefits, Inc. 440 Lincoln Street Non-insurance medical
Worcester MA 01653 services

Allmerica Equity Index Pool 440 Lincoln Street Massachusetts Grantor
Worcester MA 01653 Trust

Allmerica Financial Alliance 100 North Parkway Multi-line property and
Insurance Company Worcester MA 01605 casualty insurance

Allmerica Financial Benefit 100 North Parkway Multi-line property and
Insurance Company Worcester MA 01605 casualty insurance

Allmerica Financial 440 Lincoln Street Holding Company
Corporation Worcester MA 01653

Allmerica Financial Insurance 440 Lincoln Street Insurance Broker
Brokers, Inc. Worcester MA 01653

Allmerica Financial Life 440 Lincoln Street Life insurance, accident
Insurance and Annuity Company Worcester MA 01653 and health insurance,
(formerly known as SMA Life annuities, variable
Assurance Company) annuities and variable
life insurance

Allmerica Financial Services 440 Lincoln Street Insurance Agency
Insurance Agency, Inc. Worcester MA 01653

Allmerica Funding Corp. 440 Lincoln Street Special purpose funding
Worcester MA 01653 vehicle for commercial
paper

Allmerica, Inc. 440 Lincoln Street Common employer for
Worcester MA 01653 Allmerica Financial
Corporation entities

Allmerica Financial Investment 440 Lincoln Street Investment advisory
Management Services, Inc. Worcester MA 01653 services
(formerly known as Allmerica
Institutional Services, Inc.
and 440 Financial Group of
Worcester, Inc.)

Allmerica Investment 440 Lincoln Street Investment advisory
Management Company, Inc. Worcester MA 01653 services

Allmerica Investments, Inc. 440 Lincoln Street Securities, retail
Worcester MA 01653 broker-dealer

Allmerica Investment Trust 440 Lincoln Street Investment Company
Worcester MA 01653

Allmerica Plus Insurance 440 Lincoln Street Insurance Agency
Agency, Inc. Worcester MA 01653

Allmerica Property & Casualty 440 Lincoln Street Holding Company
Companies, Inc. Worcester MA 01653

Allmerica Securities Trust 440 Lincoln Street Investment Company
Worcester MA 01653

Allmerica Services Corporation 440 Lincoln Street Internal administrative
Worcester MA 01653 services provider to
Allmerica Financial
Corporation entities

<PAGE>

Allmerica Trust Company, N.A. 440 Lincoln Street Limited purpose national
Worcester MA 01653 trust company

AMGRO, Inc. 100 North Parkway Premium financing
Worcester MA 01605

Citizens Corporation 440 Lincoln Street Holding Company
Worcester MA 01653

Citizens Insurance Company of 645 West Grand Multi-line property and
America River casualty insurance
Howell MI 48843

Citizens Insurance Company of 333 Pierce Road Multi-line property and
Illinois Itasca IL 60143 casualty insurance

Citizens Insurance Company of 3950 Priority Way Multi-line property and
the Midwest South Drive, Suite casualty insurance
200
Indianapolis IN
46280

Citizens Insurance Company of 8101 N. High Multi-line property and
Ohio Street casualty insurance
P.O. Box 342250
Columbus OH 43234

Citizens Management, Inc. 645 West Grand Services management
River company
Howell MI 48843

Financial Profiles 5421 Avenida Computer software company
Encinas
Carlsbad, CA
92008

First Allmerica Financial Life 440 Lincoln Street Life, pension, annuity,
Insurance Company (formerly Worcester MA 01653 accident and health
State Mutual Life Assurance insurance company
Company of America)

First Sterling Limited 440 Lincoln Street Holding Company
Worcester MA 01653

First Sterling Reinsurance 440 Lincoln Street Reinsurance Company
Company Limited Worcester MA 01653

Greendale Special Placements 440 Lincoln Street Massachusetts Grantor
Fund Worcester MA 01653 Trust

The Hanover American Insurance 100 North Parkway Multi-line property and
Company Worcester MA 01605 casualty insurance

The Hanover Insurance Company 100 North Parkway Multi-line property and
Worcester MA 01605 casualty insurance

Hanover Texas Insurance 801 East Campbell Attorney-in-fact for
Management Company, Inc. Road Hanover Lloyd's Insurance
Richardson TX Company
75081

Hanover Lloyd's Insurance 801 East Campbell Multi-line property and
Company Road casualty insurance
Richardson TX
75081

Lloyds Credit Corporation 440 Lincoln Street Premium financing service
Worcester MA 01653 franchises

Massachusetts Bay Insurance 100 North Parkway Multi-line property and
Company Worcester MA 01605 casualty insurance

Sterling Risk Management 440 Lincoln Street Risk management services
Services, Inc. Worcester MA 01653

<PAGE>

ITEM 27. NUMBER OF CONTRACT HOLDERS

As of August 31, 1999, there were 78,842 Contract holders of qualified
Contracts and 23,364 Contract holders of non-qualified Contracts.

ITEM 28. INDEMNIFICATION

Article VIII of the Bylaws of Allmerica Financial Life Insurance and
Annuity Company (the Depositor) states: Each Director and each Officer of
the Corporation, whether or not in office, (and his executors or
administrators), shall be indemnified or reimbursed by the Corporation
against all expenses actually and necessarily incurred by him in the
defense or reasonable settlement of any action, suit or proceeding in which
he is made a party by reason of his being or having been a Director or
Officer of the Corporation, including any sums paid in settlement or to
discharge judgment, except in relation to matters as to which he shall be
finally adjudged in such action, suit or proceeding to be liable for
negligence or misconduct in the performance of his duties as such Director
or Officer; and the foregoing right of indemnification or reimbursement
shall not affect any other rights to which he may be entitled under the
Articles of Incorporation, any statute, bylaw, agreement, vote of
stockholders, or otherwise.

ITEM 29. PRINCIPAL UNDERWRITERS

(a) Allmerica Investments, Inc. also acts as principal underwriter for the
following:

X VEL Account, VEL II Account, VEL Account III, Select Account III,
Inheiritage Account, Separate Accounts VA-A, VA-B, VA-C, VA-G, VA-H,
VA-K, VA-P, Allmerica Select Separate Account II, Group VEL Account,
Separate Account KG, Separate Account KGC, Fulcrum Separate Account,
Fulcrum Variable Life Separate Account, and Allmerica Select Separate
Account of Allmerica Financial Life Insurance and Annuity Company

X Inheiritage Account, VEL II Account, Separate Account I, Separate
Account VA-K, Separate Account VA-P, Allmerica Select Separate
Account II, Group VEL Account, Separate Account KG, Separate Account
KGC, Fulcrum Separate Account, and Allmerica Select Separate Account
of First Allmerica Financial Life Insurance Company.

- Allmerica Investment Trust

(b) The Principal Business Address of each of the following Directors and
Officers of Allmerica Investments, Inc. is:
440 Lincoln Street
Worcester, Massachusetts 01653

NAME POSITION OR OFFICE WITH UNDERWRITER
---- -----------------------------------
Emil J. Aberizk, Jr. Vice President

Edward T. Berger Vice President and Chief Compliance Officer

Mary Eldridge Secretary

<PAGE>

Philip L. Heffernan Vice President

Daniel Mastrototaro Vice President

John F. Kelly Director

William F. Monroe, Jr. Vice President

David J. Mueller Vice President and Controller

John F. O'Brien Director

Stephen Parker President, Director and Chief Executive Officer

Edward J. Parry, III Treasurer

Richard M. Reilly Director

Eric A. Simonsen Director

Mark G. Steinberg Senior Vice President

(c) As indicated in Part B (Statement of Additional Information) in
response to Item 20(c), the aggregate amount of commissions retained
by Allmerica Investments, Inc., the principal underwriter of the
Contracts, was $36,853,600.78 for sales of variable contracts funded
by the Registrant in 1998. No commissions or other compensation was
received by the principal underwriter, directly or indirectly, from
the Registrant during the Registrant's last fiscal year.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

Each account, book or other document required to be maintained by Section
31(a) of the 1940 Act and Rules 31a-1 to 31a-3 thereunder are maintained by
the Company at 440 Lincoln Street, Worcester, Massachusetts.

ITEM 31. MANAGEMENT SERVICES

The Company provides daily unit value calculations and related services for
the Company's separate accounts.

ITEM 32. UNDERTAKINGS

(a) Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to
file with the Securities and Exchange Commission ("SEC") such
supplementary and periodic information, documents, and reports as may
be prescribed by any rule or regulation of the SEC heretofore or
hereafter duly adopted pursuant to authority conferred in that
section.

(b) The Registrant hereby undertakes to include in the prospectus a
postcard that the applicant can remove to send for a Statement of
Additional Information.

(c) The Registrant hereby undertakes to deliver a Statement of
Additional Information and any financial statements promptly upon
written or oral request, according to the requirements of Form N-4.

<PAGE>

(d) Insofar as indemnification for liability arising under the 1933 Act
may be permitted to Directors, Officers and Controlling Persons of
Registrant under any registration statement, underwriting agreement or
otherwise, Registrant has been advised that, in the opinion of the
SEC, such indemnification is against public policy as expressed in
the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a Director,
Officer or Controlling Person of Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
Director, Officer or Controlling Person in connection with the
securities being registered, Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed
in the 1933 Act and will be governed by the final adjudication
of such issue.

(e) The Company hereby represents that the aggregate fees and charges
under the Policies are reasonable in relation to the services
rendered, expenses expected to be incurred, and risks assumed by the
Company.

ITEM 33. REPRESENTATIONS CONCERNING WITHDRAWAL RESTRICTIONS ON SECTION 403(b)
PLANS AND UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM

Registrant, a separate account of Allmerica Financial Life Insurance and
Annuity Company ("Company"), states that it is (a) relying on Rule 6c-7
under the 1940 Act with respect to withdrawal restrictions under the Texas
Optional Retirement Program ("Program") and (b) relying on the "no-action"
letter (Ref. No. IP-6-88) issued on November 28, 1988 to the American
Council of Life Insurance, in applying the withdrawal restrictions
of Internal Revenue Code Section 403(b)(11).

Registrant has taken the following steps in reliance on the letter:

1. Appropriate disclosures regarding the withdrawal restrictions imposed
by the Program and by Section 403(b)(11) have been included in
the prospectus of each registration statement used in connection
with the offer of the Company's variable contracts.

2. Appropriate disclosures regarding the withdrawal restrictions
imposed by the Program and by Section 403(b)(11) have been included in
sales literature used in connection with the offer of the
Company's variable contracts.

3. Sales Representatives who solicit participants to purchase the
variable contracts have been instructed to specifically bring the
withdrawal restrictions imposed by the Program and by Section
403(b)(11) to the attention of potential participants.

4. A signed statement acknowledging the participant's understanding of
(I) the restrictions on withdrawal imposed by the Program and by
Section 403(b)(11) and (ii) the investment alternatives available
under the employer's arrangement will be obtained from each
participant who purchases a variable annuity contract prior to
or at the time of purchase.

Registrant hereby represents that it will not act to deny or limit a
transfer request except to the extent that a Service-Ruling or
written opinion of counsel, specifically addressing the fact pattern
involved and taking into account the terms of the applicable employer
plan, determines that denial or limitation is necessary for the
variable annuity contracts to meet the requirements of the Program or
of Section 403(b). Any transfer request not so denied or limited will be
effected as expeditiously as possible.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Pre-effective
Amendment No. 1 to the Registration Statement to be signed on its behalf by
the undersigned, thereto duly authorized, in the City of Worcester, and
Commonwealth of Massachusetts, on the 1st of October, 1999.

SEPARATE ACCOUNT VA-K OF
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

By: /s/ Mary Eldridge
--------------------------------
Mary Eldridge, Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Pre-effective Amendment No. 1 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.

Signatures Title Date
- ---------- ----- ----
/s/ Warren E. Barnes Vice President and Corporate October 1, 1999
- ------------------------- Controller
Warren E. Barnes

Edward J. Parry III* Director, Vice President, Chief
- ------------------------- Financial Officer and Treasurer

Richard M. Reilly* Director, President and
- ------------------------- Chief Executive Officer

John F. O'Brien* Director and Chairman of the
- ------------------------- Board

Bruce C. Anderson* Director
- -------------------------

Robert E. Bruce* Director and Chief Information
- ------------------------- Officer

John P. Kavanaugh* Director, Vice President and
- ------------------------- Chief Investment Officer

John F. Kelly* Director, Vice President and
- ------------------------- General Counsel

J. Barry May* Director
- -------------------------

James R. McAuliffe* Director
- -------------------------

Robert P. Restrepo, Jr.* Director
- -------------------------

Eric A. Simonsen* Director and Vice President
- -------------------------

Phillip E. Soule* Director
- -------------------------

*Sheila B. St. Hilaire, by signing her name hereto, does hereby sign this
document on behalf of each of the above-named Directors and Officers of the
Registrant pursuant to the Power of Attorney dated July 1, 1999 duly executed
by such persons.

/s/ Sheila B. St. Hilaire
- ---------------------------------------
Sheila B. St. Hilaire, Attorney-in-Fact

<PAGE>

EXHIBIT TABLE

Exhibit 4 Contract Form A3029-99

Exhibit 8(f) Directors' Power of Attorney

Exhibit 9 Opinion of Counsel

Exhibit 10 Consent of Independent Accountants

Exhibit 13 Schedule for Computation of Performance Quotations

<PAGE>

PLEASE READ THIS CONTRACT CAREFULLY

Annuity payments and other values provided by this contract under the Variable
Income Options may increase or decrease and are not guaranteed as to fixed
dollar amount.

RIGHT TO EXAMINE CONTRACT

ACCUMULATED VALUE STATES:
You may return this contract within 90 days after you have received it (the
"Free Look Period"). It can be mailed or delivered either to us or the
representative who sold it. If you return the contract, we will pay to you the
Contract Value on the date the contract is returned to us plus any premium tax
deducted on the Issue Date. This amount may be more or less than the Single
Purchase Payment.

FULL REFUND STATES & IRAS FOR ALL STATES:
You may return this contract within 90 days after you have received it. It can
be mailed or delivered either to us or the representative who sold it. If you
return the contract within 10 days after you have received it ("the Free Look
Period"), we will refund the Single Purchase Payment less the total amount of
all annuity payments made or withdrawals taken. If you return the contract after
the expiration of the "Free Look Period" but within 90 days after the Issue
Date, we will pay to you the Contract Value on the date the contract is returned
to us plus any premium tax deducted on the Issue Date.

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

Home Office: Dover, Delaware
Principal Office: 440 Lincoln Street, Worcester, Massachusetts 01653
Phone Number: [1-800-723-6550]

This is a legal contract between you and the Company and is issued in
consideration of the Single Purchase Payment shown on the Specifications page.
The Net Payment may be allocated to the Fixed Income Option or the Variable
Income Option or a combination of both. If you select the Variable Income
Option, you can allocate the Net Payment among the Variable Sub-Accounts.

President Secretary

Single Payment Immediate Variable and Fixed Annuity
Annuity Payments Payable on the Annuity Income Date
Death Benefit Payable if an Owner or an Annuitant Dies prior to the Annuity
Income Date
This contract does not participate in the profits or surplus of the Company

<PAGE>

Table of Contents

SPECIFICATIONS 3

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION 5

DEFINITIONS 6

OWNER, ANNUITANT AND BENEFICIARY 8

ANNUITY BENEFIT 10

OVERVIEW 10

VARIABLE INCOME OPTIONS 11

WITHDRAWALS 14

DEATH OF OWNER OR ANNUITANT 17

BEFORE THE ANNUITY INCOME DATE 17

AFTER THE ANNUITY INCOME DATE 17

GENERAL PROVISIONS 18

<PAGE>

DEFINITIONS

Annuitant The person who must be alive for annuity payments to
be made (unless payments are guaranteed). Joint
Annuitants are permitted and unless otherwise
indicated, any reference to Annuitant shall
include joint Annuitants.

Annuity Income Date The date annuity payments begin. The Annuity Income
Date is shown on the Specifications Page.

Annuity Unit A measure used to calculate annuity payments under a
Variable Income Option.

Beneficiary The person, persons or entity entitled to the Death
Benefit upon the death of the Owner prior to the
Annuity Income Date or remaining annuity payments, if
any, upon the death of the Owner on or after the
Annuity Income Date.

Change Frequency How often changes (due to investment performance) will
be reflected in the dollar value of the variable
annuity payments. For example, if you choose an annual
Change Frequency, the dollar value of variable annuity
payments will remain constant within each one-year
period.

Company, we, us or Allmerica Financial Life Insurance and Annuity
our Company.

Contract Value The Present Value of all remaining annuity payments.

Contract Year A one-year period based on the Issue Date or an
anniversary thereof.

Date of First Change The date on which your variable annuity payment will
change in value for the first time.

Effective Valuation Date The Valuation Date on or immediately following the
day we receive the Single Purchase Payment, request
for transfer, withdrawal, or proof of death.

Fund Each separate investment company, investment series
or portfolio eligible for investment by a Sub-Account
of the Variable Account.

General Account All assets of the Company that are not allocated to a
Separate Account.

Net Payment The Single Purchase Payment less any premium tax.

<PAGE>

Owner, you or your The person, persons or entity entitled to exercise the
rights and privileges under this contract. Joint
Owners are permitted and unless otherwise indicated,
any reference to you and your shall include Joint
Owners.

Premium Tax The amount of tax, if any, imposed by a State or other
governmental entity upon our receipt of the Single
Purchase Payment.

Pro Rata The way a withdrawal is deducted from the accounts.
To determine how the withdrawal is made, assume an
annuity payment is made on the date of the withdrawal.
Compare the value of the payment from each account to
the total annuity payment. The withdrawal from each
account will be made in the same proportion.

Request A request or notice made by you, in a manner
consistent with our current procedures, which is
received by us.

Separate Account A segregated account established by us. The assets in
a Separate Account are not commingled with our general
assets and obligations and are not subject to claims
arising out of any other business we may conduct.

State The state or jurisdiction in which this contract is
issued.

Sub-Account A Variable Account subdivision that invests
exclusively in shares of a corresponding Fund.

Valuation Date A day the values of all units are determined.
Valuation Dates occur on each day the New York Stock
Exchange is open for trading.

Valuation Period The period of time between two consecutive Valuation
Dates.

Variable Account The Company's Separate Account, consisting of
Sub-Accounts that invest in the underlying Funds.

<PAGE>

OWNER, ANNUITANT AND BENEFICIARY

Owner The Owner is as shown on the Specifications Page.
Upon the death of an Owner prior to the Annuity Income
Date, a Death Benefit is paid.

You may exercise all rights and options granted in
this contract or by us, subject to the consent of any
irrevocable Beneficiary (where applicable). Where
there are joint Owners, the consent of both is
required in order to exercise any ownership rights.

Assignment You may not assign this contract.

Annuitant The Annuitant is as shown on the Specifications Page.
Upon the death of an Annuitant prior to the Annuity
Income Date, a Death Benefit is paid.

Beneficiary The Beneficiary is as shown on the Specifications Page
unless subsequently changed. You may declare any
Beneficiary to be revocable or irrevocable. A
revocable Beneficiary may be changed at any time (a)
before the Annuity Income Date and before the death of
an Owner or an Annuitant; or (b) after the Annuity
Income Date and before the death of the Annuitant. An
irrevocable Beneficiary must consent in writing to any
change of beneficiary. Unless otherwise indicated, the
Beneficiary will be revocable.

A Beneficiary change must be made by Request. When we
receive the Request, the change will take place as of
the date it was signed, even if an Owner or an
Annuitant dies after the form is signed but prior to
our receipt of the Request. Any rights created by the
change will be subject to payments we made or actions
taken before the change was recorded.

All benefits payable to the Beneficiary under this
contract will be divided equally among the surviving
Beneficiaries of the same class (see your
Specifications Page), unless you direct otherwise. If
there is no surviving Beneficiary in a particular
class, then the benefit is divided equally among the
surviving Beneficiaries of the next class. If there is
no surviving Beneficiary, the deceased Beneficiary's
interest will pass to you or your estate. If your
contract has Joint Owners, and one Owner dies, the
surviving joint Owner is the primary Beneficiary. This
is confirmed on the Specifications Page.

<PAGE>

Once entitled to benefits under this contract, the
Beneficiary may transfer or commute the annuity
payments or any values provided as long as he or she
has been given that right by you.

Protection of Proceeds To the extent allowed by law, this contract and any
payments made under it will be exempt from the claims
of creditors.

<PAGE>

ANNUITY BENEFIT

OVERVIEW

Single Purchase The Single Purchase Payment is shown on the
Payment Specifications Page. No additional payments may be
made.

Net Payment The Net Payment is equal to the Single Purchase
Payment reduced by any applicable Premium Tax. The Net
Payment is allocated as shown on the Specifications
Page.

Income Options The Income Option you selected is shown on the
Specifications Page. Income Options may be Fixed,
Variable or combination Fixed and Variable.

The Fixed Income Option provides a guaranteed amount
of income. The Fixed Income Option is funded through
the General Account.

The Variable Income Option provides income that will
vary over time. The investment performance of the
selected Sub-Accounts causes changes in Annuity Unit
Values, which result in fluctuating payments.

A combination Fixed and Variable Income Option
provides a portion of income that is guaranteed in
amount and a portion that will vary in amount.

Any portion of your Net Payment allocated to the Fixed
Income Option will always remain allocated to the
Fixed Income Option. Similarly, any portion of your
Net Payment allocated to the Variable Income Option
will always remain allocated to the Variable Income
Option, but you can reallocate this variable portion
of your contract among the various Sub-Accounts. See
the "Transfers" provision for additional information.

Payment of Annuity Annuity Payments are paid to you. By Request you may
Payments direct that payments be made to another person,
persons or entity.

<PAGE>

VARIABLE INCOME OPTIONS

Assumed Investment The Assumed Investment Return ("AIR") is used to
Return calculate the initial variable annuity payment and to
determine how the payment will change over time in
response to the investment performance of the selected
Sub-Accounts. If the actual performance of any
selected Sub-Account (as measured by the Net
Investment Factor) is equal to the AIR, the annuity
payment attributable to that Sub-Account will be
constant. If the actual performance is greater than
the AIR, the annuity payment will increase. If the
actual performance is less than the AIR, the annuity
payment will decrease.

Net Investment Factor The Net Investment Factor measures the investment
performance of a Sub-Account from one Valuation
Period to the next. This factor is equal to 1.000000
plus the result (which may be positive or negative)
from dividing (a) by (b) and subtracting (c) and (d)
where:

(a) is the investment income of a Sub-Account for
the Valuation Period, including realized or
unrealized capital gains and losses during
the Valuation Period, adjusted for provisions
made for taxes, if any;
(b) is the value of that Sub-Account's assets at
the beginning of the Valuation Period;
(c) is the Mortality and Expense Risk Charge
applicable to the current Valuation Period
(see the Specifications Page) plus any
adjustment for an optional feature; and
(d) is the Administrative Charge applicable to
the current Valuation Period (see the
Specifications Page).

We guarantee that the amount of each variable
annuity payment will not be affected by changes
in our mortality and expense experience. We
assume the risk that actual mortality experience
and expenses may exceed the amounts provided
under the contract. We guarantee that the
mortality and expense risk and administrative
charges will not be increased. Subject to
applicable State and federal laws, these charges
may be decreased or the method used to determine
the Net Investment Factor may be changed.

<PAGE>

Annuity Unit Values A Sub-Account Annuity Unit Value on any Valuation Date
is equal to its value on the preceding Valuation Date
multiplied by the product of:

(a) a discount factor equivalent to the Assumed
Investment Return and
(b) the Net Investment Factor of the Sub-Account
for the applicable Valuation Period.

The value of an Annuity Unit as of any date other than
a Valuation Date is equal to its value as of the
preceding Valuation Date.

Determination of the We have annuity option rates that determine the dollar
Number of Annuity Units amount of the first periodic payment under each
Variable Income Option for each $1,000 of Net Payment.
We calculate this amount assuming there is no change
in the Annuity Unit Value. We then divide the amount
of the first annuity payment attributable to a
particular Sub-Account by the Annuity Unit Value of
that Sub-Account to determine the number of Annuity
Units. This number of Annuity Units remains fixed
under all annuity benefit options [except Joint Life
with a Survivor Benefit Options that reduce the
number of Annuity Units upon the first death.]
However, the number of variable annuity units under
any Annuity Benefit Option could change if transfers
or withdrawals are made.

Dollar Amount of First The dollar amount of the first variable annuity
Variable payment will Annuity Payment equal the number of
Annuity Units of each Sub-Account multiplied by the
value of an Annuity Unit of that Sub-Account on the
applicable Valuation Date. [The benefit of any
optional feature will be taken into account.]

Dollar Amount of The dollar amount of each subsequent variable annuity
Subsequent Variable payment will vary with the Annuity Unit Value of the
Annuity Payments selected Sub-Account(s) on certain dates. The dollar
amount of variable annuity payments remains level
until the Date of First Change and within each Change
Frequency cycle. On the Date of First Change and as
of the start of each Change Frequency cycle the dollar
amount of the variable annuity payment is determined
by multiplying the number of Annuity Units of each
Sub-Account by the Annuity Unit Value of that
Sub-Account on the applicable Valuation Date. [The
benefit of any optional feature will be taken into
account.]

<PAGE>

Transfers You may make transfers among the Sub-Accounts by
Request to us. Transfers may be made (a) before the
Annuity Income Date and before the death of an Owner
or an Annuitant; or (b) after the Annuity Income
Date and as long as annuity payments are payable under
the Annuity Benefit Option selected.

Transfers may increase or decrease the number of
Annuity Units in each subsequent payment.

There is no charge for the first twelve transfers per
Contract year. A transfer charge of up to $25 may be
imposed on each additional transfer.

We reserve the right to establish and impose
reasonable rules restricting transfers. All transfers
are subject to our consent.

<PAGE>

WITHDRAWALS

You have the right, based on the Annuity Benefit
Option selected, to make withdrawals. Withdrawals may
be made (a) before the Annuity Income Date and before
the death of an Owner or an Annuitant; or (b) after
the Annuity Income Date and as long as annuity
payments are payable under the Annuity Benefit Option
selected. If the Death Benefit is applied under an
Annuity Benefit Option, withdrawals may also be made
in accordance with this provision.

Amounts withdrawn that were applied under a Variable
Income Option will be paid within 7 days of the date
we receive your Request. We reserve the right to delay
payments subject to applicable laws, rules and
regulations governing variable annuities.

Amounts withdrawn that were applied under a Fixed
Income Option will normally be paid within 7 days of
the date we receive your Request. We may defer payment
for up to six months from the receipt date. If
deferred for 30 days or more, the amount payable will
be credited interest at a rate of at least 3% or the
appropriate rate mandated by the State.

Your Request must indicate the dollar amount to be
paid and we will withdraw that amount on a Pro-Rata
basis.

Only one Request for withdrawal under a provision(s)
may be made each calendar year:

Payment Withdrawal Each calendar year, you can request a withdrawal up to
Amount Option an amount equal to:

(a) the Payment Withdrawal Amount (see
Specifications Page) multiplied by the value
of an annuity payment, if one were to be
paid, on the date we receive your Request (if
the withdrawal is taken prior to the Annuity
Incom Date), or

(b) the Payment Withdrawal Amount (see
Specifications Page) multiplied by the
previous annuity payment (if the withdrawal
is taken after the Annuity Income Date).

Each withdrawal proportionately reduces the number of
Annuity Units (for Variable Income Options) and/or the
dollar amount (for Fixed Income Options) of each
future annuity payment. The proportionate reduction is
calculated by multiplying the number of Annuity Units
or the dollar amount (whichever is applicable) of each
future annuity payment by the following:

<PAGE>

Amount of the variable or fixed withdrawal
------------------------------------------
Present Value of all remaining variable or fixed
annuity payments immediately prior to the withdrawal]

[Present Value Over the life of the contract, when there are
Withdrawal Option remaining guaranteed annuity payments, you may
request withdrawals which represent a percentage of
the Present Value of those remaining guaranteed
payments.

Each withdrawal proportionately reduces any remaining
guaranteed payments (for Variable Income Options)
and/or the dollar amount of each future annuity
payment (for Fixed Income Options). The proportionate
reduction is calculated by multiplying the number of
Annuity Units or the dollar amount (whichever is
applicable) of each future annuity payment by the
following:

Amount of the variable or fixed withdrawal
------------------------------------------
Present Value of all remaining variable or fixed
guaranteed annuity payments immediately prior to the
withdrawal

Whenever a withdrawal is taken under this provision,
we record the percentage withdrawn. (See proportionate
reduction calculation above.) The total percentage
withdrawn over the life of the contract cannot exceed
the Present Value Withdrawal Amount (see the
Specifications Page).

[If an Annuitant is still living after the guaranteed
payments have been paid, the number of Annuity Units
(for Variable Income Options) or dollars (for Fixed
Income Options) will increase to the number of Annuity
Units/dollars payable prior to any Present Value
Withdrawals, adjusted upon the death of the first
Annuitant, if applicable, or for transfers, or for any
withdrawals taken under the Payment Withdrawal Amount
Option.]]

<PAGE>

Present Value For a variety of purposes, it is at times necessary to
determine the Present Value of either all future
annuity payments or of future guaranteed annuity
payments. Present Values are calculated based on the
Mortality Table used by us to determine your benefit
(see the Specifications Page), male, female or unisex
rates as appropriate, and the interest rate (for Fixed
Income Options) or AIR (for Variable Income Options)
used to determine the annuity payments increased by
the following adjustments:

Adjustment
Death of the Annuitant 0.00%

Withdrawals
5 or more years after Issue Date 0.00%
Within 5 years of Issue Date:
15 or more years of annuity payments
being valued 1.00%
10-14 years of payments being valued 1.50%
Less than 10 years of payments being valued 2.00%

Determination of Contract Value* 0.00%

*If an optional feature was selected, annuity payments
used in determining this Present Value will be the
amount that would have been payable had you not
selected the optional feature.

<PAGE>

DEATH OF OWNER OR ANNUITANT

BEFORE THE ANNUITY INCOME DATE

Death Benefit If an Owner or an Annuitant dies, we will pay a Death
Benefit equal to the Contract Value. The Contract
Value will be determined as of the Effective Valuation
Date.

The Death Benefit will be paid to the Owner of the
contract. If there is no Owner or Joint Owner, we will
pay the Death Benefit to the Beneficiary.

Payment of the Unless you have specified otherwise, the Death Benefit
Death Benefit will be paid within 7 days of the Effective Valuation
Date. Alternatively, the person entitled to the Death
Benefit may, by Request, elect to receive an annuity
over his or her life expectancy (or over a period not
extending beyond such life expectancy), with
distributions beginning within one year from the date
of death.

If the sole Beneficiary is the deceased Owner's
spouse, the Beneficiary may elect to continue the
contract as the Owner and Annuitant. As of the date of
such election, annuity payments will be adjusted to
reflect any change of Annuitant and Annuity Income
Date. The new Annuity Income Date must be within
twelve months of the Issue Date (see Specifications
Page). Any subsequent spouse of the new Owner, if
named as the Beneficiary, may not continue this
contract.

AFTER THE ANNUITY INCOME DATE

Remaining Annuity If the Owner or Annuitant dies, we will pay remaining
Payments annuity payments, if any, in accordance with the
terms of the Annuity Benefit Option selected.

Any remaining annuity payments will be paid to the
Owner of the contract. If there is no Owner or Joint
Owner, then the Beneficiary will receive the payments
and become the Owner of the contract.

Lump Sum Option The Beneficiary may elect to receive the Present Value
of any remaining payments in one lump sum.

<PAGE>

GENERAL PROVISIONS

Entire Contract The entire contract consists of this contract, any
application attached at issue, Specifications page and
endorsements.

Misstatement of Age If the age or sex of an individual is misstated, we
Or Sex will adjust all benefits payable to that which would
be available at the correct age or sex. Any
underpayments already made by us will be paid
immediately. Any overpayments will be deducted from
future annuity payments.

Failure to Notify Company After the Annuity Income Date and once notified of the
of Annuitant Death Annuitant's death, we reserve the right to recover any
overpaid annuity payments.

Modifications Only the President or Vice President of the Company
may modify or waive any provisions of this contract.
Agents or Brokers are not authorized to do so.

Incontestability We will not contest this Contract.

Minimums All values and benefits available under this contract
equal or exceed those required by the State in which
the contract is delivered.

Annual Report We will send you an annual report of the Sub-Accounts
and any other notices, reports or documents required
by law to be delivered to You.

Addition, Deletion, or We reserve the right, subject to compliance with
Substitution of applicable law, to add to, delete from, or substitute
Investments for the shares of a Fund that are held by the
Sub-Accounts or that the Sub-Accounts may purchase. We
also reserve the right to eliminate the shares of any
Fund no longer available for investment or if we
believe further investment in the Fund is no longer
appropriate for the purposes of the Sub-Accounts.

We will not substitute shares attributable to any
interest in a Sub-Account without notice to you and
prior approval of the Securities and Exchange
Commission as required by the Investment Company Act
of 1940. This will not prevent the Variable Account
from purchasing other securities for other series or
classes of contracts, or from permitting a conversion
between series or classes of contracts on the basis of
requests made by You.

<PAGE>

We reserve the right, subject to compliance with
applicable laws, to establish additional Separate
Accounts and Sub-Accounts and to make them available
to any class or series of contracts as we consider
appropriate. Each new Separate Account or Sub-Account
will invest in a new investment company, or in shares
of another open-end investment company, or such other
investments as may be permitted under applicable law.
We also reserve the right to eliminate or combine
existing Sub-Accounts and to transfer the assets of
any Sub-Accounts to any other Sub-Accounts. In the
event of any substitution or change, we may, by
appropriate notice, make such changes in this and
other contracts as may be necessary or appropriate to
reflect the substitution or change. If we consider it
to be in the best interests of the owners, the
Variable Account or any Sub-Account may be operated as
a management company under the Investment Company Act
of 1940 or in any other form permitted by law, or may
be de-registered under the Act in the event
registration is no longer required, or may be combined
with our other accounts.

Changes in Law We reserve the right to make any changes to provisions
of the contract to comply with, or give you the
benefit of, any federal or State statute, rule, or
regulation.

Change of Name Subject to compliance with applicable law, we reserve
the right to change the names of the Variable Account
or the Sub-Accounts.

Federal Tax The Variable Account is not currently subject to tax,
Considerations but we reserve the right to assess a charge for taxes
if the Variable Account becomes subject to tax.

Splitting of Units We reserve the right to split the value of a unit,
either to increase or decrease the number of units.
Any splitting of units will have no material effect on
the benefits, provisions or investment return of this
contract or upon you, the Annuitant, any Beneficiary,
or us.

Insulation of Separate The investment performance of Separate Account assets
Account is determined separately from our other assets. The
assets of a Separate Account equal to the reserves and
liabilities of the contracts supported by the account
will not be charged with liabilities from any other
business that we may conduct.

<PAGE>

Single Payment Immediate Variable and Fixed Annuity
Annuity Payments Payable on the Annuity Income Date
Death Benefit Payable if an Owner or an Annuitant Dies prior to the Annuity
Income Date This contract does not participate in the profits or surplus of
the Company

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Payment for a Certain Number of Years:

We will provide annuity payments, beginning on the Annuity Income Date, for
the period of time shown on the Specifications Page.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Payment for a Certain Number of Years, with a Ratchet:

We will provide annuity payments, beginning on the Annuity Income Date, for
the period of time shown on the Specifications Page.

The Ratchet is an optional feature you have selected which is applicable
only to the Variable Income Option. It guarantees that annuity payments
will never decrease as a result of investment performance.

Annuity payments made prior to the Date of First Change are guaranteed to
equal or exceed the Initial Ratchet Amount shown on the Specifications
Page. All other annuity payments are guaranteed to equal or exceed the
Current Ratchet Amount. The Current Ratchet Amount equals the amount of the
last annuity payment in the previous Change Frequency Cycle.

From one Change Frequency Cycle to the next, annuity payments are limited
so that they will not exceed the applicable ratchet amount by more than the
Ratchet Maximum Benefit Increase Percentage (see Specifications Page).

If you take a withdrawal from the contract, the Initial Ratchet Amount (if
the withdrawal is taken prior to the Date of First Change) or the Current
Ratchet Amount (if the withdrawal is taken at any other time) will be
reduced in the same manner that the withdrawal reduces the Annuity Units.

There is no periodic charge for this feature. Instead, lower Income Option
Rates are used to determine your first variable annuity payment. As a
result, the first annuity payment is lower than it would have been had this
feature not been selected. Future annuity payments will also be lower
except when the protection provided by this feature results in a greater
benefit.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Payment for a Certain Number of Years, with a Floor:

We will provide annuity payments, beginning on the Annuity Income Date, for
the period of time shown on the Specifications Page.

The Floor is an optional feature you have selected and is applicable only
to the Variable Income Option. While variable annuity payments may increase
or decrease, this feature guarantees that they will never fall below the
Floor Amount.

The Floor Amount is shown on the Specifications Page. If you take a
withdrawal from the contract, the Floor Amount will be reduced in the same
manner that the withdrawal reduces the Annuity Units.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Single Life Annuity:

We will provide annuity payments, beginning on the Annuity Income Date,
during the life of the sole Annuitant. We may require satisfactory proof
that the Annuitant is alive before any annuity payment is made.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Single Life Annuity, with a Ratchet:

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Single Life Annuity, with a Floor:

The Floor Amount is shown on the Specifications Page. If you take a
withdrawal from the contract, the Floor Amount will be reduced in the same
manner that the withdrawal reduces the Annuity Units.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Joint Life Annuity with a Survivor Benefit:

We will provide annuity payments, beginning on the Annuity Income Date,
during the joint lifetime of both Annuitants. Upon the death of an
Annuitant, the number of Annuity Units (for Variable Income Options) and/or
the dollar amount (for Fixed Income Options) of each payment will be
adjusted by the Survivor Benefit Percentage.

The Survivor Benefit Percentage is the percentage of Annuity Units or
dollars of each payment paid during the survivor's life, which may be less
than or equal to that paid when both individuals are living. This
percentage is only applicable after the death of the first Annuitant.

We may require satisfactory proof that the Annuitants are alive before any
annuity payment is made.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Joint Life Annuity with a Survivor Benefit, with a Ratchet:

We may require satisfactory proof that the Annuitants are alive before any
annuity payment is made.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Joint Life Annuity with a Survivor Benefit, with a Floor:

We may require satisfactory proof that the Annuitants are alive before any
annuity payment is made.

The Floor Amount is shown on the Specifications Page. Upon the death of the
first Annuitant, the Floor Amount is adjusted by multiplying it by the
Survivor Benefit Percentage. If you take a withdrawal from the contract,
the Floor Amount will be reduced in the same manner that the withdrawal
reduces the Annuity Units.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Single Life Annuity with Payment for a Certain Number of Years:

We will provide annuity payments, beginning on the Annuity Income Date,
during the life of the sole Annuitant with a guarantee that if, at the
Annuitant's death, annuity payments have been made for less than the number
of years elected, then annuity payments will continue thereafter to you (or
the payee you designate) for the remainder of the period. We may require
satisfactory proof that the Annuitant is alive before any annuity payment
is made.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Single Life Annuity with Payment for a Certain Number of Years, with a Ratchet:

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Single Life Annuity with Payment for a Certain Number of Years, with a Floor:

The Floor Amount is shown on the Specifications Page. If you take a
withdrawal from the contract, the Floor Amount will be reduced in the same
manner that the withdrawal reduces the Annuity Units.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Joint Annuity with a Survivor Benefit, with Payment for a Certain Number of
Years:

We will provide annuity payments, beginning on the Annuity Income Date,
during the joint lifetime of both Annuitants with a guarantee that if, upon
the death of both Annuitants, annuity payments have been made for less than
the number of years elected, then annuity payments will continue thereafter
to you (or the payee you designate) for the remainder of the period. Upon
the death of an Annuitant, the number of Annuity Units (for Variable Income
Options) and/or the dollar amount (for Fixed Income Options) of each
payment will be adjusted by the Survivor Benefit Percentage.

We may require satisfactory proof that the Annuitants are alive before any
annuity payment is made.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Joint Annuity with a Survivor Benefit, with Payment for a Certain Number of
Years, with a Ratchet:

We may require satisfactory proof that the Annuitants are alive before any
annuity payment is made.

From one Change Frequency Cycle to the next, annuity payments are limited
so that they will not exceed the applicable Ratchet amount by more than the
Ratchet Maximum Benefit Increase Percentage (see Specifications Page).

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Joint Annuity with a Survivor Benefit, with Payment for a Certain Number of
Years,with a Floor:

We may require satisfactory proof that the Annuitants are alive before any
annuity payment is made.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Single Life Annuity with Cash Back:

We will provide annuity payments, beginning on the Annuity Income Date,
during the life of the sole Annuitant with a guarantee that at the
Annuitant's death, you (or the payee you designate) will receive any excess
of the Net Payment applied over the total amount of annuity payments made
and withdrawals taken. We may require satisfactory proof that the Annuitant
is alive before any annuity payment is made.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Single Life Annuity with Cash Back, with an Ratchet:

Annuity payments made prior to the Date of First Change are guaranteed to
equal or exceed the Initial Ratchet Amount shown on the Specifications
page. All other annuity payments are guaranteed to equal or exceed the
Current Ratchet Amount. The Current Ratchet Amount equals the amount of the
last annuity payment in the previous Change Frequency Cycle.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Single Life with Cash Back, with a Floor:

The Floor Amount is shown on the Specifications page. If you take a
withdrawal from the contract, the Floor Amount will be reduced in the same
manner that the withdrawal reduces the Annuity Units.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Joint Life Annuity with a Survivor Benefit, with Cash Back:

We will provide annuity payments, beginning on the Annuity Income Date,
during the joint lifetime of both Annuitants with a guarantee that, at the
surviving Annuitant's death, you (or the payee you designate) will receive
any excess of the Net Payment applied over the total amount of annuity
payments made and withdrawals taken. Upon the death of an Annuitant, the
number of Annuity Units (for Variable Income Options) and/or the dollar
amount (for Fixed Income Options) of each payment will be adjusted by the
Survivor Benefit Percentage.

We may require satisfactory proof that the Annuitants are alive before any
annuity payment is made.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Joint Life Annuity with a Survivor Benefit, with Cash Back, with a Ratchet:

We may require satisfactory proof that the Annuitants are alive before any
annuity payment is made.

<PAGE>

SPECIFICATIONS

DESCRIPTION OF YOUR ANNUITY BENEFIT OPTION

Joint Life Annuity with a Survivor Benefit, with Cash Back, with a Floor:

We may require satisfactory proof that the Annuitants are alive before any
annuity payment is made.

<PAGE>

SPECIFICATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
Contract Type: [Non-qualified] Single Purchase Payment Amount: [ ]
Contract Number: [zz00600000] Net Payment: [ ]

Owner: [John Doe ] Owner's Date of Birth: [10/25/1960]
Joint Owner: [Jack Doe ] Joint Owner's Date of Birth: [07/12/1960]

Annuitant: [Mary Doe ] Annuitant's Date of Birth: [03/19/1945]
Joint Annuitant: [Michael Doe ] Joint Annuitant's Date of Birth: [08/20/1954]

Annuitant's Sex: [Female ] Payee: [Jane Doe ]
Joint Annuitant's Sex: [Male ] Payee's Address: [1 Main St,
Anywhere, USA ]

Primary Beneficiary: Surviving Joint Owner, if any
1st Contingent Beneficiary(ies): [Michael Doe ]
2nd Contingent Beneficiary(ies): [Jack Doe]

Issue Date: [04/01/1999]
Annuity Income Date: [10/01/1999]
- -----------------------------------------------------------------------------------------------------
Annuity Benefit Option: [Joint with a Survivor Benefit Option] (See
page [5])
[Survivor Benefit Percentage: [50%]]
Frequency of Annuity Payments: [Monthly]
Mortality Table: [Annuity 2000]

Percentage under a Fixed Income Option: [30%]
Dollar Amount of Fixed Income: [ $]
Percentage under a Variable Income Option: [70%]
Assumed Investment Return: [5%]
Change Frequency: [Monthly]
Date of First Change: [xx/xx/xxxx]
Income Option Rate: [ 4.5]

[Optional Feature:]

[The Ratchet:
Initial Ratchet Amount: [$100]
Ratchet Maximum Benefit Increase Percentage: [10%]

If you had not selected this feature, the Income Option Rate
above would have been [5.0].]

[The Floor:
Floor Amount: [$100]

If you had not selected this feature, the Income Option Rate
above would have been [5.0].]

<PAGE>

SPECIFICATIONS (continued)

Owner: [John Doe] Contract Number:
[zz00600000]

Joint Owner: [Jack Doe]

Single Purchase Amount: [$25,000.00]
- --------------------------------------------------------------------------------

[Payment Withdrawal Amount: [10 times the previous annuity payment.]
[[But not more than the remaining
guaranteed payments.]]

[Present Value Withdrawal Amount: [[75%] of Present Value of remaining
guaranteed annuity payments.]

Mortality and Expense Risk Charge: [[1.25%] on an annual basis of the daily
value of the Sub-Account assets.]

Administrative Charge: [[.20%] on an annual basis of the daily
value of the Sub-Account assets.]

Variable Allocation of Net Payment on Issue Date:

Sub-Account Name Percentage of Number of Units
- ---------------- Net Payment ---------------
-----------
[Select Aggr. Growth
Select Capital Appr.
Select Value Opp.
Select Emerging Market
Select Int'l Equity
DGPF Int'l Equity Series
Fidelity VIP Overseas
T. Rowe Price Int'l
Select Growth
Select Strategic Growth
Growth Fund
Fidelity VIP Growth
Equity Index Fund
Select Gr. & Inc.
Fidelity VIP Eq. Inc.
Fidelity VIP Asset Mgr
Fidelity VIP High Inc
Investment Grade Income Fund
Government Bond Fund
Allmerica Money Market]
</TABLE>

<PAGE>

POWER OF ATTORNEY

We, the undersigned, hereby severally constitute and appoint Richard M. Reilly,
John F. Kelly, Joseph W. MacDougall, Jr., and Sheila B. St. Hilaire, and each of
them singly, our true and lawful attorneys, with full power to them and each of
them, to sign for us, and in our names and in any and all capacities, any and
all Registration Statements and all amendments thereto, including post-effective
amendments, with respect to the Separate Accounts supporting variable life and
variable annuity contracts issued by Allmerica Financial Life Insurance and
Annuity Company, and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
and with any other regulatory agency or state authority that may so require,
granting unto said attorneys and each of them, acting alone, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys or any of them may lawfully do or cause to be done by virtue hereof.
Witness our hands on the date set forth below.

<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----

<S> <C> <C>
/s/ John F. O'Brien Director and Chairman of the Board 7/1/99
- -------------------------- ------
John F. O'Brien

/s/ Bruce C. Anderson Director 7/1/99
- -------------------------- ------
Bruce C. Anderson

/s/ Robert E. Bruce Director and Chief Information Officer 7/1/99
- -------------------------- ------
Robert E. Bruce

/s/ John P. Kavanaugh Director, Vice President and 7/1/99
- -------------------------- Chief Investment Officer ------
John P. Kavanaugh

/s/ John F. Kelly Director, Vice President and 7/1/99
- -------------------------- General Counsel ------
John F. Kelly

/s/ J. Barry May Director 7/1/99
- -------------------------- ------
J. Barry May

/s/ James R. McAuliffe Director 7/1/99
- -------------------------- ------
James R. McAuliffe

/s/ Edward J. Parry, III Director, Vice President, Chief Financial 7/1/99
- -------------------------- Officer and Treasurer ------
Edward J. Parry, III

/s/ Richard M. Reilly Director, President and 7/1/99
- -------------------------- Chief Executive Officer ------
Richard M. Reilly

/s/ Robert P. Restrepo, Jr. Director 7/1/99
- -------------------------- ------
Robert P. Restrepo, Jr.

/s/ Eric A. Simonsen Director and Vice President 7/1/99
- -------------------------- ------
Eric A. Simonsen

/s/ Phillip E. Soule Director 7/1/99
- -------------------------- ------
Phillip E. Soule
</TABLE>

<PAGE>

October 1, 1999

Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester, MA 01653

RE: SEPARATE ACCOUNT VA-K (EXECANNUITY PLUS / ALLMERICA ADVANTAGE)
OF ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
File Nos. 333-81861 and 811-6293

Gentlemen:

In my capacity as Assistant Vice President and Counsel of Allmerica Financial
Life Insurance and Annuity Company (the "Company"), I have participated in
the preparation of this Pre-effective Amendment No. 1 to the Registration
Statement for Separate Account VA-K on Form N-4 under the Securities Act of
1933 and amendment under the Investment Company Act of 1940, with respect
to the Company's qualified and non-qualified variable annuity contracts.

I am of the following opinion:

1. Separate Account VA-K is a separate account of the Company validly existing
pursuant to the Delaware Insurance Code and the regulations issued
thereunder.

2. The assets held in Separate Account VA-K are not chargeable with liabilities
arising out of any other business the Company may conduct.

3. The variable annuity contracts, when issued in accordance with the Prospectus
contained in the Pre-effective Amendment No. 1 to the Registration Statement
and upon compliance with applicable local law, will be legal and binding
obligations of the Company in accordance with their terms and when sold will
be legally issued, fully paid and non-assessable.

In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as in my judgment are necessary or
appropriate.

I hereby consent to the filing of this opinion as an exhibit to this
Pre-effective Amendment No. 1 to the Registration Statement for Separate
Account VA-K on Form N-4 filed under the Securities Act of 1933 and amendment
under the Investment Company Act of 1940.

Very truly yours,
/s/ John C. Donlon, Jr.

John C. Donlon, Jr.
Assistant Vice President and Counsel

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-effective Amendment No. 1 to the Registration
Statement of Separate Account VA-K Allmerica Advantage Variable Annuity and
ExecAnnuity Plus Variable Annuity of Allmerica Financial Life Insurance and
Annuity Company on Form N-4 of our report dated February 2, 1999, except for
paragraph 2 of Note 12, which is as of March 19, 1999, relating to the
financial statements of Allmerica Financial Life Insurance and Annuity
Company, and our report dated March 26, 1999, relating to the financial
statements of Separate Account VA-K Allmerica Advantage Variable Annuity and
ExecAnnuity Plus Variable Annuity of Allmerica Financial Life Insurance and
Annuity Company, both of which appear in such Statement of Additional
Information. We also consent to the reference to us under the heading
"Experts" in such Statement of Additional Information.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Boston, Massachusetts
October 8, 1999

<PAGE>

<TABLE>
<S> <C> <C>
AGENCY IVA -TABLE 1B AFLIAC Since Inception of Sub-Account
1 Year Without Surrender
Select Emerging Markets Fund N/A
Select International Equity Fund (1.605090-1.397911)/1.397911 = 14.82%
DGPF International Equity Series (1.735541-1.595884)/1.595884 = 8.75%
Fidelity VIP Overseas Portfolio (1.814359-1.632470)/1.632470 = 11.14%
T. Rowe Price International Stock Portfolio (1.395964-1.222345)/1.222345 = 14.20%
Select Aggressive Growth Fund (2.512515-2.305392)/2.305392 = 8.98%
Select Capital Appreciation Fund (1.874635-1.670005)/1.670005 = 12.25%
Select Value Opportunity Fund (2.010804-1.945211)/1.945211 = 3.37%
Select Growth (2.670973-2.000621)/2.000621 = 33.51%
Select Strategic Growth Fund N/A
Growth Fund (2.748076-2.336455)/2.336455 = 17.62%
Fidelity VIP Growth Portfolio (3.586147-2.608104)/2.608104 = 37.50%
Equity Index Fund (3.264990-2.581109)/2.581109 = 26.50%
Select Growth and Income Fund (2.270191-1.978118)/1.978118 = 14.77%
Fidelity VIP Equity-Income Portfolio (3.107262-2.823887)/2.823887 = 10.03%
Fidelity VIP II Asset Manager Portfolio (1.716562-1.513597)/1.513597 = 13.41%
Fidelity VIP High Income Portfolio (2.142461-2.271827)/2.271827 = -5.69%
Investment Grade Income Fund (1.628733-1.530307)/1.530307 = 6.43%
Government Bond Fund (1.468677-1.383748)/1.373748 = 6.14%
Money Market Fund (1.262284-1.213751)/1.213751 = 4.00%

Since Inception of Sub-Account
5 Years Without Surrender
Select Emerging Markets Fund N/A
Select International Equity Fund N/A
DGPF International Equity Series ((1.735541/1.129749)^(365/1825))-1 = 8.97%
Fidelity VIP Overseas Portfolio ((1.814359/1.226906)^(365/1825))-1 = 8.14%
T. Rowe Price International Stock Portfolio N/A
Select Aggressive Growth Fund ((2.512515/1.342331)^(365/1825))-1 = 13.36%
Select Capital Appreciation Fund N/A
Select Value Opportunity Fund ((2.010804/1.167480)^(365/1825))-1 = 11.49%
Select Growth ((2.670973/1.055228)^(365/1825))-1 = 20.41%
Select Strategic Growth Fund N/A
Growth Fund ((2.748076/1.236697)^(365/1825))-1 = 17.31%
Fidelity VIP Growth Portfolio ((3.586147/1.440653)^(365/1825))-1 = 20.01%
Equity Index Fund ((3.264990/1.226415)^(365/1825))-1 = 21.63%
Select Growth and Income Fund ((2.270191/1.074063)^(365/1825))-1 = 16.15%
Fidelity VIP Equity-Income Portfolio ((3.107262/1.412108)^(365/1825))-1 = 17.09%
Fidelity VIP II Asset Manager Portfolio N/A
Fidelity VIP High Income Portfolio ((2.142461/1.510060)^(365/1825))-1 = 7.25%
Investment Grade Income Fund ((1.628733/1.250417)^(365/1825))-1 = 5.43%
Government Bond Fund ((1.468677/1.179530)^(365/1825))-1 = 4.48%
Money Market Fund ((1.262284/1.051795)^(365/1825))-1 = 3.72%

Since Inception of Sub-Account
10 Years or Since Inception Without Surrender
Select Emerging Markets Fund N/A
Select International Equity Fund ((1.605090/1.000000)^(365/1703))-1 = 10.67%
DGPF International Equity Series ((1.735541/1.000000)^(365/2065))-1 = 10.24%
Fidelity VIP Overseas Portfolio ((1.814359/1.000000)^(365/2674))-1 = 8.47%
T. Rowe Price International Stock Portfolio ((1.395964/1.000000)^(365/1340))-1 = 9.51%
Select Aggressive Growth Fund ((2.512515/1.000000)^(365/2297))-1 = 15.77%
Select Capital Appreciation Fund ((1.874635/1.000000)^(365/1341))-1 = 18.65%
Select Value Opportunity Fund ((2.010804/1.000000)^(365/2069))-1 = 13.13%
Select Growth ((2.670973/1.000000)^(365/2297))-1 = 16.90%
Select Strategic Growth Fund N/A
Growth Fund ((2.748076/1.000000)^(365/2297))-1 = 14.79%
Fidelity VIP Growth Portfolio ((3.586147/1.000000)^(365/2674))-1 = 19.04%
Equity Index Fund ((3.264990/1.000000)^(365/2675))-1 = 17.52%
Select Growth and Income Fund ((2.270191/1.000000)^(365/2297))-1 = 13.91%
Fidelity VIP Equity-Income Portfolio ((3.107262/1.000000)^(365/2675))-1 = 16.73%
Fidelity VIP II Asset Manager Portfolio ((1.716562/1.000000)^(365/1702))-1 = 12.29%
Fidelity VIP High Income Portfolio ((2.142461/1.000000)^(365/2655))-1 = 11.04%
Investment Grade Income Fund ((1.628733/1.000000)^(365/2674))-1 = 6.89%
Government Bond Fund ((1.468677/1.000000)^(365/2671))-1 = 5.39%
Money Market Fund ((1.262284/1.000000)^(365/2670))-1 = 3.24%

<PAGE>

AGENCY IVA -TABLE 2B AFLIAC Since Inception of Underlying Fund
1 Year Without Surrender
Select Emerging Markets Fund N/A
Select International Equity Fund (1.605090-1.397911)/1.397911 = 14.82%
DGPF International Equity Series (1.735541-1.595884)/1.595884 = 8.75%
Fidelity VIP Overseas Portfolio (1.814359-1.632470)/1.632470 = 11.14%
T. Rowe Price International Stock Portfolio (1.395964-1.222345)/1.222345 = 14.20%
Select Aggressive Growth Fund (2.512515-2.305392)/2.305392 = 8.98%
Select Capital Appreciation Fund (1.874635-1.670005)/1.670005 = 12.25%
Select Value Opportunity Fund (2.010804-1.945211)/1.945211 = 3.37%
Select Growth (2.670973-2.000621)/2.000621 = 33.51%
Select Strategic Growth Fund N/A
Growth Fund (2.748076-2.336455)/2.336455 = 17.62%
Fidelity VIP Growth Portfolio (3.586147-2.608104)/2.608104 = 37.50%
Equity Index Fund (3.264990-2.581109)/2.581109 = 26.50%
Select Growth and Income Fund (2.270191-1.978118)/1.978118 = 14.77%
Fidelity VIP Equity-Income Portfolio (3.107262-2.823887)/2.823887 = 10.03%
Fidelity VIP II Asset Manager Portfolio (1.716562-1.513597)/1.513597 = 13.41%
Fidelity VIP High Income Portfolio (2.142461-2.271827)/2.271827 = -5.69%
Investment Grade Income Fund (1.628733-1.530307)/1.530307 = 6.43%
Government Bond Fund (1.468677-1.383748)/1.373748 = 6.14%
Money Market Fund (1.262284-1.213751)/1.213751 = 4.00%

Since Inception of Underlying Fund
5 Years Without Surrender
Select Emerging Markets Fund N/A
Select International Equity Fund N/A
DGPF International Equity Series ((1.735541/1.129749)^(365/1855))-1 = 8.97%
Fidelity VIP Overseas Portfolio ((1.814359/1.226906)^(365/1855))-1 = 8.14%
T. Rowe Price International Stock Portfolio N/A
Select Aggressive Growth Fund ((2.512515/1.342331)^(365/1855))-1 = 13.36%
Select Capital Appreciation Fund N/A
Select Value Opportunity Fund ((2.010804/1.167480)^(365/1855))-1 = 11.49%
Select Growth ((2.670973/1.055228)^(365/1855))-1 = 20.41%
Select Strategic Growth Fund N/A
Growth Fund ((2.748076/1.236697)^(365/1855))-1 = 17.31%
Fidelity VIP Growth Portfolio ((3.586147/1.440653)^(365/1855))-1 = 20.01%
Equity Index Fund ((3.264990/1.226415)^(365/1855))-1 = 21.63%
Select Growth and Income Fund ((2.270191/1.074063)^(365/1855))-1 = 16.15%
Fidelity VIP Equity-Income Portfolio ((3.107262/1.412108)^(365/1855))-1 = 17.09%
Fidelity VIP II Asset Manager Portfolio ((1.716562/0.000000)^(365/1855))-1 = 10.22%
Fidelity VIP High Income Portfolio ((2.142461/1.510060)^(365/1855))-1 = 7.25%
Investment Grade Income Fund ((1.628733/1.250417)^(365/1855))-1 = 5.43%
Government Bond Fund ((1.468677/1.179530)^(365/1855))-1 = 4.48%
Money Market Fund ((1.262284/1.051795)^(365/1855))-1 = 3.72%

Since Inception of Underlying Fund
10 Years or Since Inception Without Surrender
Select Emerging Markets Fund (0.775702-1.000000)/1.000000) = -22.43%
Select International Equity Fund ((1.605090/1.000070)^(365/1704))-1 = 10.67%
DGPF International Equity Series ((1.735541/0.988723)^(365/2254))-1 = 9.54%
Fidelity VIP Overseas Portfolio ((1.814359/0.801352)^(365/3650))-1 = 8.52%
T. Rowe Price International Stock Portfolio ((1.395964/0.964274)^(365/1736))-1 = 8.09%
Select Aggressive Growth Fund ((2.512515/0.955336)^(365/2323))-1 = 16.41%
Select Capital Appreciation Fund ((1.874635/1.000097)^(365/1343))-1 = 18.62%
Select Value Opportunity Fund ((2.010804/0.999991)^(365/2071))-1 = 13.10%
Select Growth ((2.670973/0.958997)^(365/2323))-1 = 17.46%
Select Strategic Growth Fund (0.963299-1.000000)/1.000000) = -3.67%
Growth Fund ((2.748076/0.659054)^(365/3650))-1 = 15.35%
Fidelity VIP Growth Portfolio ((3.586147/0.701754)^(365/3650))-1 = 17.72%
Equity Index Fund ((3.264990/0.777460)^(365/3016))-1 = 18.97%
Select Growth and Income Fund ((2.270191/0.993172)^(365/2323))-1 = 13.87%
Fidelity VIP Equity-Income Portfolio ((3.107262/0.839398)^(365/3650))-1 = 13.98%
Fidelity VIP II Asset Manager Portfolio ((1.716562/0.629011)^(365/3403))-1 = 11.37%
Fidelity VIP High Income Portfolio ((2.142461/0.864596)^(365/3650))-1 = 9.50%
Investment Grade Income Fund ((1.628733/0.782194)^(365/3650))-1 = 7.61%
Government Bond Fund ((1.468677/1.012729)^(365/2684))-1 = 5.18%
Money Market Fund ((1.262284/0.843665)^(365/3650))-1 = 4.11%

</TABLE>